Urban Outfitters, Inc. Plummets On Disappointing Q1 Results

Urban Outfitters plummeted after the company reported disappointing financial results for the first quarter ended April 30. The shares of the specialty retailer were trading $34.20 per share, down by 16% at the time of this writing around 2:09 in the afternoon in New York

Urban Outfitters, Inc. Plummets On Disappointing Q1 Results

Urban Outfitter financial results

During the first quarter, Urban Outfitters generated $0.25 in earnings per diluted share. Its total net sales were $739 million, up by 8%.  Wall Street analysts expected the company to report $0.30 in earnings per share on $759 million sales.

Urban Outfitters said the sales of its comparable retail segment and wholesale segment increased 4% and 18% respectively. Its Anthropologie and Free People performed well during the quarter.

Richard Hayne, CEO of Urban Outfitters commented that first quarter sales and the comparable net sales of its retail segment were positive. He said, “I believe our retail segment comparable net sales growth is being driven by the success of our omni-channel strategy.”

Although Urban Outfitters achieved sales growth during the quarter, it appears that investors worried because its gross profit rate declined 141 basis points and gross margin dropped to 33.3%.

Its gross margin was partially affected by a high level of promotions. During the Mother’s Day weekend, the company offered a 20% discounts at its stores for three days.

Urban Outfitters said total inventories increased 14% to $49 million.It effective tax rate declined from 37% to 35.6% during the quarter. Its selling, general and administrative expenses (SGA) climbed 13 basis points primarily due to the increase of its expenditures in marketing and technology to drive consumer traffic.

Urban Outfitter capital returns

On February 23, the board of directors of Urban Outfitters approved a buyback of its 20 million common shares under a new share repurchase program.  During its fiscal 2015, the company repurchased 7.7 million shares worth approximately $258 million.

Urban Outfitters stock ratings

Analysts at RBC Capital Markets initiated coverage on Urban Outfitters with an Outperform rating and a price target of $40 per share.  Analysts at Piper Jaffray and JP Morgan downgraded their rating for the stock to Neutral.  Oppenheimer also downgraded its recommendation to Perform.

Over the past 52 weeks, the shares of Urban Outfitters traded between $27.89 and $47.25 per share. The company lost more than 3% of stock value year-to-date.