Bearish stock to watch: Urban Outfitters, Inc. (NASDAQ: URBN)

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Urban Outfitters, Inc. (NASDAQ: URBN) stock fell over 6% in the pre-market session of March 4th, 2020 (Source: Google finance) after the company missed the earnings estimate for the fourth quarter of FY 20. Urban Outfitters has reported the earnings of $20 million, in the fourth quarter, compared to $86 million, in the year-ago period. URBN in the fourth quarter of FY 20 has reported the adjusted earnings per share of 50 cents, missing the analysts’ estimates for the adjusted earnings per share of 64 cents, according to analysts polled by FactSet. The company had reported the adjusted revenue growth of 3.6 percent to $1.17 billion in the fourth quarter of FY 20, which is in line with the analysts’ estimates for revenue of $1.17 billion.

URBN’s gross margin rate for the first quarter is anticipated to deleverage by approximately 100 basis points. The decline in gross profit rate could be due to the Subscription and Wholesale segments for the quarter, while the Retail segment gross profit margin could be flat to positive for the quarter. The operation of the Subscription segment business Nuuly is expected to have a negative impact on the gross profit margin for the quarter and most likely for the year.

URBN comp sales have started out the first quarter in positive territory. Based on the quarter-to-date performance, the company anticipates that URBN Retail segment comp sales could post low single to mid single digit positive for the first quarter while the company anticipates Wholesale sales could remain high single digit negative for the start of the year. The company anticipates Wholesale segment sales could begin to recapture positive sales growth in the second quarter and achieve positive sales growth for the 2021 fiscal year.

Capital expenditures for the fiscal year 2021 are planned at approximately $250 million. The spend and increase to the prior year is mainly due to the investments in additional and expanded distribution facilities. The company will be completing the new European distribution facility in FY ’21. In addition, the company will be starting construction on an additional distribution facility in the United States. This project is projected to take approximately two years to complete phase one. This facility will support the growth and expansion of the Retail segment business in North America as well as provide more efficient logistics processing speeds, as well as faster and more consistent delivery times to the stores and the digital customers.

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