Retail stock under pressure: Urban Outfitters, Inc. (NASDAQ: URBN)

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Urban Outfitters, Inc. (NASDAQ: URBN) stock lost over 4.1% in the pre-market session on 22nd May, 2019 (Source: Google finance). The company reported first-quarter net income of $32.6 million, compared with $41.3 million in the year-ago period. Urban Outfitters also announced a subscription rental service for woman’s clothes called Nuuly.

Subscribers will pay $88 for a six-item box per month drawing from Urban Outfitters and third-party brands. At launch, Nuuly will offer over 1000 styles for rent from over 100 nationally recognized designer labels and brands including Anthropologie, Free people and Urban Outfitters, as well as a curated assortment of hundreds of one of a kind vintage pieces. Nuuly anticipates approximately 50,000 subscribers within 12 months of operation, which would exceed a revenue run rate of $50 million at the periods close.

Retail stock under pressure: Urban Outfitters, Inc. (NASDAQ: URBN)

URBN in the first quarter of FY 19 has reported the adjusted earnings per share of 31 cents, beating the analysts’ estimates for the adjusted earnings per share of 25 cents, according to the Analysts surveyed by FactSet. The company had reported the adjusted revenue of $864.4 million in the first quarter of FY 19, beating the analysts’ estimates for revenue of $854.7 million.

Meanwhile, total business in May to date was challenging due to negative store traffic and some product misses at our two larger brands. In the first quarter, Anthropologie delivered a plus 1% comp, Free People are plus 2%, and Urban was comp flat. After many quarters of strong growth, business in Europe was challenging in the first quarter of 2019 due to the current political and economic uncertainty. Excluding European, the Urban brand comp for North America was a plus 1%.

For the second quarter, URBN retail segment comp sales could come in a low single-digit negative range for the quarter. URBN gross margin rate for the second quarter could be leveraged by more than 300 basis points. The decrease in gross profit margin could be due to higher markdown rates to clear underperforming products as well as deleverage in delivery, logistics and store occupancy expenses resulting from higher penetration of digital sales and negative store comps. SG&A could grow by approximately 2% for the quarter. The growth in SG&A could primarily relate to digital marketing investments to support the digital channel sales growth. Additionally SG&A will include approximately $3 million of expenses associated with the launch of Nuuly, the new subscription rental business.

Capital expenditures for the fiscal year are projected to be at approximately $260 million. The spend an increase to the prior year is primarily related to planned investments in additional and expanded distribution facilities, the opening of new stores and the new European Home Office.

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