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

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Urban Outfitters, Inc. (NASDAQ: URBN) stock fell over 2.5% in 20th May, 2020 pre market session (as of 5:36 am GMT-4 ; Source: Google finance) after the company in the first quarter of FY 20 has reported a preliminary loss of $138.4 million, or $1.41 a share, compared to net income of $32.6 million, or 31 cents a share, in the year-ago period. The company has posted lower than expected results for the period. During the quarter, the Company opened a total of four new retail locations that includes two Anthropologie Group stores and two Urban Outfitters stores and closed one Urban Outfitters store. During the three months, no franchisee-owned stores were opened or closed. During the first quarter, the total retail segment inventories had fallen 18% at quarter’s end and the inventories are reasonably clean because the company was able to fill more than 2 million digital shipments from the stores. Due to uncertainty, the company had furloughed significant number of store, wholesale and home office associates, froze all new hiring except in the fulfillment and call centers, suspended all merit raises and bonuses for FY ’21, drew down $220 million on the Line of Credit, reduced planned capital spending by over $140 million, by delaying or canceling new projects, reduced all non-payroll expenses, including creative, marketing, and travel to name a few, extended payment terms to vendors for both merchandise and non-merchandise by 30 days, aggressively reduced investments in the two growth initiatives, Nuuly and expansion. Further, the company had entered the first quarter with more than $530 million in cash and marketable securities with zero debt. During the first quarter, the company used $32 million for working capital purposes, $44 million was spent on capital projects and $7 million on share repurchases.

URBN in the first quarter of FY 20 has reported the adjusted loss per share of $1.41, missing the analysts’ estimates for the adjusted loss per share of 24 cents, according to analysts surveyed by FactSet. The company had reported 31.9 percent fall in the adjusted revenue to $588.5 million in the first quarter of FY 20, missing the analysts’ estimates for revenue of $660 million. For the first quarter, the preliminary gross profit rate fell to 2.0% from 31.1% in the prior year’s comparable period. Preliminary gross profit dollars declined 95.6% to $11.8 million from $269.1 million. The decrease in preliminary gross profit rate was on the back of significant store occupancy deleverage, a meaningful increase in inventory obsolescence reserves, an increase in delivery expense and an increase in merchandise markdowns.

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