Urban Outfitters, Inc. (NASDAQ: URBN) stock crashes on concerns over its brands performance

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Urban Outfitters, Inc. (NASDAQ: URBN) stock fell over 13.1% on 20th November, 2019 (as of 9:43 am GMT-5; Source: Google finance) after the company posted lower than expected quarterly results on the back of lower demand for its namesake brand. The company has reported the net income of $56 million in the quarter, compared to $78 million, in the year-ago period.

URBN in the third quarter of FY 20 has reported the adjusted earnings per share of 56 cents, missing the analysts’ estimates for the adjusted earnings per share of 57 cents. The company had reported the adjusted revenue growth of 1.4 percent to $987 million in the third quarter of FY 20, missing the analysts’ estimates for revenue of $1 billion, according to IBES data from Refinitiv. Comparable Retail segment net sales grew 3%, due to growth in the digital channel, which was partially offset by negative retail store sales. By brand, comparable Retail segment net sales grew 9% at Free People, 4% at the Anthropologie Group and were flat at Urban Outfitters. Wholesale segment net sales fell by 7%. During the nine months ended October 31, 2019, the Company had opened a total of 19 new retail locations.

Moreover, the gross profit rate fell by 217 basis points during the quarter compared to the prior year’s comparable period. The decline in gross profit rate is on back of higher markdowns, deleverage in delivery and logistics expenses and lower Wholesale segment margins. The higher markdowns were mainly due to underperforming women’s apparel at the Urban Outfitters brand. The deleverage in delivery and logistics expenses is on back of in part to the increased penetration of the digital channel as well as increased labor expenses due to the competitive market for employment in the United States. As of October 31, 2019, total inventory rose by 17.7%, on a year-over-year basis. The company’s Comparable Retail segment inventory rose by 9% at cost. The rise in comparable Retail segment inventory in each of the brands was due in part to early receipts related to the ongoing tariff uncertainty as well as positive comparable Retail segment net sales plans for the fourth quarter.

Additionally, in August the company had authorized to repurchase 20 million common shares under a share repurchase program. On June 4, 2019, the Company had authorized the repurchase of 20 million common shares under a new share repurchase program. As of October 31, 2019, 26.3 million common shares were remaining under the programs.

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