Urban Outfitters Plunges 10% on Declining Q2 Comps Trend

Shares of Urban Outfitters Inc. URBN fell nearly 10.3% yesterday after the company in a SEC filing unveiled that the comparable sales for the current quarter are deteriorating. So far in the second quarter of fiscal 2018, comparable retail segment net sales have declined by high-single digit.

This also led the shares to plummet to its eight year low.  In fact, in the past six months the company's shares have declined 50.9%, wider than the Zacks categorized Retail-Apparel/ Shoe industry fall of 30.7%.  

Investors are also concerned by management's remark over gross margin, which is anticipated to decline year over year in the second quarter fiscal of 2018 on account of rise in delivery and logistic expenses, higher markdowns and lower initial mark up.

In the first quarter of fiscal 2018, the company's gross margin contracted 284 basis points (bps) to approximately 31.5% primarily due to deleverage in customer delivery and logistics expense rates along with higher markdowns. This can be attributed to dismal performance of women's apparel and accessories product at Anthropologie and Urban Outfitters. We noted that, gross margin had contracted 142 bps and 15 bps in the fourth and third quarter of fiscal 2017 to 33% and 34.8%, respectively.

Let's look at Urban Outfitters earnings estimate revisions in order to get a clear picture of what analysts are thinking about the stock. In the past 30 days, the Zacks Consensus Estimate for the second quarter and fiscal 2018 declined 13 cents and 20 cents to 45 cents and $1.53, respectively.

Urban Outfitters currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked stocks worth considering in the retail space include Aaron's, Inc. AAN, Best Buy Co., Inc. BBY and The Children's Place, Inc. PLCE. All these three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Aaron's has reported better-than-expected earnings in the trailing four quarters, with an average beat of 10.6%.

Best Buy has an impressive long-term earnings growth rate of 11.8% and has also surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 33.8%.

The Children's Place has reported earnings beat in the trailing four quarters, with an average of 36.6%.

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