UPDATE: Citi Lowers Urban Outfitters' Estimates; Raises PT

In a research report published today, Citi has lowered Urban Outfitters'

estimates as there is no evidence that GM improvement can offset the expense growth in 2Q. According to Citi, “URBN's new team outlined a departure from its long-term objective for 20% sales growth and faster profit growth as it ramps spending to invest in ecommerce and international. Operating expenses are set to grow at a mid-teens rate this year versus the HSD pace across 2H11. That puts the onus on gross margin to drive profit in 2012 after a (700)bps decline in the operating margin in 2011. And that makes consensus a stretch, in our view. 1Q11 is on track for a (200) to (300)bp drop in gross margin as comps remain negative and there's no evidence that GM improvement can offset the expense growth in 2Q. Our 2012 estimate drops to $1.45 and assumes a modest 40bps increase in the operating margin in a back half weighed year.” Citi maintains its Sell rating and increases Urban Outfitters PT from $24 to $26. Urban Outfitters is currently trading at $28.38.