Update: Wedbush Maintains Urban Outfitters at Neutral, Says Sales Trends Overshadowed by Disappointing Margin Guidance

Wedbush analyst Betty Chen published a report on Urban Outfitters

that maintains its Neutral rating and $42 price target. Wedbush reported that, “In particular, management alluded to Q1 QTD sales running similar to Q4's level, which is impressive considering macroeconomic weakness and unfavorable weather. That said, the rapidly growing lower-margin web products (as limited quantity obscures IMU), along with higher delivery expenses is pressuring gross margin, leading to guidance for “at least +50 bps in gross margin expansion this year, below consensus outlook for at least +110 bps. Management continues to believe that gross margin can retrace historical peaks of ~41% (vs. 36.9% in F12) though timing remains uncertain.” Shares of urban outfitters closed at $41.50 on Monday.