Urban Outfitters Turn At Anthropologie Is 'Stalled'

Urban Outfitters, Inc. URBN reported disappointing Q3 results, with a marked decline in comp and margin at Anthropologie. “With low visibility as to when trends will stabilize in apparel and ultimately improve, we remain on the sidelines,” MKM Partners’ Roxanne Meyer said in a report. She maintains a Neutral rating on the company, while reducing the fair value estimate from $36 to $35.

Urban Outfitters reported its Q3 EPS at $0.40, missing the MKM estimate of $0.46 and the Street's $0.44. The shortfall was mainly driven by a gross margin miss, analyst Meyer mentioned. She added, “To a lesser extent, earnings were negatively impacted by a sales shortfall and a higher SG&A ratio, offset by a lower tax rate and higher other income.”

Softness At Anthropologie

The retail segment comp came in at 1 percent, below Street expectations. The Urban Outfitters brand generated 5.2 percent comp growth, but this was offset partially by softness at Anthropologie, which declined 2.7 percent, and Free People, which was down 1.5 percent. The analyst commented that the turn at Anthropologie seems to have stalled.

Referring to reasons to be cautions, Meyer said that trends at Anthropologie “could remain sluggish well into 2017.” She added that Anthropologie seems to have “a fashion problem in tops vs. being a victim of a mega-fashion shift (that is said to be 3–4 years in the making).”