Brean Murray Carret: New Stores No Longer the Answer for Urban Outfitters' Problems

In a research report published today, Brean Murray Carret maintained its Sell rating on Urban Outfitters

as the company recently reported dismal 4Q results and are producing weaker fashion looks as of late. “While URBN bulls will point to better inventories and more full price selling as compared to the disaster in 4QFY12 (where gross margins were down a whopping 950 bp), we believe the fashion looks remain weak and that near-term results will remain under pressure. Futher, we are disappointed, but really not surprised, that new management continues to think the only real answer to problems is to increase store counts through thick and thin, even when the product is not providing the answers (or justification) or unit expansion; frankly, store expansion in the face of continued weak operating results strikes us as a desperate play to grow and maintain ace with investors as a unit expansion story (deserving of a premium multiple) than a sound strategy,” Brean Murray Carret explained in the report. Brean Murray Carret maintains its $23 PT on Urban Outfitters, which closed yesterday at $29.51.