Nov 18, 2014
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Urban Outfitters profit falls as costs rise

Nov 18, 2014

Apparel retailer Urban Outfitters Inc reported a lower-than-expected quarterly profit, hurt by increased markdowns and expenses related to marketing and technology.

The company's shares fell 4.9 percent in extended trading.

The retailer has been trying to reverse falling sales in Urban Outfitters brand by revamping stores, refining its merchandise assortment to focus on its target audience aged 18-28, and improving marketing.

However, the turnaround is taking longer than expected as fewer customers visit malls and companies compete fiercely for shoppers by offering steep discounts.

Comparable retail sales fell 1 percent in the quarter ended Oct. 31, while comparable retail segment sales at its largest brand Urban Outfitters, fell 7 percent in the quarter.

"I am disappointed by the results at the Urban Outfitters brand," Chief Executive Richard Hayne said. "There is much work to be done to improve the merchandise margins and store performance at the Urban brand."

The company, whose brands include Anthropologie and Free People, said gross margins fell to 34.81 percent of sales in the quarter, as it slashed prices to encourage more sales at its stores.

Selling, general and administrative expenses rose nearly 11 percent in the third quarter, on increased marketing and technology expenses as the company continued to expand its online presence.

The company, which competes with retailers such as Abercrombie & Fitch Co and Aeropostale Inc, gets most of its customers through stores in malls.

Abercrombie also cut its quarterly profit and sales estimates this month, citing lower mall traffic and high promotions.

Urban Outfitters said net income fell to $47.1 million, or 35 cents per share, in the third quarter, from $70.3 million, or 47 cents per share, a year earlier.

Net sales rose 5.2 percent to $814.5 million.

Analysts on average had expected a profit of 41 cents per share on revenue of $812.7 million, according to Thomson Reuters I/B/E/S.

The company's shares closed at $30.83 on Monday on the Nasdaq.

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