May 20, 2014
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Urban Outfitters' profit lags Street as costs rise

May 20, 2014

Teen apparel retailer Urban Outfitters reported a quarterly profit below market expectations as costs jumped and tough competition forced the retailer to spend more on marketing.

Source: Urban Outfitters

Urban Outfitters shares fell 3.5 percent after the bell on Monday.

Same-store sales at the company's Urban Outfitters brand, which caters to shoppers aged between 18 and 28, plunged 12 percent in the first quarter ended April 30.

"While Anthropologie and Free People continue to deliver record levels in sales and profits, Urban Outfitters had a disappointing quarter and is working diligently to regain its fashion footing," Chief Executive Richard Hayne said in a statement.

Suntrust Robinson Humphrey analyst Pamela Quintiliano said gross margin was "significantly below" expectations.

"It was over a 100 bits off (consensus) and clearly that was because of Urban Outfitters."

Margins fell to 34.8 percent in the quarter from 36.8 percent a year earlier.

Cost of sales jumped 9 percent to $447.8 million.

Net income fell to $37.5 million, or 26 cents per share, for the first quarter ended April 30 from $47.1 million, or 32 cents per share, a year earlier.

Net sales rose about 6 percent to $686.3 million.

Analysts on average expected the retailer, which has been struggling to win back customers from cheaper and trendier "fast fashion" chains such as Forever 21, H&M and Inditex's Zara, to earn 27 cents per share on revenue of $680.2 million.

Urban Outfitters shares, which have fallen about 20 percent in the last year, closed at $36.17 on the New York Stock Exchange on Monday.

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