May 21, 2013
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Urban Outfitters sales miss Wall Street estimates despite profit increase

May 21, 2013

Teen apparel retailer Urban Outfitters sales missed analysts' estimates even as reduced discounting helped shore up profit in the first quarter.

Shares of the company fell as much as 4 percent to $42.77 in post-market trading on Monday.

An unusually long winter in large parts of the United States has dampened demand for spring merchandise, which are a staple at Urban's stores that include Anthropologie and Free People.

"The weather in the West Coast was certainly warmer and more conducive to spring/summer purchasing than here on the East Coast and we did see some sales differential across all brands as a result of that," Chief Executive Officer Richard Hayne said on a post-earnings call.

(image: Urban Outfitters/Stephanie Sian Smith)

Overall sales jumped 14 percent to $648.2 million in the quarter, but missed the average analyst estimate of $655.7 million.

Analysts, however, were encouraged by an improved performance at the company's Anthropologie unit, which has come under criticism for its unattractive styles.

Comparable retail net sales rose 8 percent at Anthropologie and the business contributed 40 percent to total sales in the quarter.

"We moved away from dependence on the quirky, preppy look and emphasized other areas of our brand's aesthetic reach with softer, sensual, feminine looks as well as adding elements of bohemia," Anthropologie Group Chief Executive David McCreight said on the call.

Urban said its profit was helped by a fall in merchandise markdowns due to improved demand at Anthropologie and lower store occupancy expenses.

Net income rose 39 percent to $47.1 million, or 32 cents per share, in the quarter ended April 30.

Analysts on average had expected earnings of 29 cents per share, according to Thomson Reuters I/B/E/S.

"I think 14 percent (sales growth) is pretty terrific for a seasonally small quarter and they were able to leverage expenses," Morningstar analyst Jamie Katz said.

"It appears to me the merchandise is working."

Urban said comparable retail business net sales, which also include sales in its online business, rose 9 percent in the quarter.

Shares of the company closed at $44.49 on Monday on the Nasdaq. They have risen about 70 percent in one year, outpacing the 27 percent increase for the broader S&P 500.SPX index.

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