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Urban Outfitters falls on weak 3Q-to-date sales

NEW YORK (AP) -- Shares of Urban Outfitters slid Tuesday morning as the retailer said its third-quarter sales increases are weaker than in the first half of the year.

THE SPARK: The Philadelphia company disclosed in a regulatory filing late Monday that revenue at stores open at least a year is up by a mid-single-digit percentage rate so far for the third quarter. The results include direct-to-consumer sales, which generally includes online and catalog sales.

This figure is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.

Urban Outfitters Inc., whose brands include Free People, Anthropologie and its namesake, reported a 9 percent increase in revenue at stores open at least a year in both the first and second quarters.

THE ANALYSIS: Richard Jaffe of Stifel Nicolaus said in a client note that the quarter-to-date guidance is pretty solid, considering the difficult conditions the retail sector is facing with consumers more cautious on their spending. The analyst said that the forecast indicates that shoppers are reacting favorably to its on-trend merchandise. Still, he expected Wall Street to be a bit disappointed by the forecast and suggested buying on weakness in the stock.

Jaffe maintained a "Buy" rating and $48 price target.

Adrienne Tennant of Janney Capital Markets said that she believes the quarter-to-date figure is below the retailer's first-half performance due to weaker-than-expected results from its Urban Outfitters brand. But the analyst is upbeat on the company over the long term, citing its disciplined approach to inventory management and better merchandise.

Tennant kept a "Buy" rating but trimmed its price target to $46 from $52.

A representative for Urban Outfitters did not immediately respond to an email seeking comment.

SHARE ACTION: Down $4.71, or 11 percent, to $38 in morning trading. The stock has traded between $34.38 and $44.96 over the last year. For the year to date, the shares are up 9 percent.