Retailers have been taking various proactive measures that include strengthening liquidity and cutting down on expenses to tackle the challenges stemming from coronavirus pandemic. Likewise, Urban Outfitters, Inc. URBN has issued additional business updates to stay afloat in such an unprecedented environment. Management recently announced that its global retail stores will continue to remain closed till further notice. The company’s stores have been temporarily shuttered since Mar 14.
In order to reinforce its financial position and raise flexibility, Urban Outfitters has borrowed $220 million and curbed capital budget by more than $100 million by deferring projects. It has also cut down on investments for expansion into China and enhancement of the subscription rental service, Nuuly. On its last earnings call, management anticipated capital expenditure to be $250 million for fiscal 2021, mainly associated with investments in additional and enhanced distribution facilities.
Urban Outfitters has been lowering non-payroll costs, adjusting inventory levels and extending payment terms for vendor invoices. It also carried out temporary suspension of rent payment, cancellation or delay of a few store openings, elimination of bonuses for fiscal 2021 and delay in all merit increases. Additionally, the company has also chosen to suspend buybacks, minimize senior leadership compensation during the furlough period and eliminate directors’ cash compensation for the balance of the current fiscal year. Urban Outfitters has furloughed the majority of its associates for 60 days effective Apr 1. However, these workers are entitled to receive enrolled benefits.
Earlier, Urban Outfitters had provided updates on business trends. The apparel retailer informed that it is witnessing low traffic and sales across areas like Milan, Italy, and Seattle, Washington, which have been severely hit by coronavirus. Management is unable to forecast the impact of COVID-19 on the business in first-quarter fiscal 2021 due to unpredictability surrounding the spread of coronavirus across North America and Europe. Management also cited that in the interim, the company’s e-commerce and subscription businesses will continue to function.
A Few Other Retailers’ Actions
In addition to Urban Outfitters, L Brands LB, Macy’s M and Tilly's TLYS have been largely facing the brunt of the alarming spread of the global pandemic and have also taken similar measures. Women’s apparel retailer, L Brands suspended quarterly dividend, cut down on capital expenditures and drew $950 million from the revolving credit facility. It has also temporarily reduced base compensation by 20% for senior vice presidents, deferred annual merit increases and furloughed the majority of its store associates effective Apr 5, till further notice.
Renowned omni-channel retailer, Macy’s has suspended second-quarter fiscal 2020 dividend and lowered capital expenditures for the current fiscal year. The company has also chosen to access the $1.5 billion available under the revolving credit facility. Apparel and accessories dealer, Tilly's has borrowed $23.7 million under its credit facility, shut down the distribution center in Irvine, CA and furloughed most of its associates. It has also recognized additional cost reductions for fiscal 2020.
Coming back to Urban Outfitters, the Zacks Rank #5 (Strong Sell) company’s shares have plunged 48.8% in the past three months compared with the industry's decline of 49%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report
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