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Urban Outfitters (URBN) Falls on Declining Q2 Comps Trend

Zacks Equity Research

Shares of Urban Outfitters Inc. URBN fell nearly 8% on Jun 9, in after-hours trading session after the company mentioned in a SEC filing yesterday that the comparable sales for the current quarter are deteriorating. So far in the second quarter of fiscal 2017, comparable retail segment net sales have declined by mid-single digit.

Analysts hinted that the company may report negative comparable sales in the fiscal second quarter as against a 4% increase in the year-ago quarter, if the downtrend continues. Comparable retail segment net sales, including the comparable direct-to-consumer channel, inched up 1% in the fiscal first quarter.

Nevertheless, Urban Outfitters is expected to witness long-term growth on the back of new store openings, increase in direct penetration, growing wholesale operations, technology advancements and merchandising improvements. We also believe that better product execution and effective inventory management will help augment performance. Management is making all possible efforts to enhance the performance of its brands through store refurbishment and by introducing more compelling assortments.

The company is also strategically investing in shop-in-shops. Urban Outfitters remains rational in opening new stores. The retailer opened 46, 57 and 49 stores in fiscal 2011, 2012 and 2013, respectively. It opened 38 new stores in both fiscal 2014 and 2015, and 31 in fiscal 2016. Management plans to open approximately 24 net new outlets in fiscal 2017.

Urban Outfitters currently has a Zacks Rank #3 (Hold).

URBAN OUTFITTER Price

URBAN OUTFITTER Price | URBAN OUTFITTER Quote

Stocks to Consider

Some better-ranked stocks in the retail space include Destination XL Group, Inc. DXLG, The Children's Place, Inc. PLCE and Perry Ellis International Inc. PERY. All these stocks hold Zacks Rank #2 (Buy).

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