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Why Urban Outfitters Stock Slipped Today

Jeremy Bowman, The Motley Fool

What happened

Shares of Urban Outfitters (NASDAQ: URBN) were falling today. Though there was no direct news out on the company, retail stocks dropped broadly as the S&P 500 Retail ETF finished down 2.1% while the overall market was flat with the S&P 500 up 0.1%. A combination of oil prices hitting a six-month high and jitters about the upcoming earnings season seem to have pushed Urban Outfitters stock down today.

Shares of the fashion retailer closed down 6%.

An Urban Outfitters storefront

Image source: Urban Outfitters.

So what

Oil prices climbed to a six-month high today, rising 55% since Christmas Eve to $65.90, and gasoline prices hit $2.84, up from $2.61 a month ago. Though gas prices tend to rise as summer approaches, the rapid increase may pinch consumer spending in other areas like retail, which is sensitive to pocketbook issues like gas prices.

Meanwhile, investors may also be nervous about the latest round of earnings reports as retailers will no longer get a benefit from the corporate tax cut that help lift industry profits in 2018. Retailers could also face a hangover from the government shutdown in January and delays in tax refunds as well as smaller-than-expected refunds.

Urban Outfitters isn't expected to report earnings until May 21, but earnings season will kick into high gear with reports expected from the likes of Amazon.com and Facebook. Amazon's numbers, in particular, could shed light on what to expect for brick-and-mortar retailers.

Now what 

Urban Outfitters turned in a strong round of results in its holiday quarter with comparable-store sales rising 3%, capping off a year with 8% comps growth.  Adjusted EPS in the period rose from $0.69 to $0.83. 

When the retailer, which also owns Anthropologie and Free People, reports first-quarter earnings, analysts are expecting flat revenue at $855.5 million and for EPS to fall on a year-over-year basis from $0.38 to $0.25. Urban Outfitters shares are now trading near their 52-week low as the stock has steadily fallen over the last seven months. Still, considering the low earnings bar for the first-quarter, the stock could bounce back on a better-than-expected report. 

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Amazon and Facebook. The Motley Fool owns shares of and recommends Amazon and Facebook. The Motley Fool has a disclosure policy.