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Why Urban Outfitters (URBN) Stock Is Nosediving

URBN Cover Image
Why Urban Outfitters (URBN) Stock Is Nosediving

What Happened:

Shares of clothing and accessories retailer Urban Outfitters (NASDAQ:URBN) fell 14.1% in the morning session after the company reported fourth-quarter results with same-store sales, revenue, and gross margin that missed analysts' expectations, leading to a bottom-line EPS miss vs. Wall Street's estimates. Specifically, revenue in the Anthropologie Group revenue segment fell below expectations, while sales in the Urban Outfitters segment came in ahead. However, growth in the Urban Outfitters segment continued to decline in absolute terms. On a more positive note, the Nuuly and Free People segments recorded solid growth and helped offset some of the weaknesses observed during the quarter. Overall, this was a weak quarter for Urban Outfitters.

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What is the market telling us:

Urban Outfitters's shares are not very volatile than the market average and over the last year have had only 9 moves greater than 5%. But moves this big are very rare even for Urban Outfitters and that is indicating to us that this news had a significant impact on the market's perception of the business.

The biggest move we wrote about over the last year was about 2 months ago, when the stock gained 5.9% on the news that the company announced a 10% increase in revenue for the two months ending December 31, 2023. The growth was driven by an 8% increase in retail segment sales, with notable positive performances in digital channels and retail store sales for brands like Free People and Anthropologie.

Additionally, the company announced Shea Jensen as the new President of Urban Outfitters Brand, North America, effective February 5, 2024. Given the growing challenges in the retail landscape in recent quarters, this updated guidance is expected to instill renewed optimism among investors. The announcement also aligns with the positive preliminary results reported by peers Abercrombie & Fitch (NYSE:ANF) and American Eagle Outfitters (NYSE:AEO) on January 8, 2024. Both companies (ANF and AEO) raised their financial projections ahead of the upcoming earnings season, suggesting that specialty retail seems to be holding okay.

Urban Outfitters is up 13.4% since the beginning of the year, but at $40.50 per share it is still trading 14.2% below its 52-week high of $47.18 from February 2024. Investors who bought $1,000 worth of Urban Outfitters's shares 5 years ago would now be looking at an investment worth $1,313.

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