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UPDATE 3-Urban Outfitters' Q1 profit beats Street by penny
May 14, 2009 / 10:55 AM / 8 years ago

UPDATE 3-Urban Outfitters' Q1 profit beats Street by penny

 * Q1 EPS 18 cents; Wall Street view 17 cents
 * Q1 combined same-store sales down 9.6 pct
 * Better-than-expected gross margin offset weak sales
 * Shares up as much as 8.2 pct  (Recasts, adds CEO and analysts’ comments, share movement byline)
 By Dhanya Skariachan
 BANGALORE, May 14 (Reuters) - Even as recession-weary U.S. shoppers tighten their purse strings, retailer Urban Outfitters Inc (URBN.O) managed to beat Wall Street estimates by a penny in the first quarter on better-than-expected gross margin.
 The apparel, accessories and home goods retailer, which has seen sales fall even after offering huge discounts, said its “business is well positioned to show improvement over the next several quarters.”
 “The environment is considerably more stable than it was in the fourth quarter,” said Chief Executive Glen Senk in a call with analysts.
 The company’s shares rose as much as 8.2 percent on the Nasdaq on Thursday.
  William Blair analyst Sharon Zackfia wrote in a note that shares could be bolstered by “better-than-expected margin performance and management’s optimism that the worst is behind the company on the top line.”   
 While Zackfia had expected Urban’s gross margin to fall by 420 basis points, the retailer’s gross profit margin decreased only by 300 basis points in the quarter.
 Senk said sales trends had improved, with April better than the preceding months.
 “If I look at the first quarter and I assume that April is a proxy for the second quarter, I feel better about the second quarter than I did about the first quarter,” he said.
 Urban Outfitters was one of the last clothing retailers to feel the heat from the downturn. But in recent quarters, markdowns have hurt profit margins as sales have slid.
 “We believe Urban Outfitters will be a beneficiary from the ongoing consolidation in retail and that its business appears to have bottomed,” Boenning & Scattergood analyst Holly Guthrie wrote.
 Both Zackfia and Guthrie have an “outperform” rating on the stock.
 The company’s Urban Outfitters and Anthropologie stores sell apparel, accessories and home goods to teens and women, respectively. It also operates the wholesale Free People apparel line.
 Net profit fell to $30.8 million, or 18 cents a share, in the first quarter, from $42.6 million, or 25 cents per share, a year earlier.
 Analysts on average had expected the Philadelphia-based company to earn 17 cents a share before special items, according to Reuters Estimates.
 Combined same-store sales at Urban Outfitters, Anthropologie and Free People decreased 9.6 percent in the quarter.
 Comparable-store sales fell 6 percent at the company’s Urban Outfitters stores and 13 percent at its Anthropologie stores.
 Economic uncertainty, market volatility and higher average retail prices were likely affecting the Anthropologie customer more than the younger Urban Outfitters customer, analysts have said.
 The company said total first-quarter sales fell 2 percent to $385 million.
 Urban Outfitters, which opened five new stores in the quarter, said it expects to open 42 new stores in the current fiscal year.
 The retailer’s stock was up 96 cents or 5.1 percent at $19.79 on the Nasdaq near midday, off an earlier high at $20.38.  (Additional reporting by Ajay Kamalakaran; Editing by Lisa Von Ahn, John Wallace and Matthew Lewis)    

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