Urban Outfitters starts 2019 on frosty note, shares slip

A sign hangs outside an Urban Outfitters store in Evanston, Illinois, U.S. May 13, 2016. REUTERS/Jim Young

(Reuters) - Urban Outfitters Inc said on Tuesday that the year had started off weaker than expected, placing the blame on colder weather and “costly mistakes” in the spring fashion lines of its various brands.

The owner of Anthropologie and Free People also forecast a possible drop in same-store sales in the current quarter, sending its shares down 3.5 percent to $29.29 in extended trading.

Chief Executive Officer Richard Hayne on a post-earnings call with analysts said chilly weather in California and the early introduction of spring fashion lines led to declines in traffic to its stores in February.

Hayne also said uncertainty around Britain’s exit from the European Union hit store traffic in the continent’s high streets and that demand and margins would remain under pressure until there is a clearer picture on what the divorce would look like.

The apparel retailer expects flat to low single-digit fall in first-quarter comparable sales, while analysts were expecting a 1.8 percent rise, according to IBES data from Refinitiv.

Still, Hayne’s highlighted recent efforts to bring in-fashion products to stores faster would allow the company to return to positive sales growth as early as April.

Chief Financial Officer said on the call that gross profit margins could decline by about 150 basis points in the current quarter, hit by higher markdowns to clear inventory.

Urban Outfitters reported lower-than-expected comparable retail sales in the fourth quarter ended Jan. 31 but beat profit estimates on fewer discounts.

Reporting by Uday Sampath in Bengaluru; Editing by Sriraj Kalluvila