Urban Outfitters’ (NASDAQ:URBN) stock crashed by 19% after the resignation of its CEO Glen T. Senk.  Glen Senk has been associated with Urban since last 17 years, initially as the president of Anthropologie and later as the company’s CEO from 2007-2011. While the company has named its Chairman and co-founder Richard Hayne as Senk’s replacement, the market took Hayne’s departure as a negative sign regarding Urban’s outlook. Urban Outfitters competes with other specialty retailers such as Ann (NYSE:ANN), Aeropostale (NYSE:ARO) as well as Gap (NYSE:GPS) and Abercrombie & Fitch (NYSE:ANF).
Why is the market apprehensive about Hayne
Though Richard Hayne co-founded Urban in 1970 and has been its chairman since 1976, the market is concerned with his appointment as Urban’s CEO. Some of the concerns around Hayne’s appointment is his commitment to the position provided that he is 64 years old and has had a limited workload in recent years. Additionally, a top notch management change after the all important holiday season may reflect some uncertainties regarding Urban’s future endeavors.
Urban Outfitters is currently standing at a critical juncture and while investors are hopeful for a potential turnaround after three disappointing quarters, a change of the company’s top does not inspire confidence.
Huge responsibilities on the shoulders of Hayne
Though Richard Hayne has been associated with Urban since its inception, we believe stepping into Glen Senk’s shoes would be a really challenging task. Senk is often regarded as the brain behind the emergence of Anthropologie as a major teen apparel brand, and investors feel that Urban may find itself directionless after his departure.
As the last three quarters saw numerous issues such as weak comps and inventory hangover plague the company, there are concerns about the company’s prospects. Though Urban’s stock rallied after strong holiday sales in its major brand Urban Outfitters, there are still incumbent issues with Anthropologie.
According to Trefis estimates, Anthropologie contributes roughly 28% to Urban’s stock value, and reviving Anthropologie will be the most crucial task ahead for Richard Hayne. Additionally, Hayne will also have to deal with numerous market-wide factors such as exceptionally promotional apparel market and fierce competition among teen apparel retailers.
While it may be too early to judge what does the appointment of Richard Hayne as the new CEO holds for Urban, it definitely is going to be a bumpy ride for Mr. Hayne going ahead.
Trefis price estimate for Urban Outfitters stands at $29.56, implying an upside of 25% to the current market price.Notes: