Sluggish Sales At Anthropologie To Continue In The Holiday Quarter For Urban Outfitters

Urban Outfitters (NASDAQ:URBN) has been among the top performers in the S&P 500 this year. However, the retailer’s sales and earnings missed consensus estimates this time around, sending the stock price down 10% in after-hours trading.

See our complete analysis for Urban Outfitters

The company’s Anthropologie brand lies at the heart of the problems in the quarter, which had a comparable sales decline of 2.7%. This was driven primarily by fewer transactions and lower AUR (Average Unit Retail). Moreover, a shift in fashion silhouette, a trend which has its roots in Europe, and which benefitted the Urban and Free People brand, worked to the detriment of the Anthropologie brand. Lackluster response to the apparel category of the brand forced higher markdowns. The company expects a modest comps improvement in the fourth quarter rate, over the third, but they may be pressured on a year-over-year basis, weighing heavily on the comps and margins. However, the expanded categories of home, beauty, BHLDN, and Terrain performed well.

The Free People brand grew its revenues 16% in the third quarter, with the strongest growth coming from its wholesale business, which witnessed a 30% increase. However, when normalized for last year’s operational challenges in the company’s distribution center, the growth was still a strong 13%. This was driven by the core apparel collection, increased business with online partnerships, and growth in the expanded categories of movement, intimates, and shoes, both domestically and in Europe. The positive reaction to the women’s apparel merchandise should bode well through the holiday season as well. Furthermore, a number of steps taken by the company will ensure growth in the future. The company was focused on improving the overall shopping experience through its website, and in this regard, it launched a new web platform, resulting in faster load times of the site, a streamlined checkout process, and enhanced search capabilities. Moreover, in September, the company launched an iOS shopping app in the UK and China, with over 15,000 downloads reported in the latter. Sales through the app already represent 45% of the demand in the region.

For the Urban Outfitters brand, the comp sales grew by 5%, driven by a double-digit increase in the DTC sales and positive store comps in both North America and Europe. Strong growth in the women’s apparel and accessories, as well as in the expanded categories of intimates, beauty, home decor, and tech helped in delivering the impressive performance. Additionally, for the first time in eight quarters, men’s apparel posted positive comps. The brand was also aided by the product collaboration with Justin Bieber for his Purpose tour in August. For the company as a whole, the DTC channel delivered strong double-digit sales growth in the quarter. Mobile devices now account for almost two-thirds of the company’s digital sessions.

Have more questions about Urban Outfitters? See the links below:

• Urban Outfitters’ Sales Growth Set To Continue
• How Will Urban Outfitters Perform In 2016?
• Why Is Urban Outfitters Investing In Restaurants?
• Why Has Urban Outfitters’ Stock Price Risen 66% In 2016?
• Higher Comparable Sales Helps Urban Outfitters Beat Consensus Estimates
• How Will Urban Outfitters Perform In The Second Quarter Of Its FY 2017?
• How Has Urban Outfitters Revenue Composition Changed Over The Last Three Years?
• What Are The Changes Urban Outfitters Is Implementing To Differentiate Itself?
• Why Is Urban Outfitters Increasing Its Store Count While Its Peers Are Cutting Down?
• Earnings Review: Why Were Urban Outfitters’ Results Impressive?
• What Is Urban Outfitters’ Revenue & Net Income Breakdown In Terms of Different Operating Segments?
• How Has Urban Outfitters’ Revenue Composition Changed In The Last Five Years?
• What Is Urban Outfitters’ Fundamental Value Based On Expected 2016 Results?

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