Urban Outfitters (URBN) Stock Drops on Lower than Expected Q4 Earnings

Shares of Urban Outfitters Inc. (URBN: Charts, News) closed down -1.56 or -5.29 percent to $27.95 per share on Tuesday, after the company reported its fourth quarter earnings had missed analyst expectations. Urban Outfitters reported net income of $39.3 million, with diluted earnings per share coming in at $0.27 per share, which was slightly below the average of a survey conducted by Zack's Investment Research.

The median expectation of 29 analysts was for the company to post net income of $0.30 per share, which was -40 percent lower than earnings for the same period one year ago.

Yearly net income was $185.3 million or $1.19 per share, 32.1 percent lower than the $272.9 million or $1.60 per diluted share the company earned in 2010.

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Philadelphia, PA based Urban Outfitters is best known for specialty retailing of its designer brands of clothing through its outlets, which include, Free People, Terrain, BHDLN and Anthropologie, among others. The company reported an improvement in its total sales for 2011, but on narrower margins.

Urban Outfitters reported its net sales for the fiscal fourth quarter of 2011, ending on January 31st of 2012 were $730.6 million. Sales for 2011's fourth quarter were +9.3 percent higher than the previous year's fourth quarter results of $668.4 million.

Net sales for fiscal 2011 came to $2.47 billion, an increase of +8.8 percent over 2010's fourth quarter results of $2.27 billion. Nevertheless, the company's gross profit margins fell substantially, declining by -9.55 percent for 2011's fourth quarter and -6.4 percent for the year.

Urban Outfitters attributed the drop in gross margins on rising merchandise markdowns the company had to make to clear inventories of slow moving ladies apparel at its Urban Outfitters and Anthropologie outlet stores. In addition, another factor cited for the decline was occupancy de-leverage resulting from the company's comparable store net sales.

Urban Outfitters founder and Chief Executive Officer, Richard Hayne commented on the firm's fourth quarter results, stating that, I am pleased that we managed our inventories to appropriate levels at year end even though our margins during the quarter suffered as a result. In addition, he added, We're pleased we delivered positive comps across our North America businesses during February and that customers responded well to our spring product.

Richard Hayne replaced long-term CEO Glen Senk in January, taking up the CEO position effective February 27th. Senk was at the helm of the company since 2007 and left the company to join privately held jeweler David Yurman. Urban Outfitters stock declined more than 20 percent after the news of Senk's leaving.

While recent news has been less than favorable to Urban Outfitters, with recent improvements in employment and other significant economic data, the U.S. economy seems poised for a rebound. This will most likely affect the company's prospects positively if the strength in the economy can be sustained.

With Urban Outfitter's stock trading midway between its yearly high and low, the stock price could go either way. Nevertheless, with overall improvement in the economy, Urban Outfitters Inc. could see a turnaround in 2012.

Other News About URBN
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More inventory markdowns seen for Urban Outfitters.
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Published on Mar 14, 2012
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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