NEW YORK (
(URBN - Get Report)
shake-up in the corner office is raising uncertainty for the company in 2012.
Chief Executive Glen Senk announced his resignation this week and will be replaced by Chairman, President and Co-Founder Richard Hayne. Senk said he is leaving the company to pursue another opportunity.
The reshuffle comes as Urban Outfitters tries to regain its footing following merchandise missteps and an inventory glut. The specialty apparel retailer has also experienced a slew of management changes in recent months.
The disruption at the top is causing analysts to rethink the company's timeline for a turnaround.
"Urban Outfitter's announcement that CEO Glen Senk is leaving unhinges the linchpin to the bull thesis and high valuation," Jefferies analyst Randal Konik wrote in a note. "We believe bulls were focused on management quality, particularly at the CEO level, as retail stories are very dependent on management team talent. This latest news puts the company's strategic direction in question and puts a hole in the key bull thesis. Bottom line, we see continued earnings risk and continue to be sellers."
Recently, Urban Outfitters appointed David McCreight as head of its Anthropologie division and Charles Kessler as chief merchandising officer of its namesake brand.
"With [Senk's] unexpected departure, we now see a cloud of uncertainty around the company's direction and the future, and as such, we see significant risk of loss of these new hires," Konik noted.
Urban Outfitters had just started gaining some traction in clearing inventory.
"My concern here is it's not just about a fashion miss, but Urban, and especially Anthropologie, are facing newer competitors who have lower prices," said Rahul Sharm, founder of Neev Capital. "And this combo of fashion misses, plus structural issues, in my opinion, need deeper changes to the buying and design teams, which I don't think have happened."
Citigroup analyst Jeff Black cut his rating on the stock to sell, slashed his price target to $20 from $34, removed the company from the "Top Picks" list, and lowered his 2012 estimate to $1.50 per share.