"The development shakes out faith that a turn in the business is imminent. Senk and CFO Eric Artz had begun to more Urban Outfitters in the right direction on inventory, but the lack of C-level tenure at the divisional level suggests that organizational issues could remain a serious distraction over the next year," Black wrote in a note.
There's also a question about how long Hayne, 64, will retain the role. While Hayne has been a strong guiding presence at the company, Black said he doesn't view him as having a strong hand in day-to-day management.
Hayne has been more focused on the growth of the company's newest concept, Terrain.
"We believe Hayne is well qualified for the position, but question his long-term commitment to the position given his age and recent limited workload at the company," Stifel Nicolaus analyst Richard Jaffe wrote in a note.Customer Growth Partners President Craig Johnson said Hayne may serve as CEO for a few years to get the company stabilized and during that time bring in another leader to groom to take over the post. While Urban Outfitters may be a risk in the near term, analysts are still convinced the stock is a good long-term bet. "Longer term, we are positive on Urban Outfitters as a scarce international growth story, with a clean balance sheet and multiple differentiated concepts," Baird analyst Erika Maschmeyer wrote in a note. "While we believe near-term uncertainty exists as Urban Outfitters reworks its merchandise offerings and the changes put in place by the new CEO take time to materialize, we remain positive on the long-term outlook for the company," Jaffe echoed. "This is based on a recently strengthened management team, previous merchandising strength, strong cash flow and visibility for continued square-footage growth." -- Reported by Jeanine Poggi in New York
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