Urban Outfitters (URBN) - Get Report shares plunged Wednesday after the clothing retailer posted weaker-than-expected third quarter earnings amid weakening sales for some of the nation's largest clothing-focused store chains.
Urban Outfitters said earnings for the three months ending in October came in at 56 cents per share, down 20% from the same period last year and just shy of the Street consensus forecast of 57 cents. Group revenues, the company said, fell 1.4% to $987.5 million, again missing analysts' forecasts of a $1 billion tally.
The retailer also added the inventories increased by 17.7% from last year, as of October 31, but noted that comparable store sales rose 3%, and are trending higher into the holiday period, allowing the company to put a brave face on the stock's disappointing earnings reaction.
"As we enter the holiday season and based on what we observed in the third quarter, the North American consumer seems to be in excellent shape," CEO Richard Hayne told investors on a conference call late Tuesday. "The economy is strong, jobs are plentiful, and the consumer sentiment remains high. She is willing to spend when offered compelling products and the value is right."
"A word of caution however, the big upcoming events Black Friday and Cyber Monday have an outsized effect on total quarterly comparisons and those results are yet to be written," he added. "In addition, the shortened time between Thanksgiving and Christmas this year could negatively impact overall sales. Nevertheless, we are delighted with the current strength in our business and believe all three brands could deliver positive comps in Q4."
Urban Outfitters shares were marked 15.8% lower at the start of trading Wednesday to cahnge hands at $24.36 each, a move that would extend the stock's year-to-date decline to around 25%.
The group's third quarter earnings followed similar weakness from department store retailer Kohl's Corp (KSS) - Get Report , which slashed its full-year profit guidance after missing Wall Street forecasts for same-store sales and earnings growth.
"While Urban Outfitters' apparel assortment performed sequentially better than the 1H, the category continues to hinder the brand's results. Despite Urban Outfitters' merchandise issues, management continues to believe we are in the early innings of a fashion shift," said KeyBanc Captial analyst Edward Yruma, who carries a 'sector weight' rating on the stock.
"Given Urban Outfitters'elevated inventories and management commentary on inventory levels in department stores, we remain cautious on women's apparel broadly for the holiday," he added.