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Looking for Urban Renewal

Urban Outfitters posts another sales decline, but the stock rises.

Urban Outfitters

(URBN) - Get Urban Outfitters, Inc. Report

still can't seem to fit in.

The Philadelphia-based apparel retailer posted a 7% increase in third-quarter sales from a year ago to $308 million, but missed analysts' target of $328 million. Same-store sales, or stores that have been open for a year or more, tumbled 10% from a year earlier.

By brand, same-store sales decreased 10% at its namesake chain, fell 10% at the trendy Anthropologie chain, and rose 9% at Free People, which has just eight stores.

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Following the report, Piper Jaffray downgraded the stock to market perform from outperform.

Still, the same-store sales decline didn't seem to surprise the market, and shares of Urban Outfitters rose 49 cents, or 2.7%, to $18.36 Tuesday. The retailer's stock has fallen 26% since March, when the company warned of a "dramatic shift" in women's clothing.

Last month, an analyst from Bear Stearns pointed to the company's "muddled fashion trends." The analyst held out little hope for an immediate turnaround in same-store sales and said recent difficulties may get worse before they get better.

"They have been picking the wrong fashions for a quite a while now," says Kurt Barnard, president of consulting firm Barnard's Retail Forecasting. "They don't appeal (to consumers). They seem to be stuck in the mud -- like the Intrepid."

Barnard believes Tuesday's stock rise in may be fueled by investors' belief in the Anthropologie chain, which he praised as having nicely presented merchandise.

"This is all pinned on hope," he says.