Five Below Soars, Urban Outfitters Plunges: Retail Roundup

NEW YORK ( TheStreet) -- Two retailers saw large stock swings on Tuesday reflecting each company's positioning in a difficult apparel retail environment.

Urban Outfitters ( URBN) shares plummeted after the retailer disclosed that third-quarter sales comparisons were only in the mid-single digit range so far, below analysts' expectations. The sales comments were disclosed Monday evening in Urban Outfitters' quarterly regulatory filing with the Securities and Exchange Commission.

"A mid-single digit comp increase is below the first half trend of positive 9% and will likely be viewed negatively by the Street," wrote Stifel analyst Richard Jaffe in a research note last night. "We would be buyers of the stock in weakness."

Shares were falling 10.3% to $38.30.

Jaffe said he believes sales are up between 3% and 5% at Urban Outfitters, but faring better at its two other brands Anthropologie and Free People, up between 6% and 8% and between 18% and 20%, respectively.

"In our opinion, the outlook for the balance of the quarter is favorable. The current floorsets at Urban, Anthropologie and Free People look attractive and seem to be well received by customers. Additionally management is focused on several operational initiatives (improved inventory turnover and increased speed to market) that allow URBN to buy product closer to need, allowing them to make better product decisions and thus minimizing markdown risk," the note said. "We believe strength should continue throughout 2013."

The analyst reiterated his "buy" rating and $48 for his 12-month stock target price, but trimmed third-quarter earnings estimates and full-year estimates each by a penny to 47 cents a share and $1.93 a share.

Wall Street is looking for Urban Outfitters to post earnings, on average, of 46 cents a share for the quarter and $1.93 for the year, according to Thomson Reuters.

"Although its customer base skews older, Urban Outfittersseems to have caught the same bug plaguing the teen retailers, as deceleratingcomps ... are to blame for URBN's lower comp outlook," wrote Wells Fargo Securities analyst Paul Lejuez in a research note on Tuesday. He rated Urban Outfitters at "outperform."

The retailer plans to offer more promotions at its flagship brand to regain customers, which may pressure margins in the quarter.

On the bright side, Anthropologie's comp sales seem to be accelerating while strong trends continue at Free People, the note said.

The analyst also reduced his third-quarter earnings estimates by 3 cents to 49 cents a share and full year estimates by 6 cents to $1.99 a share.

Meanwhile, Five Below ( FIVE) surged as much as 19% and set a new record since the company went public in July 2012, following the discount store's better-than-expected earnings results released Monday. The retailer, known for its position that everything sold in the store is either $5 or less, said that second-quarter net sales jumped by 35% to $117.1 million from the prior year. Comparable-store sales increased by 6.6%.

Five Below reported a profit of $4.1 million, or 7 cents a share, for the quarter. Adjusted net income came in at $6.1 million, or 11 cents a share. Analysts expected earnings of 9 cents a share.

The company also upped its earnings guidance for the remainder of the year. Net sales are expected to be in the range of $531 million to $536 million based on opening 60 net new stores for the full year and assuming a 5% increase in comparable-store sales.

The company forecast earnings between 60 cents and 63 cents a share, with adjusted earnings of 68 cents to 71 cents a share. Analysts, on average, expect the company to post earnings of 71 cents a share.

The stock was rising 17% to $48.01.

Sears ( SHLD) shares were also steadily gaining on Tuesday. Shares were up 6.3% to $56.40. Shares of Guess ( GES) were falling 3.1% to $30.05.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

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