Jim Cramer -- Buy Urban Outfitters on Dip After Big Disappointment

NEW YORK (Real Money) -- Do you trust Urban Outfitters  (URBN) management? Or do you not and just say, "You don't deserve my trust because you blew it so badly"?

That's where I find myself right now having listened, dumbfounded, to a call that was, with the exception of two weeks in April for one formerly red-hot division, Anthropologie, basically a barnburner.

That's right; if you believe management, up until one month ago this retailer, which had begun to pull away from all of its competitors, was just on fire. Then the roof caved in on Anthropologie, and you can see the results on your screen.

Urban has three divisions that matter: first, Free People; the teen apparel company that's fabulous and doing incredibly well is the smallest of the three. It had a 17% increase in comparable store sales. Downright incredible.

Then there's the flagship, Urban Outfitters, which had been doing terribly but has had a definitive turnaround, one that allowed it to continue to post excellent numbers, 5% comparable store sales this time around. Better than most.

And then there's pay dirt, the 199-store division that is Anthropologie, that curious admixture of everything from furniture to wedding gowns to accessories that I thought would be delivering mid-to-high single-digit gains because it had become the leader of the chain. The idol of most others in retail.

Yet, it only delivered 1% comp growth.

I could feel my blood boil when the company put out that anemic number. How could they not have flagged that shortfall earlier? Could it really be just the last two weeks of April? Isn't there something bigger involved? How could 14 days bring down what was otherwise looking to be a very good mid-single digit report from the division?

I am not alone in thinking that way. I know that most of the analysts who cover the stock were stunned in disbelief that things could disintegrate so quickly for the hottest division in the chain.

What went wrong? Frankly, on the surface it just sounds like they "missed opportunities in a few key silhouettes, fabric and price points," as they put it on the call. "It was a disappointment and a bit of a surprise as we had a stronger comparable performance going into April" according to David McCreight, the division's leader, in what has to be the understatement of the retail year.

Why does this all matter? Why can't we just say they blew it? What's the point of discussing it -- just sell it and move on.

Opportunity, that's why. You see, the company made it clear several times in the call that the whole chain, including Anthropologie, rebounded and May is off to a self-described "very strong start." Plus, the company has the firepower to purchase 21.9 million shares starting today, and who is to say that they aren't going to put their money where their mouth is?

Nevertheless, I have to tell you that the reason the stock is down so hard has to do with the legacy of a company that can tear your heart out just when you really believe in it. Even as this management team is the old terrific founders group, brought back after years of the company being fallow, the burns are still too recent.

The analyst community feels horrifically bagged. Plus there is a foreboding here, as the company talked about a major distribution hub switch that has to go smoothly to make the projections.

Great. That's just what I needed from these guys.

Still, here's my bottom line. If people are going to send this down 12%-15% because of two weeks of one division and the company said that division's problems are through, I am going to give them the benefit of the doubt.

I think that Urban's suffering from the Kohl's  (KSS) syndrome, an apparel company that failed to deliver like other apparel companies in a very difficult window. I bet Anthropologie will come back this current quarter and we will wonder why we didn't pull the trigger.

Yes, I was too positive going in, a creature of the company's guidance. Now I think people are too negative on the go out, and that both extremes were wrong.

I'd start buying into the downgrades. I just don't believe the turn, after being not at hand but in hand, can be wiped away with two weeks of bad selections at a division that had otherwise been delivering excellent results.

It's just not worth throwing away. I say give them the benefit of the doubt, and buy some down 12%. I am sure the company will be right behind you.

Editor's Note: This article was originally published at 6:15 a.m. EDT on Real Money on May 19.

At the time of publication, Jim Cramer's charitable trust Action Alerts PLUS held no positions in stocks mentioned.

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