Interpreting Urban Outfitter's Same-Store Sales Miss

Urban Outfitters, Inc. URBN reported another miss in Q4, with same-store sales short of expectations.

“[W]e do not read much into January’s softness for projecting spring sales, given it is the lowest volume month of the year and largely focused on backward-looking clearance activity,” Wedbush’s Morry Brown said in a report.

Urban Outfitters reported its Q4 SSS below the consensus estimate of +1 percent. On a two-year stack basis, the company’s overall comp decelerated sequentially by 400 bps [basis points]. All three divisions decelerated after the Holiday season, implying “significantly negative comps during January,” Brown mentioned. He maintained a Neutral rating on the company, with a price target of $28.

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Q4 Performance Read Through

Anthropologie recorded its third consecutive negative comp, with little traction in apparel sell-through during the Holiday season. Despite this, the shift in product mix, higher IMU [initial mark-up] and easing comps “could offer some margin support into spring,” Brown noted.

Checks indicated increased promotions and markdowns in Q4, across all three divisions, the analyst stated. He reduced the EPS estimate for Q4 from $0.59 to $0.56.

The EPS estimates for 2016, 2017 and 2018 have been reduced from $1.90 to $1.87, from $2.03 to $2.01 and from $2.22 to $2.20, respectively. Brown expressed optimism, however, on the company’s long-term growth prospects.