Urban Outfitters, Anthropologie Continue To Struggle

Urban Outfitters, Inc. URBN's first-quarter earnings report sent the stock lower by nearly 3 percent Wednesday. With the stock trading at its lowest level in years, some among Wall Street aren't ready to recommend the stock.

Wunderlich's Eric Beder maintained a Hold rating on Urban Outfitters with a price target lowered from $26 to $20 after the retailer's first-quarter revenue, margin and earnings all fell short of expectations.

Beder did acknowledge that Urban Outfitters' troubles isn't an outlier as nearly all specialty retailers are suffering from various "external consumer market headwinds." However, in Urban Outfitters' case, the analyst believes management is guilty of committing several "internal missteps" which is hurting its revenue, margin and earnings potential in both the short and long term.

Two Of Three Chains In Trouble

Urban Outfitters' core store benefited from four full quarters of comparable sales growth on a year-over-year basis, yet in the recent quarter comparable sales fell 3.1 percent. In fact, this marks the store's worst performance since 2014 and the analyst believes "lagging trends" now impacts the company's near-term outlook.

Moving on to Anthropologie, Urban Outfitters' largest concept chain, continues to struggle with a 4.4 percent same-store sales decline in the quarter. The chain suffered its worst quarter dating back all the way to 2011 and the analyst believes a year of "apparel missteps cannot be overlooked."

Finally, Free People was the lone bright spot in the quarter with a 1.5 percent same-store sales growth. However, the analyst did point out that the concept faced its weakest quarterly comparable sales rate since 2009. Nevertheless, the chain is the strongest of the three concepts, but investors are cautioned not to expect it to achieve the double-digit retail sales growth it previously contributed.

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Image: Mike Mozart, Flickr