Wall Street Analysts Explain The Urban Outfitters Earnings Sell-Off

Urban Outfitters, Inc. URBN shares dropped more than 7 percent on Wednesday despite the company beating first-quarter earnings and sales expectations.

Urban Outfitters reported first-quarter net income of $32.6 million, or 31 cents per share, a 21 percent drop from a year ago. Analysts had expected 25 cents in EPS. Revenue was up 1 percent to $864.4 million, beating consensus expectations of $854.7 million.

Urban Outfitters also announced the launch of Nuuly, a subscription rental service for women’s apparel.

Several analysts have weighed in on Urban Outfitters following the mixed quarter. Here’s a sampling of what they had to say.

Second-Quarter Stumble

Bank of America analyst Lorraine Hutchinson said the first quarter was great, but the second quarter is off to a rough start.

“After a surprising positive comp in 1Q (+1%), 2QTD comps are down a mid-single digit against the best weeks of last year,” Hutchinson wrote in a note.

KeyBanc analyst Edward Yruma said softness in Urban Outfitters’ business continues to persist.

“Product issues at URBN will persist near term, but the business remains well positioned long term,” Yruma wrote.

Trade War Impact

Wedbush analyst Jen Redding said Urban Outfitters management is bracing for the impact of the latest trade war tariffs.

“Together, the combination of notable supply chain exposure to China, deteriorating business trends as seen in May in our Transaction Data, and a challenging 2Q SSS comparison continues to keep us sidelined until visibility improves,” Redding wrote.

MKM Partners analyst Roxanne Meyer said a slowdown in women’s apparel is dragging down Urban Outfitters numbers in the second quarter.

“Comps swung about 10 pts between April and QTD (with store comps likely -HSD), reflecting a slowdown in store traffic and steeper declines in apparel, with a lack of casual at Anthropologie and too narrow an edit point at UO blamed,” Meyer wrote.

Ratings And Price Targets

• Bank of America has a Buy rating and $27 target.
• KeyBanc has a Sector Weight rating and no target.
• Wedbush has a Neutral rating and $26 target.
• MKM Partners has a Neutral rating and $28 target.

The stock traded around $25 per share at time of publication.

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