Urban Outfitters Profit Misses Estimates

(RTTNews) - Apparel and accessories retailer Urban Outfitters, Inc. (URBN) said Monday after the markets closed that its third quarter profit fell 33% from last year, as higher costs and expenses more than offset a 5% increase in revenue.

The company's quarterly earnings per share also came in below analysts' expectations, but its quarterly sales just managed to beat analysts' forecast.

"While we are pleased with delivering record third quarter sales fueled by strong performances at our Anthropologie and Free People brands, I am disappointed by the results at the Urban Outfitters brand," said Richard Hayne, Chief Executive Officer of Urban Outfitters. "There is much work to be done to improve the merchandise margins and store performance at the Urban brand, but I see positive signs as shown by strong results at the brand's direct-to-consumer channel."

Urban Outfitters shares are currently losing 4.96% in after hours trading after closing the day's regular trading session at $30.83, down 2 cents. The shares trade in a 52-week range of $29.11 to $40.67.

The company operates 236 Urban Outfitters stores, 199 Anthropologie stores, 102 Free People stores and 2 Terrain garden centers. The company's competitors include Abercrombie & Fitch Co. (ANF) and Gap, Inc. (GPS).

For the third quarter ended October 31, 2014, the Philadelphia, Pennsylvania-based company reported net income of $47.1 million or $0.35 per share, compared to $70.3 million or $0.47 per share for the year-ago quarter.

On average, 35 analysts polled by Thomson Reuters expected the company to earn $0.41 per share for the third quarter.

Urban Outfitters had warned that its third quarter earnings would be negatively impacted if gross profit margin for the quarter were to deleverage at a rate greater than during the first half of the year due to lower than expected sales.

Gross margin for the third quarter shrank to 34.8% from 37.7% a year ago, mainly due to lower initial merchandise markup followed by higher markdowns at the stores and store occupancy expense deleverage due to negative store comparable net sales, which were all mainly driven by the poor performance at the Urban Outfitters brand.

Operating margin for the quarter narrowed to 9.4% from 13.6% last year. Net sales for the third quarter rose 5% to a record $814.47 million from $774.05 million in the same quarter last year. Thirty-three analysts had a consensus revenue estimate of $813.05 million for the third quarter.

Comparable retail segment net sales, which include the company's comparable direct-to-consumer channel, fell 1% in the third quarter. Comparable retail segment net sales increased 15% at Free People and 2% at the Anthropologie Group but slipped 7% at Urban Outfitters. Wholesale segment net sales rose 26%.