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Urban Outfitters says it's reviewing 'all areas' of its struggling namesake stores

By Bill Peters

Shoppers are 'not as exuberant as they were when first coming out of the pandemic,' CEO says

Clothing retailer Urban Outfitters Inc. said Tuesday it is reviewing "all areas" of its struggling namesake stores, after yet another quarter of falling same-store sales and what executives described as waning exuberance among shoppers.

Those remarks came during Urban Outfitters' (URBN) earnings conference call, after the company - which also runs women's clothing chains Anthropologie and Free People, as well as Nuuly, a women's clothing rental and resale service - reported fourth-quarter results that missed expectations.

Shares sank 10.2% after hours.

Chief Executive Dick Hayne said on the call that while the retailer's customers remain upbeat overall, "they're not as exuberant as they were when first coming out of the pandemic."

"They don't have as many weddings and events to attend. They are less apt to move and have recently refurbished their living spaces," Hayne said. "So demand for categories like dress or footwear and home furnishings are trending softer."

However, he said consumers were in decent financial shape, adding: "They tend to be optimistic, want the latest fashion and are willing to spend some of those extra earnings to enjoy them."

Urban Outfitters executives said they believe the company could put up "low-single-digit" same-store sales growth across its business for both the current first quarter and the full fiscal year ahead - helped by Anthropologie and Free People, which tend to cater to wealthier customers who are better shielded from inflation. Wall Street analysts forecast 2.8% same-store sales growth for the year.

However, the company said first-quarter same-store sales for its namesake Urban Outfitters chain, specifically, would look a lot like the fourth quarter, when they fell 13.6%. They said those sales would improve over the course of the year.

Urban Outfitters stores have struggled to stay fashionably relevant among younger, less affluent customers, who have been hit by two years of higher prices for basics. That inflation has hurt demand for clothing across the industry.

As part of efforts to revitalize its business, Shea Jensen - a veteran of department-store chain Nordstrom Inc. (JWN) - joined the company this month as president of its Urban Outfitters brand for North America. During the call, Hayne said having that leadership in place is the core ingredient to the brand's turnaround.

Still, management said they have had to cut prices at Urban Outfitters more than expected, to clear out existing clothing stockpiles.

"Markdowns were flat for the quarter versus last year, but were higher than planned in the month of January as Urban Outfitters needed to promote more aggressively than planned to clear through excess inventory," Frank Conforti, the company's chief operating officer, said on the call.

For the fourth quarter, Urban Outfitters reported adjusted earnings per share of 69 cents, below FactSet analyst forecasts of 74 cents. Revenue rose 7.3% to a $1.486 billion, just below estimates for $1.499 billion.

As Anthropologie puts up bigger same-store sales gains, executives said they are trying to "modernize" what is on its shelves, offering refreshed denim and dress selections in an effort to attract more customers under 40.

-Bill Peters

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


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02-27-24 2018ET

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