Urban Outfitters Inc.’s stock hit an eight-year low last month, at just over $16 a share. Contrarians looking for underpriced stocks would say it’s time to buy the Philadelphia-based retail giant.
Why? In the short term, Urban reported dismal same-store sales: “Thus far during the second quarter of fiscal 2018, comparable retail segment net sales are high single-digit negative,” the company said in a 10-Q regulatory filing.
While the retailer’s shares have since rebounded to about $19 last week, investors are asking longer-term questions: Will Urban Outfitters, whose critics say is in need of fresher leadership, go the way of Nordstrom and go private, paying shareholders a premium? Will the closely held public company be bought by a rival, as its market cap has dropped to $2 billion?
Urban’s share price has fallen about 30 percent year-to-date, more than those of other apparel stores. The main reasons include pressure from other e‐commerce sites (Urban derives about one-third of its sales online) and lower brick‐and‐mortar store traffic; weaker‐than‐expected promotions; and poor first-quarter earnings and sales, as well as a lower outlook for the second quarter.
As of April 30, the company operated 242 Urban Outfitters stores, 225 Anthropologie Group stores, 130 Free People stores, and 12 restaurants. But women’s apparel, particularly expensive dresses at Urban Outfitters and Anthropologie, didn’t fly off the shelves. And investors still aren’t happy about Urban buying Marc Vetri’s chain of pizza restaurants, “although that could enhance the experience in the stores,” said RBC Capital Markets analyst Brian Tunick.
“Executives have talked about opening up bigger stores, because if beauty and home and lingerie are where consumers are spending — not on apparel — they need a store catering to that. They might even put in a restaurant or a coffee bar to drive traffic.”
The acquisition itself, given it was a friend of the family, was “puzzling and strange,” said Stephen Cohn, co-president of Sage Financial Group in West Conshohocken.
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Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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