Shares of Urban Outfitters Inc. shed more than 15 percent of their value in early after hours trading following the Philadelphia-based specialty store group’s disclosure of first-quarter earnings that fell well short of both year-ago results and analysts’ consensus estimates.
In the three months ended April 30, the operator of the Urban Outfitters, Anthropologie and Free People nameplates registered net income of $32.8 million, or 25 cents a diluted share, 12.6 percent below the $37.5 million, or 26 cents, recorded in the 2014 period. The earnings per share figure was also 5 cents below the 30-cent result expected by Wall Street.
Sales improved, but less than analysts had expected. Revenues were up 7.7 percent to $739 million, from $686.3 million, but were more than $19 million below the consensus estimate of $758.3 million.
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Sales rose at all three of the company’s groups, with Urban Outfitters, a top-line trouble spot last year, up 6.5 percent to $295.7 million; the Anthropologie Group, including BHLDN and Terrain, up 3.8 percent to $311.4 million, and Free People up 21.4 percent to $132 million. On a comparable basis, including direct-to-consumer sales, Urban Outfitters moved up 5 percent, Anthropologie up 1 percent and Free People up 17 percent.
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But gross margin fell 141 basis points to 33.3 percent of sales as the 10 percent increase in cost of goods sold — to $492.6 million — outpaced the corporate sales gain. Similarly, selling, general and administrative costs were up 8.2 percent to $193.4 million while inventories rose 14 percent to $398 million.
The company attributed the decline in gross margin to “lower initial margins at the Urban Outfitters brand and higher delivery and fulfillment expense across the entire company.”
The firm cited the acquisition of merchandise to stock new and non-comparable stores for the increase in inventories, noting that comparable retail segment inventories increased 8 percent at cost while decrease 5 percent by units.
Shares of the company, up 2.9 percent to $40.72 during the regular trading session in anticipation of improved profitability, fell 15.5 percent to $34.40 after the quarterly results were disclosed upon the 4 p.m. close of the markets.