• Q1 earnings fall to US$32.8m
  • Gross margin down 141 bps
  • Sales increase 8%
Weaker than expected results were driven by merchandise misses

Weaker than expected results were driven by merchandise misses

Urban Outfitters is weathering the tribulations of the youth fashion market far better than its competitors, one analyst believes, despite first-quarter profit and sales that missed expectations.

The US lifestyle retailer revealed earnings of US$32.8m, or $0.25 per diluted share, in the three months to the end of April. This compared to earnings of $37.5m, or $0.26 per diluted share in the year ago period.

This came in $0.05 below consensus and Stifel's estimate, and 4% below last year’s $0.26.

Gross margin decreased by 141 basis points, primarily due to lower initial margins at the Urban Outfitters Brand and higher delivery and fulfilment expense across the entire company.

Net sales, however, were up 8% over the same quarter last year to a record $739m. Comparable retail segment net sales increased 4% but were below Stifel's expectation of 4% and the 6% comp achieved in the fourth quarter.

Stifel said the weaker than expected results were driven by merchandise misses in dresses and accessories given the sizeable market this category represents, in addition to the shift of a catalogue delivery from April into May.

Comparable sales grew 17% at Free People, 5% at Urban Outfitters and 1% at the Anthropologie Group. Wholesale segment net sales rose 18%.

Despite this, Neil Saunders, CEO of Conlumino, noted: "Away from fulfilment, we continue to hold the view that Urban Outfitters is weathering the tribulations of the youth fashion market far better than many of its competitors. This is largely thanks to some relatively strong fashion stories, including a focus on outdoor and camping products which are currently in vogue."