Urban Outfitters Falls On Absent GuidanceNov 27, 2023
Despite weakness at their flagship brand, the diversifying retailer is showing a lot of strength.
Urban Outfitters stock fell today after the company did not offer concrete full-year and Q4 guidance. Despite a strong showing, investors are nervous about a 'slight moderation in demand' being experienced by the apparel company. Let's unpack what this means:
Overall, Urban notched a 9% increase in revenue to $1.28 billion for Q3 and generated an $0.88 EPS from that result. This easily surpasses market expectations as company-wide, Urban Outfitters has managed to reduce inventory by 3% after facing stock issues last year.
URBN's premium stores are carrying this growth while their core brand stores actually declined 14% year-over-year. Premium retail is still the way to go, so the market largely expected this.
Another big surprise was that Urban Outfitter's rental brand Nuuly managed to scrape together a profit for the quarter. Meanwhile, investor-darling Rent The Runway hasn't even come close to operating profitably in the 12 years they've been operating.
Once again, subjective comments about Q4 are what's really pushing the price action right now. Urban Outfitters did not share full-year or Q4 guidance, which would probably have been fine if they also hadn't mentioned a 'moderation in demand' at their core stores across the last few weeks. As consumers get more and more cost-sensitive, the market is having a really hard time knowing which retailers will win in Q4 and which ones will lose, so investors are just indiscriminately pulling money out of any retail company that has even the slightest whiff of slowed growth.
WHY IT MATTERS
Urban has proven their model further lately. It's important to have high-end brands that are in high demand to carry your broader-appeal products through a period of depressed spending like this. Urban has proven they can crush costs and thrive even in this environment, but investors are going to stay on the sidelines until we get more concrete numbers about how their holiday sales go. For now, Urban fell over 7% at market open.