Urban Outfitters’ profit dips on costs, signature brand weakness

Urban Outfitters’ struggle continued into Q2 with profit down in double digits on higher costs as sales at its core signature brand continued to disappoint. On the bright side, its Free People and Anthropologie brands continue to show strength. Its shares fell 2% to $36.41 in after-hours trading. For the quarter ended July 31, Urban Outfitters’ profit slid 12% to $67.5m/49 cents a share, matching analysts’ view, from $76.4m/51 cents a year ago. Total revenue rose 7% to $811.3m, topping analysts’ $804.7m view. However, Urban Outfitters store comps fell 10% against the 21% and 6% respective rises for Free People and Anthropologie.

Gross margin fell to 37.4% from 39.3%, primarily due to the weaker results at the signature brand.

Selling, general and administrative expenses jumped 11%, which the company attributed to increased marketing and technology expenses.

As of July 31, inventory increased by $15m, or up 4% year-on-year, which the company attributed mainly to stocking new stores. During the period, the company opened 14 new stores, including seven Free People stores and four Anthropologie stores.

“We are pleased to announce record second quarter sales driven by strong performances at our Anthropologie and Free People brands,” said CEO Richard A Hayne. “This achievement is a testament to the strength and validity of our model and to the ability of our talented teams to create powerful lifestyle brands, through compelling product, imagery and experiences.”

Urban Outfitters stock was down 0.46% to $36.75 at 4:17pm EST.

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