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Urban Brand Cuts Into Q4 UO Sales

Anthropologie, Free People thrive as namesake brand’s struggles continue into first quarter.

An Urban Outfitters store.

Declines in net and comparable sales at the Urban Outfitters brand failed to prevent its parent company from moving the top line up during the fourth quarter.

Richard Hayne, chief executive officer of Urban Outfitters Inc., said the pressure at the Urban brand continued into the first quarter.

The Philadelphia-based specialty retailer said late Monday that sales for the three months ended Jan. 31 advanced 5.7 percent to $905.9 million from $856.8 million as comparable revenues pulled out a 1 percent gain. On average, analysts had expected total revenues of $925.7 million, making for a revenue “miss” and sending shares down 1.7 percent to $36.01 in the early moments of after-hours trading.

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The quarterly update, in advance of the company’s full report on profits and sales scheduled for March 10, indicated pressure at Urban as its smaller siblings, Anthropologie and Free People, logged double-digit gains.

Sales at Urban Outfitters declined 4.2 percent to $398 million, with comps down 9 percent. Meanwhile, Anthropologie logged an 11.7 percent increase, to $374 million, on a 10 percent rise in comps, and Free People had sales growth of 25.7 percent, to $122.9 million, as comps expanded 20 percent.

For the quarter, retail sales were up 4.9 percent to $858 million and wholesale volume, principally through the Free People unit, was up 23.7 percent to $47.9 million.

“Although customer response to our early spring fashion offerings has been difficult to read due to weather abnormalities, the Anthropologie and Free People brands continue to deliver solid comparable retail segment sales gains,” Hayne commented. “These gains, however, have been largely offset by weakness at the Urban Outfitters brand.”

Stifel Nicolaus analyst Richard Jaffe noted that the quarterly results indicated a deceleration in January, particularly at the Urban brand, as company comps were running ahead 3 percent through the end of December. “We believe this was driven by weak customer response to spring merchandise due to fashion misses and abnormally cold weather in January,” he wrote in a research note.

For the full year, revenues were up 10.4 percent to $3.09 billion and comps were up 6 percent. The company didn’t specify full-year comps by brand but reported they were up 6 percent overall for the 12 months. The full-year figures also suggested a weakening trend at the Urban brand in the fourth quarter as full-year revenues were up 3.4 percent to $1.37 billion while growing 13 percent at Anthropologie, to $1.26 billion, and 29.8 percent at Free People, to $416.4 million.

Shares were up 40 cents, or 1.1 percent, to $36.64 during Monday’s regular trading session before retreating after the announcement and the close of the markets.