By  on August 11, 2006

NEW YORK — Urban Outfitters Inc. on Thursday posted a 16.1 percent decline in second-quarter earnings, hurt by rising fixed-store occupancy expenses caused by same-store sales declines and additional markdowns to clear seasonal inventories.

For the three months ended July 31, income fell to $25.7 million, or 15 cents a diluted share, from $30.6 million, or 18 cents, compared with the same period last year. Sales were up 12.7 percent to $285.6 million from $253.4 million. Total company same-store sales fell 7 percent. By brand, comps decreased 2 percent at Anthropologie and 11 percent at Urban Outfitters, but rose 8 percent at Free People.

For the six-month period, income dropped 20.8 percent to $46 million, or 27 cents a diluted share, from $58 million, or 34 cents, a year ago. Sales rose by 14.6 percent to $555.6 million from $484.7 million last year.

Company executives on the conference call with Wall Street analysts attributed the large dip in comps to missed fashion opportunities and the failure of the company to comprehend the trends of their core customers. There was also too much emphasis on skinny jeans, the executives said.

"We have good information about our customers' current fashion preferences," Richard A. Hayne, chairman and president, said in a statement. "Our goal for the second half is to use that information to bring the comps back into positive territory."

However, executives said during the call that it is unlikely positive comps will surface in the third quarter, and may not become a reality until the fourth.

The company plans to open 35 to 38 additional stores in 2006, including three to five Free People units. During the first six months of the fiscal year, Urban Outfitters has opened 13 new stores.

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