Clearance sales rose at Urban Outfitters Inc. last quarter, cutting profits and causing the company’s shares to plummet in after-hours trading on Tuesday.
The retailer — which includes the nameplate brand as well as Anthropologie, Free People and a food and beverage company — released quarterly earnings after the bell, which showed an improvement in top-line sales, but was a hit to profits.
For the three-month period ending Jan. 30, revenues were $1.16 billion, up from $1.12 billion the same time last year. All three apparel brands had improved sales: Anthropologie with $491 million, up from $464 million; Urban Outfitters had $449 million, up from $447 million, and Free People had $215 million, up from $209 million during 2019’s fourth quarter.
But quarterly profits were just $19.5 million, down from $86.4 million the same time last year. The losses were driven by higher promotional activity, lower wholesale margins, logistical expenses, deleverage in delivery and misses in the product assortment at the Urban Outfitters and Anthropologie brands.
For the year, the company had $3.98 billion in revenues, up from $3.95 billion the prior year, while profits were $168 million, down from $298 million in the 2019 fiscal year.
The retailer also had a disappointing holiday season, with comp sales falling during the November to December shopping season at Urban Outfitters, the company’s largest brand, by 1 percent.
Shares of Urban Outfitters, which closed up 0.48 percent to $23.13, are down more than 20 percent year-over-year, and continued to fall by nearly 5 percent in Tuesday’s after-hours trading session.
The company is also concerned about the ongoing coronavirus, which Richard A. Hayne, chief executive officer of Urban Outfitters said could potentially impact the business in two ways: across the supply chain and by way of outbreaks in North America or Europe. Hayne added that the company is monitoring the situation daily.
Even so, the ceo said it wasn’t all bad news.
“Positive customer reaction to our early spring assortment bodes well for continued comp growth in the first quarter,” Hayne said.
The company, which currently has more than 600 retail locations in North America and Europe, plans to open 39 news stores in the coming year, while closing nine. Hayes said on the conference call with analysts Tuesday evening that many of the new stores came with favorable lease deals and were in secondary markets, which tend to be the most lucrative locations for the company. In addition, store openings often lead to a halo effect, luring shoppers to buy more online after visiting stores.
“The U.S. consumer is in excellent shape,” Hayne said. “She’s optimistic and willing to spend when she sees compelling fashions.”
And, unlike some competitors, women’s comps are leading all three brands. “And she’s not just looking; she’s buying,” Hayne said.