The Philadelphia-based retailer’s net income came in at $49.9 million, a 54 percent decline from $76.9 million a year earlier. Still, earnings per diluted share totaled 44 cents, well ahead of the 37 cents analysts projected. That helped propel the stock up 14.2 percent to $19.21 in after-hours trading Tuesday.
Sales for the second quarter fell to $872.9 million from $890.6 million a year earlier, a 2 percent drop. Comparable-store sales slipped by 4.9 percent, driven by a 4 percent declines at Anthropologie and a 7.9 percent dip at Urban Outfitters.
Free People was a bright spot, with comp sales up by 2.9 percent, as was Urban’s wholesale segment, where net sales grew by 10 percent.
But those gains weren’t enough to satisfy Hayne, who told analysts on a conference call that the quarter “fell far short of expectations” mainly due to an underperformance of women’s product.
“The top-line shortfall in our two larger brands in North America came mostly from poor execution rather than macro headwinds,” Hayne said. “I’m quite confident there was and still is sufficient newness in women’s fashion to drive positive comp sales.”
During the quarter Urban started to tweak its process to allow for product to hit stores fast and for a quicker response to in-season trends. And it seems to be paying off.
Hayne said sales in June and July improved sequentially over May and noted that Urban Outfitters and Anthropologie “are currently delivering positive regular-priced women’s comps and I believe both have the opportunity to show further improvement in the back half.”
Hayne also sees opportunity for Urban’s brands to grow in Europe and Asia. He said Urban Outfitters launched on Alibaba’s Tmall during the quarter and “results have exceeded expectations.”
The brand also has a new deal with the Estée Lauder Cos. Inc. for the sale of cosmetics and Hayne said “the company plans to sign several international franchise and joint venture agreements over the next year or two.”
The second-quarter results did not come as a big surprise since the company warned in a June disclosure with the Securities and Exchange Commission that sales were trending down.
At the time, Baird Equity Research said the company “held a cautious tone” when discussing its near-term outlook.
Urban’s first-quarter results showed a 60 percent drop in net income on sales that had fallen by 0.2 percent. Comp sales were also down 3.1 percent at Urban Outfitters and 4.4 percent at Anthropologie.
Hayne then attributed the dip in sales to “sluggish” foot traffic in North America, an issue he noted is “impacting virtually all U.S. brick-and-mortar retailers.”
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