Richard Hayne, chief executive officer of Urban Outfitters Inc., served up a bitter pill to Wall Street, declaring that the bubble had burst in the retail real estate market.
Analysts and investors agreed that at least something is wrong and moved further away from the company. Urban Outfitters has proven over the years to be a retail leader and keen observer of trends. But lately, the retailer’s been all too subject to the laws of gravity and reported that earnings slid 2.8 percent to $218.1 million last year on a 2.9 percent drop in sales, to $3.55 billion.
Shares of the retailer fell 5.6 percent to $23.98 in midday trading.
Credit Suisse analyst Christian Buss said the retailer, “continues to struggle with choppy execution across its concepts, with fourth-quarter strength in Urban Outfitters and Free People offset by weakness at Anthropologie.”
While Buss was encouraged by Hayne’s “outsized focus on e-commerce penetration and inventory management,” he advised his clients to “remain on the sidelines as the narrow consumer base inherent to each brand adds significant fashion execution risk.”
Wells Fargo analyst Ike Boruchow pointed to weakness in women’s at there company’s top nameplates.
“While [Urban Outfitters] appeared to be on its way to a comeback, comping positively for all of fiscal year 2017, it appears that its trend may have been derailed, as the all-important women’s dresses category slowed this holiday — a trend that is continuing into the first quarter,” Boruchow said.
He said Anthropologie’s women’s apparel continues to struggle and noted that it has taken “aggressive measures to get it back on track,” bringing in former Guess and Maris Collective executive Hillary Super as president of women’s.
“With a challenged retail space and decelerating fundamentals across the P&L, we would stay sidelined on the name and remain fairly cautious given the potential for multiple compression as estimates likely come down across the board,” Boruchow said.
The year ended up with a disappointing quarter for Hayne, who last summer started becoming much more bullish on a rebound in fashion.
The ceo told analysts in August that: “The change is now upon us. Our customers are adapting to new looks and silhouettes as we speak. As in all such cycles, some customers and brands adopt newness faster than others, but the fact is, there’s currently an abundance of exciting fashion happening and this is very good for our brands, for [our company] and for our industry as a whole.”
But his tone had changed markedly by Tuesday’s year-end update.
“Our industry, not unlike the housing industry, saw too much square footage capacity added in the Nineties and early 2000s,” Hayne said. “Thousands of doors opened…and created a bubble and like housing, that bubble has now burst. We are seeing the results, doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.”