Urban Outfitters Inc. is falling over 8 percent to $27.93 in early trading after the specialty retailer gave a second-quarter same-store sales warning when it filed its first-quarter 10-Q report with the Securities and Exchange Commission.
In the filing, Urban stated, “Thus far during the second quarter of fiscal 2017, comparable retail segment net sales are midsingle-digit negative.”
The response from the market was swift, with investors selling shares and analysts taking out their pencils and revising numbers. Brian Tunick, an analyst with RBC Capital Markets, cut his price target to $29 from $32 and trimmed his earnings estimates. He dropped his second-quarter earnings per share to 53 cents from 57 cents and his 2016 number to $1.88 from $1.98.
“While an improvement in trend in the last three weeks, tight inventories and merchandise margin integrity are the bright spots, we’re lowering our estimates and price target on the softer 2Q16 comp and tempered 2H16 top-line assumptions.” He said that despite the negative comps there were green shoots at Anthropologie with newer dresses and product extensions outperforming other categories. Free People is still expected to remain negative.
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William Blair analyst Amy Noblin also cut her estimates on the news. She reduced her second-quarter estimate from 55 cents to 53 cents and her full-year estimate to $1.96 from $1.98. She also cut her comp estimate from flat to negative 2 percent, but she does expect gross margin improvement at Anthropologie.
“Encouragingly, business picked up over Memorial Day weekend, in line with commentary we have heard from other operators,” said Noblin. “The loss of a Saturday in May given the company’s reporting schedule was expected to have a 250-basis-point impact in the month, lessening through the quarter, and will be completely reversed by the end of the quarter, but is still affecting comp currently to some degree.”
Noblin said she maintains her long-term positive view on shares and the brands continue to make a recovery. She believes further stock price downside is limited because the company may buy back shares. Her price target is $27.93.