Richard Hayne

Richard Hayne, chief executive officer of Urban Outfitters Inc., has a new and very unfavorable comparison for retail today — the housing market of 2008.

“Our industry, not unlike the housing industry, saw too much square footage capacity added in the Nineties and early 2000s,” Hayne told Wall Street analysts Tuesday, after his company reported sagging profits as more sales shift online.

“Thousands of doors opened…and created a bubble and like housing, that bubble has now burst,” he said. “We are seeing the results, doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.”

J.C. Penney Co. Inc., Macy’s Inc. and Sears Holdings Corp. are all closing stores, while a number of well-known chains have faded into insolvency recently, including The Limited, BCBG and The Wet Seal Inc.

“The U.S. market is oversaturated with retail space and far too much of that space is occupied by stores selling apparel,” said Hayne, noting America has six times the retail space per capita of either Europe or Japan.

It’s a dynamic that is driving prices in the market down as stores hit the promotional button to drive sales and attract customers.

To navigate the choppy waters, the ceo said Urban would put its money behind its best opportunities, diversify and conserve its liquidity.

“Our highest priority is where we’ve had the most recent success, digital,” Hayne said. “Last year we made many improvements to our capabilities in this channel. We developed a single platform for all brands. This enables [the company] to be more scalable and efficient in developing and growing on front-end enhancements across all brands, both on mobile and on web sites. We have improved our functionality around check-out, payment, search, inventory visibility, in-store pickup, ship-to-store, mobile capabilities and speed on all web platforms.”

Hayne was careful to say the company — parent to its namesake brand as well as Anthropologie and Free People — was not abandoning retail, but is viewing stores as an equal partner with the web.

The reading of the landscape is made all the more stark by the fact that Urban is one of the few retailers that is still growing, with plans to open 15 doors in North America this year, down from 26 stores last year and 29 the year before.

And square-footage growth might eventually get easier as the bubble deflates.

“It makes little sense to enter into many new long-term leases at this time, but all signs indicate that a similar lease will be less expensive in the near future,” Hayne said.

Last year, Urban’s earnings slid 2.8 percent to $218.1 million, or $1.86 a diluted share, on a 2.9 percent drop in sales, to $3.55 billion.

load comments
blog comments powered by Disqus