Urban Outfitters Inc. (URBN), the retailer of apparel, footwear, and accessories, recently announced its sales results for the third quarter ended October 31, 2011.

Urban Outfitters, which mainly competes with Gap Inc. (GPS) and Abercrombie & Fitch Co. (ANF), stated that total net sales increased 6% year over year to $610 million. However, sales were below the Zacks Consensus Estimate of $629 million.

As per the company, comparable retail segment net sales decreased 3%, whereas comparable store net sales dropped 7% during the quarter. Comparable retail segment net sales by brands rose 14% at Free People, decreased 7% at Anthropologie, while it remained flat at Urban Outfitters.

Direct-to-consumer comparable net sales increased 15%, while wholesale segment witnessed a rise of 13% during the quarter.During the quarter, Urban Outfitters opened 16 new stores –– 7 Urban Outfitters stores, 4 Anthropologie stores and 4 Free People stores and 1 BHLDN store.

Urban Outfitters is scheduled to report its third quarter financial results on Monday, November 14, 2011. The current Zacks Consensus Earnings Estimate for the quarter is 34 cents a share.

In a separate story, the company announced the appointment of David W. McCreight as the Chief Executive Officer, Anthropologie Group, effective from November 15, 2011. Moreover, Wendy McDevitt has been named as the President of Terrain, while Charles Kessler joined the Urban Outfitters Brand as Chief Merchandising Officer on October 31, 2011.

Closing Remarks

Going forward, we believe that the company’s increasing inventory level remains a matter of concern as it might weigh upon the margins in the coming quarters.  Besides, young men's and women's apparel market include extremely competitive players.

Moreover, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively affect their discretionary spending, and in turn, the company’s growth and profitability.

Currently, Urban Outfitters holds a Zacks #5 Rank, which translates into a short-term ‘Strong Sell’ rating.


 
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