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Bear of the Day: Urban Outfitters, Inc. (URBN)

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Urban Outfitters, Inc. (URBN - Free Report) stock has plummeted over 40% in the last year, alongside its industry’s 53% downturn.

The youth-focused apparel retailer fell short of Zacks earnings and revenue estimates on May 24. Urban Outfitters is one of the many victims of soaring prices and supply chain setbacks that have made running its fast-fashion operation extremely difficult.

Urban Decay?

Urban Outfitters is a clothing and apparel retailer that’s expanded its reach into other areas. URBN operates a sizable brand portfolio that includes Anthropologie, Free People, its namesake segment, and more. Urban also owns a portfolio of wedding related-offerings, as well as what it calls a menus and venues segment.

Urban Outfitters and many of its established brick and mortar-focused peers in apparel retail have struggled to keep up with the quickly changing world of e-commerce and social-media retail. Urban has more competition than ever before from an array of upstarts and niche brands that thrive by marketing to URBN’s core youth demographic.

Zacks Investment Research
Image Source: Zacks Investment Research

Urban Outfitters stock is down 20% in the last 10 years, compared to the S&P 500’s over 300% climb. URBN has gone on some wild up and down runs during this stretch. And potential investors should know that Urban Outfitters stock is pretty heavily shorted at the moment. This helps make URBN more of a trader’s stock than a buy-and-hold investment.

Urban Outfitters posted somewhat solid first quarter results on May 24. But the company’s second quarter consensus earnings estimate has tumbled from $1.00 to $0.73 per share since its report, with its current full-year figure down by roughly 18% and next year about 15% off the pace. “The impact of inflation on our costs of doing business more than offset the benefit of record revenues,” CEO Richard Hayne said in prepared Q1 remarks.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

Urban Outfitters’ downward EPS revisions help it grab is a Zacks Rank #5 (Strong Sell) right now. Plus, its Retail - Apparel and Shoes space sits in the bottom 12% of over 250 Zacks industries.  

URBN stock did pop on Wednesday. But it still might be best for investors to stay away from the retailer given its own issues and the negative forces dragging down its industry.


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