Why Urban Outfitters Stock Got Dumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

An Urban Outfitters store in San Francisco. Source: Wikimedia.

What: Shares of Urban Outfitters (NASDAQ: URBN  ) weren't looking so fashionable today, falling as much as 11% after warning on third-quarter sales.

So what: Urban Outfitters had managed to escape the whirling dervish that hit other teen retailers last quarter, including Abercrombie & Fitch, Aeropostale, and American Eagle, all of which dropped double digits.  Last night, however, the company noted in its 10-Q report that same-store sales, which includes the normally strong online channel, were only up mid-single digits in the third quarter thus far, down from a 9% clip in the first half of the year, and below some analysts' expectations.

Now what: The sell-off seemed to come as much from general fears about teen retailers as from the outlook itself. For Urban Outfitters, which also owns the upscale Anthropologie brand, as well as Free People, a mid-single-digit comparable growth rate is perfectly reasonable. That figure may be below analysts' expectations and will likely force a drop in estimates, but considering the overall weakness in the teen sector, it doesn't look like anything to worry about long-term. I'd tend to see today's drop as a buying opportunity.  

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9/23/2016 4:00 PM
URBN $35.66 Down -0.07 -0.20%
Urban Outfitters CAPS Rating: ****