Why Staples, Dick's Sporting Goods, and Urban Outfitters Tumbled Today

Tuesday was a tough day for the stock market as a whole, but these stocks did even worse than most. Find out why.

May 20, 2014 at 8:35PM
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Tuesday brought extensive losses to the stock market, although most major-market benchmarks finished well above their lowest levels of the day. In large part, the pessimism in the broader market came from the poor results from three companies serving different subsectors of the retail industry: Staples (NASDAQ:SPLS), Dick's Sporting Goods (NYSE:DKS), and Urban Outfitters (NASDAQ:URBN), all of which fell sharply today after troubling earnings reports.

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Staples fell 13% as the poor showings for the office-products retailer continued. Same-store sales fell 4% in North America, with falling customer traffic accounting for the decline, and overall revenue fell 3%. Net income fell even more than expected, with earnings per share dropping by more than 40% from year-ago levels. Looking forward, Staples plans to keep implementing its previously announced strategy to close up to 225 stores by late 2015, with 80 store closures expected during the current quarter. With Staples believing that sales will remain under pressure, it's hard to anticipate when the office-products leader will be able to recover, given the immense competition from online rivals and the challenge of having to make productive use of the floor space in its stores.

Dick's Sporting Goods plunged 18% as the sporting goods retailer hit investors hard with ugly guidance for the remainder of the year. Dick's saw profit rise 8% in the first quarter on a nearly 8% jump in sales, but same-store sales only managed a 1.5% rise. Even worse, Dick's said that second-quarter earnings would come in about 20% to 25% below what investors were expecting to see, blaming its golf and hunting divisions for particular weakness. Moreover, with full-year earnings now seen almost 10% below what Dick's had originally projected and same-store sales growth for the year of between 1% and 3%, investors are disappointed and nervous about whether the company can jump-start its growth in the future.

Urban Outfitters fell 9%, with most of the apparel retailer's problems stemming from its namesake stores. Several of Urban Outfitters' newer concepts, including its Free People and Anthropologie brands, saw their revenue soar from year-ago levels, with Free People comparable sales jumping 25% and Anthropologie posting 8% gains. But the Urban Outfitters brand itself suffered 12% declines in comps, and as a result, overall revenue was up only 6% from last year, and net income dropped about 20%. It'll be interesting to see if Urban Outfitters starts considering emphasizing Anthropologie even more, especially as it now represents the company's biggest segment by sales.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Urban Outfitters and owns shares of Staples. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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