Those of us who have been following Urban Outfitters (Nasdaq: URBN ) know that the last couple months have brought about what has historically been a rare occurrence: weakness. Thursday's same-store sales figures for Urban Outfitters' first quarter reflect some of the difficulties. The big question for the day: Is the worst over?
First-quarter sales at Urban Outfitters increased by 17% to $270 million, but same-store overall sales for the period decreased by 3% overall. Double-digit sales gains are great, but last year this time, Urban Outfitters' sales had increased 36%. Sure, Urban Outfitters is up against tough comparisons from last year, but this company has often butted up against tough comparisons and come out victorious; it even weathered the recession very well. So in that regard, it's small consolation.
On the other hand, although same-store sales for the Urban Outfitters concept dipped 4%, and Anthropologie decreased 2%, Free People's same-store sales increased 14%. The company said that other elements offset the difficult quarter, such as a 22% increase in store count, as well as success in Urban Outfitters' European division, both of which exceeded company expectations.
That the beginning of 2006 has been difficult for Urban Outfitters isn't news, of course. Last quarter, management described a major shift in women's fashion. (In case you missed it -- and I admit I did -- the shift was to larger tops and skinnier bottoms, as opposed to the tighter tops and larger bottoms that were previously in fashion.) Meanwhile, the company's Form 10-K also disclosed lagging same-store sales in the beginning of the year.
On an overall level, April same-store sales numbers have been released across the retail universe, and they point to a strong showing from the consumer (helped of course by Easter's shift into April). And April was equally kind to Urban Outfitters.
I still like the company for the long term -- its total store count is still very low, leaving ample room for growth, its Urban Outfitters brand retains great cache with young people, and it has carved itself a prominent niche as a portfolio of lifestyle brands. I don't happen to believe that it directly competes with brands like Abercrombie & Fitch (NYSE: ANF ) . In fact, I always have a hard time identifying a clear competitor -- although Target's (NYSE: TGT ) successful bid at luring hipsters to clothe themselves and furnish their homes on the cheap has made an impression on me lately.
For years, Urban Outfitters could seemingly do no wrong, so weakness hasn't been welcome. At the same time, there are opportunities -- consider Urban Outfitters shares when pessimism has depressed them, or at the very least monitor how this company performs under adversity. Urban Outfitters reports first-quarter earnings next week, which will lend a better idea of how it has dealt with its awkward phase -- an important element for any company.
Alyce Lomax owns shares of Urban Outfitters.