Image source: Urban Outfitters.

A sluggish back-to-school shopping season finds shares of Urban Outfitters (NASDAQ:URBN) flunking out with investors. Shares of the mall-based apparel retailer plunged 10.53% last week, held back by a poorly received quarterly report and a couple of bearish analyst moves.

Net sales clocked in at $862.5 million, up 5% since the prior year. Earnings went the other way. Urban Outfitters' profit of $0.40 a share was just short of the $0.42 a share it posted a year earlier, but reality is a few shades darker than that. A lower effective tax rate and aggressive share buybacks over the past year helped inflate after-tax income on a per-share basis. The chain's operating profit actually dropped nearly 13% for the period as its operating margin contracted.

Performance was mixed cross the retailer's different concepts. Comparable retail segment net sales moved 5.2% higher at its namesake stores only to decline 1.5% at Free People and 2.7% at Anthropoligie Group.

Investors were holding out for more during the telltale reporting period. Analysts were targeting a profit of $0.44 a share on $869.1 million in net sales. It fell short on both ends of the income statement. This isn't the kind of momentum that one likes to see heading into the seasonally potent holiday quarter.  

Wall Street goes shopping

Wunderlich analyst Eric Beder downgraded the stock following what he deemed to be anemic results, lowering his rating from buy to hold. Beder is concerned about the negative comps at Free People and Antropologie Group, a pretty big deal since they combine for 59% of Urban Outfitters' sales. Gross margin also remains under pressure. He is slashing his price target from $40 to $32.

Baird analyst Mark Altschwager is also worried about Anthropologie with its shrinking popularity with shoppers weighing on the parent company's consolidated comps and margins. He didn't back away from his previous outperform rating, but he is advising investors to build up their positions closer to the low $30s than the high $30s as he originally recommended.

Altschwager and Deutsche Bank analyst Paul Trussell used the word "murky" in describing the situation at Urban Outfitters, and in Trussell's case, it's resulting in his price target slipping from $37 to $34 following the weaker-than-expected financial results. He sees weak margins capping the upside on earnings for now. 

Not every Wall Street pro is souring on the stock's prospects. Stifel's Richard Jaffe is sticking to his price target of $40 and Randal Konik at Jefferies isn't budging from $45. Both analysts don't think that Anthropologie will be a quick fix, but they are encouraged by the performance at Urban Outfitters' namesake concept to carry it through the lull. Jaffe and Konik are reiterating their bullish ratings on the stock. 

There's no denying that the fiscal third quarter was rough, but this is the mall retailer's first bottom-line miss over the past year. The important holiday shopping season awaits, and while momentum isn't kind at Anthropologie and to a lesser extent Free People, it's ultimately up to the whims of the shoppers to decide how long Urban Outfitters will remain on the market's naughty list. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.