What happened

Shares of Urban Outfitters, Inc. (NASDAQ:URBN) were moving higher after the hip clothier reported today that holiday sales that didn't quite meet analyst expectations. While results were still solid, the pace of sales growth slowed from when the company reported third-quarter 2017 earnings in November. The bull run in the sector in December as well as strong holiday sales reports across the industry indicated that investors rightfully had high expectations.

As a result, the stock was down 4.2% as of 12:42 p.m EST Tuesday.

A scene inside an Urban Outfitters store where clothing and plants are displayed.

Image source: Urban Outfitters.

So what

Urban Outfitters, which also owns Anthropologie and Free People, said that net sales increased 3.6% in the two months ending Dec. 31 as comparable retail sales increased 2%, driven by a double-digit increase in direct-to-commerce sales. Wholesale revenue was up 6.8%. 

Comparable sales were up 5% at Free People, 2% at Anthropologie, and 1% at Urban Outfitters.

At its ICR conference presentation yesterday, CFO Francis Conforti said that the slowdown in sales growth from November came due to lower-than-expected sales of tech and media products at Urban Outfitters, which are particularly strong during the gift-giving season.

Now what 

In other words, Conforti seemed to be saying that the company was in a solid position as sales were temporarily tamped down by lower sales from products like Crosley cameras. Considering that growth in the retail sector outpaced the 11-month growth rate of 1.2%, and comps increased at all three of its brands, I'd say this was a solid report. Even with today's sell-off, the stock is still up 40% over the three-month period, and profit growth should return as long as comp sales are positive.

 

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.