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Shares of Urban Outfitters (NASDAQ:URBN) have dropped by 9% today after the youth-focused apparel retailer reported disappointing third-quarter earnings following Monday's closing bell.
Why it's happening
Urban Outfitters' revenue for the third quarter was 5% higher year over year at $814.5 million, which narrowly beat the consensus of $813 million. However, a discount-focused retail strategy decimated Urban Outfitters' earnings, which dropped by a third from last year's $0.47 per share result to a mere $0.35 in the third quarter. This was well below Wall Street's expectation for $0.41 in EPS. Gross margin fell from 37.8% a year ago to 34.8% today, and Urban Outfitters CEO Richard Hayne said that he was "disappointed by the results at the Urban Outfitters brand," which endured a 7% decline in same-store sales. The company's best performance came from its wholesale segment, which grew its revenue by 26% year over year. However, that won't be enough to offset the weak same-store sales Urban Outfitters foresees for the fourth quarter now in progress.
Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Urban Outfitters. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.