Clearance sales increased at Urban Outfitters Inc. in the last quarter, slashing profits and causing the company’s shares to fall Tuesday after hours.
The retailer – which includes the brand as well as Anthropologie, Free People and a food and beverage company – released quarterly results after the bell, which showed improved sales, but were a blow to profits .
For the three-month period ending Jan. 30, revenue was $ 1.16 billion, up from $ 1.12 billion in the same period last year. All three clothing brands improved their sales: Anthropologie with $ 491 million, compared to $ 464 million; Urban Outfitters had $ 449 million, up from $ 447 million, and Free People had $ 215 million, up from $ 209 million in the fourth quarter of 2019.
But quarterly profits were only $ 19.5 million, up from $ 86.4 million in the same period last year. The losses were caused by higher promotional activity, lower wholesale margins, logistics expenses, deleveraging in delivery and shortages in the product assortment of the Urban Outfitters and Anthropologie brands.
For the year, the company posted revenue of $ 3.98 billion, up from $ 3.95 billion a year earlier, while profits were $ 168 million, up from $ 298 million for the 2019 financial year.
The retailer also had a disappointing holiday season, with gift sales falling 1% between November and December at Urban Outfitters, the company’s biggest brand.
Shares of Urban Outfitters, which closed 0.48% higher at $ 23.13, are down more than 20% year-on-year and continued to fall nearly 5% on the trading session. Tuesday after hours.
The company is also concerned about the ongoing coronavirus, which Richard A. Hayne, chief executive of Urban Outfitters, has the potential to impact the business in two ways: through the supply chain and through epidemics in North America or Europe. Hayne added that the company is monitoring the situation on a daily basis.
Even so, the CEO said it wasn’t all bad news.
“The positive customer response to our early spring assortment bodes well for continued membership growth in the first quarter,” said Hayne.
The company, which currently has more than 600 outlets in North America and Europe, plans to open 39 newsagents in the coming year, while closing nine. Hayes said during the conference call with analysts Tuesday night that many new stores come on offer with advantageous leases and are in secondary markets, which tend to be the most lucrative locations for the company. Additionally, store openings often result in a halo effect, causing shoppers to buy more online after visiting stores.
“The American consumer is in excellent shape,” said Hayne. “She’s upbeat and willing to spend when she sees irresistible fashions.”
And, unlike some competitors, women’s compositions dominate all three brands. “And she doesn’t just watch; she buys, ”said Hayne.