Urban Outfitters’ profits and shares tumble

November 17, 2014, 10:34 PM UTC
Shoppers are pictured outside a Urban Outfitters store in Pasadena
Shoppers are pictured outside a Urban Outfitters store in Pasadena, California August 19, 2013. Urban Outfitters Inc's quarterly profit beat market estimates as its on-fashion teen apparel drew shoppers to its stores despite fewer discounts. REUTERS/Mario Anzuoni (UNITED STATES - Tags: BUSINESS LOGO) - RTX12R8V
Photograph by Mario Anzuoni — Reuters

Urban Outfitters reported record third-quarter sales, but the clothing company’s profits fell year-over-year as it’s namesake brand courted controversy. Here are some of the key points from Monday’s third-quarter earnings report.

What you need to know: Quarterly sales for Urban Outfitters — whose brands also include retailers Anthropologie, Free People and Terrain — increased by 5% year-over-year, to $814 million, but sales at the company’s namesake brand fell by $1.5 million. What’s more, same-store sales across the company dipped 1% after analysts predicted they would be flat for the quarter.

Urban Outfitters (URBN) also reported a quarterly profit of $47 million, or 35 cents per share, which is down nearly a third year-over-year. Shares of the company fell almost 5% in after-hours trading following the release of the earnings report. The company’s stock has tumbled nearly 17% since the start of the year after profits through the first three quarters of the year have dropped 22% year-over-year, to $152 million.

CEO Richard Hayne said in a statement that he is “disappointed by the results at the Urban Outfitters brand.”

The big number: Sales for the Urban Outfitters brand dropped again, offsetting gains from some of the company’s other brands. Same-store sales for the namesake brand fell 7% in the third quarter after dropping 10% in the previous quarter.

The Urban Outfitters brand recently suffered through a social media firestorm after the retailer put a bloodstained Kent State University sweatshirt for sale on its website, drawing connections to the 1970 student massacre at that school. The item was removed from the website after much public outcry, but the incident was just the latest for a chain that previously peddled a women’s t-shirt emblazoned with the phrase “Eat Less,” which critics said was an inappropriate swipe at people with eating disorders.

It is hard to say whether or not the controversy adversely affected the brand’s sales in the third quarter, especially since same-store sales took an even bigger hit the previous quarter, but Hayne clearly thinks improvement is needed at Urban Outfitters stores.

“There is much work to be done to improve the merchandise margins and store performance at the Urban brand, but I see positive signs as shown by strong results at the brand’s direct-to-consumer channel,” the CEO said.

What you might have missed: Once again, the poor performance by Urban Outfitter stores overshadowed positive news from the company’s other divisions. Same-store sales at Free People jumped 15% in the quarter while the Anthropologie got a 2% bump. Same-store sales at the two chains were also up in the second quarter: 21% and 6%, respectively.

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