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Urban Outfitters tumbles as Anthropologie slows

Shoppers are pictured outside a Urban Outfitters store in PasadenaShoppers are pictured outside a Urban Outfitters store in Pasadena
Shoppers are pictured outside a Urban Outfitters store in Pasadena, California August 19, 2013.Photograph by Mario Anzuoni — Reuters

(Reuters) – Urban Outfitters’ quarterly sales fell short of market estimates as sales under the Anthropologie brand rose at the slowest pace in 11 quarters, sending the company’s shares down 17% in extended trading.

The company called Anthropologie’s performance a “disappointment” and said it expects more discounts in the business in the second quarter as it tries to attract young women.

Increasing competition from fast fashion brands such as H&M, Inditex’s Zara and Forever 21 and a series of fashion misses have turned women away from Urban Outfitters’ stores.

Net sales in the Anthropologie brands business, which caters to women aged 28-45 years, rose 3.8% to $311.4 million.

The company said Tedford Marlow, chief executive of the Urban Outfitters division, would retire by the end of August.

The company has been overhauling stores and merchandise at its namesake brand to fight a slowdown in sales.

Urban Outfitters said inventories rose 14% in the first quarter.

Overall same-store sales rose 4%, missing the 5.3% growth analysts had expected, according to research firm Consensus Metrix.

Comparable retail net sales at Free People, the company’s smallest brand, rose 17% in the quarter, compared with a 5% rise in Urban Outfitters and a 1% rise in Anthropologie.

Revenue rose nearly 8% to $739.0 million.

Net income fell 12.5% to $32.8 million, or 25 cents per share, as cost of goods sold rose 10%.

Analysts on average had expected a profit of 30 cents per share and revenue of $758.2 million, according to Thomson Reuters I/B/E/S.

Shares of Urban Outfitters [fortune stock-symbol=”URBN”] closed at $40.72 per share on the Nasdaq on Monday.

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