Philadelphia-based apparel company Urban Outfitters Inc. (URBN) has seen it shares sink more than 15% this month, following its retail peers on a slippery slope as ecommerce steals traffic away from traditional shopping malls.

Amid the retail crisis, players such as Urban have tried to hedge against a sales slump by tapping into Millennial trends favoring casual and athletic wear over dressier options. While analysts weren’t expecting anything grand, Urban’s latest report suggests the firm missed the already-low bar by a long shot.

Misreading Consumers

In the most recent first quarter, the owner of Free People and Anthropologie posted earnings of $0.10 per share, down from $0.25 per share reported over same period last year and missing expectations for EPS of $0.16. Revenue of $761 million in the quarter came in flat over last year and also failed to meet the consensus for $768.6 million. While direct-to-consumer sales grew at a double-digit pace, comp sales in the retail division dipped 3.1% year over year (YOY) and sales at same stores open for more than a year declined 3%.


In order to reach a new “athleisure” shopper, Urban banked on rompers and onesies, pulling back from its orders of pricier dresses. “Sales of bottoms, onesies and rompers did, indeed, trend up nicely, but except for the Free People brand, increases in these categories did not offset losses in dresses,” said Chief Executive Officer Richard Hayne. “In retrospect, dresses were planned lower than they needed to be.”

Anthropologie Findings

In particular, Urban’s Anthropologie brand dragged down earnings after “misreading” its customers’ preferences, overcompensating for a shift to casual wear and failing to offer enough clothes appropriate for work or going out.

Cowen & Co. analysts said they were disappointed with Urban’s underperformance, indicating the firm “missed the mark in terms of offering styles that fit the Anthro customer lens.”

Trading at a price of $19.39 on Friday afternoon, URBN shares reflect an approximate 32% decline year-to-date (YTD). (See also: Apparel Rivals Fight for Piece of Athleisure Space.)

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