An empty Urban Outfitters in New York City on Friday afternoon.
Shareholders and analysts hoping more favorable weather would help slumping retail sales at Urban Outfitters (URBN) saw the exact opposite happen, with the trend continuing downward into the new quarter.
The at-times controversial apparel retailer, known for clothing such as the "vintage" faux-bloodstained Kent State Sweatshirt and shampoo for "suicidal hair," posted weaker-than-expected first-quarter results after the bell Thursday. The big standout: retail segment net sales are mid-single-digit negative so far during the second quarter of fiscal 2017, according to the company. Urban shares were down by more than 6% in trading Friday at a price around $26.
TheStreet's Jim Cramer said on CNBC's Squawk on the Street Friday that Urban had done quite well, but now the shares will start reflecting the weak quarterly results, adding that "it's going to hit a Macy's (M), going to hit a Kohl's (KSS)," which all trade together now. Cramer also noted that Urban's results serve as a reminder for the majority of the retail industry that "we are not out of the woods."
After visiting an Urban Outfitters store in Manhattan's financial district during lunchtime Friday, it is clear to see that the retailer offers a wide range of clothes and other home products, like the inflatable pink flamingo for lounging in the pool. But the store only had a handful of customers, the majority of whom were looking at the sales section and at summer dresses. One family stopped at the perfume section, noting that the fragrances smelled "so good." Ironically, no one was looking at a prominently displayed Calvin Klein collection, which had plenty of inventory. But sales associates were hard to find, and one only approached me as I was leaving the store.
Immediately after checking out Urban, I visited the Anthropologie store in Union Square. It was a different vibe there. I followed two mothers inside after they said they would meet up with their daughters later, as the younger girls did not want to shop at Anthropologie. Once inside, I saw another young mother with her children in tow looking at dresses. She left without buying anything. I spotted some younger shoppers near the accessories but none were making any purchases. The home section was empty, as customers were more interested in sales and the neighboring shoe section.
I tried on a jumpsuit prominently displayed front and center in the store. The sales associates were helpful, and said they hoped I would be coming back to buy it. Overall, Anthropologie had far more customers than the Urban Outfitters store I visited but some of the customers in the checkout line were actually making returns.
When looking at the company's quarterly results, William Blair analysts were mixed on Urban's outlook, saying in a research note Friday that they believe the brand picked up more meaningfully after Memorial Day. As for the company's other brands, Anthropologie and Free People, the analysts believe both will see negative comparisons for the quarter, estimating declines of 4% and 5%, respectively. Because the quarter-to-date trends are tracking below their initial estimates, the analysts lowered their second-quarter earnings forecast to $0.53 per share, down from $0.55, and their full-year estimate down by $0.02 to $1.96.
But the analysts still said there is some upside with the stock. They are maintaining their "long-term positive view on shares as the Urban Outfitters and Anthropologie brands continue to make a recovery," citing meaningful upside to operating margin and longer-term growth opportunities stemming from a new category and international expansion. They reiterated their Outperform rating.
Analysts at Wells Fargo were more pessimistic about the retailer. In a research note Thursday, they said it appears that "business hasn't rebounded in the magnitude that management was hoping for." The analysts also expressed future concerns about tougher compares, recent product misses at Anthropologie and low margin visibility. They rate Urban Market Perform, but revised their earnings estimated downward, moving their full-year earnings view to $1.82 per share, down $0.10.
-- This story has been updated with photos and additional reporting on location.