Most everyone knew that this Christmas was not going to look like any other before it. Whether you mailed your gifts to the family and met them all on Zoom (NASDAQ:ZM), or you celebrated your Christmas Eve church service from the comfort of your car—which was surprisingly appropriate, given the Christmas story as a whole—it wasn't the same as it was even last year. It also wasn't the same for many retailers, who found themselves left out in the cold as much as all those car-bound Christians. Urban Outfitters (NASDAQ:URBN) recently announced its holiday sales, and the result is a very Grinchly one indeed.
The Lockdown Grinch That Stole Urban Outfitters' Christmas
Urban Outfitters recently clued investors in to what was a substantial disaster in comparable holiday sales. For the two months leading up to December 31, 2020—which is essentially the holiday season—net sales were down a hefty 8.4%. While Urban Outfitters had made the discovery that many retailers did in 2020, that online sales are now vital to maintaining a business, such sales didn't help break the disaster that was the holiday for the company. Online sales increased by a double-digit factor, reports note, but it wasn't enough to offset the hit that Urban Outfitters took in foot traffic. Retail segment sales dropped 9%, and wholesale sales were short 1%, a combination that meant a disastrous Christmas for Urban Outfitters.
There was some brightness in the reports, however; Free People—a brand within Urban Outfitters' bailiwick—was up 1% for the holiday shopping season, but with Urban Outfitters itself losing 8% and its Anthropologie brand losing 12%, one slight up isn't much match for two big downs. However, Urban Outfitters also noted that sales for January so far have made a decent comeback.
In response, the CEO of Urban Outfitters, Trish Donnelly, appears to have fallen on the sword and departed the post. Donnelly will be replaced by Sheila Harrington, who is currently CEO of Free People. From the look of the reports, Harrington will be doing both jobs at once.
Not Helping on the Analyst Front
This kind of news can turn any investor away, and our latest research suggests the broader analyst consensus is already swinging away itself. The current consensus remains a hold, but the ratios making up the hold have switched closer to “sell” than they've been in six months. Six months ago, the company had 13 “hold” ratings and seven “buy” ratings to its credit. That held true three months ago as well, but a month ago, it slipped to 13 “hold” and six “buy.” Today, we have a “sell” rating for the first time in six months, along with 12 “hold” and six “buy.” The stock is moving increasingly bearish based on the latest analyst projections.
However, there is some hope; the price target has remained unchanged for the last month, and is up overall. Six months ago, consensus expected a price of $20.56, which went to $25.28 three months ago before settling in for the month at $29.22.
Overextended, Underfunded, and a Potential Winner?
The news is not good for Urban Outfitters, and for several good reasons. Urban Outfitters is suffering as one of those mall-facing stores that we spent a good chunk of 2020 talking about; stores like this are so dependent on foot traffic that any impact in same sends the whole store's sales figures crashing. While certainly, the company has made adjustments since, it's been behind the eight-ball on this whole process, much in the same way The Children's Place (NASDAQ:PLCE) and American Eagle Outfitters (NYSE:AEO) were. Worse yet, Urban Outfitters' response doesn't engender a lot of hope here; instead of bringing in someone new, it's basically doubled one person's workload. That's the kind of thing that's the setup for a “Dilbert” strip, not a plan for a return to greatness. Sure, Harrington led the big profit center of Urban Outfitters this year, but that doesn't necessarily translate into improving the main body, especially when Harrington needs to do two jobs at once.
There could, however, be opportunity here. Depending on what Harrington can do here, and depending on a potential return to almost-normalcy this year with the rapidly-increasing stock of coronavirus vaccines and treatments around, Urban Outfitters may be able to get its struggling physical branches to put out enough fodder to fund a boost to online operations, which likely could use some retooling to help get them properly putting out in an online-heavy shopping market. If you already have Urban Outfitters stock in your portfolio, hang on to it, and let's see if the new boss can deliver on the promise of a previous career.
Companies in This Article:
