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Urban Outfitters’ profits down after Euro investment

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Youth fashion retailer Urban Outfitters saw like-for-like (LFL) sales fall in the second quarter of its financial year, while investment in technology, e-commerce and distribution facilities in Europe also contributed to a significant fall in its profits margins.

A trading statement published late yesterday by the company, which also owns brands such as Anthropologie and Free People, revealed that total sales rose ten per cent to $609 million (£372 million) in the three months to July 31st 2011 but gross profit margin percentage declined 21 per cent year-on-year.

With its stores located in the US, Canada and Europe, the business finds itself operating in a number of tough markets at present.

Profits margins dropped and comparable store net sales slipped two per cent as a result of a high number of promotions needed to clear slow-moving women’s clothing at both its Anthropologie and Urban Outfitters outlets.

Net income for the quarter totalled $57 million, a fall of around $15 million compared to the same period last year, as the company made significant investments in e-commerce and catalogue services worldwide.

Additional pressure was put on margins by the retail group’s strategy to grow its property portfolio during the six months ending July 31, with nine Free People stores, seven Anthropologie outlets and four Urban Outfitters shops opening over that period.

Despite the tough trading environment, Group CEO Glen Senk is positive about the second half of the financial year.

“We remain confident in our strategies and believe we made great executional progress during the quarter,” he commented.

“We anticipate gradual improvements in our comparable sales over the balance of the fiscal year and into spring 2012.”

Urban Outfitters Inc owns close to 400 stores worldwide, including 16 eponymous outlets and three Anthropologie shops located in prime retail destinations across the UK.

Published on Tuesday 16 August by Editorial Assistant

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