Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

Previous Posts

Wednesday, August 09, 2006

Can Urban Outfitters Kill the Short Sellers?

Urban Outfitters (URBN) about a company that has fallen out of grace on the street.

The retailer just this week has posted lower same-store-sales of -7% for the quarter. One year ago you would have thought it was blasphemy. What occured, despite the company saying was missed opportunities, was that the company didn't really do anything different from last year. With it having had such large jumps from 2003 to 2004 and from 2004 to 2005, these comps are getting very hard to show additional gains. That was particularly the case at the flagship brand "Urban Outfitter" stores with this last quarter showing -11% same store sales numbers.

If you are an adult, this will make sense. If you are a young adult or high school to college student, then you may just have been priced out as the economy softened. A pair of jeans and a couple shirts there are probably going to set you back about $250.00.

What is important to know is that the company already gave us the total revenue numbers of $285.55 million for the quarter, which is up from $253.3 million in the same quarter in 2005. That was under the $298+ million estimate. It looks like the street is at $0.16 EPS, but that looks rounded down. The expectation for next quarter is $0.25 EPS and $350.5 million in revenues. If they can get even close to that number and say that they are handling their internal metrics better, then you will probably see some serious short covering. The short interest is old now, but it looks like last month it had 14% of the float short.

This isn't predicting the company will change its signal, but you will see a pretty big recovery rally if it looks like it is turning around. Specialty retailers usually tend to take 18 to 24 months to remedy their woes before the comparable sales got so low that they look on track to blow them out again, but this has been such a fast stock in the past that they may be unique.

URBN at a $14.02 close put in another year low today ahead of earnings, and it is down from the 52-week high of $33.77. Its shares are also down over 7% from the highs in the last 5-days alone. It is back to 2-year lows, but still up massively from levels in early 2003 when the company really began taking off.

Maybe they should start selling Ghettopoly again.

Jon C. Ogg
August 9, 2006

Powered by Blogger