Urban Outfitters’ Shares fall 15%

Urban Outfitters’ Shares fall 15%

Shares of an American multinational clothing corporation, Urban Outfitters fell nearly 15% on Friday after investors received warning from the apparel retailer that third-quarter earnings would be hurt by declining sales.

The stock dropped to its lowest since July 2012, closing down $4.94, or 14.29%, to $29.62. The warning increased worries that teens will avoid the company's fashions at the time of the essential holiday season.

The Philadelphia-based owner of Anthropologie, Free People, and Urban Outfitters stores said that quarterly comparable sales have declined in early September and still persist.

The company said in an update on Thursday after the market closed that lower than expected sales may deleverage its gross profit margin for the third quarter at a rate greater than in the first half of the year. If this occurs, then third-quarter earnings will be affected.

Goldman Sachs Group Inc., Morgan Stanley, and Janney Montgomery Scott L.L.C reduced their ratings on the company after the announcement. For the target stock price, analysts also lowered their estimates.

"We believe the sales shortfall is due to lighter inventories rather than product misses. We are seeing better fashion in stores, and we continue to expect a stronger assortment for the holidays", said analyst Laura Champine.

Paul Lejuez, analyst with Wells Fargo Securities, said in a note that they still believe in long-term prospects of their brand portfolio. Adding to it, Lejuez said that near-term business pressures can't be ignored.

Lejuez wrote that this has been a tough retail environment, where there is possibility to see many other disappointments. Analysts said that Urban Outfitters is different from many others because they have three differentiated concepts that are under-penetrated in the US and worldwide.

The company is also facing a broader spending fall heading into the holiday shopping season.

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