Urban Outfitters, the youth-oriented apparel retailer, continues to strike out with shoppers during the second quarter. The company behind Free People, Anthropologie and its eponymous brand stores, reported yet another quarter of sales and profit declines as its fashion offerings failed to resonate with finicky millennials. For the three months to end of July, like-for-like sales – a measure of sales online and at stores opened more than 12 months – slumped 4.9 per cent, the most in seven years, according to Bloomberg data. Net sales dropped 2 per cent year-on-year to $873m. However net income tumbled by more than a third to just under $50m after the company was forced to sharply ramp up markdowns at its stores in order to clear inventories.
The heavy discounting dealt a 440 basis points blow to group’s gross margins during the quarter and raises further questions over the effectiveness of Urban’s turnaround efforts. “While we are disappointed in our second quarter performance, we have a number of initiatives underway including: speed to customer, international growth, wholesale expansion and digital investments,” said chief executive Richard Hayne. Mr Hayne conceded earlier this year that clothing at Anthropologie, its biggest division by revenue, wasn’t appealing to customers.
“The customer is also telling us in no uncertain terms the apparel and accessory offerings are currently off-pitch,” he said in March. There was little sign of the pressure easing during the second quarter. Anthropologie, best known for its “bohemian modern” mix of pricey 70s-inspired flowing tops and whimsical dresses, saw same-store sales fall 4 per cent while those at Urban Outfitters dropped 7.9 per cent. The declines were slightly offset by sales gains at Free People and its wholesale business.
Still, the results will only underscore the difficulties of operating in the teen retail space. Apparel retailers catering to younger people have been hard hit in recent years by declining mall traffic, changing tastes and the rise of cheaper fast fashion chains such as Forever 21 and H&M. Shares in Urban – down 41 per cent so far this year, jumped more than 13 per cent in after market trading as investors expressed relief that the sales and profit declines came in narrower than expected.