Investopedia: Urban Warfare

When a company's management spends part of their earnings conference call talking about a company's ten-year trends and history, that is often a bad sign. Such is the case for Urban Outfitters (Nasdaq:URBN). However impressive Urban Outfitters' past may be, it is not going to spare the stock today as investors focus on worrisome developments in margins and inventory. 

A Sour Note To End 2010
Urban Outfitters did report 14% overall sales growth for the fourth quarter. That is pretty much it for the good news. That sales level was a bit below analyst expectations, and store comps were down 2% as transactions fell about 1%. On a slightly more encouraging note, sales comps were up 4% if direct-to-consumer sales are included.

To its credit, Urban Outfitters has managed to do what American Eagle (NYSE:AEO) and many other retailers have struggled to do - operate multiple successful brands. The core Urban Outfitters brand saw revenue increase 13% this quarter, with Anthropologie up 10% and Free People up 35%. URBN also has a successful direct-to-consumer business, and revenue here jumped 28%.

Turning back to bad news, the company saw gross margin shrink more than 2% as the company had to get more aggressive with markdowns to move product. SG&A growth matched sales, though, and the company saw operating income tick up 1% while operating margin fell more than 2%. Taxes also came in above analyst expectations, contributing a few pennies to the company's earnings miss.


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