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Suravi Thacker
Suravi Thacker
Articles (157) 

Is This Company Now On The Right Track?

June 23, 2014 | About:

Consumer taste and preference keep changing, and so do their choice of fashion clothing. Sudden changes in fashion taste should be accompanied with new and fresh clothing which will keep customers hooked to the stores. However, there are some retailers who fail to keep updated with the change in tastes, leading to loss in sales as well as market share.

A typical example here is that of Urban Outfitters (NASDAQ:URBN) which suffered a lot due to some of its fashion missteps which resulted in the loss of customers. However, its first quarter numbers highlight that the company is making up for its mistakes and deserves another chance.

The quarter in detail

Revenue surged 6% over last year, clocking in at $686 million. This was slightly below the estimate of $688 million. The top line growth was driven by growth in the Free People and the Anthropologie brand. Revenue from Anthropologie grew 25% and that of Free People surged 8%. Also, revenue from wholesale business jumped 27%, adding to the top line growth. Moreover, 5 new stores opened during the quarter helped revenue grow.

However, revenue from Urban Outfitters brand plunged 12%, hampering total sales during the quarter. Earnings also dropped to $0.26 per share from $0.32 per share in the year ago quarter. The bottom line was affected by factors such as higher operating costs and higher costs of marketing its products.

Road to a great future

After the effects of fashion missteps and lack of promotions, Urban Outfitters made a large number of efforts to win back lost customers and revive its business. It strengthened its Free People brand and Anthropologie brand.

For instance, new product assortments at Anthropologie stores and expansion of boutique assortments to seven such stores helped in driving growth. The retailer got into story telling techniques through various advertising media along with catalog and email communication. Also, it plans to expand its petite line of wear, which caters to the shorter women.

Even for the Free People brand, it launched an activewear called Movement. This new launch should attract customer interests. Also, intimate special occasion dresses had been one of the bright spots of this brand.

On the online front also, the company introduced a new activewear concept called Without Walls. Additionally, it plans to launch its website in multiple languages which will make it easier to cater to the International crowd.

Moreover, the company is making huge investments in technology upgrades and marketing expenses. It also plans to reformat its stores. The new format stores will lead to a differentiated experience for customers, enabling them to visit the stores more often.

Lastly, Urban Outfitters eyes expansion into new regions such as Japan and Hong Kong. Also, it declared that it aims to open a total of 35 to 40 new stores during the year. Therefore, this company looks all set to grow.

The takeaway

Although factors such as severe weather conditions and fashion missteps took a toll on its results, it should not continue for long. Further, these factors should no longer affect when the undertaken strategies start bearing fruits. Also, certain positives should play an important role. Firstly, higher consumer spending should boost overall spending of people. The consumer confidence index too has increased to 100. New and fresh products introduced by the company will entice more customers. Therefore, I find no reason to ignore this company.

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