Urban Outfitters Fighting Uphill Battle

Jacob Harper |

Perhaps the most drastic change to the retail landscape in the last 10 years has been the transition away from storefront commerce and towards e-commerce. Those who have been able to adapt, or have always been a digital brand like Amazon (AMZN) , have thrived. Those who haven’t… well, we all know how JC Penney’s (JCP) been doing.

Who else has been upended in the digital revolution? Big boxes like Best Buy (BBY) have certainly been hit hard. But the ones that should really be worried aren’t the behemoths like JC Penney and Best Buy, who have the resources to jumpstart a thriving online biz. It’s their smaller counterparts with a relatively quiet online presence, especially those shops that primarily reside in that largest and most moribund of dying brick-and-mortar institutions: the mall.



Think American Eagle (AEO) .Think the slowly dying Abercrombie and Fitch (ANF) . And think Urban Outfitters (URBN) , who report earnings after the bell on May 19. Earnings per share are expected to drop from $0.32 to $0.25 a share. But as this shopping season has largely disappointed, and the retail sea change to the web continues unabated, the numbers could be much worse.

And the analysts seem to agree. Just last week, Urban Outfitters was downgraded by FBR Capital, citing the retailer’s increased competition in the already-choked mall space.

However, it bears mentioning that, compared to their brick-and-mortar compatriots, Urban Outfitters has a much more developed web presence. How much they’ve been able to grab their slice of the digital pie remains to be seen. UO did surprise back in September 2013, beating earnings expectations on higher than expected web sales. But since then, shares of Urban Outfitter shave falled 17 percent, as profits have been shrinking at an exponential rate.

A couple things must occur during the earnings report to consider this a win for Urban Outfitters. One, they obviously must keep ratcheting up online sales. Same-store sales have been declining, with last quarter representing a whopping 9 percent drop year-over-year, and they must make this up in digital.

Two, they must present a plan to close underperforming stores. Much as big-box office supply chain Office Depot (ODP) recently popped after announcing plans to scuttle the dead weight, Urban Outfitters must shave expenses to stay competitive. This means trimming out locations that aren’t up to snuff, and are causing the drop down in same-store sales.

The mall as a concept is dying, and its holdouts will continue fighting for less and less scraps. Unless the mallrats can scurry to some new digs, they risk being completely left behind.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AMZN Amazon.com Inc. 1,167.25 -1.67 -0.14 1,494,361 Trade
ODP Office Depot Inc. 3.32 -0.07 -1.92 2,235,844 Trade
URBN Urban Outfitters Inc. 32.86 0.59 1.83 3,724,921 Trade
ANF Abercrombie & Fitch Company 17.88 -0.03 -0.17 886,562 Trade
AEO American Eagle Outfitters Inc. 17.35 -0.28 -1.59 4,222,444 Trade
JCP J.C. Penney Company Inc. Holding Company 2.99 -0.21 -6.56 15,312,649 Trade
AVIFY Advanced Info Service Public Co Ltd ADR (Sponsored 5.36 0.00 0.00 100

Comments

Emerging Growth

Winston Gold Corp.

Winston Gold Mining Corp is a mineral exploration and development company. The Company is engaged in acquiring, exploring, developing, and operating mining properties.

Private Markets

The Green Organic Dutchman

The Green Organic Dutchman Ltd. ("TGOD") produces farm grown, organic cannabis for medical use. The company grows its high quality organic cannabis in small batches using craft growing, all natural…

Voleo

Voleo is a free download that allows you to form investment clubs with your friends, family, colleagues, classmates, teammates…basically anyone you know and trust. Invest and manage a stock portfolio…