Urban Outfitters Reports Profits are Down

In the three months ended Jan. 31, profits at the Philadelphia-based specialty store group fell 24.4 percent to $40.5 million, or 24 cents a diluted share, from $53.6 million, or 32 cents a share, a year ago. Shares of the operator of Urban Outfitters, Anthropologie and Free People dropped $1.16, or 7.3 percent, to $14.81 Thursday as EPS fell 4 cents short of analysts' expectations.

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The company said the higher rate of markdowns it needed to clear seasonal inventory contributed to the net income decline. Fourth-quarter gross margins fell about 550 basis points to 34 percent from 39.6 percent a year ago. On a mid-morning call with investors, chief executive officer Glen Senk said the company was not pleased with the slide in margins.

"But we responded quickly to the change in environment and are pleased with the company's comparable inventory position, down 13 percent at quarter's end," Senk continued. "Frankly, I'm not sure the merchant teams or our supplier base could have reacted any better to the abrupt change in business. They turned on a dime and repositioned the inventory in less than three months."