As its hip slips, Urban Outfitters refocuses

Posted: May 25, 2014

With the flagship listing, it is all hands on deck over at Urban Outfitters Inc. Even the boss' wife has joined the bucket brigade.

How bad are things? Well, the iconic purveyor of hip just completed its fifth straight quarter of slipping sales. For the record, that's Urban Outfitters, the brand. The overarching company of the same name - No. 20 on the Philly50 - saw sales up, thanks to Anthropologie and Free People, the firm's other major brands.

Still, that success hardly ameliorates the disappointment in the missteps of the company's firstborn.

"Clearly, there is still much work to be done for Urban to regain its fashion footing," said Richard Hayne, founder and chief executive of the retailer.

It is uncertain how it happened, but Urban has lost a bit of its mojo with its target market - 18-to-28-year-olds. Hayne, in speaking to financial analysts Monday, put the onus squarely on his team.

"We believe there is no fundamental structural changes in the young-adult market," he said. "There are, of course, fashion changes, and the success of each brand depends on the accuracy with which it predicts those changes."

Urban has been feverishly working to improve its aim. It is getting help from Meg Hayne, who, besides being Richard's wife, is president of Free People, which had a stellar quarter, sales up 30 percent.

"We are working on a look and a voice that is unique to Urban Outfitter," Meg Hayne told analysts. "And it goes above and beyond the product. We are focused on our customers' lifestyle and life stage. . . . We are really going after looks from head to toe."

The goal is to have new products in place by July for the back-to-school buying season.

July coincides with the arrival of Trish Donnelly, who takes over as president of the Urban Outfitters brand in North America. Donnelly comes from Steve Alan, where she has been president since 2011.

Stifel Nicolaus analyst Richard Jaffe believes Donnelly "will help to ensure that the merchandise assortments at the Urban brand are appropriate and on trend."

Urban is also broadening its product offerings as well as experimenting with store design.

It has launched Without Walls, a line of activewear apparel and accessories. It is largely an online entity, but the retailer has added its products to eight stores, including its King of Prussia location.

Urban Outfitters' chief financial officer, Frank J. Conforti, told analysts that the company had yet to see a noticeable "lift" in store sales. Sales were weak among men, he said.

"But we really like what we have seen on the women's side," he said.

With store design, Urban is pushing the envelope with 50,000-square-foot concept stores, such as Space 98, which occupies a four-story warehouse in Brooklyn. It includes the works of 40 local designers, men's and women's clothing, electronics, and home goods. It has a restaurant and bar.

"We've had a positive response since we opened the door," Tedford Marlow, chief executive of the Urban Outfitters Group, said.


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