Urban Outfitters predicts 60% fall in same-store sales on slow recovery

(Reuters) – Apparel retailer Urban Outfitters Inc (URBN.O) on Tuesday projected a 60% decline in same-store sales in the second quarter due to tepid demand recovery from the COVID-19 pandemic disruptions, sending its shares down 6% in extended trading.

The Free People brand owner has reopened about 40% of its more than 600 stores worldwide, but said initial customer traffic has been sluggish. It expects to open 100 more stores by the first week of June.

“We believe a return to near pre-virus levels will take many quarters and a medical vaccine or cure,” Chief Executive Officer Richard Hayne told analysts.

Urban Outfitters also reported worse-than-expected preliminary results for first-quarter ended April 30, as its stores remained closed for about half of the quarter due to the coronavirus-led restrictions.

The company’s Anthropologie brand reported a 33% decline in same-store sales despite increased discounting as consumers switched to sweatpants and loungewear.

Gross margin decreased to 2% from 31.1% a year earlier, mainly due to higher delivery charges and increased discounts, even as it cut costs through furloughs and decreased investments in its China expansion plans.

Net sales fell 32% to $588.5 million, missing expectations of $627.1 million, according to IBES data from Refinitiv.

Excluding items, the company recorded a loss of 77 cents per share, while analysts’ had estimated a 29-cent loss.

Urban Outfitters, however, said online business demand remained robust after recording double-digit digital sales in the first quarter, driven mainly by sales in Europe.