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Retailer Urban Outfitters $URBN reported better than expected fiscal second quarter 2018 earnings after the market opened on Wednesday. Shorts are being squeezed by the high 22% short interest in the stock. 

The reaction to $URBN earnings is a lesson on the frailties of trends especially fashion trends and the dangers of being overly short or long around a market event. 

Earnings: Earnings per share: 44 cents per share, vs. 37 cents expected by Thomson Reuters. Revenue $873 million, vs. $861 million estimated.

Reaction: Urban Outfitters, Inc. NASDAQ: $URBN Pre-market20.43 +3.61 (+21.46%)

Same-store sales fell 4.9 percent vs. 6.9 percent fall expected, according to Thomson Reuters.

For 2Q18, the gross profit rate of Urban Outfitters decreased 440 basis points, driven mostly by higher markdowns due to underperforming women’s apparel and accessories product at Anthropologie and Urban Outfitters. As of July 31, 2017, total inventory decreased by $2MM, or 0.6%, on a year-over-year basis.

Urban Outfitters is generally linked to the hipster millennials with that demographic a big feature of URBN's customer base and target. These is a grouping that society often parodies for their reliability, which carries some of the basis for the large short book on Wall Street. Not a sound basis to 'hate a stock'.

Segment Brands

  • Free People sales rose 2.9 percent
  • Anthropologie Group fell 4 percent 
  • Urban Outfitters sales fell 7.9 percent

Guidance

CEO Richard A. Hayne said in a statement.

"While we are disappointed in our second quarter performance, we have a number of initiatives underway including: speed to customer, international growth, wholesale expansion and digital investments.  We believe these initiatives combined with encouraging fashion apparel trends could lead to improved topline performance in future quarters."

$URBN said that if the current trajectory of apparel were to continue throughout the third quarter, Urban Outfitters would expect to see regular price comps improve, but be offset in part by a reduction in markdown comps.

Source: Urban Outfitters, AlphaStreet

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