Urban Outfitter (URBN) Making Agile Edits, But Problems Could be Multi-Year - Cowen
Cowen analyst, Oliver Chen, seems to be throwing in the towel on Urban Outfitter (NASDAQ: URBN) as he drops his price target precipitously to $21 from $30. He states that the company's business model is vulnerable and it needs to diversify away from Apparel.
He sees multiple challenges ahead for URBN's stock and near-term performance:
1) Need new fashion to generate traffic: management spoke to the customer's current lack of enthusiasm for apparel/accessories is being driven primarily by a lack of fashion. URBN's distinct look & sensitive correlation to fashion trends carries with it an inherent risk, and mgmt noted they believe the current fashion look is getting somewhat stale. Significant newness is likely necessary to fuel sustainable comp improvements
2) Multi-concept fashion risk: concerns that multiple fashion concepts add some diversification benefit and risk as URBN has had challenges having all concepts comp positive
3) Execution of lifestyle transformation: URBN needs to become a retailer that can compete in a land of apparel deflation, commoditization of fashion and store experiences set a new high bar
4) Lifestyle of new customers is changing rapidly: we believe URBN's core millennial & Generation Z customers have less loyalty to specific store brands and greater propensity to mix-and-match and leverage personal style, which puts URBN's higher price + new fashion model at risk
The analyst believes these core issues will likely be a multi-year problem.
The stock is already at a Market Perform rating so there seems to be little risk to the rating unless another material change in fundamentals
For an analyst ratings summary and ratings history on Urban Outfitters, Inc. click here. For more ratings news on Urban Outfitters, Inc. click here.
Shares of Urban Outfitters, Inc. closed at $22.67 yesterday.