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UPDATE 2-Urban Outfitters falls on weak sales growth, restaurant deal
November 16, 2015 / 9:39 PM / 2 years ago

UPDATE 2-Urban Outfitters falls on weak sales growth, restaurant deal

* Q3 sales $825.3 mln vs $869.8 mln

* Profit matches est at $0.42 per share

* Q3 performance “sub-par” - CEO

* Shares fall 10 pct in extended trading (Adds comments from CEO, analyst; updates shares)

By Subrat Patnaik

Nov 16 (Reuters) - Apparel retailer Urban Outfitters Inc reported weaker-than-expected comparable sales, piling more pressure on its shares already strained by the surprise purchase of an Italian pizza chain earlier on Monday.

Shares of the company fell as much as 10 percent after Urban Outfitters said it would buy the Vetri Family restaurant group, and fell another 10 percent in extended trading after the company reported weak third-quarter results.

Urban Outfitters’ performance in the quarter ended Oct.31 was “sub-par”, Chief Executive Richard Hayne said on a post-earnings call, citing weak sales at the company’s namesake brand.

Retailers have been hurt by a long spell of warm weather in September and October, which is weighing on cold-weather apparel such as coats and jackets.

The company’s expansion into the restaurant business comes at time when consumers are spending less on discretionary items such as clothes and cosmetics.

Urban Outfitters is not new to the food business. Some of the company’s stores already have restaurants and coffee bars attached to them.

“While the potential overlap of the customer base is obvious, the challenge of operating a new business and successfully integrating it with URBN is not insignificant,” Stifel analyst Richard Jaffe wrote in note.

Neil Saunders, chief executive of retail research firm Conlumino, added that the deal, which includes the restaurant chain Pizzeria Vetri, could sap management attention and capital.

Philadelphia-based Urban Outfitters said third-quarter comparable sales at its namesake brand, the second-biggest by sales, rose by 1 percent in the quarter ended Oct. 31.

Analysts polled by research firm Consensus Metrix had expected sales at the brand to grow 3 percent.

The company’s quarterly net income rose 10.3 percent to $52 million, or 42 cents per share, matching the average analyst estimate.

Net sales rose 1.3 percent to $825.3 million, but fell short of the $869.8 million analysts had expected.

Up to Monday’s close, Urban Outfitters shares had fallen about 35 percent this year. (Reporting by Subrat Patnaik in Bengaluru; Editing by Don Sebastian)

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