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Urban Outfitters Q2 not so disappointing as shares jump, “encouraged” by new fashion trends

Urban Outfitters was “disappointed” with its Q2 performance Tuesday. But how did the market react? Its shares jumped almost 21% after hours as weak sales and earnings for the quarter still beat analysts’ tepid expectations.

The numbers weren’t particualrly good. Urban Outfitters said Q2 earnings fell to $50m/44 cents a share from $77m/66 cents a year ago. Analysts expected 37 cents.

Total net sales fell 2% to $873m, ahead of analysts’ $862m call.

Comparable sales, including digital, fell 4.9%, which the company attributed to “negative retail store sales” offsetting continued growth in direct-to-consumer sales, although the group did not say by how much. Analysts had expected a 6.5% comps dip.

By brand, comp sales increased 2.9% at Free People, fell 4% at Anthropologie, and dipped 7.9% at its core Urban Outfitters business.

Wholesale segment net sales, meanwhile, increased 10%.

But those gains weren’t enough to satisfy CEO Richard Hayne, who told analysts on a conference call that the quarter “fell far short of expectations” mainly due to an underperformance of women’s product. He had earlier said in a statement he had been disappointed with the Q2 perormance.

“The top-line shortfall in our two larger brands in North America came mostly from poor execution rather than macro headwinds,” Hayne said. “I’m quite confident there was and still is sufficient newness in women’s fashion to drive positive comp sales.

“We have a number of initiatives underway including: speed to customer, international growth, wholesale expansion and digital investments,” Hayne also said.

”We believe these initiatives combined with encouraging fashion apparel trends could lead to improved top-line performance in future quarters,” he reiterated.

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