Q4 Reports: Profits Down at Urban Outfitters, Hot Topic

Urban OutfittersUrban Outfitters’ Q4 Profits Decline 3.1% on Weaker Margins

Philadelphia–Urban Outfitters Inc. posted an unexpectedly 3.1%  decline in its fourth quarter profit due to weaker margins and a higher tax payment, the specialty retailer reported Monday.

For the quarter ended Jan. 31, Urban Outfitters reported a profit of $75.2 million, or 45 cents a share, compared with $77.7 million, or 45 cents a share, a year earlier. Revenue increased 14% to $668.4 million. But the figures fell short of analysts’ average estimate for earnings of 52 cents on $676 million in revenue.

Urban Outfitters, which operates namesake stores as well as Anthropologie and Free People shops, reported gross margin fell to 39.7% from 41.7% as the company markdown seasonal inventory and as shipping costs rose higher as international direct-to-consumer sales increased. Furthermore, a higher tax bill in the fourth quarter pushed the bottom line lower.

The fourth quarter results were surprising to analysts since company posted sales increases in nearly every quarter during the recession and since then it has repeatedly broken quarterly records for profit or revenue. Indeed, the fourth quarter’s top line was a record high. However, the latest results follow a muted third-quarter performance, when earnings per share were only slightly above analysts’ average estimates and revenue also fell short.

By division, Free People saw same-store sales jump 28%, while Anthropologie’s rose 1% and Urban Outfitters comparable store sales grew 5%. Direct-to-consumer sales climbed 29%. Total inventories rose 23% from a year earlier.

 

Hot Topic Posts Q4 Loss, Hired Consulting Firm

 

City of Industry, CA–Hot Topic swung into a net loss for the fourth quarter, after sales declined 0.8% during the period.

The company reported Monday a net loss in the fourth quarter, compared to net income of $8.0 million for the same period last year. For quarter ended Jan. 29, revenue decreased 0.8% to $212.4 million, compared to $214.2 million for the fourth quarter last year. Same-store sales fell 2.1%.

The fourth quarter results include $9.8 million of expenses related to the implementation of a previously announced cost reduction plan.

Board to Review Consultant’s Recommendations

The teen retailer’s latest results continue a trend of weak quarterly performances. After weaker second and third quarters, Hot Topic also announces a cost-reduction plan in November. Previously, the company struggled to win shoppers after its “Twilight” film sequel merchandise failed to boost results as much the original film did.

During the final quarter the company also engaged an outside consulting and financial advisory firm to review the company’s business and operations and make recommendations regarding potential future improvements. The board said it would delay issuing a first quarter guidance until it reviews the consultant’s conclusions expected to come in mid-March. The company will hold its fourth-quarter conference call after it can evaluate that report and decide how to move forward.

The teen retailer’s latest results continue a trend of weak quarterly performance. In the second and third quarters, it also posted weaker sales, which prompted Hot Topic to announce a cost-reduction plan in November. Previously, it has struggled to win shoppers after its merchandise geared to the “Twilight” vampire movie sequels failed to buoy results as much the original film did.

For the fiscal 2010, Hot Topic reported a net loss of $8.2 million, compared to net income of $11.9 million last year. Fiscal year 2010 results include $12.8 million of expenses for the implementation of the cost reduction plan, too.

Hot Topic, which operates mostly mall-based stores, has 657 Hot Topic stores and 153 Torrid stores, compared to 680 Hot Topic stores and 156 Torrid stores at the end of the fourth quarter of fiscal 2009.

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