Why Shares of Urban Outfitters Inc. Slumped on Monday

By Timothy GreenFool.com

What: Shares of apparel retailer Urban Outfitters slumped on Monday ahead of the company's third quarter earnings report. Recent lackluster reports from major retailers may be contributing to the decline, in addition to the company's announcement on Monday morning that it had acquired a group of restaurants, including Pizzeria Vetri. At 1 PM Monday, the stock was down about 9%.

So what: Urban Outfitters will announce its third quarter results after the market close on Monday, and with disappointing reports from both Macy's and Nordstrom last week, concerns about a tough holiday season for retailers have affected stocks across the entire sector. Shares of Urban Outfitters have been slumping since Macy's reported on November 11, and the decline today may be in part due to continued pessimism.

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News about a seemingly bizarre acquisition could also be behind the decline. Urban Outfitters announced on Monday that it was acquiring The Vetri Family group of restaurants, including Pizzeria Vetri, the best Pizza restaurant in America, according to Food and Wine Magazine. Few details of the transaction were disclosed, and the press release from Urban Outfitters simply pointed to growing consumer spending on casual dining, and the growth potential of the Pizzeria Vetri concept, as the reasons behind the acquisition.

Now what: Urban Outfitters' conference call should shed some light on why the company is getting into the restaurant business, but at the moment, investors aren't taking the news well. Analysts are expecting Urban Outfitters to report both revenue and earnings growth during the third quarter, calling for $872 million of revenue and EPS of $0.42, year-over-year increases of 7.1% and 20% respectively. In light of the poor results from other retailers like Macy's, some of the decline today may simply be the result of investors adjusting their expectations.

The article Why Shares of Urban Outfitters Inc. Slumped on Monday originally appeared on Fool.com.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Urban Outfitters. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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