So, can the stock’s recent pullback be turned into a buying opportunity? The present climate might not be favorable for investing, at least until the next earnings report – to be published on June 2. The primary concern is the uncertainty prevailing in the market in the wake of the COVID-19 outbreak, which has left the business world paralyzed. Earlier, company executives had warned of product delays due to disruptions caused by the epidemic, especially in China.
What’s in Store
In such a situation, investors will wait and look for convincing signs from the company to make sure it is back on growth path. Moreover, the spike in operating costs and dismal margin performance in the last quarter, reflecting the heavy discounts, is a cause for concern. The problem might persist if adequate measures are not taken to deal with the low-performing products.
Hold It?
Profitability will likely remain under pressure in the foreseeable future due to the weakness in the retailer’s wholesale channel and low margins. Experts, in general, recommend holding Urban Outfitters’ stock but predict a marked improvement in the long term.
Mixed Q4
Like most of its peers, the company had a relatively weak holiday season when sales growth faltered and margins came under pressure from cost-escalation. Consequently, January-quarter earnings, excluding special items, dropped to $0.50 per share and missed the Street view. Retail comparable sales rose 4% aided by the continued uptick in digital sales, while wholesale net sales dropped 10%.
Also read: American Eagle Outfitters Q4 2019 Earnings Snapshot
Urban Outfitter’s stock closed the last trading session at $19.73, its lowest value in more than two-and-half years. The shares lost 32% since last year and is trading 29% below the levels seen at the beginning of 2020.