Urban Outfitters, Children’s Place Defy Apparel Field’s Woes

  • Many youth-oriented retailers have been struggling to recover
  • American Eagle also tops estimates, but investors disappointed

Shares of Urban Outfitters Inc. and Children’s Place Inc. rose on Wednesday after the companies gave an optimistic view of the beleaguered U.S. apparel industry.

Urban Outfitters topped analysts’ estimates for second-quarter sales and profit, while Children’s Place raised its earnings forecast for the year.

The results helped brighten the outlook of a sector suffering from sluggish mall traffic and a shift of young shoppers online. Aeropostale Inc., American Apparel Inc., Quiksilver Inc. and Pacific Sunwear of California Inc. have all filed for bankruptcy over the past year.

American Eagle Outfitters Inc. also beat projections with its latest results, though elevated expectations for the company brought a negative reaction from investors. Its stock was up ahead of its earnings report, signaling that Wall Street was looking for the chain to beat estimates handily. The shares then fell as much as 7.4 percent.

“The Street was looking for a big beat,” Oliver Chen, an analyst at Cowen & Co., said in a report.

Urban Outfitters, meanwhile, has benefited from selling items other than apparel, including beauty, lingerie and home products, according to Chen.

“We do note that weather was a helper in June and July, and there could have been some pent-up demand from a weak May,” he said.

Urban Outfitters shares jumped as much as 17 percent to $36.52, while Children’s Place rose 4.8 percent to $90. American Eagle, after climbing as much as 6.3 percent in premarket trading ahead of its report, fell as low as $17.55. That marked the biggest intraday decline since January.

Beating Estimates

Urban Outfitters posted second-quarter profit of 66 cents a share, compared with an estimate of 55 cents. Its revenue was $890.6 million, beating the $885.6 million projection. At Children’s Place, management upped their annual forecast to $4.60 to $4.70 a share, excluding some items. The company had previously predicted a high end of $4.27.

American Eagle followed with its results Wednesday morning. Though its profit also surpassed estimates, it didn’t outperform by as much as Urban Outfitters. Earnings amounted to 23 cents last quarter, compared with a 21-cent projection.

American Eagle’s quarter was “decent,” said Citigroup Inc. analyst Paul Lejuez, “but not strong enough given high expectations.”

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