Urban Outfitters' Controversial Pizza Deal Was Under $20 Millionby
Urban Outfitters Inc. is spending less than $20 million on its controversial deal to acquire a pizza chain, a move that jarred investors and sent the shares tumbling.
Chief Financial Officer Frank Conforti, who discussed the pricing on Tuesday, said that the transaction won’t change the company’s capital structure or its ability to invest in e-commerce and stock buybacks -- two areas seen as bigger priorities. Urban Outfitters announced the acquisition of the Pizzeria Vetri restaurants on Monday, without disclosing financial terms.
The decision to get into the pizza business left shareholders scratching their heads and raised concerns about Urban Outfitters’ core retail business. The announcement also came on the same day as disappointing quarterly results, which added to the company’s woes. Its shares have tumbled 11 percent in the past two days.
But the Pizzeria Vetri chain will give Urban Outfitters another way to attract customers, at a relatively small cost, Conforti said in an interview. The retailer is buying six restaurants and will only be spending $1 million apiece to add new ones, he said. In some cases, the pizza places will be paired up with stores.
“Stores won’t go away, and it gives the customer more reason to come to your stores as a destination,” he said.
Urban Outfitters will open three new pizzerias next year. Some will be adjacent to existing company stores, while others will stand alone. The retailer plans to cluster these restaurants in locations like Devon, Pennsylvania, a suburb outside Philadelphia, or Austin, Texas, where the company will open a pizzeria as part of its Space 24 Twenty lifestyle center. Keeping the restaurants close together will allow a strong management team to oversee the execution of several locations, Conforti said.
It’s part of a shift toward an economy where consumers want experiences, rather than just merchandise.
“We believe that we do experiences really well and know our customer very well, and we have a lot of history in growing brands organically,” he said.