Published: November 20, 2015
Pegged as a place that caters to young hipsters, Urban Outfitters and its branch off companies Anthropologie Group, Free People and Terrain are some of today’s hottest places to shop, or maybe not. The company, along with much of the retail industry, has been facing steep declines over the past few months. More specifically, the publicly traded company’s stock peaked last March to an all-time high of $47.01 a share. Since then, the price has slowly and steadily fallen before finally plummeting this week. The stock opened monday at $23.92 a share and ended the day at its current value of $22.67 a share, posting a 7.43 percent loss monday alone.
So why has the company been performing so poorly lately? Well, a common short coming is the company’s inability to compete in the teen to young adult market, where it fails to find the balance between style and price range. This idea is supported by Tim Connelly, a first-year chemistry and business major, who said the store has a nice selection of clothing, but stated, “Some of the stuff there is just too expensive for what it is.” The company is not losing money, it has repeatedly failed to make the projected earnings set by Wall Street, which is a problem. Also, it was consistently underperformbased on industry averages. The strange part of the recent plummet is that none of the above factors are to blame. The reason for this sudden plummet is due to Urban Outfitters’ new acquisition of Ventri Family, a restaurant group native to Philadelphia. The group consists of six unique restaurants located across the United States, with some restaurants in multiple locations.
So why buy a restaurant chain? This is the major question, and there may be a few answers. One reason could be that Urban Outfitters plans to create a “mega-store” of sorts where one can eat and shop in one stop. Nordstrom, Target and even Barnes and Noble have added small eating areas in stores to attract and keep customers in the store. This idea is exciting to some. Luis Britez, a first-year business major said, “I really like when stores have cafés in them. It is a strange thing to buy the company though; why not just partner up with them?” This question leads into a second reason. Urban Outfitters could be hedging itself from further loss by investing in a company that can help to curtail its losses in this hard retail climate.
Especially with the holiday season coming, Urban Outfitters may be looking to boost its profit with the addition of this new venture. One final reason could be that Urban Outfitters is attempting to distract investors from a possible miss in projected earnings, which did happen. The last of these scenarios seemed to backfire though. The announcement of the acquisition caused a plummet in stock, as previously stated.
So why did investors not like the news of the acquisition? This seems to be a classic example of investors wanting companies to stick to what they do best. There is nothing to show that Urban Outfitters is at all qualified to run both a restaurant chain and a clothing store. However, the choice to acquire the chain does not seem hastily made, due in part to the fact that Ventri Family is a critically acclaimed family of restaurants.
Whatever the reasoning behind this acquisition choice, it is apparent that Urban Outfitters will have a lot of work ahead of it to earn back investor confidence.
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