How Once-Cool Urban Outfitters Lost Its Mojo

Disappointing sales may point to deeper troubles

The namesake brand of Urban Outfitters continues to struggle, based on results that the Philadelphia-based specialty retailer released last week.

Following a 5.2 percent tumble in Q1, Urban Outfitters’ sales fell another 2.4 percent for Q2. The company’s better performing Anthropologie and Free People brands took up the slack—Q2 revenues overall rose by 7 percent—but the Urban Outfitters brand continues to disappoint. Comp sales fell by 10 percent.

In a statement, the company blamed a 194 basis point decrease in its gross profit rate on “underperformance at the Urban Outfitters brand.” While a report published this week by Zacks noted that “performance has improved sequentially,” the Urban Outfitters concept has been troubled for some time, having lost its CEO two years ago and endured a number of high-profile embarrassments.

Those with a long enough memory might recall how Urban Outfitters was the specialty-retail darling of the mid 1990s, choosing college-student-heavy locales for its 9,000-square-foot stores, distinctive for their expanses of bare concrete and crackle glass front windows, and for mixing novelty housewares amid racks of earthy, cheap clothing. The chain made a practice of fitting into the existing urban fabric by renovating existing buildings rather than raising big-box stores and selling the sort of funky threads that youngsters couldn’t find elsewhere.

So what happened?

Various factors have been blamed for Urban Outfitters’ obvious loss of countercultural clout. In January, the company found itself in hot water over printed T-shirts reading “depression” and “eat less,” which critics blasted as insensitive to those suffering mental illness and eating disorders. Last year, Urban Outfitters—which has always carried amusing and quirky home/dorm accessories—stocked its shelves with drink ware that resembled prescription bottles (since pulled) and a T-shirt that read “Misery Loves Alcohol” (no longer in stock). Both angered those in recovery, and some bloggers, too.

Then there were the other PR disasters, including a “Navajo” liquor flask upholstered in a traditional rug pattern. The Navajo Nation sued over that one, calling it “derogatory and scandalous.” Urban Outfitters also made the news when various outlets reported that the company president Richard Hayne had given money to Rick Santorum, whose anti-gay political views are at variance with those of many of the store’s customers. One of the pissed off patrons happened to be Miley Cyrus, whose angry tweets did not help the company’s image.

But the bigger problem may be that Urban Outfitters success has been successfully replicated by newer concepts. While Hayne told Philly’s Business Journal in May that the brand was “working diligently to regain its fashion footing,” that job is not as easy as it used to be. Urban Outfitters attracted many of its early fans back when chains like Forever 21 and H&M were mere rumors. Now, these chains—plus category killers like Target—are all vying for the youth clothing dollar.

Going forward, Urban Outfitters is betting on a new, in-store concept called Without Walls, which began a rollout this spring. The collection focuses on young, physically active shoppers into personal fitness, cycling and hiking. 

It’s also targeting surfers. Which is what Hollister—still another competitor—now does, too.

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