Urban Outfitters downgraded at Telsey Advisory on slowing sales trends

As previously reported, Telsey Advisory downgraded Urban Outfitters to Market Perform from Outperform with a price target of $44, down from $49. While noting that Urban Outfitters delivered a second consecutive quarter of better-than-expected sales, gross margin, and expense control, the comp miss “disappointed,” with underperformance at all three key brands relative to market expectations, the analyst tells investors. With sales trends slowing near-term, the company is planning for increased promotions to clear excess inventory in Q3 that is expected to weigh on gross margin and while FY24 gross margin guidance was reiterated, the outlook now suggests a significant improvement in Q4 that the firm calls “an incremental risk in the current landscape.”