Trendy American fashion retailer Urban Outfitters has bought a small pizza chain in Philadelphia. The news was a huge surprise to investors and they answered by sending the share down 7.5 %, but still ...
Fashion chain buys pizza maker
Plenty of raised eyebrows when it was announced Urban Outfitters was Pizzeria Vetri restaurant chain's new owner, because what could a fashion retailer possible do with a pizza restaurant chain, many said.
Urban Outfitters' shareholders were not very enthusiastic about the purchase and shares dropped 7.5 %, the biggest drop in a single day the brand had ever endured. That is remarkable as the brand has already lost more than 30 % of its share value this year alone. Investors believe the purchase to underline the fact that Urban Outfitters' own board does not have faith in the company's dealings and is looking for income elsewhere instead of investing the funds into its own growth.
Their fears were confirmed when Urban Outfitters revealed its third quarter numbers once the stock exchange had closed: its like-for-like turnover in the 1 July - 31 October period only grew 1 % to 825.3 million dollars (nearly 774 million euro). That is well below analysts' expectations at 868.8 million dollars and a 3.4 % like-for-like turnover growth. This news dragged the share down even more.
Ideal to get "customers to the store"
Retail analysts have an entirely different view on the situation and point out that, like many other retailers, Urban Outfitters has to deal with the customer's flight to the internet. "To keep afloat, brick-and-mortar stores must increasingly differentiate themselves by giving shoppers a reason to actually set foot in a physical chain" Shelly Banjo and Gillian Tan wrote in their own blog on financial press agency Bloomberg's website.
They cite supermarket chain Whole Foods, which not only has its own restaurants, but also recently purchased the increasingly popular sandwich chain Mendocino Farms.
Besides, it is not the first time Urban Outfitters has stepped outside its comfort zone: it has its own restaurants in its home-and-garden centers Terrain, while its largest flagship store, a huge "Lifestyle Center" in New York, experiments with a coffee shop, a make-up shop and even a hair dresser. These all serve the same purpose: to lure customers to the store, to keep them in the store for a longer period of time and therefore increase the chance of a purchase.