Urban Outfitters is crashing after a sales slump that its CEO blamed on a comedown from Trump's tax cut 'sugar high'
- Shares in Urban Outfitters plunged 5% after sales flatlined in the first quarter.
- CEO Richard Hayne blamed the slowdown on shoppers coming off of a "sugar high" fueled by the Trump administration's tax cuts.
- The retailer also suffered from "fashion confusion" as it failed to predict the latest styles in women's apparel.
- Watch Urban Outfitters trade live.
Shares in Urban Outfitters plunged 5% in New York trading after its boss blamed flat sales at its flagship brand on shoppers coming down from a "sugar high" fueled by the Trump administration's tax cuts.
"There is no question that a customer this year in this summer, is not as enthusiastic a shopper as she was last year," said CEO Richard Hayne on the group's first-quarter earnings call. "Last year at this time, she is just coming off what I like to talk about as a sugar high from the tax rebates, the tax cuts.""That really boosts sales a lot and this is a very odd thing," he added.
Hayne determined the tax cuts, passed in late 2017, were a key factor after thinking about the average customer. Given the strength of US employment, take-home pay, and consumer sentiment, "it's hard to imagine that there is anything wrong with her," Hayne said.
Following the tax cuts, the trend of declining store traffic was "set on its head" last year, Hayne said. "We are back down to where we were before and if you took out that one anomaly of the summer of 2018, then I think you would see that it's pretty much a direct line and I don't expect that to really change."
Comparable retail net sales fell 1% at Anthropologie and were flat at Urban Outfitters, after rising 8% and 10% at those brands in the year-ago quarter. Net income, which surged more than 250% in the comparable quarter, slumped 21% to about $33 million.
Along with the tax cuts, management blamed "fashion confusion" or their failure to predict style trends, which forced the company to mark down its women's apparel. They expect to cut prices further to clear inventory, but highlighted the "back-to-school fall aesthetic" as a positive trend for the second half of the year.