Urban Outfitters Inc.'s results including the back-to-school shopping season missed Wall Street targets, as higher costs lowered profit and margins and sales remained sluggish at its largest brand.

Shares, up 71% this year, fell 9% to $35.44 in after-hours trading.

Comparable sales—a key metric for retailers that Urban Outfitters defines as online sales and sales at stores open for at least a year—rose 1% in the latest period, roughly the same as in the year-ago period but below the 1.9% projected by analysts surveyed by FactSet.

A 5.2% comparable-sales increase at its namesake brand was partly offset by a 1.5% decline from the Free People brand and a 2.7% decline from the Anthropologie Group, which includes BHLDN and Terrain and is its largest brand by sales.

Over all, third-quarter profit narrowed 9% to $47.4 million, or 40 cents a share. The most recent results are based on 5% fewer shares outstanding.

Sales rose 4.5% to $862.5 million, with Vetri Family restaurants adding another $5.8 million to revenue.

Gross profit margin, the percentage of sales the retailer makes after accounting for production costs, narrowed 15 basis points to 34.8%.

Urban Outfitters, which opened its first store in 1970 near the University of Pennsylvania campus, has expanded into a multinational clothing company with more than $3 billion in sales a year. But a sales slowdown weighed on annual profit in the last two years as inventory built up. To help control inventory, the retailer fulfills online orders with web-exclusive items that are returned to stores, shipping them straight from the store. That, company officials said, has allowed them to speed up delivery and reduce markdowns, even if it had to ship items from one order separately.

On Tuesday, company officials said inventory rose 3%, or $12 million, as of Oct. 31.

Write to Maria Armental at maria.armental@wsj.com

 

(END) Dow Jones Newswires

November 22, 2016 17:55 ET (22:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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