Urban Outfitters Might Be in Trouble this Year

Nowadays its seems like everywhere you look, store displays are being dismantled, liquidation signs are going up, and store fronts are being shuttered.

Nowadays its seems like everywhere you look, store displays are being dismantled, liquidation signs are going up, and store fronts are being shuttered. In the last few months alone, we saw stores like HMV, BCBG, Shoes.com, and Jean Machine waving a white flag in the face of bankruptcy, while several other stores are also in deep water. And now it might seem like Urban Outfitters could be joining the list of struggling retailers.

While you may think the epidemic is exclusive to Canada due to the amount of competition coming from big American box stores like Nordstrom and Saks, think again. The retail landscape in the US is facing similar problems, Urban Outfitters being one of the retailers feeling the pressure.

So much so, that the CEO of Urban Outfitters, Richard Hayne, is speaking up about his concerns regarding the retail landscape. Comparable to the housing bubble in the 2000s, the retail industry is seeing a similar trend of overbuilding that has led to soaring rent prices, coupled with the fact that foot traffic is decreasing in the order of 6% per year.

And then just like the housing bubble, the retail bubble has finally burst too. Hayne told Fortune, “Our industry, not unlike the housing industry, saw too much square footage capacity added in the ’90s and early 2000s. Thousands of new doors opened and rents soared. This created a bubble. And like housing, that bubble has now burst… We are seeing the results — doors shuttering and rents retreating.”

Urban Outfitters’ fourth-quarter being proof of the matter; earnings fell short of estimates, same-store sales were flat, profits last year fell 3% and shares went down by 4%. The retailer’s expansion efforts are also suffering as only 15 new stores are scheduled to open this year in North America, not even half the pace of expansion compared to the past two years.

Along with Urban Outfitters’ falling profits, everyone from Macy’s to Gap is closing stores – the retail industry bubble appears to be even worse off in the states then one would assume. Fortune’s examination of the mall sector revealed that there are 2,353 square feet of space of shopping centers for every 100 Americans, while in Canada there are 1,636 square feet for every 100 Canadians.

While it’s true that we have our own issues with a saturated retail landscape and aggressive competition in Canada, the US definitely has comparable problems. It will be interesting to see how it continues to trickle over into our Canadian malls and shopping centers. Will we see Urban Outfitters stores closing in Canada? Only time will tell.

Do you think Urban Outfitters is in trouble because of the retail industry bubble?

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