Kaplan Fox files first action suit against Urban Outfitters

19 Apr '11

3 min read

Kaplan Fox & Kilsheimer LLP has filed the first and only class action suit against Urban Outfitters Inc that alleges violations of the Securities Exchange Act of 1934 on behalf of purchasers of Urban Outfitters common stock during the period November 15, 2010 through March 7, 2011, inclusive.

The Lead Plaintiff deadline is May 31, 2011. The case is pending in the United States District Court for the Eastern District of Pennsylvania. A copy of the complaint may be obtained from Kaplan Fox or the Court.

The Complaint alleges that, during the Class Period, Defendants discussed an emerging shift in fashion trends that Defendants represented was an opportunity for the Company and represented to investors that the Company would be able to manage the trend, that Company had effective inventory management controls and systems, and that Urban Outfitters inventory would "grow more in-line with sales growth."

It is alleged, however, that by the beginning of the Class Period, Defendants knew, or had reason to know, that the Company was not managing the shift in fashion trends because: (1) the Company's inventories were increasing materially more than sales, (2) sales at the Company's namesake Urban Outfitters store and Anthropologie division were materially declining due to lack of customer demand, especially for women's apparel, and (3) as a result, the Company was forced to mark down the price of inventory which materially adversely affected the Company's margins and financial results for the quarter ended January 31, 2011.

The Complaint further alleges that on March 7, 2011, investors in Urban Outfitters' stock learned the truth about the Company when, after the close of trading, Defendants disclosed the Company's financial results for the quarter ended January 31, 2011. Among other things, the Company disclosed i) earnings of $75 million or $0.45 per share for the fourth quarter, which was approximately 13% less than the $0.52 per share expected by analysts; ii) that gross profit margin materially declined, primarily due to increased merchandise markdowns to clear seasonal inventory associated with changing women's apparel fashion trends; and iii) retail inventories increased by 10% at cost while total comparable store inventory increased by 4% at cost and total inventories grew by $43 million or 23%, on a year-over-year basis.

On March 8, 2011, Urban Outfitters shares declined from a close on March 7, 2011 of $37.99 per share, to close at $31.66 per share, a decline of $6.33 per share or approximately 17% on heavier than usual volume.

If you are a member of the proposed Class, you may move the court no later than May 31, 2011 to serve as a lead plaintiff for the Class. You need not seek to become a lead plaintiff in order to share in any possible recovery.

Plaintiff seeks to recover damages on behalf of the Class and is represented by Kaplan Fox & Kilsheimer LLP. Our firm, with offices in New York, San Francisco, Los Angeles, Chicago and New Jersey, has many years of experience in prosecuting investor class actions and actions involving financial fraud.

Kaplan Fox & Kilsheimer LLP

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