UO goes rogue with pizza chain acquisition

Shoppers are pictured outside a Urban Outfitters store in Pasadena

For over a decade, the diversification tactics of UO have been impressive, appropriate and successful. Keeping hipsters, hippies and fashionistas happy under the same virtual roof, they’ve expanded in a gardening-focused offshoot named Terrain and a wedding and luxury brand (BHLDN). These products are sold in UO retail locations, as well as their Anthropologie store chain.

Smart.

Those were rational business model expansions that fueled an increase across the board in sales, store traffic, brand popularity and stock value. The sales of UO furnishings and urban gardening alternatives rose from 15% to 48% within just 8 months during 2007. This was the same year UO received the Global Award for Excellence from the Urban Land Institute and launched the Terrain brand. In 2008, they took home the Best In Show and People’s Choice Award for Terrain from the Philadelphia Flower Show.

Super smart.

Urban Outfitters announced on Monday (Nov. 16) that it would be acquiring Philadelphia’s Vetri Family restaurants, including the Pizzeria Vetri chain. UO Company stock immediately dropped 7.4% and shares fell upwards of 20% in the two sessions immediately following the release. The undisclosed amount spent on this 7 restaurant acquisition (including Pizzeria Vetri, named by Food & Wine as the nation’s best pizza restaurant) is suggested to be hovering between $50 and $100 million.

Not the smartest.

Shareholders are understandably concerned and even more confused following the events of the week. UO has released several statements since Monday, boasting confidence that this acquisition, “although unique” is a “perfect match” for Urban Outfitters to gain market share as a lifestyle brand.

Strange.

The reassurance PR isn’t doing much to ease these concerns. Sales for the previous 3 quarters have fallen below projections for UO. Decreasing revenue paired with a 7 restaurant acquisition to the tune of $50-$100 million is certainly a UNIQUE decision.

Super strange.

What are your thoughts?

Is the UO #FashionablePizza

initiative brilliant beyond our current business model understanding… or a poorly disguised desperation for market diversification?

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