Struggling for many months leading up to its second quarter
earnings call, Urban Outfitters (NASDAQ:
) pulled off a beat that had traders frantically
snatching up shares
on Monday in after-hours trading. Conversely, Fossil (NASDAQ:
) was downgraded from Buy to Hold on Tuesday morning as the
retailer finds itself at a branding crossroads.
With Christmas a few months down the road, seasonality has begun
to affect the retail market in a mostly positive way. Companies
) have experienced positive results following recent earnings
While some may blame the change of seasons for Urban Outfitters'
upturn as well, how does the cooling weather apply to Fossil's
downgrade? As we slink away from the summer months and the holidays
begin to shift front and center, many would think the watchmaker is
more likely to see increased sales and heightened investor
confidence. That is not the case this time around, according to
Omar Saad of research firm ISI Group -- but it actually has nothing
to do with the weather at all.
Saad says that watches have the opportunity to become the next
handbag in terms of accessories - which is great news for Fossil.
However, the retailer is currently facing a high-risk, high-reward
opportunity as it attempts to take control of the industry.
"Opportunity to build a designer watch category comes once in a
lifetime," Saad wrote in Tuesday's research report. "We think FOSL
is poised to capitalize on this unique opportunity and actually
create the aspirational watch category ($200-1,000 price point) and
ultimately replicate Sunglass Hut's success in eyewear."
ISI's downgrade was not implemented to determine Fossil's
holiday success, but rather was put in place to allow investors to
wait out the situation. In fact, ISI believes that Fossil could see
monopoly-esque growth in the near future.
Those who choose to sit on the sidelines with Fossil shares can
find solace in other retail stocks that are on the mend. Urban
Outfitters jumped over 15 percent in after-hours trading on Monday
as the company reported net income of $61.29 million, or $0.42
cents per share, compared to $56.69 million, or $0.35 cents per
shares, in the same quarter one year prior.
Urban Outfitters exceeded many analysts' expectations for the
first time this year
, leaving those at research firms such as Piper Jaffray and Sterne
Agee to raise price targets. The retailer has been reporting good
news throughout the month of August, as Urban Outfitters recently
signed a deal with Viacom's (NASDAQ:
) Comedy Central to promote the 2012 presidential election through
hilarious t-shirts, cups and posters.
Urban Outfitters continues to rise in pre-market trading on
Tuesday morning as the company is up almost 15.5 percent at $36.15.
Comparatively, Fossil is trading around $87, down 1.57 percent in
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