Why Urban Outfitters, Sasol, and Pure Storage Slumped Today

Wednesday wasn't the best day for Wall Street, with ongoing uncertainty about the future prospects for the 10-year-old bull market holding back the broader indexes from climbing back toward all-time highs. Of particular concern were the continuing trade talks between the U.S. and China, as negotiations have gotten more complex with the introduction of what amounts to company- and industry-specific sanctions preventing domestic companies from doing business with specified targets. Moves for the major benchmarks were relatively modest, but some stocks suffered more dramatic declines. Urban Outfitters (NASDAQ: URBN), Sasol (NYSE: SSL), and Pure Storage (NYSE: PSTG) were among the worst performers. Here's why they did so poorly.

Urban Outfitters goes out of style

Shares of Urban Outfitters fell 10% after the offbeat fashion retailer reported first-quarter financial results. At first glance, the company seemed to make all the right moves, with record sales for a first-quarter period, a 1% rise in comparable sales, and earnings that were significantly higher than most had predicted. Yet investors seemed unimpressed with the retailer's announcement about its launch of a new business, dubbed Nuuly, that will allow customers to subscribe to a service that will in turn let them rent women's apparel. Despite consumer interest in clothing rental, Urban Outfitters shareholders seem concerned that the business could eat into traditional clothing sales, hurting the overall company's results.

Urban Outfitters store as seen from front on empty street at dusk.

Image source: Urban Outfitters.

Sasol expects higher costs

Sasol saw its stock drop almost 15% following its latest update on a major project it's working on in Louisiana. In assessing the current status of the Lake Charles Chemicals Project, Sasol said that its initial estimate of $11.6 billion to $11.8 billion in construction costs has proven to be too conservative, and it now believes that a cost estimate of $12.6 billion to $12.9 billion would be more accurate. The news represents a setback for the South African energy specialist, because it had hoped that the North American market would prove to be fertile ground for growth. Sasol says the costs are disappointing, but they won't change its overall strategy, and so shareholders will simply have to accept lower expected rates of return from the project.

Pure Storage leaves investors feeling empty

Finally, shares of Pure Storage plunged 25%. The flash storage and data center hardware specialist suffered a larger net loss for the fiscal first quarter than investors had expected, and despite revenue growth of 28% year over year, projections for the fiscal Q2 weren't as strong as many had hoped. As with many cloud-related stocks, shareholders have counted on Pure Storage to stay on an aggressive growth track for as long as possible. Even with a top-line growth rate that many businesses would be glad to have, Pure Storage will need to work even harder to regain the trust of investors who take stratospheric growth in cloud companies for granted.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Pure Storage. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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