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November 18, 2015

Urban Outfitters' stock falls after acquiring Vetri

Investors wary of retail chain's venture into culinary realm

Retail Restaurants
Urban Outfitters Coke Whitworth/AP Photo

URBN, based in Philadelphia, owns Urban Outfitters, Anthropologie and Free People.

Chef Marc Vetri says he couldn’t be more excited about his restaurant group’s partnership with Urban Outfitters, but investors seemed to have given the deal the side-eye.

The Philadelphia company’s stock was down 13 percent on Tuesday morning, close to a six-year low, reported the Wall Street Journal. URBN, which owns Urban Outfitters, Anthropologie and Free People, announced Monday that it was acquiring all of the Vetri restaurants for an undisclosed amount.

Urban Stock
Urban Outfitters' stock fell sharply after Monday's announcement. (Contributed Art / Google)

The deal isn’t Urban’s first venture into the restaurant realm. It established a garden-center-meets-café business called Terrain in Glen Mills, Pennsylvania, and Westport, Connecticut, and founded a café in New York City as well.

One analyst told the Journal that Urban's move into the food industry is a gamble that "potentially introduc(es) incremental volatility and executive risk."

Another analyst said, "“While the potential overlap of the customer base is obvious (URBN shoppers surely like gourmet pizza!), the challenge of operating a new business and successfully integrating it with URBN is not insignificant."

However, Marc Vetri said that the deal makes a lot of sense for both companies.

“We’re each really good at specific things,” he told PhillyVoice. “I think we’re good at operating restaurants, creating menus and they are really good at finding real estate, building restaurants and scaling things. It’s just kind of it seems like we’re both missing what the other one has and what is the other one’s core competency.”

The James Beard-award-winner said that Urban and the Vetri Family share a similar “culture and entrepreneurial vision,” one that is focused “on innovation, on creating things, on collaboration, on socialization.”

Socialization is defined by valuing in-person interactions, he added.

"I’m talking about touch, feel, smell, things like that. We’re both I think larger organizations that still feel like small, family-owned businesses and that’s not going to change,” said Vetri.

Despite the stock slide, there's good news for the lifestyle boutique: it touted record sales of $825 million in its quarterly earnings report on Monday.

The report noted, however, that sales in the business's wholesale section were down five percent because of shipment delays in its new Gap, Pennsylvania distribution facility. Just last month, Urban had to ask salaried workers to volunteer at the fulfillment center because it needed "additional helping hands to ensure the timely shipment of orders."

Vetri said there are no plans yet for what exactly this partnership will mean for the two businesses, as “we’re going to evaluate things and figure out where we want to go next.” However, he visited all of his restaurants on Monday to assure the employees that there will be no changes to how the eateries are run.

“We wanted to talk to them, tell them in our words that nothing’s going to change, we’re still going to have great healthcare, still going to have your 401(k), still going to have all of your jobs,” he said.

Oh, and another bonus: employee discounts at any Urban Outfitter store. Urban employees will also eventually get to eat at Vetri restaurants for less as well.

Because URBN employees, too, like gourmet pizza.