Shares of retailer Urban Outfitters (URBN) are sinking in early trading after the company’s fourth quarter results missed analysts’ consensus estimates.

EARNINGS MISS: After the market close on Tuesday, Urban Outfitters reported Q4 earnings per share of 55c and revenue of $1.03B, narrowly missing the consensus of 56c and $1.04B, respectively. Comparable retail segment net sales, which include comparable direct-to-consumer channel, were flat for the quarter, with comparable retail segment net sales up 2% at Urban Outfitters, up 1.2% at Free People and down 2.9% at Anthropologie.

WHAT’S NOTABLE: The earnings miss comes after Urban Outfitters reported same-store sales for the critical holiday season that were less than expected, requiring higher promotional activity to boost demand. The retailer said in January that total sales for the two month period ended December 31 increased 3% over last year. Comparable retail segment net sales for the period increased 1.5% including comparable direct-to-consumer sales, as a double-digit percentage increase in direct-to-consumer sales was partially offset by lower-than-expected retail same-store sales. Retailers have been hurt this holiday season by the increasing popularity of fast-fashion retailers like Zara, Forever 21 and H&M, as well as an increase in online shopping.

MIXED ANALYST COMMENTARY: This morning, William Blair analyst Dylan Carden downgraded Urban Outfitters to Market Perform, telling investors that near-term investment spending and a “more subdued” comp outlook should continue to delay margin recovery. Conversely, Jefferies analyst Randal Konik said that while Urban Outfitters’ growth in 2016 was underwhelming, more balanced inventories and easy compares make for a “very favorable” setup in the second half of 2017. The analyst viewed Urban as one of the prime beneficiaries of a stronger fashion cycle. He lowered his price target for the shares to $35 from $43 and kept a Buy rating on the name. The analyst believes the risk/reward is attractive at current share levels.

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