Why Urban Outfitters Stock Just Crashed

Urban Outfitters (NASDAQ: URBN) stock tumbled 11% through 11:50 a.m. ET Monday despite reporting "record holiday sales" for November and December.

Total sales for the two months ended Dec. 31, 2025, rose 9% in comparison to the year-ago period.

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Details, please

Same-store sales for the company as a whole increased 5%, with SSS growing 3% at Anthropologie, 5% at Free People, 9% at Urban Outfitters, and 18% at FP Movement.

Is that good news? Well, for the year (actually, the 11 months from February through December), Urban Outfitters said sales were up 11%, and comps were up 6%. So, from that perspective, the 2025 holiday season actually represented a bit of a slowdown from the growth rates earlier in the year.

I suspect this is the main reason for the sell-off today. Also disturbing is the fact that analysts have been forecasting better than 9% sales growth for the January quarter, and with the two most important months of that quarter tracking below Wall Street's target, the implication would appear to be that Urban Outfitters is heading for a "miss" when it next reports earnings.

Is Urban Outfitters a sell?

Should you sell before the earnings are released? Maybe yes.

Consider: Urban Outfitters stock costs 15 times trailing earnings. Weak free cash flow means the price-to-free cash flow ratio is even more expensive at 18 times. That was already looking a bit pricey with earnings forecast to grow less than 10% over the next five years. If sales -- and earnings -- growth are going to fall short of that target now, due to the holiday sales miss, then Urban Outfitters stock is probably even more expensive than it appears.

With shares still up 46% over the past year, now might be a good time to sell Urban Outfitters stock.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.