The American fashion retail group behind Urban Outfitters just made a rather curious purchase. It announced yesterday that it had bought fellow Philadelphian firm The Vetri Family group of pizza restaurants for an undisclosed sum.
Apparently no one told parent company URBN that there’s a fairly good reason why even the most hipster of clothes shops don’t sell products with bright red tomato sauce and melted cheese. Its stock fell 16.7% in yesterday’s trading, most of that after-hours as investors digested the news.
Of course, that could have been indigestion from the firm’s flat(ish) sales of $825.3m (£536m) for the quarter to the end of October, but it’s not exactly auspicious for URBN’s new venture. The new partners were unsurprisingly undeterred.
‘Spending on casual dining is expanding rapidly, and thus we believe there is a tremendous opportunity to expand the Pizzeria Vetri concept,’ said URBN chief executive Richard Hayne. Vetri’s co-founder and head chef Marc Vetri added that ‘it’s a perfect match’.
This isn’t an edgy splicing of the shopping and dining experiences, however, the hipster version of the M&S cafe if you will. It’s plain diversification. Fashion is fickle, so investing too heavily in one brand is risky. Indeed, the group’s core Urban Outfitters division actually suffered a modest sales decline in the last quarter as the supercool turn their noses up at its latest offerings.
By getting its fingers in another pizza pie, URBN could help insulate itself from those buffeting forces. It’s essentially trying to do a ‘reverse-Primark’. The low-cost clothing store has worked wonders for parent company Associated British Foods in mitigating the impact of falling sugar prices, after all.
It could take a while for Vetri’s acclaimed pizzerias to fulfil an equivalent role though. There are only nine establishments across the US at the moment, compared to URBN’s 566 fashion stores globally under the Urban Outfitters, Anthropologie and Free People brands. It could become a sumptuous main course in the future, then, but for now it’s just a side dish - and one shareholders don't think looks very appetising.