Urban Outfitters (URBN) Falls as Investors Pooh-Pooh Move Into Restaurant Business

Urban Outfitters (NASDAQ: URBN) is under pressure Monday (-8.8%) as investors are perplexed with the company's decision to acquire The Vetri Family group of restaurants including Pizzeria Vetri.

While the companies are calling the deal a "perfect match", investors are concerned that the company is moving away from its core competency - apparel retailing.

Analyst Richard Jaffe at Stifel, while surprised, believes there is cross-shopping potential between URBN retail stores and Pizzeria Vetri, given the similar customer demographic. .Additionally, adding Pizzeria Vetri to select stores could serve as a traffic driver for URBN.

Jaffe, however, does note that the challenge of operating a new business and successfully integrating it with URBN is "not insignificant." In addition, the operating and investing metrics are unique to the casual dining business, possibly diminishing visibility for investors.

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