Urban Outfitters rocked by boss's shock departure

It's the latest setback for the edgy fashion chain after accusations over race and design copying

Its stores have been described as the epitome of urban cool. Its clothes are favoured by actors including Cameron Diaz and its chief executive heralded as a retailing genius. But the golden age of Urban Outfitters, known for its subversive styles – including a discontinued line of T-shirts featuring a Palestinian child holding an AK47 over the word "victimized" – may be on the wane.

Last week, chief executive Glen Senk, 55, the only openly gay CEO in the Fortune 1000, resigned suddenly, sending shares tumbling sharply. He had spent 18 years working for the company, becoming chief executive in 2007.

His departure comes after a tough year for the high-street-with-a-twist company beloved by fashion stylists. In May, the pop star Miley Cyrus launched a Twitter campaign urging people to boycott the company, accusing it of copying an "I Heart Destination" necklace from an independent jeweller's design, with a pendant in the shape of the place. Urban Outfitters strongly denied the allegation, but a Boycott Urban Outfitters Facebook page was launched over the controversy.

Then in October, the company removed the word Navajo, after the Native American tribe, from the title of more than 20 products, after a cease-and-desist letter from the attorney general of the Navajo nation. Sasha Houston Brown, from Minneapolis, wrote an open letter to Mr Senk, deploring the use of the title. "I am deeply distressed by your company's mass-marketed collection of distasteful and racially demeaning apparel and decor. I take personal offence to the blatant racism and perverted cultural appropriation your store features this season as 'fashion'," she wrote. More than 16,000 people signed a petition protesting against the term Navajo being used on its fashion items.

Although the Navajo title was removed in the US, the UK online site was yesterday selling a "Truly Madly Deeply Tribal Navajo Tee", "Navajo Wayfarers" and a "Navajo Blanket Shopper".

Last April the company, which also owns Anthropologie and Free People brands, announced plans to double the number of stores in the UK, with MR Senk estimating the business could grow to have 50 stores here. But his departure has left analysts speculating that the company is in trouble. Urban Outfitters had already seen its finances dip, with net income in the nine months ending October falling 27 per cent to £95.3m.

After the announcement of Mr Senk's exit, stock dropped 19 per cent last Wednesday morning, before rising 2.3 per cent during afternoon trading. Investment analysts from Nomura bank said: "If Glen can't do it, we wonder who can. [Urban] is still a good growth story, but the departure of Senk signals that problems at the company are no closer (more likely farther) to being solved."

Richard Hayne, who founded the Philadelphia company in 1970 and is already chairman, will step into Mr Senk's role. The chief financial officer of the company, Eric Artz, sought to reassure investors, saying: "Dick never retired from anything. He's been involved in our strategy and knows what's going on. I don't anticipate a significant change in the overall strategy."

But Poppy Dinsey, stylist and founder of the fashion website WIWT (What I Wore Today), believes the company has lost its edge. "What they did that was so niche has now become common on the high street. In the early 2000s, I used to shop in Urban Outfitters in the US to get T-shirts with slogans like "Jesus is my homeboy". It's expensive, and their quirky designs and slogan T-shirts can now be bought at Asos.com or other online outlets. Their vintage look has become so common people can find it in New Look. It's lost its edge. But it's still well curated, is good for men, and no other store does homeware like Urban Outfitters."

The firm launched as the Free People's Store in Pennsylvania, and shortly after changed its name. It now has more than 140 stores in the US, Canada, Belgium, Denmark and Sweden, as well as in the UK, but retains its edgy style, selling "What Would Jesus Do?" fortune telling figurines and wind-up nun toys, alongside "Jive Turkey" and "Death Before Disco" T-shirts.

After resigning, Mr Senk will join the US jewellery retailer David Yurman as chief executive next month. And Richard Hayne will have to reassure fashionistas and the City that the brand is not losing its cool.