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Business News

Urban Outfitters defies high street gloom

US retailer to double number of UK stores, while Ralph Lauren signs up to cross Atlantic with RRL 'vintage' menswear brand

Two US retail brands plan to expand on the UK high street despite the slowdown in consumer spending. Urban Outfitters – with a market capitalisation of $4.9bn (£3bn) – said it will double the number of stores it has in Britain and bring new brands to our streets. And, last week, the American designer brand Ralph Lauren signed up to bring its vintage-inspired menswear brand RRL to London.

Glen Senk, Urban Outfitters' chief executive, said: "It is cyclical what is going on. The economy has not changed in the past two to three years. It was near collapse in 2008, but people feel even more negative now. I said in 2008 it will take 10 years to get better and I still think that is the case. People are spending less so we have a smaller slice of the pie, but we need to concentrate and focus on the customer."

Mr Senk said that the business could grow to 50 shops here. "When the economy is challenging, it is the best time to grow."

Urban Outfitters is also looking at small businesses to buy. It had looked at All Saints, a fashion retailer, earlier this year but did not pursue this. All Saints is still in talks with another investor to rescue the business.

But Urban Outfitters is not immune to the gloom. In the US last month it posted a 3.2 per cent drop in fourth-quarter profits as higher sales were offset by markdowns and rising costs. Shares fell at the time from around $38 a share and are now at around $31.

But this year it will open up to nine shops, adding to its existing two Anthropologie outlets and 16 Urban Outfitters stores in the UK. It will also consider smaller stores than its previous two- or three-storey concept. Mr Senk also plans to expand its Free People brand; this has wholesale accounts that include Harvey Nichols. Free People will open stores once its wholesale presence is built up.

Urban Outfitters has recently opened a new distribution warehouse in Rushden, Northamptonshire, which will service its British shops and online delivery business. In the US, it launched a new online bridal wear brand in February – bhldn.com – which it will bring here too. It also owns brands Leifsdottir and Terrain.

Ralph Lauren, meanwhile, signed up to open a store for its menswear brand RRL on Mount Street in Mayfair. The company attributed this year's strong results – revenues were up 24 per cent – to the growth in retail sales worldwide.

Late last year, it signed up to open a store for its young menswear fashion brand, Rugby, in Covent Garden, central London.

Overall, the UK high street is feeling the pain of consumers beginning to tighten their belts following government cuts. Last week saw Carpetright and Halfords warn that their profits will fall short, joining HMV, Argos owner Home Retail, Dixons and Mothercare, which have all warned on profits in the past three weeks.

Last week, former Asda boss Andy Bond predicted two years of pain on the high street. Speaking at the Retail London Conference in the Hilton Park Lane, he said: "You're kidding yourself if you think the worst is over and we've had a consumer recession – it's ahead of us."

The latest research from Ernst & Young found that UK-quoted firms have faced their toughest quarter of trading in two years as the squeeze on household spending, soaring commodity prices and rising inflation eroded consumer and business spending.

UK companies issued 75 profit warnings in the first quarter of 2011, nearly 50 per cent more than the fourth quarter of 2010 and a near 40 per cent increase on the same quarter in 2010, according to Ernst & Young's latest Profit Warnings report. Alan Hudson, partner at E&Y, said: "The austerity measures mean consumers are feeling the cuts. Retail is under pressure and trading fell off a cliff."

E&Y said that the leisure andtravel business and those in the business support services sector have also suffered.