- Urban Outfitters Inc reported a lower fourth-quarter profit Thursday that fell short of market expectations despite higher sales, as markdowns crimped earnings during the holiday shopping season.

Urban Outfitters spring 09

Shares of the apparel, accessories and home goods retailer were down as much as 10 percent in trading before the bell.

Most apparel retailers have had to take up aggressive discounting at their stores over the past few months, to lure customers who have cut back heavily on discretionary spending.

During the fourth quarter ended January 31, the company said it was able to cut comparable inventory levels by 13 percent, and selling, general and administrative expense as a percentage of sales by 73 basis points.

However, these were unable to offset the impact of the markdowns, as gross profit margin fell 555 basis points from the year-ago period.

The operator of the Urban Outfitters, Anthropologie and Free People chains said net income in the holiday quarter was $40.5 million, or 24 cents per share, compared with $53.6 million, or 32 cents per share, a year earlier.

Revenue grew 9 percent to $508 million.

Analysts, on average, had been expecting the Philadelphia-based company to report earnings of 28 cents a share on revenue of $518.3 million, according to Reuters Estimates.

The company, whose rivals include Aeropostale and American Eagle Outfitters, also cut back on its store expansion plans for 2010. It now expects to open 42 to 45 new stores, against earlier plans of opening 52 stores.

Shares of the company were down to $14.30 in trading before the bell, before paring some losses to trade at $15.00 Thursday morning.

(Reporting by Nivedita Bhattacharjee in Bangalore; Editing by Anthony Kurian)