An analyst lowered his rating on Urban Outfitters Inc. on Wednesday, a day after the clothing company announced that CEO Glen Senk resigned.
Urban Outfitters said late Tuesday that Senk resigned on Monday. He is being succeeded by Richard Hayne, the company's co-founder, chairman and president.
It shares tumbled $5, or 17 percent, to $24.41 in premarket trading Wednesday. They had risen 37 percent through Tuesday's close since hitting a 52-week low of $21.47 per share.
The announcement came a little less than a week after Urban Outfitters said that revenue for November and December rose 11 percent but tough competition and a drive to reduce inventory led to more markdowns than expected during the crucial holiday sales period
Urban Outfitters, which runs Anthropologie, Free People and its namesake stores, said that Senk plans to pursue another opportunity but will remain with the company temporarily to assist with the transition. It also said that Senk has resigned from the board.
Jeff Black of Citi Investment Research cut Urban Outfitters to "Sell" from "Buy," saying in a client note that Senk's "abrupt departure puts a major dent in our near-term confidence that a turn is indeed at hand."
Black said it seems that Senk left suddenly but that the move was on his own accord.
Looking at Senk's successor, Black said Hayne has been a "guiding presence" at Urban Outfitters but hasn't had a strong hand in day-to-day management.
Black took Urban Outfitters off of the Top Picks Live list and slashed its price target to $20 from $34. The analyst was not the only one to downgrade Urban Outfitters, as R.W. Baird reduced its rating on the Philadelphia company to "Neutral" from "Outperform."
Jefferies & Co.'s Randal Konik said Senk's exit "puts the company's strategic direction in question."
"Bottom line, we see continued earnings risks and continue to be sellers," the analyst wrote.
Konik reaffirmed an "Underperform" rating and $17 price target.
A representative for Urban Outfitters could not be immediately reached for comment.