This week's abrupt departure of Urban Outfitters (NASDAQ: URBN ) CEO Glen
Senk sent shares of the Philadelphia-based retailer reeling as investors
wondered if the ultra-cool parent of its namesake stores, Anthropologie and Free
People would be able to recapture its lost mojo. That's a question with no
easy answer. Urban Outfitters is a mess because in the words of Senk, the
company has "a fashion issue." That's corporate-speak for the public
thinks our clothes are ugly. Investors didn't think the company's finances
were much prettier. During the third quarter, inventories of unsold clothes
soared a whopping 27%, and gross margins declined to 35% from 41% a year
earlier. Net income in the nine months ended Oct. 31 fell about 27% to $145.9
million. In the past six months, the stock has shed 22% and now trades around
$25. Senk, the first openly gay CEO of a Fortune 1000 company, was until
recently considered to be a retailing genius who could do no wrong. As
Knowledge@Wharton noted in 2010, he took pride in creating a corporate culture
where top managers were willing to listen to the views of underlings who might
disagree with them. When you are the CEO, everyone wants to yes you; no one
wants to give you bad news, said Senk in an interview with the website
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