Urban Outfitters, Inc. (URBN) saw its shares drop more than 2% during Wednesday’s premarket trading session. The fashion retailer reported better-than-expected Q1 sales and earning late Tuesday.

The results, however, failed to impress investors, and URBN stock ended up losing the gains it had made earlier. At the time of writing, the stock was trading at $40.25 before the bell Wednesday after going down $0.96, or 2.33%.

URBN Earnings & Outlook

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The company’s total sales during the quarter was $856 million, compared to the $838 million that analysts had expected. During the quarter, the retailer posted a net income of $41 million, or $0.38 share.

In the same period last year, Urban Outfitters earned $12 million, or $0.10 per share. Wall Street had expected it to report earnings per share of $0.31 during the quarter.

Urban Outfitters CEO Comments

“All three brands performed at a high level. In addition to the expected strong digital demand, each brand produced nicely positive store comps – a first in over four years. Store traffic, which has been improving for the past three quarters, turned slightly positive in the first quarter. Better store sales came primarily from an increase in AUR which in turn, was driven largely by fewer markdowns and to a lesser degree more nationally-branded product,” said Urban Outfitters Chief Executive Officer Richard Hayne said during the company’s earnings call.

“The total company markdown rate in Q1 was the lowest of any quarter in the last ten years. Better fashion execution, strong demand for apparel and accessories, plus disciplined inventory control reduced the need to take markdowns and drove strong comps and full-priced selling. Happily, not only have these trends continued in May, they’ve strengthened,” Hayne added.