Quick recap: Urban Outfitters is struggling to resonate with its once-loyal Gen Z customer base, as evidenced by a 9% decline in retail segment sales during the second quarter of fiscal year 2025. The company acknowledged this during its August earnings call and unveiled a recovery plan aimed at revitalizing the brand.

Zooming in: The company's sibling brands Anthropologie and Free People posted record sales, with only Urban Outfitters notably underperforming. Shea Jensen, President of Urban Outfitters North America, attributed the brand's struggles to losing focus on its core demographic amid generational shifts. "We lost focus on our customer, and we lost track of how to win with them in today’s dynamic retail environment," Jensen said during the call. This misalignment led to a shrinking customer funnel, lower new customer acquisition, and declining retention rates. She also pointed to unclear product and marketing strategies that affected the brand’s overall customer experience.

What’s at stake: Urban Outfitters faces a rapidly changing youth culture, with Gen Z’s tastes, values, and spending habits diverging significantly from the millennial generation that once defined its audience. The company’s challenges are part of a broader industry trend, as retailers work to retain younger customers who prioritize value and sustainability.

What’s next: Urban Outfitters is betting on a five-pillar recovery strategy that includes refreshing its brand identity, expanding product offerings, and realigning its physical and digital presence to better connect with young consumers.

• The brand aims to serve a broader range of customers by diversifying its styles, sizes, and price points. Additionally, Urban Outfitters will move away from its traditionally "alternative" sensibility, shifting toward a more "upbeat and welcoming" aesthetic to rebuild its customer base.

• Leadership acknowledges that recovery will take time. As the company works to reclaim its relevance, all eyes will be on the upcoming quarters to see if these changes reverse the downward trend.