Pizzeria Vetri plays a starring role in the deal

On Monday morning, Nov. 16, Marc Vetri was excited.

He and business partner Jeff Benjamin were about to announce they’d agreed to sell their collection of restaurants to Philly-based retail giant Urban Outfitters, Inc. It was a deal that would change the Vetri Family forever, giving it a chance to grow in ways the partners had never imagined when they opened the doors to their first tiny dining room 17 years ago. It would bring expansion capital and resources to the restaurant group, and add food and beverage expertise to the clothing retailer. The players viewed the partnership as a win-win for all involved.

Then the markets opened. And URBN stock dropped like a stone.

The Downturn

As word of the Vetri acquisition spread through the financial world, Wall Street’s knee-jerk reaction was one of derision.

“Urban Outfitters Has a Bold New Plan to Ruin Pizza,” wrote Esquire.

“It’ll Take More Than A Pizza Party To Shore Up Urban Outfitters Sagging Sales,” barked Forbes.

“Urban Outfitters buys pizzerias in a desperate comeback move,” blared the New York Post.

By the end of the day, the stock was down more than 7 percent, which stoked another 12 percent drop during after hours trading.

On Tuesday morning, the rabble-rousing continued. “You’re out of your mind,” said TheStreet’s Jim Cramer, ostensibly addressing URBN CEO Richard Hayne. “Hey, how about a little pepperoni with that wedding dress in the back?” he jabbed.

Throughout the day, hot takes multiplied, with one slapdash opinion feeding off the next. Many of the initial negative news reports were rife with misconceptions.

First, there was a misunderstanding of what the restaurant group even was. Most of the early articles referred to the Vetri Family as “a pizza chain” — or maybe “an Italian food chain,” if reporters were feeling generous and managed to notice the multiple logos that dot the Vetri Family website.

The confusion was understandable for anyone outside of Philadelphia (or anyone not part the growing food-obsessed cohort that pays attention to Food & Wine “best of” lists and James Beard awards — of which the Vetri Family members have won several).

CEO Hayne did call out pizza in his official statement, saying “there is tremendous opportunity to expand the Pizzeria Vetri concept.” However, the deal also included the other Vetri spots (Amis, Osteria, Alla Spina and Lo Spiedo), each of which are distinct and none of which could (yet) be considered “chains.”

Then there was the mistaken impression that the pizza would be served inside URBN’s clothing stores, which include Urban Outfitters, Anthropologie and Free People. Food service inside of a retail outlet isn’t a foreign concept — think meatballs at IKEA, Starbucks at Barnes & Noble, McDonald’s at Walmart — but for some reason this particular combo was met with suspicion.

Thing is, shoehorning existing Vetri concepts into the clothing shops was never the plan. Rather, as explained by Hayne and URBN chief development officer Dave Ziel, Urban wanted Vetri restaurants next to or near its retail stores. It follows a strategy the company was already acting on with “lifestyle centers,” such as under-construction Space24 Twenty in Austin.

The Rotolo is a Pizzeria Vetri specialty
The Rotolo is a Pizzeria Vetri specialty Credit: Danya Henninger

The logic behind the pairing is that as e-commerce takes over, people have fewer and fewer reasons to visit storefronts. The one reason folks do venture out, and will continue to for the foreseeable future? Food and drink. Put restaurants and retail next to each other, and you create a compelling attraction. (Just don’t call it a “mall.”)

This last idea is where analysts derived what could be called their most salient pessimistic point: That the pivot shows URBN believes retail is doomed.

Even after it was revealed that URBN had spent relatively little on the restaurant group (less than $20 million, a drop in the bucket if your annual revenue is more than $800 million) the idea that some kind of switch-up was needed was hailed as admitting the retail sector was in trouble.

“Anything that’s going to give credibility to the fear that the old-school retail model is antiquated is going to trigger more fear,” Nomura Securities’ Simeon Siegel told Bloomberg.

At close of business on Tuesday, Nov. 17, URBN was trading at a six-year low.

The Big Picture

It’s worth taking a quick step back to look at where URBN stock was headed before the Vetri news became public.


Although the drop appears dramatic when viewed in a five-day outlook, the Vetri news barely appears as more than a wobble when you expand the field of view to a year. Retailers in the fashion world are struggling overall, with more traditional brands like Macy’s, Nordstrom’s and JCPenney also seeing significant stock drops recently. Even though Urban reported year-over-year sales growth every quarter this year, the growth wasn’t enough to meet analyst estimates. In early November, URBN shares had already lost more than half their value since hitting a high last March.

Credit: Google Finance

Pull back even further:

Credit: Google Finance

The decline in 2011 did not spell the end for URBN, and neither is this year’s dip likely to finish off the company, which Richard Hayne founded in 1970 in West Philadelphia.

The Upswing

By Wednesday morning, analysts began to realize this, and many came around to the idea that the Vetri-URBN deal might not be apocalyptic.

“It Makes Sense For Urban Outfitters To Sell Pizza. Seriously” wrote Huffington Post in an uncharacteristically non-clickbait headline. The story quoted retail consultant Howard Davidowitz as calling the move “a savvy one, given the millennial spending shift to dining and experiences over purchases like clothing.”

Even articles with negative headlines began to lighten up a touch.

An Investopedia post entitled “Has Urban Outfitters Lost its Way?” spent a section describing Pizzeria Vetri’s great Yelp ratings, and noted that if the pizzerias were built next to Urban Outfitters storefronts, it could “lead to consumers outside of the target market entering the store – there are a lot of pizza lovers in the United States.”

Pundits also admitted that URBN had already put the restaurant-retail combination into play — the Herald Square Urban Outfitters store contains a UO Cafe, and the two Terrain home and garden centers in Westport, Conn. and Glen Mills, Pa. also have dining areas inside.

Stifel analyst Richard Jaffe expounded on the topic to Fortune: “Urban Outfitters has tested adding restaurants to select stores, and we believe these tests have proven successful, likely driving traffic and increasing the amount of time consumers stay in the stores.”

In an article titled “Urban Outfitters’ Purchase of Pizza Chain Might Not be that Crazy,” Restaurant Finance Monitor noted that while “[i]nitially, it seemed like a desperate grab for millennial dollars,” URBN stock was “surging back to normal as investors look past the confusing purchase and start to see some synergies.”

And surging back it was. Although it had not by any means reached new heights, by the close of business on Friday, URBN stock was trading at the same price as a week prior.

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Danya Henninger

Danya Henninger is director of Billy Penn at WHYY, where she oversees the team, all editorial decisions, and all revenue generation — including the...