Urban Outfitters just announced an unexpected acquisition — it's buying a group of popular Italian restaurants rooted in its hometown of Philadelphia, including a gourmet pizza chain.
The Vetri Family group, founded by James Beard Award-winning chef Marc Vetri, operates six different chains, as per its website. Urban Outfitters specifically called out its pizza chain, Pizzeria Vetri, as a major opportunity when announcing the deal.
"Spending on casual dining is expanding rapidly, and thus, we believe there is tremendous opportunity to expand the Pizzeria Vetri concept," CEO Richard Hayne said in today's statement.
Investors don't seem to be embracing that opportunity just yet — Urban Outfitters stock was down 8% by Monday afternoon following the deal's announcement. As of the close of trading on Friday, the company is down about 30% so far this year, which has been a bad one for most big publicly listed retailers.
Pizzeria Vetri currently has two locations in Philadelphia and has announced plans for another in Austin, Texas, earlier this year as part of a new Urban Outfitters center. Its bigger pizzas go for $26 or $34 and include toppings like sicilian tuna, prosciutto crudo and fennel sausage.
Dave Ziel, Urban Outfitters' chief development officer, told Philly.com that disposable income "is increasingly shifting from retail and into food."
"We think retailing needs to become more experiential," he told the website. "I think there's a craving for real socialization beyond social media."
Initially, it might sound kind of absurd that a restaurant group will join a stable of brands that includes Anthropologie, Free People, Terrain and BHLDN.
But retailers, for years now, have been turning to food to drum up interest in their goods in a somewhat sluggish sales environment. Restaurants still draw in the crowds, a fact that's not lost on retailers as foot traffic in malls declines.
Take this Businessweek story from December 2012 headlined: "The Rise of the Retailer-Restaurant." (Disclaimer: I wrote it.) Tommy Bahama noted at the time that its combination restaurant-stores generated 2.5 times the sales per square foot of its regular locations worldwide. Food and drink don't just draw more dollars on their own; they get people to hang around more and hopefully, spend more money on other stuff, too.
Urban Outfitters, in particular, has been testing the idea for a few years in a variety of locations. Both of its Terrain home and garden stores have cafes, serving items like kale salad, seared scallops and duck breast. And in Williamsburg, Brooklyn, it was big news in the neighborhood when chef Ilan Hall of Top Chef fame opened a second location of his restaurant, The Gorbals, inside the new Urban Outfitters last year.
Urban Outfitters reports earnings later today, and so far, results haven't been hot in the retail industry. Analysts will be eager to learn more details on whether pizza can help save the apparel retail business.
"While the potential overlap of the customer base is obvious (URBN shoppers surely like gourmet pizza!), the challenge of operating a new business and successfully integrating it with URBN is not insignificant," Richard Jaffe of Stifel wrote in a note today.
He added: "CEO Richard Hayne is highly regarded as an innovative leader in retail, with his success based on his willingness and ability to think outside the box. Whether Pizzeria Vetri proves to be a success like Free People or simply an interesting, but as of yet immaterial venture like Terrain, remains to be seen."