Bankruptcy of URBN's primary lender, CIT, will affect its liquidity
Top Contributor: Helen Han | Created when NASDAQ:URBN was $31.38 | Edit | History
URBN, like many other small-medium retailers, borrows its short-term revolving credit line from the ailing bank CIT, which filed for Chapter 11 bankruptcy on November 1, 2009. CIT's bankruptcy process will likely place a freeze on all lendable assets and cut off funds for its borrowers like URBN. The financing hit for the retailer also comes right before the important holiday season, during which time short-term financing is indispensable for stocking inventory and other cash needs.
URBN is undoubtedly overvalued at its current price of $25, which gives it a P/E ratio of 30. In the current retail environment and uncertain economy, very few retailers are trading at this high of a multiple. URBN cannot generate enough growth to justify such a high valuation.