Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Children's Place (PLCE) Tumbles 29% Despite Q4 Earnings Beat

By Zacks Investment ResearchStock MarketsMar 17, 2020 11:29PM ET
Children's Place (PLCE) Tumbles 29% Despite Q4 Earnings Beat
By Zacks Investment Research   |  Mar 17, 2020 11:29PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Shares of The Children’s Place, Inc. (NASDAQ:PLCE) lost 29.1% during the trading session on Mar 17 despite the company reporting better-than-expected results for fourth-quarter fiscal 2019. While the bottom line registered solid growth year over year, the top line declined on soft comparable retail sales. In the past three months, the stock has plunged 67.7%, wider than the industry’s decline of 49.5%.

Further, management deferred the guidance for fiscal 2020 in the wake of the prevailing uncertainty surrounding the coronavirus outbreak. Although the company saw low-single digits growth in comparable sales for the first five weeks of first-quarter fiscal 2020, management cited that after five weeks, the impact of the pandemic increases. It further informed that Children’s Place has taken measures in the form of store closures and limited hours across the United States and Canada.

Nevertheless, this Zacks Rank #3 (Hold) company has been receiving positive customer feedback for the Gymboree brand. The company also informed that it is not forecasting issues with product deliveries or delays due to the disruption in China, backed by strength in its diversification strategy and vendor partnerships.

Q4 Details

The children's specialty apparel retailer reported adjusted earnings of $1.85 a share, which outshined the Zacks Consensus Estimate of $1.59. Also, the bottom line surged a whopping 68.2% from the year-ago quarter’s $1.10. Impressively, this marked the company’s fourth straight quarter of an earnings beat. The reported figure exceeded management’s guided earnings range of $1.48-$1.68 as well.

However, net sales fell 3.3% year over year to $513 million in the fiscal fourth quarter. The decline was mainly due to soft comparable retail sales, which fell 3.6%. Nonetheless, the top line marginally came ahead of the Zacks Consensus Estimate of $512 million, returning to a positive surprise after two straight quarters of a miss. Further, the company’s digital business represented nearly 31% of total sales in the quarter under review.

Moreover, adjusted gross profit remained flat year over year at $166.9 million. Meanwhile, adjusted gross margin expanded 100 basis points (bps) to 32.5% owing to higher merchandise margins. The improvement was somewhat offset by deleveraged fixed expenses and higher penetration of e-commerce business that operates at a lower gross-margin rate.

Adjusted SG&A expenses fell 11.9% from the year-ago period to $113 million, while as a percentage of net sales, the metric leveraged 220 bps to 22%. The contraction in SG&A expenses primarily resulted from better expense management and lower incentive compensations, somewhat negated by higher fixed expenses.

As a result, the company’s adjusted operating income surged 62.4% to $35.4 million, with adjusted operating margin increasing 280 bps to 6.9%.

Store Update

As part of store fleet optimization endeavors, Children’s Place opened two stores and shuttered 33 in fourth-quarter fiscal 2019, thereby ending the quarter with 924 stores. Since the announcement of the store fleet optimization program in 2013, it has shuttered 271 stores.

Additionally, its international franchise partners opened six net new points of distribution in fourth-quarter fiscal 2019. Consequently, the company had 266 international points of distribution open and operated by eight franchise partners across 19 countries, as of Feb 1, 2020.

Other Financial Details

Children's Place ended the quarter under review with cash and cash equivalents of $68.5 million compared with $69.1 million a year ago. The company exited the quarter with inventories of $327.2 million, up 7.8% year over year. Shareholders’ equity totaled $235.2 million as of Feb 1, 2020.

Moreover, the company generated operating cash flow of about $178 million in fiscal 2019. Also, it had $171 million outstanding on its $325-million revolving credit facility at the end of the fiscal year. This revolving credit facility also provides an additional $50 million in liquidity.

During the fiscal fourth quarter, the company bought back 557 thousand shares for roughly $38 million and paid quarterly dividends worth nearly $8 million. In the fiscal year, it bought back about 1.6 million shares for roughly $131 million and paid dividends of nearly $35 million. As of Feb 1, 2020, it had about $108 million remaining under its existing share repurchase program.

Key Picks in Retail

Macy's (NYSE:M) has an expected long-term earnings growth rate of 12% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chico's FAS (NYSE:CHS) , which has a long-term earnings growth rate of 15%, carries a Zacks Rank #2 (Buy).

Costco Wholesale (NASDAQ:COST) , also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 8.4%.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Costco Wholesale Corporation (COST): Free Stock Analysis Report

Chico's FAS, Inc. (CHS): Free Stock Analysis Report

Macy's, Inc. (M): Free Stock Analysis Report

The Children's Place, Inc. (PLCE): Free Stock Analysis Report

Original post

Zacks Investment Research
Children's Place (PLCE) Tumbles 29% Despite Q4 Earnings Beat

Related Articles

Children's Place (PLCE) Tumbles 29% Despite Q4 Earnings Beat

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email