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Children's Place Banks on Digital Efforts to Beat Competition

Zacks Equity Research
Updated

The Children's Place, Inc. PLCE is leaving no stone unturned to boost the company’s top line and expand its customer base. In an effort to provide a hassle-free shopping experience, the company is focusing on digital transformation  

This Zacks Rank #3 (Hold) company has plans to invest $50 million in SG&A over the next three fiscals to support digital transformation, with $30 million, $15 million and $5 million in fiscal 2018, 2019 and 2020, respectively. Per management, its digital business is expected to see a CAGR of low 20% range. The company also expects to generate 35% of total revenues from its digital channel by 2020.

Further, the company had earlier delivered customer database and rolled out Wi-Fi, BOPIS, Ship from Store, mobile POS across all U.S. stores. Also, it launched SMS texting capabilities and implemented everyday-free shipping with no minimum purchase. Children's Place will also take up initiatives to implement “BOSS” (Buy Online, Ship to Store) in the fourth quarter of fiscal 2018. Further, it announced plans to open a new e-commerce site with Tmall — the e-commerce platform of Alibaba — in the second half of fiscal 2018.

Children's Place, Inc. (The) Price, Consensus and EPS Surprise

Children's Place, Inc. (The) Price, Consensus and EPS Surprise | Children's Place, Inc. (The) Quote

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Moreover, the company will roll out a brand store on Amazon in the second quarter of fiscal 2018. The company intends to participate in the launch of Amazon’s Prime Wardrobe, enabling Prime members to try on products before purchasing.

The company is taking steps not only to gain traction in the U.S. market but also expand globally. This is evident from its recently signed license agreement with Zhejiang Semir Garment Co. Ltd (Semir) for the Greater China market, which covers Mainland China, Taiwan, Hong Kong and Macau. Semir is the parent company of Balabala — a prominent name in China’s specialty children’s apparel retail industry.

Nevertheless, the children's apparel, footwear, and accessories retail landscape has been witnessing a sea change, with online shopping taking precedence. Furthermore, Children's Place faces competition from department stores, as well as other discount stores, such as Walmart WMT. We believe unhealthy price competition and promotional activities to gain market share and drive footfall might weigh on the company’s results.

We note that after recording growth for nine straight quarters, the company’s comparable sales declined for the first time in first-quarter fiscal 2018. Along with the intense competition, decline in comps acts as a deterrent. Consequently, shares of the company have declined 2.8% as against the industry’s gain of 8.3% in the past three months.

2 Retail Stocks Hogging the Limelight

Urban Outfitters URBN delivered an average positive earnings surprise of 19.8% in the trailing four quarters. The stock has a long-term earnings growth rate of 12% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fossil Group FOSL delivered an average positive earnings surprise of 54.1%, in the preceding four quarters. This Zacks Rank #2 (Buy) company has a long-term earnings growth rate of 5%.

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