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The Children's Place (PLCE) Posts Wider Than Expected Q1 Loss

The Children’s Place, Inc. PLCE disappointed with its first-quarter fiscal 2024 performance. This pure-play children’s specialty apparel retailer posted a loss that was wider than anticipated. Additionally, its revenues missed the Zacks Consensus Estimate and declined year over year.

Q1 Details

The Children’s Place posted an adjusted loss per share of $1.18, wider than the Zacks Consensus Estimate of a loss of 88 cents. However, the loss narrowed from an adjusted loss of $2.00 reported in the year-ago quarter.

Net sales of $267.9 million declined 16.7% year over year, primarily due to a decrease in retail sales, caused by factors such as fewer stores and reduced foot traffic. Additionally, e-commerce demand also declined due to reductions in marketing efforts from liquidity challenges early in the quarter and a fall in wholesale revenues. Meanwhile, comparable retail sales saw a decline of 11.7% in the quarter.

Adjusted gross profit was $93.6 million, down from $96.5 million reported in the year-ago quarter. The adjusted gross margin expanded 500 basis points (bps) to 35% due to lower product input costs, including cotton and supply-chain expenses, which had affected margins in the prior year. Additionally, the company benefited from improved leverage on e-commerce freight costs resulting from its new shipping threshold for free shipping. However, these gains were somewhat diminished by margin pressures from aggressive promotional strategies.

Adjusted selling, general and administrative (SG&A) expenses were $88.6 million, down from $109.2 million in the year-ago quarter. Adjusted SG&A, as a percentage of sales, leveraged 80 bps to 33.1%. This mainly resulted from decreases in store payroll and home office payroll, and reductions in marketing costs.

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

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

The Children's Place, Inc. price-consensus-eps-surprise-chart | The Children's Place, Inc. Quote

Store Update

At the end of the first quarter, the company operated 518 stores with 2.5 million square feet, marking a 13.8% reduction in square footage from the previous year. Also, it closed five stores in the past three months.

Other Financial Details

The Children’s Place ended the quarter with cash and cash equivalents of $13 million. The company had $226.1 million outstanding on its revolving credit facility as of May 4, 2024. It generated a loss of $110.8 million in operating cash flow in the three months ended May 4, 2024. Stockholders' deficit at the end of the quarter was $34.9 million.

Shares of this Zacks Rank #3 (Hold) company have lost 31.4% in the past three months against the industry’s growth of 8.4%.

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Key Picks

We have highlighted three better-ranked stocks, namely, Abercrombie & Fitch Co. ANF, The Gap Inc. GPS and DICK'S Sporting Goods DKS.

Abercrombie & Fitch, a specialty retailer of premium, high-quality casual apparel, currently sports a Zacks Rank #1 (Strong Buy). ANF has a trailing four-quarter average earnings surprise of 210.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year sales and earnings indicates growth of 10.5% and 47.6%, respectively, from the year-ago figures.

Gap, a fashion retailer of apparel and accessories, currently flaunts a Zacks Rank #1. GPS has a trailing four-quarter earnings surprise of 202.7%, on average.

The Zacks Consensus Estimate for Gap’s current financial-year sales and earnings per share suggests a rise of 0.1% and 17.5%, respectively, from the year-earlier levels.

DICK'S Sporting operates as an omni-channel sporting goods retailer. It currently carries a Zacks Rank #2 (Buy). DKS has a trailing four-quarter earnings surprise of 4.7%, on average.

The Zacks Consensus Estimate for DICK’S Sporting current fiscal-year sales and earnings implies an improvement of 1.8% and 6.3%, respectively, from the prior-year numbers.


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