Children's Place (PLCE) Bounces Back with Surprising Earnings

Shares of Children's Place Retail Stores (PLCE: Charts, News) bounced back strongly late November after it beat Wall Street expectations with a solid third quarter. Children's Place, the largest children's apparel retailer in North America, posted earnings of $1.33 per share, or $33.7 million, up from the $1.55 per share, or $31.3 million, it posted a year earlier.

Its revenue rose 7% from $453.4 to $484.1 million year-over-year. Both came in above analysts' expectations of $1.22 per share on $469 in revenue. Most surprising of all, same-store sales increased 0.9%, trumping expectations of a 2.2% decline. Meanwhile, gross margins increased from 40.2% to 41.3% over a year. For the rest of the year, the company expects gross margins to remain between 30-50%. The company also opened 18 new stores during the quarter while closing two, and bought back $27.9 million worth of outstanding shares. Looking forward, the company expects full year earnings between $3.24 to $3.29, up from its previous August guidance of $3.13 to $3.25. Daily Chart
"We attribute these results to a combination of our enhanced merchandise offerings," stated CEO Jane Elfers. "Our intense focus on inventory management and the momentum from our other strategic growth initiatives which enabled us to drive sales and expand margin despite significantly higher product costs and a difficult macroeconomic environment." Children's Place's third quarter results were also boosted by positive sales during the back to school season in September. This marks a stunning turnaround for the company, which was crushed back in May after poor second quarter earnings. In that quarter, the company made previous inventory and merchandise missteps, which led to an oversized inventory and heavy discounts - which crushed margins in the process. "We have a stronger promotional strategy in place for fourth quarter versus last year," Elfers added on a conference call with analysts. Although catering specifically to children, Children's Place is considered a competitor to superstores such as Target (TGT: Charts, News) and Wal-Mart (WMT: Charts, News), as well as lower-end apparel stores such as Gap Inc's (GPS: Charts, News) Old Navy stores. These retailers all share a common target demographic - middle class households with a combined annual income of $70,000, or shoppers dependent on discounts and special offers. Children's Place products are considered value items, priced approximately 30% lower than its other mall-based competitors. In only a short year at the helm, Elfers has made a noticeable impact on the company's operations - with revamped clothes and promotions. Elfers also recently appointed former Pepsico (PEP: Charts, News) official Lori Tauber Marcus as its marketing chief. In addition, she also appointed Michael Gianelli, the former designer of Gap Inc.'s kids, baby and body brands, to renew and strengthen its other merchandise offerings. The company is currently focused on five specific age groups - Big Girls and Big Boys (4 to 14 years old), Baby Girls and Baby Boys (6 months to four years old), and Newborns (0-12 months). The Secaucus, New Jersey-based retailer is primarily located in regional malls, but also has a presence in strip malls, outlets, and street stores. Shares of Children's Place, with a P/E of 15, are on par with its industry peers, but undervalued in comparison to the S&P 500. Analysts and investors have recently turned bullish on this stock, touting its solid financial position, low debt levels and reasonable technical valuation levels. The stock's solid performance in the past month, despite market turmoil and macro uncertainty, make it a good value play which could bounce back quickly. In addition, its status as a lower-end value retailer makes it an attractive choice in times of lower discretionary spending. Other News About PLCE Children's Place Retail Stores Stock Gaps Up On Today's Open Children's Place soars 14% in a single day of trading. Children's Place Retail Q3 Profit Rises; Lifts FY11 EPS View Despite macro headwinds, Children's Place has an optimistic view of 2012. Other Stocks in the News Angie's List gains 33% in IPO Is this yet another Internet emperor with no clothes? Disney acquires online parenting platform Babble Media Disney expands its interactive unit into online parenting. Copyright 2011 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Dec 8, 2011
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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