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Bear of the Day: The Children's Place (PLCE)

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Madeleine Johnson
·3 min read
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The Children’s Place, Inc. (PLCE) is the largest pure-play children’s specialty apparel retailer in North America. Based in Secaucus, NJ, the company sells apparel, footwear, accessories and other items for children, and designs and sells merchandise under the brand names The Children’s Place, Place, Baby Place, and Gymboree.

Shares Sink on Disappointing Q2 Earnings

Back in August, The Children’s Place reported disappointing second quarter results, and shares fell as much as 19% as a result.

Net sales fell 12% to $368.9 million compared to the prior-year period, and are down 25% so far this year; the company’s sharp revenue decline led to a huge $47 million net loss, or a loss of $3.19 per share.

However, digital sales soared 118% in Q2, and the company anticipates online demand to remain strong in the near- and long-term.

Retailers, especially those based in malls, continue to struggle during Covid-19. Even though most of its store locations have reopened, business has struggled to return to pre-pandemic levels. On top of that, the back-to-school shopping season failed to provide any significant sales bump for PLCE this year.

CEO Jane Effers anticipates a “meaningful” negative impact on the company’s Q3 numbers as a result of the back-to-school season slump.

Bottom Line

PLCE is now a Zacks Rank #5 (Strong Sell).

Four analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen almost three dollars to a loss of $2.95 per share; earnings are expected to see a triple-digit decline for the current fiscal year.

Shares are actually up considerably since the March lows, rising about 50%, which is in line with the S&P 500’s rebound during the same time frame.

Even though shares have run up over the past few months, The Children’s Place will still have a hard road ahead of it. But, it’s an industry leader, with brands that remain popular with families.

Looking ahead, The Children’s Place is looking to optimize its real estate portfolio so that it will be less dependent on physical brick-and-mortar locations. By the end of 2020, it plans to close 100 locations and next year, 100 more.

Investors who are interested in adding a fellow mall retail stock to their portfolio could consider Zumiez (ZUMZ). ZUMZ is a #1 (Strong Buy) on the Zacks Rank, and shares have jumped almost 68% since mid-March.

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