Children's Place (PLCE) Stock Falls Despite Q4 Earnings Beat
The Children's Place, Inc. PLCE came up with sixth-straight quarter of positive earnings surprise, as it reported fourth-quarter fiscal 2017 results. However, the stock declined nearly 8% yesterday, primarily due to soft first-quarter and fiscal 2018 guidance. In the past three months, shares of the company have lost 9.9%, wider than the industry’s decline of 6%.
In the reported quarter, the company’s adjusted earnings per share of $2.52 surpassed the Zacks Consensus Estimate of $2.49 and improved 34% year over year. Revenues were up 9.4% year over year to $570 million, which came in line with the consensus mark. Also, comparable retail sales increased 8.2% driven by robust retail sales in all geographies and channels. Notably, this marked the ninth straight quarter of positive comparable sales.
Adjusted gross profit increased 12.3% year over year to $211.1 million, while gross margin expanded 90 basis points (bps) to 37%. This specialty retailer of children's apparel reported adjusted operating income of $57 million compared with $50 million in the prior-year quarter. Moreover, operating margin increased 40 bps to 10%.
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
Other Financial Details
The Children's Place ended the quarter with cash and cash equivalents of $244.5 million, inventories of $324.4 million and shareholders’ equity of $473.7 million.
In the fourth quarter, the company repurchased 244,269 shares for nearly $33 million. In addition, its board of directors announced a new share repurchase program of $250 million and also raised the quarterly dividend to 50 cents from 40 cents. The dividend will be paid on Apr 27, 2018 to stockholders of record as of Apr 16, 2018.
Guidance
Following sturdy performance, The Children's Place provided fiscal 2018 earnings projection that disappointed investors. Management now envisions adjusted earnings per share in the range of $7.95-$8.20 compared with $7.91 last year. Comparable sales are expected to increase by 2.5%.
For the first quarter, the company projected adjusted earnings per share in the band of $2.12-$2.22 compared with $1.95 in the year-ago quarter.
The Zacks Consensus Estimate for the first quarter and fiscal 2018 is currently pegged at $2.53 and $8.95, respectively, which are likely to witness a sharp decline in the coming days.
Furthermore, The Children's Place provided its fiscal 2020 target. It expects operating margin to expand 12% and earnings of $12.00 per share by the end of 2020. Also, the company plans to invest $50 million on transformation efforts from 2018 to 2020.
The Children's Place carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Picks
The Buckle, Inc. BKE delivered an average positive earnings surprise of 9.1% in the trailing four quarters and has a Zacks Rank #2.
The Gap, Inc. GPS pulled off an average positive earnings surprise of 11.1% in the trailing four quarters. The company has a long-term earnings growth rate of 8% and a Zacks Rank of 2.
Nordstrom, Inc. JWN has delivered a positive earnings surprise in the trailing three out of four quarters. The company carries a Zacks Rank #2.
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