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Children's Place (PLCE) Digitization Strategy is Paying Off

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·4 min read
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The Retail - Apparel And Shoes industry is striving to capitalize on any revival in demand with focus areas being value addition, product innovation and diversification, digitization, supply chain and disciplined capital spending. Undeniably, The Children's Place, Inc. PLCE has been aggressively adopting strategies and making planned investments to cater to consumer demand and behavior.

This NJ-based company has been on track with growth efforts such as enhancing digital capabilities, augmenting supply chain and improving financial flexibility. The company is leaving no stone unturned to improve its top-line performance and expand customer base. It is focusing on superior product strategy to resonate well with millennial customers and advancing omni-channel capabilities.

Let’s Introspect

Children's Place has been making investments to upgrade its omni-channel capabilities as part of its digital transformation strategy. The company’s $50 million digital transformation investment to enhance omni-channel capabilities in order to meet online demand is reaping benefits. Markedly, the company has one of the highest digital penetrations in the industry. It has also launched a completely redesigned responsive site and mobile app for The Children's Place and Gymboree brands.

We note that the company’s digital sales surged 38% during fourth-quarter fiscal 2020, representing 46% of total sales. During fiscal 2020, the company added 1.9 million new digital customers and converted more than 1 million of store-only customers to omni-channel customers. Furthermore, the company’s app downloads rose about 60%. As a result, digital sales advanced 37% during the fiscal year. Impressively, the company ended the year with digital penetration of 53% of total sales.

Children's Place has rolled out "BOPIS" (Buy Online, Pick Up in Store), Save the Sale and Ship from Store. Further, it launched SMS texting capabilities. It has also rolled out “BOSS” (Buy Online, Ship to Store), response to which has been encouraging. With changing consumer shopping pattern, the company has been making efforts to lower dependency on brick-and-mortar platform and shift toward digitization. It is aiming mall-based brick-and-mortar portfolio to account for less than 25% of revenues entering fiscal 2022.

With respect to its store fleet optimization strategy, the company has permanently shuttered 60 stores during the fourth quarter. This brings the total store closures to 178 in fiscal 2020. The company now plans to shutter 122 stores in fiscal 2021. Of these, the company plans to close roughly 25 stores in the first quarter and about 97 stores by the end of fiscal 2021. This will take the total store closure count to 300 for the two-year period.

Wrapping Up

Markedly, shares of this Zacks Rank #3 (Hold) company have appreciated 36.8% over the past three-month time frame, courtesy of its robust business strategies. In the said period, the industry rallied 15.4%. Meanwhile, the Zacks Consensus Estimate for the company’s fiscal 2021 earnings has moved up 7.1% over the past 60 days.

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