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How Children's Place (PLCE) Looks Just Ahead of Q2 Earnings

Zacks Equity Research

The Children's Place, Inc. PLCE is likely to witness a significant decline in the bottom line in second-quarter fiscal 2019. In two of the trailing four quarters, this pure-play children's specialty apparel retailer has outperformed the Zacks Consensus Estimate, with average positive earnings surprise of 37.4%. Let’s see what awaits the upcoming quarterly release.

Notably, the Zacks Consensus Estimate for second-quarter earnings is pegged at 17 cents per share, indicating a significant decline from earnings of 70 cents reported in the year-ago quarter. The consensus mark has gone up by a penny over the past 30 days. The Zacks Consensus Estimate for revenues stands at $430.2 million, suggesting a decline of approximately 4.1% from the year-ago quarter’s reported figure.

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Factors Driving the Stock

Children's Place at its first-quarter earnings call highlighted that its second-quarter results would likely be impacted by several factors. These include Gymboree’s liquidation event; soft sales in May due to better-than-expected sales in April on account of Easter and earlier closings of Gymboree stores; and adverse weather impact this time in contrast to the prior-year period that resulted in tough year-over-year comparison in comparable retail sales.

Consequently, management projected second-quarter fiscal 2019 adjusted earnings to be in the range of breakeven to 20 cents a share, implying a decline from earnings of 70 cents reported in the prior-year period. Net sales are anticipated to be $415-$420 million, down from $448.7 million reported in the second quarter of fiscal 2018. 

Comparable retail sales are expected to decline 4-5% against growth of 13.2% in the prior-year period. Meanwhile, adjusted operating margin is projected to be 0.4-1.3% compared with 3.5% reported in the year-ago period.

Nonetheless, Children's Place is leaving no stone unturned to improve the top-line performance and expand the customer base. Initiatives like alternate channels of distribution, digital transformation, fleet optimization and international expansion, are likely to provide some cushion to the stock.

What Our Model Say

Our proven model shows that Children's Place is likely to beat estimates this quarter. This is because a stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Children's Place has a Zacks Rank #3 and an Earnings ESP of +47.06%, which makes us confident of a beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat.

Burlington Stores BURL has an Earnings ESP of +0.70% and a Zacks Rank #2.

Target Corporation TGT has an Earnings ESP of +0.42% and a Zacks Rank #2.

Dollar General DG has an Earnings ESP of +1.51% and a Zacks Rank #3.

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