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Children's Place (PLCE) Looks Well-Poised to Tap Budding Demand

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While coronavirus-inflicted challenges still persist, the Retail - Apparel And Shoes industry has been steadily making its way out of the woods. The gradual reopening of the economy, thanks to widespread vaccinations, and the return to active social lifestyle, events and occasions are likely to spur demand for traditional categories such as apparel and other accessories. We believe The Children's Place, Inc. PLCE is well poised to maximize its share of customers’ wallet.

Children's Place foresees sales opportunities and operational efficiencies when social distancing measures as well as other restrictions such as limited-hour operations are eased further, and the company’s stores and distribution centers start to operate normally. Additionally, if the majority of elementary schools returned to in-person learning, the company will be among the big gainers.

This pure-play children’s specialty apparel retailer has commenced second-quarter fiscal 2021 on a strong note. We note that the Zacks Consensus Estimate for second-quarter sales and earnings suggests growth of 13.5% and 112.8%, respectively, from the year-ago period.

Let’s Delve Deeper

Children's Place has been aggressively adopting strategies and making planned investments to cater to consumer demand and behavior. It 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.

This NJ-based company 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.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

We note that the company’s consolidated digital sales surged 37% during first-quarter fiscal 2021, representing 42% of total sales. Digital sales rose 35% in the United States and 82% in Canada. The expansion of digital business coupled with the significant sales transfer rate that the company is attaining owing to the strategic decision to shutter 300 stores is resulting in long-term steady state annual digital penetration of 50%.

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), the response to which has been encouraging. Realizing changing consumer shopping pattern, the company has been making efforts to lower dependency on brick-and-mortar platform and shift toward digitization. It anticipates 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, Children’s Place permanently shuttered 25 stores during the first quarter. The company now plans to shutter additional 98 stores in fiscal 2021. This will take the total store closure count to 300 for the two-year period.

Wrapping Up

Children's Place has exhibited an outstanding run on the bourses in the past six months. In the said period, shares of this Zacks Rank #1 (Strong Buy) company have soared about 87.7% compared with the industry’s rally of 30.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.

3 More Stocks Looking Red Hot

Abercrombie & Fitch ANF has a long-term earnings growth rate of 18%. It presently sports a Zacks Rank #1.

Boot Barn Holdings BOOT has a trailing four-quarter earnings surprise of 51.7%, on average. The stock sports a Zacks Rank #1.

L Brands LB has a long-term earnings growth rate of 13%. It currently carries a Zacks Rank #2 (Buy).

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