Will Cost Hike Mar The Children's Place's (PLCE) Q2 Earnings?
The Children's Place, Inc. PLCE is likely to witness declines in the top and bottom lines when it reports second-quarter fiscal 2023 numbers. The Zacks Consensus Estimate for revenues is pegged at $341.7 million, suggesting a decline of 10.3% from the prior-year reported figure.
The Zacks Consensus Estimate for the quarterly loss per share has been unchanged at $2.04 over the past 30 days. It suggests a significant widening from a loss of 89 cents per share reported in the year-ago period.
In the last reported quarter, the children's specialty apparel retailer recorded a negative earnings surprise of 13%. It delivered a negative earnings surprise of 63.1%, on average, in the trailing four quarters.
The Children's Place, Inc. Price and EPS Surprise
The Children's Place, Inc. price-eps-surprise | The Children's Place, Inc. Quote
Key Factors to Note
The Children’s Place has been grappling with soft consumer demand due to unprecedented inflation, increased promotional activity from key competitors and supply-chain issues. This, along with higher airfreight expenses, container costs and elevated marketing spend, is expected to have dented the fiscal second-quarter performance.
On its last reported quarter’s earnings call, management expected second-quarter fiscal 2023 net sales to be $340-$345 million, indicating a 10% decline from the year-ago reported figure. It expects the gross margin to decline 200 bps. The company envisions the quarterly adjusted operating loss to be -8% of net sales. The adjusted net loss per share is anticipated to be $2.15-$2.20 in the fiscal second quarter.
Rising operating costs and expenses have also been major concerns for the company. A spike in cotton prices and other input costs, coupled with inflation-wary shoppers, has been resulting in elevated cost of sales for the company. This has been weighing on the company’s gross margin performance. Additionally, deleveraging of fixed costs and planned higher marketing spend have been resulting in higher SG&A expenses.
Our model estimates adjusted cost of sales, as a percentage of sales, to increase 200 basis points (bps) to 71.8% in the fiscal second quarter. Consequently, the gross margin is expected to decline 200 bps to 28.2%. We predict the adjusted SG&A expense rate to increase 320 bps to 33% in the to-be-reported quarter. This, combined with a reduced gross margin, is estimated to result in an operating margin of -8.2%.
However, PLCE’s accelerated fleet optimization initiative, directing resources toward digital platforms to better engage with customers, augmenting the supply chain and concentrating on improving financial flexibility bode well.
The Children’s Place has been making efforts to get back on track by focusing on its superior products, digital transformation, wholesale & international expansion and fleet optimization. Investments to upgrade its omni-channel capabilities as part of its Digital Transformation strategy are likely to have contributed to the fiscal second-quarter performance.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for The Children's Place this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The Children's Place has an Earnings ESP of 0.00% and a Zacks Rank #3.
3 Stocks With Favorable Combination
Here are three companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:
The TJX Companies TJX currently has an Earnings ESP of +2.63% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports second-quarter fiscal 2023 results. The consensus mark for TJX’s quarterly revenues is pegged at $12.4 billion, which suggests growth of 4.7% from the figure reported in the prior-year quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TJX’s earnings has been unchanged at 76 cents per share in the past 30 days. The consensus estimate indicates 10.1% growth from the year-ago quarter’s reported figure.
Urban Outfitters URBN currently has an Earnings ESP of +2.27% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports second-quarter fiscal 2023 numbers. The consensus mark for URBN’s quarterly earnings has moved up by a penny to 88 cents per share in the past seven days. The consensus estimate suggests 37.5% growth from the year-ago quarter’s reported number.
The Zacks Consensus Estimate for Urban Outfitters’ quarterly revenues is pegged at $1.24 billion, which suggests growth of 5.1% from the figure reported in the prior-year quarter.
Tapestry TPR currently has an Earnings ESP of +1.71% and a Zacks Rank #3. The company is likely to register growth in the top and bottom lines when it reports second-quarter 2023 results. The consensus mark for TPR’s quarterly revenues is pegged at $1.7 billion, which suggests a 2.3% rise from the figure reported in the prior-year quarter.
The consensus mark for TPR’s quarterly earnings has moved up by a penny in the past seven days to 96 cents per share. The consensus estimate suggests growth of 23.1% from the year-ago quarter.
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The TJX Companies, Inc. (TJX) : Free Stock Analysis Report
Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report
The Children's Place, Inc. (PLCE) : Free Stock Analysis Report
Tapestry, Inc. (TPR) : Free Stock Analysis Report
