Shares of The Children's Place, Inc. PLCE have gained approximately 8%, against the industry’s decline of 22.8% and he overall sector’s rise of 1.7% in the past three months.
This may be attributed to multi-year growth initiatives, comprising productivity efforts, alternate channels of distribution, digital transformation, fleet optimization and international expansion. These helped this Zacks Rank #1 (Strong Buy) stock post better-than-expected first-quarter fiscal 2019 results that also came ahead of management’s expectations. Following the results, the company raised fiscal 2019 view.
Consequently, there has been an upward revision in the Zacks Consensus Estimate. Notably, the Zacks Consensus Estimate for the current quarter and fiscal 2019 has increased 9 cents and 65 cents to 15 cents and $6.37, respectively, in the past 30 days.
Factors Propelling the Stock
Children's Place is leaving no stone unturned to improve the top-line performance and expand customer base. The company is making efforts to expand footprint not only in the U.S. market but also globally. This is evident from the company’s license agreement with Zhejiang Semir Garment Co. Ltd (“Semir”) for the Greater China market, which covers Mainland China, Taiwan, Hong Kong and Macau.
Further, in an effort to provide a hassle-free shopping experience, the company is focusing on digital transformation. It had rolled out "BOPIS" (Buy Online, Pick Up in Store), Ship from Store, and mobile POS to all its U.S. stores. Further, the company launched SMS texting capabilities and is implementing “BOSS” (Buy Online, Ship to Store). Notably, e-commerce penetration expanded 270 basis points to 29% of net sales during the first quarter of fiscal 2019. E-commerce penetration is projected to increase more than 30% of net sales in fiscal 2019 from approximately 28% in fiscal 2018.
Additionally, the company is focusing on striking a balance between digital and physical stores. To this end, the company had closed 213 stores since 2013 till the end of the first quarter of fiscal 2019 and targets to close 300 by 2020. The company closed 42 stores in fiscal 2018. It plans to close 40-45 stores in fiscal 2019 and roughly 45 in fiscal 2020. The company had earlier informed that this fleet optimization initiative will help it achieve a 200-basis point improvement in operating margin from 2013 to 2020.
As a result of Gymboree Group, Inc.’s bankruptcy, the company intends to open 25 stores in centers with high productivity within a span of two years. It entered an Asset Purchase Agreement with Gymboree and related entities to buy intellectual property assets of the latter and Crazy 8 (the “Gymboree Assets”) for $76 million. This buyout is likely to be accretive to fiscal 2020 adjusted earnings per share.
3 Other Stocks to Bank On
Stitch Fix SFIX, with a long-term earnings per share growth rate of 22.5%, carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
L Brands LB, with a long-term earnings per share growth rate of 11%, carries a Zacks Rank #2.
Kering SA PPRUY, with a long-term earnings per share growth rate of 10%, carries a Zacks Rank #2.
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