The Children's Place (PLCE) Up 8.9% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for The Children's Place (PLCE). Shares have added about 8.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is The Children's Place due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
The Children's Place (PLCE) Posts Wider Than Expected Q1 Loss
The Children’s Place, Inc. disappointed with its first-quarter fiscal 2024 performance. This pure-play children’s specialty apparel retailer posted a loss that was wider than anticipated. Additionally, its revenues missed the Zacks Consensus Estimate and declined year over year.
Q1 Details
The Children’s Place posted an adjusted loss per share of $1.18, wider than the Zacks Consensus Estimate of a loss of 88 cents. However, the loss narrowed from an adjusted loss of $2.00 reported in the year-ago quarter.
Net sales of $267.9 million declined 16.7% year over year, primarily due to a decrease in retail sales, caused by factors such as fewer stores and reduced foot traffic. Additionally, e-commerce demand also declined due to reductions in marketing efforts from liquidity challenges early in the quarter and a fall in wholesale revenues. Meanwhile, comparable retail sales saw a decline of 11.7% in the quarter.
Adjusted gross profit was $93.6 million, down from $96.5 million reported in the year-ago quarter. The adjusted gross margin expanded 500 basis points (bps) to 35% due to lower product input costs, including cotton and supply-chain expenses, which had affected margins in the prior year. Additionally, the company benefited from improved leverage on e-commerce freight costs resulting from its new shipping threshold for free shipping. However, these gains were somewhat diminished by margin pressures from aggressive promotional strategies.
Adjusted selling, general and administrative (SG&A) expenses were $88.6 million, down from $109.2 million in the year-ago quarter. Adjusted SG&A, as a percentage of sales, leveraged 80 bps to 33.1%. This mainly resulted from decreases in store payroll and home office payroll, and reductions in marketing costs.
Store Update
At the end of the first quarter, the company operated 518 stores with 2.5 million square feet, marking a 13.8% reduction in square footage from the previous year. Also, it closed five stores in the past three months.
Other Financial Details
The Children’s Place ended the quarter with cash and cash equivalents of $13 million. The company had $226.1 million outstanding on its revolving credit facility as of May 4, 2024. It generated a loss of $110.8 million in operating cash flow in the three months ended May 4, 2024. Stockholders' deficit at the end of the quarter was $34.9 million.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
VGM Scores
Currently, The Children's Place has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
The Children's Place has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
The Children's Place is part of the Zacks Retail - Apparel and Shoes industry. Over the past month, Zumiez (ZUMZ), a stock from the same industry, has gained 21.7%. The company reported its results for the quarter ended April 2024 more than a month ago.
Zumiez reported revenues of $177.39 million in the last reported quarter, representing a year-over-year change of -3%. EPS of -$0.86 for the same period compares with -$0.96 a year ago.
For the current quarter, Zumiez is expected to post a loss of $0.29 per share, indicating a change of +34.1% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Zumiez has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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The Children's Place, Inc. (PLCE) : Free Stock Analysis Report
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