Factors Behind Children's Place Sluggish Run on Bourses

The Children's Place, Inc.’s PLCE shares have not only declined year to date but also underperformed its industry and the broader market. The stock has declined around 18% against the industry’s growth of 0.2% and the S&P 500’s increase of 5% in the same time frame.

Stiff competition, declining comps, aggressive promotional environment and soft traffic are making things tough for the company as is evident from the dismal performance in the last reported quarter, wherein both the top and the bottom lines missed estimates. These factors along with bleak second-quarter fiscal 2018 guidance add to the woes.

In the last reported quarter, Children's Place’s streak of positive earnings surprise came to a halt. The company posted earnings of $1.87 in the fiscal first quarter, lagging the Zacks Consensus Estimate of $2.22. It also fell short of the company’s projection of $2.12-$2.22. The results were impacted by unseasonable cold weather conditions and declining traffic. Earnings also declined 4.1% on a year-over-year basis. Meanwhile, net sales remained almost flat at $436.3 million but missed the consensus mark of $443 million.

 

The company’s comparable sales declined for the first time, after increasing for nine straight quarters. Comparable retail sales were down 1.8% from 6.1% growth recorded in the year-ago quarter. U.S. and Canada comp sales also declined 1.4% and 7.1%, respectively.

For the fiscal second quarter, this Zacks Rank #4 (Sell) projects adjusted earnings per share of 51-61 cents, sharply down from 86 cents reported in the year-ago quarter.

Margin, an important financial metric for the company’s health, also declined in the fiscal first quarter. Adjusted gross profit fell 5.6% year over year to $161.5 million and gross margin contracted 220 basis points (bps) to 37%. This specialty retailer of children's apparel reported adjusted operating income of $25.4 million, down from $48.4 million in the prior-year quarter.

Moreover, operating margin decreased 530 bps to 5.8%. For fiscal 2018, management expects adjusted operating margin within 8.5-8.7% compared with 8.7-9% announced earlier. Further, the projected range falls below fiscal 2017’s figure of 9.6%.

3 Retail Stocks Hogging the Limelight

Shoe Carnival, Inc. SCVL has a long-term earnings growth rate of 12% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. BURL has a long-term earnings growth rate of 18.1% and carries a Zacks Rank #2 (Buy).

Fossil Group FOSL delivered an average positive earnings surprise of 54.1% in the trailing four quarters. The Zacks Rank #2 company has a long-term earnings growth rate of 5%.

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