Children’s Place slashes Q4 outlook, stock tumbles

Yahoo Finance Live anchors discuss the decline in stock for Children’s Place after the retailer slashed its fourth-quarter outlook.

Video transcript

[AUDIO LOGO]

BRAD SMITH: We also got to talk about Children's Place this morning, too. Shares of Children's Place taking a hit after the retailer cuts its fourth quarter outlook, with expectations of reporting a loss per share amid a deterioration in its gross margin. Citing a challenging macro environment here. There, you're taking a look at some of the metrics as well that they had come out with. But this was an interesting one to really hear about, especially for the children's specialty apparel retailer here.

And I think they had also mentioned within this-- as a result of the challenging environment, higher input costs, decade-high cotton costs, which-- that caught your attention as well, Sozzi-- as well as some other supply chain costs. That's what led them to update the Street on what they're expecting here, and the negatively impacted short term margins as well.

BRIAN SOZZI: Yeah. This is-- and I wouldn't say CEO-operational issue. Jane Elfers, long-time CEO at Children's Place. She's really great. She's done a phenomenal job rejuvenating that brand. But if you take a step back and just overall look at what Children's Place is-- it is a brand in a mall that is seeing challenging traffic. The mall itself-- the focus is on middle America during an inflationary time.

And this is-- I think this customer base went to a Target. They went to a Marshalls. They've gone to a Walmart the past six months to save money. And Children's Place has been impacted. And it is unclear when that turn in the business-- when things might start to improve.

JULIE HYMAN: And PS, the kids apparel at the likes of a Target is good stuff.

- Not bad.

JULIE HYMAN: They have that Janie and Jack brand. They have some other strong kids clothing. I found myself wondering as they were talking about spiking cotton prices-- a lot of clothing is not made from cotton anymore, but I wonder if the mix in children's clothing still skews more cotton. I don't know if that is the case or not, but I don't know if-- I think it's already the majority of clothing that is purchased in the US is petroleum-based, if I'm not mistaken.

BRIAN SOZZI: Interesting.

BRAD SMITH: There's also such a dynamic shift in how much children's clothing is being pushed-- or not pushed, purchased-- because I think more parents have come around to the second-hand-- some of the different opportunities on the market to just say, OK, yeah, I will go into either a second-hand platform that says-- because my kids are just going to grow out of this so quick, then what's the point of purchasing it and then holding it? Or you just have family members where you just create your own little network of these things.

JULIE HYMAN: All about it. All about it. But you got to supplement sometimes--

BRAD SMITH: Yeah, you get some new stuff.

JULIE HYMAN: --with the new stuff as well. And I was going to say you can't do second-hand shoes, but I have done hand-me-down shoes for months.

BRIAN SOZZI: #MomHacks. Mom hacks.

JULIE HYMAN: Yes. Exactly.