Back to top

Image: Shutterstock

Children's Place (PLCE) Outpaces Industry YTD: Here's Why

Read MoreHide Full Article

The Children's Place, Inc. (PLCE - Free Report) , one of the widely recognized names in the Retail - Apparel And Shoes industry, has exhibited an outstanding run on the bourses so far this year. In the said period, shares of this Zacks Rank #1 (Strong Buy) company have soared about 73.4% compared with the industry’s rally of 10.9%. Digital transformation, superior product assortment and sturdy demand — as people gradually resume active social lifestyles and schools start in-person classes — are likely to play a vital role in revenue generation.

This pure-play children’s specialty apparel retailer continued with its decent performance in second-quarter fiscal 2021. Fleet optimization strategy, introduction of Gymboree into a portfolio of brands and accelerated digital investments continued to drive results. Without doubt, favorable response toward product assortment, higher price realization and lower promotional activity have been acting as tailwinds.

Let’s Analyze

Children's Place has been aggressively adopting strategies and making planned investments to cater to consumer demand and behavior. It has been focusing on superior product strategy to resonate well with millennial customers as well as advancing omni-channel capabilities and augmenting the supply chain. The company’s $50 million digital transformation investment is reaping benefits. Markedly, it has one of the highest digital penetrations in the industry.

Impressively, digital sales represented 43% of total net sales during the second quarter of fiscal 2021 with more than 70% of digital business now coming through a mobile device. The company notified that its active mobile users were up double digits. The expansion of digital business along with the significant sales transfer rate that the company is attaining owing to its strategic decision to shutter 300 stores are resulting in long-term steady state annual digital penetration of 50%.

With changing consumer shopping patterns, the company has been making efforts to lower dependency on brick-and-mortar platform and shift toward digitization. It anticipates a mall-based brick-and-mortar portfolio to account for less than 25% of revenues entering fiscal 2022.

With respect to its store fleet optimization strategy, The Children’s Place permanently shuttered 42 stores during the six months period ended Jul 31, 2021. The company now plans to shutter additional 81 stores in fiscal 2021. This will take the total store closure count to 300.

Zacks Investment Research
Image Source: Zacks Investment Research

Wrapping Up

Children's Place commenced the third quarter on a strong note and remains well on track to accelerate operating margin expansion in fiscal 2021 and beyond. The Zacks Consensus Estimate for the company’s current financial year sales and earnings suggests growth of 27.4% and 381.6%, respectively, from the year-ago period.

Pick These 3 Stocks Too

Abercrombie & Fitch Co. (ANF - Free Report) has a long-term earnings growth rate of 18%. It presently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Foot Locker, Inc. (FL - Free Report) has a trailing four-quarter earnings surprise of 73.1%, on average. It currently carries a Zacks Rank #1.

The Buckle, Inc. (BKE - Free Report) has a trailing four-quarter earnings surprise of 42.1%, on average. The stock carries a Zacks Rank #2 (Buy).

Published in