Back to top

Image: Shutterstock

Children's Place (PLCE) Well-Poised to Tap Holiday Season Demand

Read MoreHide Full Article

Well, as Americans look to refresh their wardrobes this holiday season, thanks to the resumption of active social lifestyle, events and occasions; apparel and shoe companies have been witnessing a surge in demand. It is quite apparent that the massive coronavirus stimulus package and COVID-19 vaccines have instilled confidence among consumers. Without doubt, The Children's Place, Inc. (PLCE - Free Report) is set to cash in on the opportunities.

The company 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, advancing omni-channel capabilities and augmenting the supply chain.

Industry experts foresee sales opportunities and operational efficiencies when social distancing measures and other restrictions such as limited-hour operations are further removed and stores as well as distribution centers operate normally. Per Mastercard SpendingPulse, apparel sales are projected to increase 45.9% during the traditional holiday period that runs from Nov 1-Dec 24 compared with the prior year.

Let’s Introspect

The Children's Place has been constantly deploying resources to expand product offerings, upgrade distribution channels, create seamless omni-channel capabilities and deepen engagement with customers. The company’s $50 million digital transformation investment is reaping benefits. Markedly, it has one of the highest digital penetrations in the industry.

We note that 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%.


Zacks Investment ResearchImage Source: Zacks Investment Research

Looking at The Children's Place digitization endeavors, it has rolled out "BOPIS" (Buy Online, Pick Up in Store) and “Save the Sale” functionality. It has also launched “BOSS” or Buy Online, Ship to Store capabilities, the response to which has been encouraging. The company has introduced Afterpay, a buy now pay later option, for its customers. Impressively, management intends to allocate a major portion of its fiscal 2021 capital expenditures to digital and supply chain fulfillment initiatives.

The company has been making efforts to lower dependency on brick-and-mortar platform and shift toward digitization owing to changing consumer shopping patterns 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.

Wrapping Up

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. Markedly, The 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.

Shares of The Children's Place have 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 surged about 64.6% against the industry’s decline of 0.9%. The Zacks Consensus Estimate for the company’s current financial year sales and earnings per share suggests growth of 26.9% and 403.8%, respectively, from the year-ago period.

3 More Stocks Hogging Limelight

The Buckle (BKE - Free Report) has a trailing four-quarter earnings surprise of 42.1%, on average. It presently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch (ANF - Free Report) has a long-term earnings growth rate of 18%. It presently flaunts a Zacks Rank #1.

Tapestry (TPR - Free Report) has a long-term earnings growth rate of 12.3%. It currently carries a Zacks Rank #2 (Buy).