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Here's Why You Should Give The Children's Place (PLCE) Stock a Miss
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The Children’s Place, Inc. (PLCE - Free Report) has been bearing the brunt of challenging macroeconomic trends, including persistent inflation, a highly promotional retail environment and escalating operating costs and expenses.
Image Source: Zacks Investment Research
The currently Zacks Rank #4 (Sell) player has a market capitalization of $277.1 million. PLCE's shares have lost 39% year to date against the industry's growth of 14.7%.
Let’s discuss the factors that might continue to affect the firm’s performance in the near term.
Soft Operational Performance: The Children’s Place has been grappling with the adverse impacts of a tough macroeconomic backdrop of late. It witnessed a significant downturn in its third-quarter fiscal 2023 net sales, as the metric declined 5.7% on a year-over-year basis.
Comparable retail sales declined 7.3% in the quarter due to soft consumer demand stemming from a high inflationary environment, geo-political concerns affecting consumer confidence and the impacts of permanent store closures. It posted an adjusted earnings per share of $3.22, down from $3.33 in the year-ago quarter.
Tepid Fiscal 2023 Outlook: The persistence of a high inflationary environment is anticipated to continue affecting consumer demand in fiscal 2023. For the fiscal year, management projected net sales in the range of $1.605-$1.610 billion, indicating a decline from $1.71 billion reported in fiscal 2022. Also, the adjusted loss is currently envisioned in the range of 39-59 cents per share against the earlier adjusted earnings projection of $1.00-$1.25 per share.
Rising Costs & Expenses: The company continues to battle increased operating costs and expenses. In the first nine months of fiscal 2023, its selling, general and administrative expenses remained stable year over year. However, the metric, as a percentage of net sales, increased 230 basis points to 28.7%. The firm witnessed a deleverage in fixed costs and planned higher marketing expenditures in the quarter. In third-quarter fiscal 2023, its adjusted gross profit margin declined 110 bps to 33.7%.
Stiff Competition: PLCE is exposed to stiff competition and an aggressive promotional environment. The company competes on the basis of brand recognition, fashion, price, service, store location and quality. It also competes with regional retail chains, catalog companies and e-commerce players. Such industry-wide headwinds might adversely impact its performance.
However, it expects a supply-chain improvement and inventory optimization efforts to benefit operating results. PLCE’s deliberate actions, including fleet optimization, cost reduction and inventory management are likely to support its performance.
3 Promising Stocks
Below we have highlighted three better-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , American Eagle Outfitters (AEO - Free Report) and Gap (GPS - Free Report) .
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial year sales implies growth of 13.3% year over year. ANF delivered an earnings surprise of 713% in the last reported quarter.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently has a Zacks Rank #2 (Buy). AEO delivered a trailing four-quarter average earnings surprise of 23%. The Zacks Consensus Estimate for American Eagle Outfitters’ current financial year sales and EPS implies growth of 4% and 39.2%, respectively, from that reported a year ago.
Gap, a fashion retailer of apparel and accessories, currently sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 137.9%, on average. The Zacks Consensus Estimate for Gap’s current financial year EPS indicates growth of 387.5% year over year.
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Here's Why You Should Give The Children's Place (PLCE) Stock a Miss
The Children’s Place, Inc. (PLCE - Free Report) has been bearing the brunt of challenging macroeconomic trends, including persistent inflation, a highly promotional retail environment and escalating operating costs and expenses.
Image Source: Zacks Investment Research
The currently Zacks Rank #4 (Sell) player has a market capitalization of $277.1 million. PLCE's shares have lost 39% year to date against the industry's growth of 14.7%.
Let’s discuss the factors that might continue to affect the firm’s performance in the near term.
Soft Operational Performance: The Children’s Place has been grappling with the adverse impacts of a tough macroeconomic backdrop of late. It witnessed a significant downturn in its third-quarter fiscal 2023 net sales, as the metric declined 5.7% on a year-over-year basis.
Comparable retail sales declined 7.3% in the quarter due to soft consumer demand stemming from a high inflationary environment, geo-political concerns affecting consumer confidence and the impacts of permanent store closures. It posted an adjusted earnings per share of $3.22, down from $3.33 in the year-ago quarter.
Tepid Fiscal 2023 Outlook: The persistence of a high inflationary environment is anticipated to continue affecting consumer demand in fiscal 2023. For the fiscal year, management projected net sales in the range of $1.605-$1.610 billion, indicating a decline from $1.71 billion reported in fiscal 2022. Also, the adjusted loss is currently envisioned in the range of 39-59 cents per share against the earlier adjusted earnings projection of $1.00-$1.25 per share.
Rising Costs & Expenses: The company continues to battle increased operating costs and expenses. In the first nine months of fiscal 2023, its selling, general and administrative expenses remained stable year over year. However, the metric, as a percentage of net sales, increased 230 basis points to 28.7%. The firm witnessed a deleverage in fixed costs and planned higher marketing expenditures in the quarter. In third-quarter fiscal 2023, its adjusted gross profit margin declined 110 bps to 33.7%.
Stiff Competition: PLCE is exposed to stiff competition and an aggressive promotional environment. The company competes on the basis of brand recognition, fashion, price, service, store location and quality. It also competes with regional retail chains, catalog companies and e-commerce players. Such industry-wide headwinds might adversely impact its performance.
However, it expects a supply-chain improvement and inventory optimization efforts to benefit operating results. PLCE’s deliberate actions, including fleet optimization, cost reduction and inventory management are likely to support its performance.
3 Promising Stocks
Below we have highlighted three better-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , American Eagle Outfitters (AEO - Free Report) and Gap (GPS - Free Report) .
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial year sales implies growth of 13.3% year over year. ANF delivered an earnings surprise of 713% in the last reported quarter.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently has a Zacks Rank #2 (Buy). AEO delivered a trailing four-quarter average earnings surprise of 23%. The Zacks Consensus Estimate for American Eagle Outfitters’ current financial year sales and EPS implies growth of 4% and 39.2%, respectively, from that reported a year ago.
Gap, a fashion retailer of apparel and accessories, currently sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 137.9%, on average. The Zacks Consensus Estimate for Gap’s current financial year EPS indicates growth of 387.5% year over year.