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Children's Place (PLCE) Up 1.3% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for The Children's Place, Inc. (PLCE - Free Report) . Shares have added about 1.3% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is PLCE due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Children's Place Misses Q1 Earnings Estimates

Children's Place reported dismal first-quarter fiscal 2018 results. We note that the quarter under review broke Children's Place’s streak of positive earnings surprises.

The company posted earnings of $1.87 in the quarter, which missed 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 cooler weather and declining traffic. The figure declined 4.1% on a year-over-year basis.

On the other hand, net sales remained almost flat at $436.3 million but missed the consensus mark of $443 million.

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

Adjusted gross profit declined 5.6% year over year to $161.5 million and gross margin contracted 220 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%.

Other Financial Details

Children's Place ended the quarter with cash and cash equivalents of $90.1 million compared with $175.6 million a year ago. The company exited the first quarter with inventories of $334.7 million and shareholders’ equity of $343.1 million.

In the first quarter, the company repurchased 1.03 million shares for nearly $162 million. The company also paid a quarterly dividend of around $8 million or 50 cents a share. In addition, its board of directors announced a quarterly dividend of 50 cents. The dividend will be paid on Jun 29, 2018, to stockholders of record as of Jun 18, 2018.

Guidance

For fiscal 2018, the company reaffirmed the guidance for adjusted earnings per share at $7.95-$8.20compared with $7.91 last year. It now expects total net sales of $1.92-$1.94 billion compared with the earlier guidance of $1.91-$1.93 billion. It anticipates comparable retail sales growth of 3.5-4.5% versus the earlier projection of 2.5-3.5%. Management expects adjusted operating margin of 8.5-8.7% compared with 8.7-9% issued earlier.

For the fiscal second quarter, the company projects adjusted earnings per share of 51-61 cents, sharply down from 86 cents reported in the year-ago quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter.

VGM Scores

At this time, PLCE has a poor Growth Score of F, however its Momentum is doing a lot better with a C. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than momentum investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, PLCE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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