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Children's Place Digitization Effort Key to Future Growth

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The coronavirus outbreak highlighted a paradigm shift in consumer buying pattern with companies now playing dual in-store and online roles. With social distancing becoming the norm, retailers have been focusing on bolstering omni-channel operations and ramping up delivery services to meet customer needs. Clearly, The Children's Place, Inc. (PLCE - Free Report) is fully aware of the prevailing circumstances, and is leaving no stone unturned to improve top-line performance and expand customer base.

This children's specialty apparel retailer remains committed to addressing the challenges related to the pandemic and positioning themselves for future success. In this respect, it is directing resources toward digital platforms in order to better engage with customers, accelerating fleet optimization initiative, augmenting supply chain and concentrating on improving financial flexibility. The company is also focusing on superior product strategy to resonate well with customers and advancing omni-channel capabilities. Notably, shares of this Zacks Rank #3 (Hold) company have surged 68.9% in the past three months compared with the industry’s gain of 20.2%.

Children's Place has been making investments to upgrade its omni-channel capabilities as part of its digital transformation strategy. We note that three years ago management made an investment of $50 million to fast-track its digital endeavors. Notably, the company has one of the highest digital penetrations in the industry — accounting for 31% of revenues for fiscal 2019. The company informed that to help fulfill its surging online demand amid the pandemic, it enabled ship-from-store capabilities in roughly 85% of its U.S. stores, which more than doubled its daily shipping capacity.

We note that e-commerce sales rose 12.2% during first-quarter fiscal 2020, and represented approximately 53% of total net sales, as online sales accelerated following the closure of store effective Mar 18. Management at its earnings call on Jun 11 highlighted that second-quarter to date on-line demand has soared 300%, courtesy of upsurge in demand for essential children’s clothing. Children's Place notified that more and more customers are now shifting to online platform with 50% of its customers utilizing e-commerce or omni-channel, up from 37% last year.
With changing shopping trend, the company has been making every effort to lower dependency on brick-and-mortar platform and shift toward digitization. The company plans to close an additional 300 stores by the end of fiscal 2021. Of these, 200 closures are planned for this year and remaining for fiscal 2021. Since the announcement of fleet optimization initiative in 2013, the company has closed 275 stores. The company is aiming mall-based, brick-and-mortar portfolio to represent less than 25% of revenues entering fiscal 2022.

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