WMT - Children's Place: Betting Against Mithaq's Lifeline But Wait For Likely Canada Exit
2024-05-30 15:26:03 ET
Summary
- Children's Place financial results have been terrible and worsening, notably for the Q4 holiday quarters. The future looks bleak, and guidance is being withheld.
- Competitive pressures in the company's target market are immense, leaving the company little road to profitability.
- An activist investor has recently taken control of the company and instituted a new interim CEO.
- The company will likely continue to shrink its retail footprint, and will likely close its Canadian stores. That might provide a short-term boost for shares, at which point a long-term downside bet using Put Options may be compelling.
I tend to be a contrarian investor, and kind of have a soft spot for retail. That should make me a prime target investor for Children's Place ( PLCE ), but all signs point me away from this company. The negatives keeping piling up, and I've gone from neutral to now considering whether Children's Place is near the end of the line. The balance sheet is already a zero (no net book or economic value), and I see competitive pressures burying the business before new management can achieve a major overhaul. I'm unlikely to pull the trigger on any downside bet right at this point, but I'll be kicking the tires on it. I'm also waiting for a possible short-term upside catalyst before entering any bearish trade....
Children's Place: Betting Against Mithaq's Lifeline, But Wait For Likely Canada Exit