PLCE - Children's Place falls after inflation supply chain headwinds lead to sales drop

The Children's Place ( NASDAQ: PLCE ) traded lower early on Wednesday after noting that a sales drop of 8% in Q2 was tied to a slowdown in consumer demand resulting from unprecedented inflation and competitive pressures. Comparable retail sales decreased 8.7% for the quarter against a tough comparison to last year that included the enhanced child tax credit.

"The combination of an unexpected and meaningful increase in promotional activity from our key competitors and the widely reported inflation-driven consumer slowdown, put significant downward pressure on our fashion AUR’s and margins during the quarter," noted CEO Jane Elfers. PLCE also had to address a significant imbalance in channel inventories late in the quarter due to unplanned inbound supply chain issues. A rapid deterioration of the east coast port situation led to other retailers scrambling to move their deliveries from their west coast ports.

The early Q3 trend looks improved for PLCE compared to the last two weeks of July and the quarter to date AUR increase is called encouraging. Looking ahead, the retailer sees Q3 revenue of $500M vs. $508M consensus and EPS of $3.95 vs. $3.94 consensus. For the full year, a low double digit decrease in comparable retail sales is anticipated and revenue of $1.725B vs. $1.76B consensus. Full-year EPS of $7.00 is seen vs. $7.95 consensus.

Shares of PLCE fell 3.35% in premarket trading on Wednesday to $53.11 vs. the 52-week trading range of $36.97 to $113.50.

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