PLCE - Children's Place sees sales margins drop due to inflation impact

2023-03-16 07:41:50 ET

The Children's Place ( NASDAQ: PLCE ) reported sales fell 10.2% in Q4 to $456.1M. The retailer said the decrease in sales was primarily due to the impact of permanent store closures and what it described as a slowdown in consumer demand resulting from the unprecedented inflation impacting customers. The quarter also lapped the impact of the enhanced child tax credits and a record holiday season in 2021.

Comparable retail sales decreased 12.8% for the quarter for Children's Place ( PLCE ).

Adjusted gross profit deleveraged 2,070 basis points to 17.5% of sales during the quarter compared to 38.2% a year ago. The severe margin hit was due in part to higher cotton and inbound supply chain costs, lower merchandise margins due to a highly promotional environment, higher distribution costs, increased shipping costs, due to rate increases and a higher level of split customer shipments, and decisions regarding the level and composition of inventory and an increase in inventory donations and shrinkage.

Looking ahead, PLCE set FY24 revenue guidance at $1.62B to $1.66B vs. $1.71B consensus and expects EPS to fall in a range of $2.50 to $3.00 vs. $3.35 consensus.

CEO outlook: "With our transformation phase now behind us, our team is resolutely focused on execution, and we believe we are on track to return to double digit operating margins in the back half of 2023, and are well positioned to deliver long term, consistent growth for our shareholders."

Shares of Children's Place ( PLCE ) rose 2.45% premarket to $42.20.

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