PLCE - Children's Place stock plunges 15% on earnings miss slashed forecasts

2023-05-24 07:27:06 ET

The Children’s Place ( NASDAQ: PLCE ) shares slumped on Wednesday after the company flagged a steep drop in sales and profits for the first quarter and forecast deepening losses ahead.

The New Jersey-based retailer reported a $2 per share loss in the first quarter on $321.6M in sales. Analysts had projected a $1.78 per share loss and $338.46M in revenue for the quarter.

The company noted that gross profit decreased $45.4M year over year to $96.5M as gross margins contracted 920 basis points due to “higher input costs, including cotton and other supply chain costs such as inbound transportation expenses.” The company ended Q1 with $504.2M in inventory, down 8.2% as compared to Q1 2022.

“Our first quarter results were negatively impacted by the ongoing macro-tension which resulted in outsized pressure on our core customer by limiting their purchasing power,” CEO Jane Elfers commented. “Due to the ongoing outsized pressure on our core consumer from the challenging macro-economic environment, we have tempered both our top and bottom line expectations for the full year. However, with input cost pressures significantly abating in the back half of the year, combined with inventory levels that are projected to continue to decline versus last year, we continue to expect to deliver double digit operating margin in the back half of 2023.”

The company sees net sales in a range between $340M to $345M and an adjusted net loss per share in the range of $2.15 to $2.20 for Q2. Analysts had projected a $1.58 loss for the quarter on $358.3M in revenue.

“Despite continued macro-economic pressures, the company expects to deliver double-digit operating margin and adjusted net earnings per diluted share of over $5.00 in the back half of 2023, driven by decreasing input costs embedded in inventory and the benefit from appropriately sized inventory investments,” the earnings release stated.

As such, management forecast between $1.575B to $1.59B in net sales for the full year and earnings per diluted share in the range of $1.00 to $1.50. Both figures were cut significantly from guidance ranges of $1.62B to $1.66B in sales and $2.50 to $3.00 in adjusted EPS provided in March . The updated guidance also falls short of the EPS and revenue estimates for the full year that had been pegged at $2.34 and $1.65B, respectively.

Shares of The Children’s Place ( PLCE ) plummeted 15.82% in premarket trading.

More on The Children’s Place:

Seeking Alpha Quant team calls the stock a ‘Strong Sell’

The Children's Place: Not In A Great Place

Electronics, department stores lead declines in weak retail sales report

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