PLCE - The Children's Place cuts back on Q4 outlook citing macro economic pressure guides below consensus

The Children’s Place ( NASDAQ: PLCE ) cuts it's outlook on Q4 citing far more challenging macro economic pressures during the quarter.

The company now expects Q4 Net sales in the range of approximately $454M to $456M vs. prior guidance of $460M at the low end and consensus of $467.82M.

Adjusted operating loss is expected to be (13.4%) to (14.8%) vs. previous outlook of 2.5% to 3.3% of net sales.

Adjusted EPS is expected to be in the range of ($4.02) to ($4.41) as compared to previous guidance of $0.50 to $0.75 and consensus of $0.55.

Q4 inventory is now expected to be up 5.5% to 6.5%.

Jane Elfers, President and Chief Executive Officer, said “We now expect to report a net loss in the range of ($52) million to ($57) million for the fourth quarter. This net loss was primarily due to a deterioration in gross margin for reasons not expected when we provided prior guidance, particularly a macro-economic environment in the fourth quarter that proved to be far more challenging for our core customers than we originally anticipated."

"As we enter 2023, cotton prices are down approximately 40% from their 2022 highs and are expected to continue to decline in 2023, container costs are now approaching pre-pandemic rates, and we have effectively eliminated the use of air freight in 2023 as the worldwide supply chain moves back in line with historical norms. While we still need to work through inventory in the front half of 2023 that has these higher input costs embedded in it, beginning in the back half of 2023, the combined impact of these three input cost reductions is expected to result in an annualized benefit to our operating results of more than $100 million," he added.

Elfers concluded, “The significant reduction of input costs and the strong focus on expense and inventory management led by our new CFO, Sheamus Toal, position us well to deliver for investors in 2023. Combined with our industry-leading digital penetration as a result of our successful digital transformation that began several years ago and was completed during the pandemic, our strong stable of brands, the success of our fleet optimization strategy and our rapidly growing Amazon business, we expect to return to double digit operating margins for the back half of 2023 and beyond.”

Looking at the stock action, PLCE slipped more than 30% over a period of 12 months but have bounced back almost equally so far this year.

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