PLCE - Why Children's Place Can Overcome the COVID-19 Pandemic
Like most apparel retailers, Children's Place (NASDAQ: PLCE) stock was hit hard during the market crash in March when the pandemic first struck. Shares of the retail chain fell from a closing price of $69.18 on February 21 all the way to a low of $9.25 on March 18, though the stock has since recouped most of those losses, a sign that investors are optimistic about a recovery.
Children's Place presented its first quarterly report since the pandemic started last Thursday, and the stock whipsawed over the following two sessions as investors struggled to interpret the news. As expected, the retailer's results for the first quarter were dismal. Revenue fell 38.1% to $255.2 million, and it posted an adjusted loss per share of $1.96, compared to a per-share profit of $0.36 a year ago. The company closed stores on March 18 and began reopening them on May 19, meaning they were closed for about half of the quarter. As of June 8, it had 61 locations open, and it expects to have a majority open by July.
Children's Place is accelerating its store optimization plan and said it would close 300 stores over the next two years, about 200 this year and 100 in 2021, which would leave it with about 620 stores. While other retailers are closing stores out of weakness, Children's Place is accelerating its store rationalization as part of a long-standing strategy: The company has been gradually shuttering stores over the last several years in order to invest in e-commerce and build up its digital channel. That strategy has been successful -- the company generated 31% of its sales from the online channel last year, and has purposely signed leases that were easy to get out of in case of an event like this.