Stock of Children’s Place Falls

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Stock of Children’s Place Falls

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Children’s Place Inc (PLCE) is a retailer of children’s specialty apparel and accessories. It operates through two segments, the Children’s Place U.S and the Children’s Place International.  The company was founded in 1969. In 1981, company was acquired by Federated Department Stores. The company (PLCE) is divided into six specific size ranges sections: Big Boys and Big Girls, Toddler Boys and Toddler Girls and Baby Boys and Baby Girls.

What happened

On June 11, 2020, The Children’s Place Inc. (PLCE) shares were down by 4% during the trading session. In 2020 this downside can be the reason for the irrecoverable first fiscal quarter, performance owing to the COVID-19 outbreak that led to the temporary closure of stores, that were undertaken to check the spread of coronavirus. The company (PLCE) has suspended all the store operations in the US and Canada owing to the COVID-19 effected march 18 and started reopening the stores on May 19. The company (PLCE) has announced that it will reopen all the stores in a sequence wise manner and follow all the guidelines. The management is ready to face challenges related to pandemic (COVID-19). Children’s Place (PLCE) has been starting fleet optimization initiative for directing resources toward digital platforms for better engagement with customers and increasing supply chain and focusing on improving financial flexibility. The company is concentrating on Superior Product strategy, for the advancement of omnichannel capabilities and it has one of the highest digital penetrations (31% of revenues for fiscal 2019).

Source: Business Quant

The company (PLCE) is planning to close its additional 300 stores by the end of fiscal 2021, and 200 stores will close this year. Its company’s effort to lower dependency on brick and mortar platform, and company (PLCE) has already shifted toward digitization because the customer has changed its shopping pattern.  In the 2022 fiscal quarter, Children’s Place (PLCE) is expecting mall-based or brick and mortar portfolio to represent less than 25% of revenues. The children’s Place (PLCE) reported a loss and continued decline in net sales.

The company (PLCE) reported loss of $1.96 per share, its nearly Zacks Consensus loss ($2.35). Children’s Place (PLCE) reported earnings of 365% in 2019. Net sales of $255.2 million have decreased by 38.1% (Y-o-Y). Gross profit $68.4 million has decreased from $151.4 million in 2019. In this quarter SG&A expenses have decreased by 30.7% to $88.2 million. Children’s Place (PLCE) reported an operating loss of $37.5 million and an operating income of $6.6 million.

Other Financial highlights.

At the end of the quarter, the company has cash and cash equivalents of $71.8 million, and it reflects a succession rise of 4.8%. Children’s Place (PLCE) has no long term debt and it had $235 million outstanding on its $360 million. In the end of fiscal 2019 company revolving its credit facility as compared with $171 million outstanding on its $325 revolving credit facility. The increase reflects funding to support seasonal working capital needs and operations.

At the end of the quarter stakeholder’s equity was $105 million.  ($40.5 million) company’s (PLCE) operating cash flow and repurchased 262 thousand shares for $15 million.  Children’s Place (PLCE) has $94 million existing shares at the end of the quarter. The company (PLCE) has suspended its capital return program on March 18 and in response to the coronavirus crisis, it has repurchased its shares and dividends. During this quarter, the capital expenditures of the company (PLCE) were approximately $6 million. In fiscal 2020, Children’s Place (PLCE) anticipates capital expenditures of approximately $20 million.

Pandemic impact.

The business has been getting hammered by the coronavirus. At the end of May, sales of Children’s Place (PLCE) have gone down by 38% and there has been a loss of $28.6 million. At the same time, EPS has been $1.96. It was the worst quarter for the company.

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