Why Children's Place Shares Are Surging Today

Children's Place Inc PLCE reported a second-quarter FY23 sales decline of 9.3% year-on-year to $345.59 million, beating the analyst consensus of $342.64 million.

The sales decline was primarily due to the impact of a slowdown in consumer demand resulting from the unprecedented inflation impacting customers, an increase in promotional activity across the sector, and the impact of permanent store closures.

Comparable retail sales decreased 9.0% for the quarter.

Gross profit decreased 24% Y/Y to $87.8 million, with the margin contracting 500 basis points to 25.3%.

The operating loss for the quarter was $(36.9) million compared to a loss of $(13.8) million last year.

Adjusted EPS of $(2.12) beat the analyst consensus estimate of $(2.13).

The company held $19 million in cash and equivalents as of July 29, 2023.

Inventories as of July 29, 2023, fell 12.9% Y/Y to $537 million.

The company ended the quarter with 596 stores and square footage of 2.9 million, a decrease of 9% compared to the prior year.

Jane Elfers, President and Chief Executive Officer, said, "Our Q2 results exceeded our guidance on both the top- and bottom-lines. The top-line beat was the result of a strong digital performance fueled by a strong start to Back-to-School, driven by our successful First-to-Market Back-to-School digital marketing strategies, and our on-trend product assortments."

"It is early days, but our Back-to-School momentum has continued into Q3, and we are looking forward to capitalizing on our transformation to a digital-first operating model by delivering our back half outlook for our shareholders."

Outlook: Children's Place narrowed FY23 sales guidance to $1.575 billion - $1.585 billion (prior $1.575 billion - $1.590 billion) versus the Street view of $1.56 billion. EPS of $1.00-$1.25 against the estimate of $0.88. The company's previous Adjusted EPS outlook was $1.00-$1.50.

PLCE expects Q3 sales of $470 million - $475 million, above the consensus of $466.39 million. Q3 Adjusted EPS of $3.55 - $3.65, against the Street view of $3.67.

Price Action: PLCE shares are trading higher by 9.39% at $29.00 in premarket on the last check Thursday.