Children's Place (PLCE) Q3 Earnings & Sales Beat Estimates

The Children’s Place, Inc. (NASDAQ:PLCE) continued with upbeat performance in fiscal 2017 as it posted third-quarter results and also provided an encouraging outlook.

As a result, shares of the company rose 5.9% in the trading session on Nov 15. Year to date, this Zacks Rank #3 (Hold) stock has been up 19.6% comfortably outperforming the industry’s decline of 19.4%.

In the reported quarter, this pure-play children’s specialty apparel retailer posted adjusted earnings of $2.58 per share outpacing the Zacks Consensus Estimate of $2.46 and surged 12.7% from the year-ago period. Higher sales, margin expansion and share repurchase activity drove the bottom line.

Net sales came in at $490 million, up 3.4% year over year and also surpassed the Zacks Consensus Estimate of $477 million. Comparable store sales (comps) rose 5.1% in the quarter compared with 4.6% growth registered in the year-ago period. Notably, this was the eighth straight quarter of comps growth. Though U.S. comp grew 5.9%, Canada comp declined 1.2%.

Adjusted gross profit increased 4.1% to $202.4 million while adjusted gross margin improved 30 basis points to 41.3% on account of improved merchandise margin. Adjusted operating income rose 9.5% to $68.4 million while operating margin expanded 80 basis points to 14%.

Children's Place, Inc. (The) Price, Consensus and EPS Surprise

Children's Place, Inc. (The) Price, Consensus and EPS Surprise | Children's Place, Inc. (The) Quote

Store Update

In the quarter under review, Children’s Place opened one outlet but did not shutter any stores bringing the total count to 1,027 stores. Since the announcement of fleet optimization strategy in 2013, the company had closed 156 stores.

During fiscal 2017, the company plans to open two and shutter approximately 25-30 stores.

Per Children’s Place, its international franchise partners opened 10 points of distribution and closed three. At the end of the quarter, there were 168 international points of distribution operated by seven franchise partners in 19 countries. The company believes that there is ample opportunity to take the count to more than 300 points of distribution by the end of 2020.

Gill Capital, the company’s new franchise partner, will open five stores in Indonesia on November 18 with plans to open 25 outlets over a period.

Other Financial Aspects

Children’s Place ended the quarter with cash and cash equivalents of $257.7 million, revolving loan of $56.4 million and shareholders’ equity of $510.5 million. For fiscal 2017, the company projects capital expenditures of approximately $65 million.

Furthermore, the company bought back shares worth roughly $28 million and paid quarterly dividend of approximately $7 million. Since 2009, Children’s Place has returned more than $863 million via share repurchases and dividends.

Encouraging View

Management now envisions fiscal 2017 adjusted earnings in the range of $7.46-$7.51, up from $7.23 to $7.33 per share, projected earlier. For the fourth quarter, earnings are expected to come within the range of $2.07-$2.12 per share.

Net sales are expected to be in the band of $1.835-$1.845 billion, including the 53rd week during fiscal 2017. It forecasts low-single digit increase in comparable retail sales for the final quarter.

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