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Category: Stock Market and The Children's Place
Date: 11 December 2019 Stock Price: $54.51 We take a look at the 3rd quarter earnings report for their 2019 fiscal year of children's speciality apparel retailer in North America across 961 stores in United States, Canada and Puerto Rico. The company's stock is down almost 23% today following the release of their latest results.
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About The Children's Place
The Children’s Place is the largest pure-play children’s specialty apparel retailer in North America. The Company designs, contracts to manufacture, sells at retail and wholesale, and licenses to sell fashionable, high-quality merchandise at value prices, primarily under the proprietary “The Children’s Place,” “Place” and “Baby Place” brand names. As of August 3, 2019, the Company operated 961 stores in the United States, Canada and Puerto Rico, an online store at www.childrensplace.com, and had 225 international points of distribution open and operated by its eight franchise partners in 19 countries.
Overview of The Children's Place 3rd quarter 2019 earnings report
The numbers we are interested in (for the quarter):
- Net Sales: $524.796 (up from $522.495 million for the same quarter of the previous year)
- Net sales increased by 0.44% over the last 12 months
- Cost of sales: $326.671 million (up from $318.129 million for the same quarter of the previous year)
- Net income $43.048 million (down from $49.913 million for the same quarter of the previous year)
- Diluted earnings per share: $2.77 (down from $3.03 for the same quarter of the previous year)
- PE ratio of The Children’s Place: 13.2
- Diluted number of shares in issue: 15.546 million (down from 16.496 million for the same quarter of the previous year)
- Accounts receivable, net: $39.471 million
- Accounts receivable makes up 3.1% of The Children’s Place's total assets
- Cash and cash equivalents: $66.059 million
- Cash and cash equivalents per share: $4.24
- Cash and cash equivalents makes up 7.8% of The Children’s Place' market capital
- Cash and cash equivalents makes up 5.1% of The Children’s Place' assets
- Inventories: $389.815 million (up from $303.466 million for the same quarter of the previous year)
- Inventories makes up 30.3% of The Children’s Place' total assets
- Inventories grew by 28.4% over the last 12 months
- Stockholders equity in The Children’s Place: $254.439 million
- Stockholders equity per share: $16.36
- The Children’s Place is trading at 3.3 times its stockholders equity per share which is within the expected range of between 2 and 4 times that most firms tend to trade at
- Cash generated from operations (for the 3 quarters of the fiscal year): $100.566 million
- Cash generated from operations per share (for the 3 quarters of the fiscal year): $6.46
The Children's Place management commentary on their 3rd quarter earnings report
SECAUCUS, N.J., Dec. 11, 2019 (GLOBE NEWSWIRE) -- The Children’s Place, Inc. (Nasdaq: PLCE), the largest pure-play children’s specialty apparel retailer in North America, today announced financial results for the third quarter ended November 2, 2019.
Jane Elfers, President and Chief Executive Officer announced, “Driven by a strong back-to-school season, we delivered a positive 0.8% comp in Q3 on top of a positive 9.5% comp in Q3 a year ago and EPS near the upper-end of our guided range, despite multiple headwinds, including prolonged warmer weather into late October, which negatively impacted sales of colder weather product in key regions across the country.”
Ms. Elfers continued, “Quarter-to-date, our digital penetration continues to increase and our AURs are strengthening as we focus on disciplined inventory management in a promotional environment. However, due to meaningfully weaker than planned mall traffic quarter-to-date, we are lowering our outlook for Q4.”
Ms. Elfers concluded, “With respect to Gymboree, we are on track to relaunch this iconic brand in early 2020 with an enhanced, personalized, online shopping experience at gymboree.com, and with over 200 shop-in-shop locations in select The Children’s Place stores across the U.S. and Canada. We recently showcased our spring 2020 Gymboree collections at a media event supporting the relaunch of the brand and the response from the attendees was overwhelmingly positive. In addition, Gymboree fans have posted thousands of positive comments on our Gymboree social media sites, sharing their excitement for the relaunch, and further demonstrating the extraordinary level of passion exhibited for the iconic Gymboree brand.”
Jane Elfers, President and Chief Executive Officer announced, “Driven by a strong back-to-school season, we delivered a positive 0.8% comp in Q3 on top of a positive 9.5% comp in Q3 a year ago and EPS near the upper-end of our guided range, despite multiple headwinds, including prolonged warmer weather into late October, which negatively impacted sales of colder weather product in key regions across the country.”
Ms. Elfers continued, “Quarter-to-date, our digital penetration continues to increase and our AURs are strengthening as we focus on disciplined inventory management in a promotional environment. However, due to meaningfully weaker than planned mall traffic quarter-to-date, we are lowering our outlook for Q4.”
Ms. Elfers concluded, “With respect to Gymboree, we are on track to relaunch this iconic brand in early 2020 with an enhanced, personalized, online shopping experience at gymboree.com, and with over 200 shop-in-shop locations in select The Children’s Place stores across the U.S. and Canada. We recently showcased our spring 2020 Gymboree collections at a media event supporting the relaunch of the brand and the response from the attendees was overwhelmingly positive. In addition, Gymboree fans have posted thousands of positive comments on our Gymboree social media sites, sharing their excitement for the relaunch, and further demonstrating the extraordinary level of passion exhibited for the iconic Gymboree brand.”
Store Openings and Closures
Consistent with the Company’s store fleet optimization initiative, the Company opened six stores and closed 12 stores in the three months ended November 2, 2019. The Company ended the quarter with 955 stores and square footage of 4.5 million, a decrease of 3.2% compared to the prior year. Since our fleet optimization initiative was announced in 2013, the Company has closed 238 stores.
The Company’s international franchise partners opened 34 net new points of distribution in the three months ended November 2, 2019, and the Company ended the quarter with 260 international points of distribution open and operated by its eight franchise partners in 19 countries.
Capital Return Program
During the three months ended November 2, 2019, the Company repurchased 414 thousand shares for approximately $33 million, inclusive of shares repurchased and surrendered to cover tax withholdings associated with the vesting of equity awards held by management. The Company also paid a quarterly dividend of approximately $9 million, or $0.56 per share, in the quarter.
During the first nine months of fiscal 2019, the Company repurchased approximately 1.0 million shares for approximately $94 million, inclusive of shares repurchased and surrendered to cover tax withholdings associated with the vesting of equity awards held by management. The Company also paid quarterly dividends totaling approximately $26 million in the first nine months of 2019.
Since 2009, the Company has repurchased approximately $1.2 billion of its common stock and, since 2014, paid approximately $126 million in dividends. At the end of the third quarter of 2019, approximately $146 million remained available for future share repurchases under the Company’s existing share repurchase program.
Outlook
The Company is providing guidance for the fourth quarter and updated guidance for fiscal 2019.
For the fourth quarter of 2019, the Company expects:
For fiscal 2019, the Company’s updated outlook includes:
Consistent with the Company’s store fleet optimization initiative, the Company opened six stores and closed 12 stores in the three months ended November 2, 2019. The Company ended the quarter with 955 stores and square footage of 4.5 million, a decrease of 3.2% compared to the prior year. Since our fleet optimization initiative was announced in 2013, the Company has closed 238 stores.
The Company’s international franchise partners opened 34 net new points of distribution in the three months ended November 2, 2019, and the Company ended the quarter with 260 international points of distribution open and operated by its eight franchise partners in 19 countries.
Capital Return Program
During the three months ended November 2, 2019, the Company repurchased 414 thousand shares for approximately $33 million, inclusive of shares repurchased and surrendered to cover tax withholdings associated with the vesting of equity awards held by management. The Company also paid a quarterly dividend of approximately $9 million, or $0.56 per share, in the quarter.
During the first nine months of fiscal 2019, the Company repurchased approximately 1.0 million shares for approximately $94 million, inclusive of shares repurchased and surrendered to cover tax withholdings associated with the vesting of equity awards held by management. The Company also paid quarterly dividends totaling approximately $26 million in the first nine months of 2019.
Since 2009, the Company has repurchased approximately $1.2 billion of its common stock and, since 2014, paid approximately $126 million in dividends. At the end of the third quarter of 2019, approximately $146 million remained available for future share repurchases under the Company’s existing share repurchase program.
Outlook
The Company is providing guidance for the fourth quarter and updated guidance for fiscal 2019.
For the fourth quarter of 2019, the Company expects:
- Net sales in the range of $504 million to $509 million
- A mid-single digit decrease in comparable retail sales
- Adjusted operating margin in the range of 6.1% to 6.8%
- Adjusted net income per diluted share in the range of $1.48 to $1.68
For fiscal 2019, the Company’s updated outlook includes:
- Net sales in the range of $1.862 billion to $1.867 billion
- A comparable retail sales decrease of approximately 3%
- Adjusted operating margin in the range of 5.7% to 5.9%
- Adjusted net income per diluted share in the range of $5.00 to $5.20, including an adverse impact of approximately $0.13 per share from the announced tariffs effective on September 1st and December 15th
The Children's Place (NASDAQ: PLCE) stock price history
The image below, obtained from Google shows the stock price history of The Children's Place for the last 5 years. And its been a pretty average time for Children's Place investors. With the underlying trend in the group's stock price over the last 5 years basically being sideways considering the fact that the stock is trading at very close to where it was 5 years ago. 5 years ago the stock was trading at $54.70 and its currently trading at $54.44. The stock of Children's Place declined by -0.47% over the last 5 years.
The stock of Children's Place is trading at a lot closer to its 52 week low of $54.28 than it is to its 52 week high of $116.84 which to us is a clear indication that the short term sentiment and momentum of Children's Place stock is very negative. This is further shown by the fact that the stock is down over 23% for the day (11 December 2019) following the release of their results. We do however believe the market is overreacting (but discuss this in more detail later in the article).
The stock of Children's Place is trading at a lot closer to its 52 week low of $54.28 than it is to its 52 week high of $116.84 which to us is a clear indication that the short term sentiment and momentum of Children's Place stock is very negative. This is further shown by the fact that the stock is down over 23% for the day (11 December 2019) following the release of their results. We do however believe the market is overreacting (but discuss this in more detail later in the article).
Recent coverage of The Children's Place
The extract below discusses the previous earnings report of Te Children's Place as obtained from TheStreet.com
Children's Place (PLCE) - Get Report plunged Wednesday after the specialty apparel chain reported a big downturn in quarterly earnings and sales. The stock price of the chain, which operates 961 stores in North America, dived 7.72% to $71.99. Children's Place reported earnings of 10 cents a share in the second quarter, or $1 million, down from 45 cents and $7.5 million during the same period last year.
The retailer reported a decline in net sales of 6.3% to $420.5 million in the three months ended Aug. 3, from $448.7 million a year ago. Comparable-store sales were down 3.8%, compared to a 13.8% increase in the second quarter of 2018. In a press statement, CEO Jane Elfers said integration of the bankrupt Gymboree chain, which Children's Place acquired for $76 million earlier this year, along with rights to the Crazy 8 brand, weighed on the latest quarterly results.
Read the full article here
Children's Place (PLCE) - Get Report plunged Wednesday after the specialty apparel chain reported a big downturn in quarterly earnings and sales. The stock price of the chain, which operates 961 stores in North America, dived 7.72% to $71.99. Children's Place reported earnings of 10 cents a share in the second quarter, or $1 million, down from 45 cents and $7.5 million during the same period last year.
The retailer reported a decline in net sales of 6.3% to $420.5 million in the three months ended Aug. 3, from $448.7 million a year ago. Comparable-store sales were down 3.8%, compared to a 13.8% increase in the second quarter of 2018. In a press statement, CEO Jane Elfers said integration of the bankrupt Gymboree chain, which Children's Place acquired for $76 million earlier this year, along with rights to the Crazy 8 brand, weighed on the latest quarterly results.
Read the full article here
The Children's Place (NASDAQ: PLCE) latest stock valuation
So based on The Children’s Place latest earnings report and the fiscal guidance that they provided what to we value their stock at? Based on the earnings reported and the guidance provided our valuation model provides a target price (full value price) for The Children’s Place at $77.90 a stock. We therefore believe the stock of The Children’s Place is undervalued following the significant decline in the group's stock price over the last couple of months and today.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price wich in this case is $77.90 . We therefore believe a good entry point into The Children’s Place stock is at $70.10 or below. Since the stock of The Children’s Place is trading at well below our suggested entry point following the sharp decline in its stock price today we rate the stock of Children's Place a buy. We believe that once the initial knee-jerk reaction following their results blow over they will kick upwards to levels closer to our target price in coming weeks and months
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price wich in this case is $77.90 . We therefore believe a good entry point into The Children’s Place stock is at $70.10 or below. Since the stock of The Children’s Place is trading at well below our suggested entry point following the sharp decline in its stock price today we rate the stock of Children's Place a buy. We believe that once the initial knee-jerk reaction following their results blow over they will kick upwards to levels closer to our target price in coming weeks and months
Next earnings release of The Children's Place
It is expected that The Children's Place will release their 4th quarter and full fiscal 2019 earnings report in early March 2020