Market News

The Children’s Place Q3 Results Outperform; Shares Jump 6.6%

Shares of The Children’s Place, Inc. (PLCE) jumped 6.6% to close at $111.41 on November 18 after the company’s third-quarter results outperformed expectations for both its top and bottom lines.

PLCE is the largest American children’s specialty apparel retailer, and its shares have gained a whopping 176% over the past year.

The company is focusing on its digital channel to achieve higher operating margins. In Q3, the company’s digital sales contributed 45% of total sales, with more than 71% of digital business coming from a mobile device. The company has set a target of achieving annual digital penetration of 50%.  

Solid Results

The company posted adjusted earnings of $5.43 per share, significantly higher than analysts’ estimates of $4.17 per share. In Q3FY20, PLCE posted adjusted earnings of $1.35 per share.

Moreover, quarterly revenue of $558.22 million grew 31.2% year-over-year, outpacing analysts’ estimates of $556.92 million. The solid revenue growth was aided by strong demand for the product offerings, and a strategic reset of the company’s pricing and promotions.

Recently, the company announced the launch of its newest brand Sugar & Jade, a dedicated tween line of apparel, to capture the estimated $8 billion annual tween market. The company is actively marketing the new digital-only brand to over four million potential customers. 

Management Comments

Jane Elfers, President and CEO of PLCE, said, “The significant structural changes we made to our business in 2020, combined with the accelerated digital investments we made pre-pandemic, continue to propel our results.”

Elfers concluded, “While we are only a few weeks in, Q4 is off to a very strong start. We continue to operate at a high level while navigating the ever-changing COVID landscape. We remain firmly on offense and we look forward to continuing to deliver accelerated operating margin expansion for 2021 and beyond.”

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Analysts’ Take

In response to the company’s solid performance, analyst Susan Anderson of B. Riley Financial raised the price target on the stock to $139 (24.8% upside potential) from $136, and maintained a Buy rating.

Overall, the stock has a Moderate Buy consensus rating based on 2 Buys and 2 Holds. The average Children’s Place price target of $119 implies 6.8% upside potential to current levels.

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