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A month has gone by since the last earnings report for The Children's Place (PLCE). Shares have added about 8.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is The Children's Place due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
The Children's Place (PLCE) Posts Wider Than Expected Q1 Loss
The Children’s Place, Inc. disappointed with its first-quarter fiscal 2024 performance. This pure-play children’s specialty apparel retailer posted a loss that was wider than anticipated. Additionally, its revenues missed the Zacks Consensus Estimate and declined year over year.
Q1 Details
The Children’s Place posted an adjusted loss per share of $1.18, wider than the Zacks Consensus Estimate of a loss of 88 cents. However, the loss narrowed from an adjusted loss of $2.00 reported in the year-ago quarter.
Net sales of $267.9 million declined 16.7% year over year, primarily due to a decrease in retail sales, caused by factors such as fewer stores and reduced foot traffic. Additionally, e-commerce demand also declined due to reductions in marketing efforts from liquidity challenges early in the quarter and a fall in wholesale revenues. Meanwhile, comparable retail sales saw a decline of 11.7% in the quarter.
Adjusted gross profit was $93.6 million, down from $96.5 million reported in the year-ago quarter. The adjusted gross margin expanded 500 basis points (bps) to 35% due to lower product input costs, including cotton and supply-chain expenses, which had affected margins in the prior year. Additionally, the company benefited from improved leverage on e-commerce freight costs resulting from its new shipping threshold for free shipping. However, these gains were somewhat diminished by margin pressures from aggressive promotional strategies.
Adjusted selling, general and administrative (SG&A) expenses were $88.6 million, down from $109.2 million in the year-ago quarter. Adjusted SG&A, as a percentage of sales, leveraged 80 bps to 33.1%. This mainly resulted from decreases in store payroll and home office payroll, and reductions in marketing costs.
Store Update
At the end of the first quarter, the company operated 518 stores with 2.5 million square feet, marking a 13.8% reduction in square footage from the previous year. Also, it closed five stores in the past three months.