The Children’s Place shares nosedived almost 19% on Tuesday as the kid’s apparel retailer expects the slowdown in back-to-school sales, to put a dent on 3Q sales.
For the 2Q ended Aug. 1, Children’s Place (PLCE) reported an adjusted loss of $1.48 per share versus the Street consensus of a loss of $1.14 per share. The company had posted earnings of $0.19 per share in the year-ago quarter. Sales of $368.9 million were below the consensus estimate of $372 million. Revenue fell 12.3% year-over-year due to store closures and a decline in back to school sales. However, its digital sales grew 118% in the quarter.
Amid the COVID-19 uncertainty, its CEO Jane Elfers said that “We remain on track to close 300 stores by the end of fiscal 2021 with a target of 200 store closures in fiscal 2020.” Elfers added that “Due to the large majority of schools adopting remote or hybrid learning models for the start of the school year, our back-to-school sales have been significantly impacted and we anticipate a meaningful negative impact on our Q3 results.” (See PLCE stock analysis on TipRanks).
Ahead of the 2Q results, on Aug. 18, B. Riley FBR analyst Susan Anderson lowered the price target to $29 (53.3% upside potential) from $36 and maintained a Hold rating. Anderson believes that the company will face a “significant headwind” related to back-to-school sales as the company is heavily reliant on school uniforms.
Currently, the Street has a cautious outlook on the stock. The Hold analyst consensus is based on 6 Holds, 2 Buys, and 1 Sell. In view of the year-to-date share price plunge of about 70%, the average price target of $38.78 implies upside potential of about 105%.
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