Children’s Place Smashes Expectations; Shares Pop 5%

The Children’s Place (PLCE) reported an exceptional first-quarter performance with adjusted earnings of $3.25 per share compared to a loss of $3.33 per share in the prior-year quarter. Earnings significantly outpaced the Street’s estimates of $0.06 per share. Shares of the company gained 5% to close at $92.94 on May 20.

The Children’s Place is a leading children’s specialty retailer providing apparel, footwear, accessories, and other items.

Net sales for the quarter were up 70.6% at $435.48 million compared to the year-ago period and surpassed Street’s estimates of $354.78 million.

At the end of the quarter, the company had 724 stores and square footage of 3.4 million decreased by 20.2% compared to the prior-year period. (See The Children’s Place stock analysis on TipRanks)

Jane Elfers, President, and CEO of the company said, “All key metrics across both our digital and stores channels exceeded expectations. Our top line results were driven by several factors, including double digit increases in AUR versus Q1 2020, resulting from strong product acceptance, higher price realization, reduced promotional activity, and unprecedented stimulus, as well as an acceleration in back-to-school sales…We leveraged a very difficult period in 2020 to accelerate our strategic transformation and we are now well positioned for accelerated operating margin expansion in 2021 and beyond.”

The company refrained from giving EPS guidance due to the uncertainty surrounding the COVID-19 situation.

Following the “blowout” Q1 results, Citigroup analyst Paul Lejuez upgraded the stock to a Hold and lifted the price target to $95 (from $50), which implies 2.2% upside potential to current levels.

Lejuez stated that Children’s Place’s solid Q1 performance was driven by government stimulus, reopening of schools, and lower rent and cost efficiencies. The analyst sees these tailwinds continuing in 2021 but does not believe that the current margin outlook will be sustainable beyond this “unique year”.

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 3 Buys versus 3 Holds. The average analyst price target of $107.17  implies 15.3% upside potential to current levels. Shares have gained 89.9% year-to-date.

The Children’s Place scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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