A consumer paradigm shift toward "things that last" could disrupt the critical holiday shopping season, according to retail analysts.
After a Q2 which saw Home Depot (HD), Lowe's (LOW), Best Buy (BBY), hhgregg (HGG), and Conn's (CONN) report solid sales for appliances, a fresh forecast from IBM sees much of the same for H2 with discretionary spending tightening for apparel and incidentals.
The Children's Place (PLCE) is upgraded to Buy at Topeka following the company's Q2 report which looked half decent compared to the double-digit negative comps growth some other retailers put up during the period.
Comps at PLCE fell 0.4% in Q2 but revenues rose 6% and EPS guidance was raised for the full year to $3.15-3.28 from $3.05-3.20 even as the company revised its comps guidance lower. Consensus is $3.19/ share for the year. (PR)
"In the midst of a retail rout for teens, PLCE pulled off a much better quarter," Topeka's Dorothy Lakner says, adding that "strategies for improved merchandise assortments are working and margins are moving up in outlets and Canada."
Children's Place (PLCE +6.7%) posts strong gains after beating on both the top and bottom line. From the report: CEO Jane Elfers says — in what is now a familiar refrain from retailers this quarter — that the company "had a difficult start [before] April sales improved significantly." Comps growth was negative (-5.5%) as was sales growth (-3.5%). $56.2M remains under the company's share repurchase program. PLCE also raises its EPS guidance for FY13 to $3.05-3.20 against consensus of $3. (PR)
A devastating apparel factory disaster in Bangladesh doesn't directly involve any large well-known companies, but could affect global retailers as an increased focus on safety appears imminent. Retailers which reportedly bought clothes from suppliers located in the collapsed building in the recent past include The Children's Place (PLCE), Wal-Mart (WMT), Dress Barn (ASNA), Primark (ASBFY.PK), and Benetton (BNGPY.PK). Analysts think the sector will rethink supply chain decisions with a heightened focus on safety.
Analysts think the colder March weather this year could hurt retailers that sell clothing to kids and teenagers as family shopping takes a backseat. Though the spring selling season could still pick up steam in April despite the slow start, retailers such as American Eagle (AEO -1.4%), Abercrombie & Fitch (ANF +0.1%), Gap (GPS -0.8%), Aeropostale (ARO -3.2%), and Children's Place (PLCE +0.1%) that depend on mall traffic have a lot of ground to make up.
Shares of Children's Place (PLCE) slump, down 5.9% premarket, after the retailer issues guidance for Q1 well-below the estimates of analysts. The company expects sales to fall off at a negative high single-digit pace during the period.
Janney cuts its rating on Children's Place (PLCE -4.7%) to Neutral from Buy with discounting hitting the sector amid payroll tax pressure on lower-end consumers. The firm lowered its price target on shares to $49 from $59.
Retail Geeks think it's more productive to compare gross profit margins for apparel retailers on a 2-3 year time time frame instead of getting lost in the noise of a Y/Y comparison. The longer view gives a clearer picture of which firms are able to re-capture lost merchandising margins from higher sourcing costs. After crunching the numbers, margin trends at Aeropostale (ARO), J.C. Penney (JCP), Children's Place (PLCE), and Urban Outfitters (URBN) look broken. On the flip side, Dick's Sporting Goods (DKS), Hibbett Sports (HBB), and Dillard's (DDS) show some promise.
Deloitte retail analyst Alison Paul doesn't think the Hurricane Sandy excuse being trotted out by major retailers is too far off base. After accounting for a significant pre-storm slowdown and major power outages in the Northeast, she thinks the numbers as a whole are actually quite good. In that same vein, other analysts point to layaway sales and online sales yet to ship as two categories that will help December compensate for the light November.
Children's Place Retail Stores (PLCE) says its board has approved an additional share buyback for up to $100M. At the end of Q3, the company had approximately $21.6M remaining of the $50M share repurchase program previously authorized in March. Additionally, the company also announces that CFO Steven Baginski has left the company effective immediately. Michael Scarpa will assume the duties as CFO, effective December 3rd, and will report to president and CEO Jane Elfers.