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The Children's Place: Declining Birth Rate Is A Concern For Long-Term Investors

Apr. 11, 2021 11:08 AM ETThe Children's Place, Inc. (PLCE)6 Comments


  • The pandemic has accelerated the declining trend of the birth rate in North America.
  • Despite successful digitalization, the company will face the challenges of top-line growth due to the low birth rate after 2023/2024.
  • The current price of $70+ is not an extreme overshooting, but it already reflects all the recoveries that will happen in the coming years.
  • Investors do not have to rush to sell the stock, but I recommend reconsidering this stock from a long-term perspective.

Newborn babies sleeping in hospital nursery
Photo by ER Productions Limited/DigitalVision via Getty Images


Nice revenue recovery is expected for The Children's Place (NASDAQ:PLCE) for 2021 to 2023. However, the revenue growth is expected to be pressured from 2024, as the pandemic has accelerated the declining trend

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Comments (6)

"Declining Birth Rate Is A Concern For Long-Term Investors"

There is a paradox from the party of fake capitalists and seditionists. They want to keep US white. This is the reason the state of Texas tried to pass an anti-abortion law. But the best indicator that will encourage people to have kids is to put a robust social safety net and minimum standard of living, and this is basically ignored by them.
Zhang Fei profile picture
Is the influx of ~2m immigrants per year from across the southern border any help on the demographic front? These are presumably mostly young people ready and willing to get down to the hard work of making babies.

Excel Black Research profile picture
@Zhang Fei Thank you. While it is good thoughts, I will purely logically approach your idea,
1. The southern immigrants have been there for some time, so I don't think there is a meaningful change of those inputs between 2019 and now - we are talking about long-term expectations.
2. those immigrants' income is generally lower in average or poor circumstances. won't have significantly beneficial in profitable sales for PLCE.
We would need the typical middle-income type of American or Canadian families for the Children's place business.
FiXu Research profile picture
Thoughts after earnings?
Excel Black Research profile picture
@FiXu Research

Thank you for your reply. It has been very quiet here.

Our Q1 ‘21 net sales of $435 million exceeded our Q1 ‘19 net sales of $412 million. - not beyond my expectation; I expected $1.74B revenue for this year.

Focusing on digital. Consolidated digital sales increased 37% in Q1 versus 2020, representing 42% of total sales. Digital sales increased 35% in the U.S. and 82% in Canada driven by a double-digit increase in traffic partly as a result of our ability to retain new customers acquired during the pandemic. -Well, Canada is a surprise! But...

Canada’s store sales were down 43%, with traffic down 69% due to the continued impact of government-mandated COVID-19 temporary closures impacting approximately 50% of our Canadian fleet during the quarter.

Long-term concern continues...
As we indicated on our Q4 call, we recognized a long time ago that U.S. birth rates were not going to be a tailwind. So, our strategic focus has been on taking market share for the better part of the last decade.

In Short-term...
s you may know, July is our biggest month in Q2. And within July, the majority of sales are concentrated into the last 2 weeks of the month with the start of back-to-school shopping. We believe that if the vast majority of elementary schools returned to 100% in-person learning this fall, we will be an outsized beneficiary.

For Gross Margin...
Two, significantly higher merchandise margins in both our digital and stores channel, resulting from a double-digit AUR increase due to strong customer product acceptance, leading to higher price realization and reduced promotions.

Cash flow...
We are planning to return to positive operating cash flows for fiscal year 2021. However, we expect operating cash flow generation to be slightly lower than historical levels for the first half of the year due to the repayment of the suspended 2020 rents net of abatements as well as other changes in working capital.
Excel Black Research profile picture
I wouldn't change my long-term view. I think the valuation is full in a long-term perspective.
My paper is basically a long-term view papers, so please keep that in mind. (especially the children's place writing, I focused on the birth rate - this will take more than 3 years to impact the business.)

I heartfully admire the children's place management's ability and actions, and I personally like the brand. Just that in long term, they are in the depressing industry with a good amount of competition. It is just so amazing to see how they create such value in this tough environment. They are doing a very good job online / designing. Strategy overall (Gymboree and all) doesn't seem that bad.

If you are a holder already, I think it is just fine to hold it until Q3 (when everybody busy buying for school), or maybe you can dump today? Certainly looks like the stimulus and reopening (of basically, school) is benefiting the operation. But the momentum will eventually fade off along with business growth.
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