Children’s Place stock plunges after pulling in full-year forecasts
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Children’s Place (NASDAQ:PLCE) fell nearly 15% at pre-market lows after the youth-focused retailer reeled in full-year earnings forecasts.
For the third quarter, the retailer exceeded revenue expectations, but fell well short of consensus EPS estimates. Management blamed persistent supply chain pressures and elevated costs, coupled with promotional activity, for the disappointing bottom line report. Inventory levels rose 24% as compared to the prior year quarter, prompting the need for continued promotional activity.
“Sales significantly decelerated in the last two weeks of October,” CEO Jane Elfers said. “Gross margin was approximately 300 basis points below our expectations due to transitory supply chain pressure from elevated freight, distribution, and transportation costs.”
While she highlighted strong digital sales and successful marketing efforts, Elfers offered more caution on the quarters ahead.
“We have reduced our top and bottom-line expectations for the fourth quarter and the full year, due to the combination of an increasingly challenging macro-economic environment and continued supply chain cost pressure,” she commented. “Sales for the first two weeks of November were below expectations and we anticipate that the record levels of inflation impacting our core consumer will continue to result in lower demand this holiday season. We are now planning for a significantly heightened promotional environment in the fourth quarter, and we are focused on right-sizing our inventory levels during the quarter and anticipate that, due to our planned actions, our inventory will be better positioned ending Q4 at up approximately high single digits.”
Management expects net sales in the range of $460M to $470M for the fourth quarter, below the consensus of $480.09M. Meanwhile, a guide for adjusted earnings per diluted share in the range of $0.50 to $0.75 is far below the consensus of $2.34 amid the expected “right–sizing” of inventory.
For the full-year, net sales in the range of $1.713B to $1.723B was trimmed from a prior $1.73B expectation and $1.72B consensus. Earnings per share expectations were slashed as a result of the shockingly low Q4 EPS guide to $4.05 to $4.30 from a prior forecast of $7.00. Wall Street had anticipated $6.27.
Shares of The Children’s Place fell over 14% shortly after the print before moderating losses to about 5.9% about 90 minutes prior to Thursday’s opening bell. Trading volume remained light during the premarket session.
Dig into the details of the results.