But the report itself was certainly impressive overall, illustrating that PLCE is out-performing its peers by a wide margin. Net sales were up a healthy 20% to $448.7 mln, cruising past the $427.9 mln consensus. This was the company's highest top-line growth rate in at least five years -- and by a wide margin. In fact, its next closest growth rate was the +9% it posted in 4Q17.
There is one caveat here, though: part of the sales increase was due to the benefit from the calendar shift to the 53rd week in FY17. This amounted to a $22 mln, benefit, to be specific.
Nonetheless, the company’s performance in the quarter was solid. Growth was mainly driven by an impressive +13.2% increase in comparable retail sales, a company record coming on top of a +3.1% figure last year. In a time when many retailers are struggling to generate traffic at brick-and-mortar shops, PLCE delivered positive brick-and-mortar sales comes in each month this quarter. In the earnings press release, management noted that its mall traffic was particularly strong, delivering a high single digit comp for the quarter. Again, that is just rare these days.
In addition to the robust top-line growth, gross margin also ticked higher by 10 basis points to 34.5%, resulting from fixed cost leverage, in addition to the strong comparable retail sales. This led to PLCE generating EPS of $0.70, easily surpassing the $0.59 consensus.
Despite the strong growth and bump in margins, Adjusted EPS actually declined by 19% year/year. But this was mainly due to a massive swing in adjusted tax rate to 21% compared to negative 226% last year, attributable to accounting rules related to the income tax on share-based compensation. More specifically, the impact was $0.03/share this quarter, compared to $0.68/share in the year ago quarter, as the majority of share vesting occurred in the first quarter this year versus in the second quarter last year.
As for its outlook, PLCE issued in-line Q3 EPS guidance of $2.97-$3.07 vs. the $2.99 consensus based upon mid-single digit comparable sales. Coming on the heels of the 13.2% comp mark, some investors might be viewing this as disappointing, helping to explain the weakness so far today. It should be noted, however, that last quarter, PLCE guided for Q2 comps growth in the high single digit range, and it easily surpassed that outlook.
PLCE also raised its FY19 guidance, seeing EPS of $8.08-$8.29 versus the $8.07 consensus and revenue of $1.945-$1.955 versus the $1.93 bln expectation.
To conclude, PLCE delivered a strong Q2 report, highlighted by record quarterly comparable store sales. So far, shareholders aren't being rewarded for the results, but today’s action could be due to some profit-taking following a two-month rally. The stock is also running up against some resistance at the $140 level, which could also be playing a role. All and all, though, business appears to be very healthy for PLCE.