The Children's Place (PLCE) is trading higher today (+5%) after reporting Q3 (Oct) earnings this morning. In case you're not familiar, PLCE bills itself as the largest pure-play children's specialty apparel retailer in North America. It sells fashionable, high-quality merchandise at value prices, primarily under the proprietary "The Children's Place," "Place" and "Baby Place" brand names. The company currently operates 1,027 stores in the US, Canada and Puerto Rico and has 168 international points of distribution open and operated by its 7 franchise partners in 19 countries.
Turning to the Q3 (Oct) results, non-GAAP EPS rose 13% YoY to $2.58, which was better than prior guidance of $2.41-2.46. Revenue rose 3.4% year/year to $490.0 mln, which was better than market expectations. In terms of guidance for the all-important holiday selling season, PLCE expects Q4 (Jan) non-GAAP EPS of $2.07-2.12, which was generally in-line with market expectations.
As with all retailers, same store comps is a very important metric. On that front, PLCE reported OctQ comps of +5.1%, which was better than prior guidance of a low single digit increase. That was a good result considering that PLCE was lapping a tough +4.6% comp in the prior year period. For Q4 (Jan), PLCE is guiding to a low single digit increase for comps. Adjusted operating margin in OctQ improved to 14.0%, an 80 basis point improvement.
PLCE says its results were impressive on their own, but given the impact of three major hurricanes, rival Gymboree's bankruptcy and inventory liquidation sales, the record October heat across most of the country, and the anniversary of its very successful private label credit card and loyalty program launches in OctQ of last year, the company believes its results are outstanding. All of its key retail metrics increased: AUR (Average Unit Retail), ADS (Avg Dollar Sales), UPT (Units per Transaction), transactions and conversion.
PLCE has been undergoing a bit of a turnaround with a big part of that including closing underperforming stores. Since its fleet optimization initiative was announced in 2013, PLCE has closed 156 stores. In OctQ, the company opened one store and did not close any stores. The company ended the quarter with 1,027 stores and square footage of 4.81 mln, a decrease of 3.2% YoY.
In sum, investors appear to be quite pleased with PLCE's OctQ results, and especially the robust +5.1% comps. That was a nice improvement from JulQ's +3.1% comp. Of note, store traffic has experienced sequential improvement for each of the past six quarters. Looking ahead, while still early in Q4 (Jan), PLCE says its business is strong heading into the holiday season.
On a final note, even as the overall stock market has been charging ahead, PLCE has seen its stock mostly trade sideways over the past year, mostly staying in the $100-120 range. Today's report is pushing on the higher end of this trading range. PLCE has been pretty active in terms of buying back stock, which is always good for investors to see.
In OctQ, the company repurchased 258,669 shares for approximately $28 mln. For the first nine months of 2017, the company repurchased 766,037 shares for approximately $85 mln, that computes to an average price of just under $111 per share. In addition to share buybacks, PLCE pays a $0.40/sh quarterly dividend which computes to an annual yield of 1.3%.