If you are not familiar, PLCE is largest pure-play children’s specialty apparel retailer in North America. The Company designs, contracts to manufacture, sells at retail and wholesale, and licenses to sell fashionable, high-quality merchandise at value prices, primarily under the proprietary “The Children’s Place,” “Place” and “Baby Place” brand names. As of April 29, 2017, the company operated 1,033 stores in the United States, Canada and Puerto Rico, an online store, and had 156 international points of distribution open and operated by its 6 franchise partners in 18 countries.
Getting back to the results though, PLCE reported strong earnings and revenues of $1.95 and $436.7 million, respectively.
Comparable retail sales increased 6.1%, PLCE’s highest Q1 comp in over a decade, on top of the positive 5.1% comp in the first quarter of 2016. By demographic, U.S. comps were up 6.8% and Canada comps were down 1.4%. Further, the company also generated a positive comp in their brick and mortar channel for the sixth consecutive quarter and it continues to see a significant increase in the penetration of its ecommerce sales.
The company also managed to keep its inventory in check in Q1. Inventories at the end of the quarter were up 2.8%, well below the company’s guidance of a high single-digit increase, reflecting the impact of their 6.1% comp sales increase.
Looking ahead, for Q2 PLCE guided adjusted EPS in the range of $0.70-0.75, inclusive of a $0.70 tax benefit due to the new accounting rules, compared to an adjusted loss per share of $0.01 last year. The total tax benefit for the full year is $0.89, $0.19 from Q1 plus $0.70 in Q2. Furthermore, the company expects that comparable retail sales will increase low single digits for Q2 on adjusted gross margins of flat to leverage 20 basis points as a percentage of net sales.
For the full year 2017, PLCE increased its adjusted EPS guidance to $7.10-7.20 per share compared to their previous guidance of $6.50-6.65, an increase of $0.55 at the high end of the range. This compares to $5.43 in full year 2016. The company’s new full year guidance includes the $0.89 tax benefits while the original guidance only included a $0.45 benefit, resulting in an incremental tax benefit for the full year of $0.44. Additionally, for the full year 2017, PLCE expects comparable retail sales to increase about 3%. The company sees total net sales for the year to be in the range of $1.825-1.835 billion, inclusive of the impact of a 53rd week. PLCE also expects adjusted gross margin to leverage 20-40 basis points.
PLCE continues to turn out solid results in the competitive retail market. With a quarterly top and bottom line beat on top of raised full year guidance, PLCE trades modestly higher today.