Children's Place lowers full year earnings outlook despite strong Q3

For its third quarter, The Children’s Place, Inc. reported net sales increase of 32.5 million dollars or 6.6 percent to 522.5 million dollars driven by a positive comparable retail sales increase of 9.5 percent and approximately 5 million dollars due to the new revenue recognition rules, partially offset by an approximately a 14 million dollars adverse impact from the calendar shift related to the 53rd week in fiscal 2017. Net income was 49.9 million dollars or 3.03 dollars per diluted share compared to 44.1 million dollars or 2.44 dollars per diluted share, the previous year. Adjusted net income was 50.7 million dollars or 3.07 dollars per diluted share compared to 46.7 million dollars or 2.58 dollars per diluted share, in the third quarter last year.

“For Q3, we delivered adjusted EPS of 3.07 dollars, the high-end of our guidance range. Led by surging demand in our digital channels, we delivered an industry-leading 9.5 percent comp on top of a positive 5.1 percent comp last year. Our digital channels delivered a 38 percent increase, representing 29 percent of our net sales for the quarter. Our strategy to take market share continues to produce meaningful results; we delivered positive traffic in our brick-and-mortar stores and generated positive comps every month in the quarter. Importantly, our customer file increased five percent in Q3, which provides us with increased visibility into future sales,” said Jane Elfers, President and Chief Executive Officer in a statement.

Highlights of Children’s Place Q3 and year-to-date results

Gross profit for the third quarter was 204.4 million dollars compared to 202.4 million dollars in the third quarter of 2017. Adjusted gross profit was 204.4 million dollars compared to 202.4 million dollars last year. Adjusted gross margin deleveraged 220 basis points to 39.1 percent of sales.

Year-to-date net sales increased 8.2 percent to 1.408 billion dollars and comparable retail sales increased 6.7 percent, inclusive of a positive impact of approximately 17 million dollars resulting from the calendar shift related to the 53rd week in fiscal 2017 and approximately 14 million dollars due to the new revenue recognition rules.

Net income was 88.9 million dollars or 5.24 dollars per diluted share, in the first nine months of 2018, compared to net income of 94.6 million dollars or 5.19 dollars per diluted share, the previous year. Adjusted net income was 95.5 million dollars or 5.62 dollars per diluted share, compared to adjusted net income of 98.3 million dollars or 5.39 dollars per diluted share, in the first nine months of last year.

Consistent with the company’s store fleet optimization initiative, the company closed four stores and did not open any stores during the third quarter of 2018. The company ended the third quarter with 988 stores, a decrease of 4 percent compared to the prior year. Since the fleet optimization initiative announced in 2013, the company has closed 195 stores. The company’s international franchise partners opened 21 net new points of distribution in the first nine months of 2018 and ended the quarter with 211 international points of distribution open and operated by its eight franchise partners in 20 countries.

The Children’s Place lowers full year earnings outlook

The company is updating its outlook for fiscal 2018 and now expects adjusted net income per diluted share to be in the range of 7.69 dollars to 7.79 dollars compared to previous guidance in the range of 8.09 dollars to 8.29 dollars. This compares to adjusted net income per diluted share of 7.91 dollars in fiscal 2017. The company now expects total net sales for the year to be in the range of 1.955 to 1.960 billion dollars. This guidance assumes a positive mid-single digit comparable retail sales increase. The company now expects adjusted operating margin to be in the range of 7.7 percent to 7.8 percent.

The company expects adjusted net income per diluted share in the fourth quarter of 2018 to be in the range of 2.07 dollars to 2.17 dollars. This compares to adjusted net income per diluted share of 2.52 dollars in fiscal 2017. The company now expects total net sales in the fourth quarter to be in the range of 547 million dollars to 552 million dollars. This guidance assumes a positive low-single digit comparable retail sales increase.

The company also declared a quarterly cash dividend of 50 cents per share to be paid on December 28, 2018 to shareholders of record at the close of business on December 17, 2018.

Picture:Children's Place website

 

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