The Children’s Place returns to earnings growth in Q2

The Children’s Place net sales increased 0.6 percent to 373.6 million dollars in the second quarter of 2017, while comparable retail sales increased 3.1 percent. Net income was 14.3 million dollars or 0.79 dollar per diluted share compared to a net loss of 2 million dollars or 0.11 dollar per diluted share, the previous year. Adjusted net income was 15.6 million dollars or 0.86 dollar per diluted share, compared to an adjusted net loss of 0.2 million dollars or 0.01 dollar per diluted share, in the second quarter last year.

Commenting on the company’s results, Jane Elfers, President and CEO, said in a media release, “Comparable retail sales, gross margin, operating margin and earnings per diluted share were above last year and exceeded the high end of our guidance range. Gymboree’s recent bankruptcy, and the liquidation of 330 of their stores, presents a market share opportunity for The Children’s Place. We are directly co-located in 216 of those locations and we have experienced sales and traffic lifts in those stores since the Gymboree liquidation began on July 18th.”

Review of the second quarter results

Gross profit was 128.4 million dollars in the second quarter, compared to 123.9 million dollars in the second quarter of 2016. Adjusted gross profit was 128.7 million dollars compared to 123.9 million dollars last year.

Operating income was 3.2 million dollars, compared to a net operating loss of 2.9 million dollars in the second quarter of 2016. Adjusted operating income was 5.1 million dollars or 1.4 percent of net sales, compared to adjusted operating income of 0.1 million dollars in the second quarter last year, leveraging 140 basis points compared to last year.

First half net sales increased 2.5 percent

Net sales increased 2.5percent to 810.3 million dollars in the first half of fiscal 2017, while comparable retail sales increased 4.7 percent. Net income was 50.5 million dollars or 2.76 dollars per diluted share, compared to net income of 24 million dollars or 1.24 dollars per diluted share, the previous year. Adjusted net income was 51.6 million dollars or 2.82 dollars per diluted share, compared to 25.6 million dollars or 1.32 dollars per diluted share.

In accordance with the fleet optimization initiative, the company closed seven stores and did not open any stores during the second quarter of 2017. The company ended the quarter with 1,026 stores, a decrease of 3.4 percent compared to the prior year. Since fleet optimization initiative was announced in 2013, the company closed 156 stores. The company’s international franchise partners opened six points of distribution and closed one in the second quarter, and the company ended the quarter with 161 international points of distribution open and operated by its seven franchise partners in 19 countries.

The Children’s Place appoints Chief Digital Officer

The company has announced the appointment of Steven G. Rado to the position of Chief Digital Officer, effective August 14, 2017. Rado will report directly to Jane Elfers, President and Chief Executive Officer.

“I am very excited to join the best in class management team at The Children’s Place and drive the significant benefits associated with implementing a robust personalized customer contact strategy,” Rado said in a media statement.

The company has updated its outlook for fiscal 2017 and now expects adjusted net income per diluted share to be in the range of 7.23 dollars to 7.33 dollars, inclusive of an 0.89 dollar benefit resulting from new accounting rules for the income tax impact on share-based compensation.

This compares to the company’s previous guidance for adjusted net income per diluted share of 7.10 dollars to 7.20 dollars, inclusive of an 0.89 dollar benefit resulting from new accounting rules for the income tax impact on share-based compensation. Excluding the tax benefit, full year adjusted net income per diluted share guidance is projected to increase 17percent to 19 percent compared to adjusted net income per diluted share of 5.43 dollars last year. This guidance assumes an approximate 3 percent increase in comparable retail sales for the year.

The company expects adjusted net income per diluted share in the third quarter will be between 2.41 dollars and 2.46 dollars. This compares to adjusted net income per diluted share of 2.29 dollars in the third quarter of 2016. This guidance assumes a low single digit increase in comparable retail sales.

Picture:Facebook/The Children's Place