The Children’s Place (PLCE, Financial) is the largest pure-play children’s specialty apparel retailer in North America. The company designs, contracts to manufacture, sells 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 30 the company operated 1,064 stores in the U.S., Canada and Puerto Rico, an online store at www.childrensplace.com, and had 110 international points of distribution open and operated by its six franchise partners in 16 countries.
It is one-stop shopping across apparel, footwear, accessories and other items for children. The company reported first-quarter results and delivered positive comparable retail sales and increased adjusted gross margin. It also raised the guidance for the full year.
First-quarter results
Net sales increased by 3.6% and were $419.4 million in the first quarter. On a constant currency basis, net sales were $421.6 million, which marked a 4.1% increase from the net sales of $404.9 million in the first quarter of 2015.
Comparable retail sales increased by 5.1% in the first quarter.
Net income was $26.0 million, or $1.33 per diluted share, in the first quarter, which was $15.6 million, or $0.73 per diluted share during the prior-year quarter.
Adjusted net income was $25.8 million, or $1.32 per diluted share, which marked an increase of 59.0%, from $17.7 million, or 83 cents per diluted share, during the prior-year quarter. On a constant currency basis, adjusted net income per diluted share $1.33 increased by 60.2% from the prior-year quarter.
Gross profit was $165.4 million in the first quarter, which was $152.1 million in the prior-year quarter.
Adjusted gross profit was $165.3 million in the first quarter, which was $152.5 million during the prior-year quarter.
Selling, general and administrative expenses were $109.2 million ($114.5 million in the prior-year quarter).
Adjusted SG&A was $109.6 million ($111.3 million in the prior-year quarter).
Operating income was $39.6 million, which was $23.2 million in the prior-year quarter.
Adjusted operating income in the first quarter of 2016 was $39.2 million ($26.7 million in the prior-year quarter).
The company returned $47 million to shareholders through share repurchases and dividends.
Store openings and closures
Consistent with its store fleet rationalization initiative; the company closed five stores during the first quarter. The company ended the first quarter with 1,064 stores and square footage of 4.968 million, a decrease of 2.6% compared to the prior year. The company’s international franchise partners opened nine points of distribution in the first quarter, and the company ended the quarter with 110 international points of distribution open and operated by its six franchise partners in 16 countries. (Source: Company’s Website)
Dividend
The company declared a quarterly cash dividend of 20 cents per share to be paid July 7 to shareholders of record at the close of business on June 16.
Expectations
| Ă‚ | Range | |
| Ă‚ | Second Quarter | Full Year |
| Adjusted net income per diluted share | Adjusted net loss per diluted share in the second quarter of 2016 will be between (30 cents) and (22 cents), inclusive of an estimated (2 cents) negative impact from foreign exchange. | To be in the range of $4.17 to $4.27, inclusive of a (12 cents) negative impact from foreign exchange. |
Positive attributes of the company
- Multipronged transformation strategy.
- Superior product.
- Business transformation through technology.
- Global growth through alternate channels of distribution.
- Store fleet optimization.
Focus
- Brand image building.
- Low-Cost Global Sourcing.
- Design.
- Ecommerce.
- International expansion program.
On a concluding note
The company is all set to execute on its strategic initiatives continuing commitment to return excess capital to shareholders. The Children’s Place has a profitable business model which generates strong cash flow. Since 2009, it returned over $671 million to shareholders through dividends and share repurchases. At the end of the first quarter, approximately $227 million remained available for future share repurchases under the company’s existing share repurchase program.
It is a well recognized brand with a trend right offering and a compelling value proposition. The company’s commitment to operational excellence coupled with its talent, disciplined expense management and improving store operations forms the strong base necessary to support its long-term growth initiatives. The company is doing well now and adding this company is going to generate shareholder returns.
Disclosure: I do not hold any position in the company.
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