Children’s Place (PLCE) reports first-quarter losses and revenue estimates on delays

Children’s Place (PLCE) came out with a quarterly loss of $2 per share versus the Zacks Consensus Estimate of a loss of $1.77. For comparison, a year ago earnings per share were $1.05. These numbers have been adjusted for one-off items.

This quarterly report showed an earnings surprise of -12.99%. A quarter ago, it was expected that this children’s clothing and accessories chain would post a loss of $4.18 per share when it actually produced a loss of $3.87, delivering a surprise of 7.42%.

Over the last four quarters, the company has surpassed consensus EPS estimates only once.

Children’s Place, which belongs to the Zacks Retail – Apparel & Footwear industry, posted revenues of $321.64 million for the quarter ended April 2023, missing the Zacks Consensus Estimate by 4.93%. For comparison, revenues from the previous year amounted to USD 362.35 million. The company has topped consensus revenue estimates twice over the last four quarters.

The sustainability of the immediate share price movement based on the recently-released numbers and future earnings expectations will largely depend on management’s commentary on the earnings call.

Children’s Place shares have lost about 34.8% since the beginning of the year, compared with the S&P 500’s gain of 8%.

What’s next for Children’s Square?

While The Children’s Place has underperformed the market this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no simple answers to this key question, but one reliable measure that can help investors address this issue is the company’s earnings prospects. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of the earnings release, the estimate revision trend for The Children’s Place is unfavorable. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #5 (Strong Sell) for the stock. Therefore, it can be expected that the company’s shares will underperform the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the next quarters and the current fiscal year change in the coming days. The current consensus EPS estimate is -$1.34 on revenue of $353.08 million for the coming quarter and $2.44 on revenue of $1.64 billion for the current fiscal year.

Investors should be aware that the outlook for the industry may also have a significant impact on share prices. In terms of the Zacks Industry Rank, the Retail – Apparel & Footwear industry is currently in the bottom 25% of the 250+ Zacks industries. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Gap (GPS), another company in the same industry, has not yet released results for the quarter ending April 2023. The results are expected to be released on May 25.

The clothing chain is expected to report a quarterly loss of $0.17 per share in its upcoming report, representing a year-over-year change of +61.4%. The consensus EPS estimate for the quarter has been revised 4.2% down to the current level over the last 30 days.

Gap revenue is expected to be $3.29 billion, down 5.4% from the year-ago quarter.

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