Children's Place (PLCE) closed up 5% on Wednesday. Volume? Not bad at all. An earnings report got the market interested in the stock. Should the rest of us be just as interested?
For the fourth quarter, income from continuing operations, on an adjusted basis, came in at $1.03 per diluted share. The growth was very strong; last year, the retailer only made 72 cents per diluted share from continuing operations, excluding items. According to our earnings preview, expectations were right on target.
Children's Place didn't beat the analysts, unfortunately. And here's another disappointing thing: Same-store sales were flat in Q4. For the full fiscal year, comps were off by 2%.
Management must do something about the same-store sales metric. A collection of five growth initiatives was presented in the release. As you can imagine, it was the standard corporate stuff: optimize inventory, leverage e-commerce, etc.
The initiative that should be the main focus, as far as I'm concerned, is the one referring to the marketing aspect. Many specialty retailers fail in this department. Children's Place needs to really get serious about branding. Execs might benefit from studying the big guys, chains like Target (TGT) and Wal-Mart (WMT). Obviously, they can't launch campaigns the same way those entities do, but still, there is a lot to learn from them. Perhaps the presence of a new CEO will act as a catalyst for the company's prospects.
Children's Place hit a 52-week high yesterday on the numbers. The stock most likely is heading higher, but I'm not particularly attracted to it. I'd be a seller if I possessed a paper profit in the business, and would look to trade it after a drop in the share price.
Disclosure: I don't own any company mentioned; positions can change without notice.
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