Why Children's Place Shares Jumped
Aug 22nd 2013 5:10PM
Updated Aug 23rd 2013 10:38AM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of The Children's Place moved higher today, gaining as much as 15% after a better-than-expected earnings report.
So what: The children's-clothing retailer posted a $0.42-per-share loss, but that beat expectations of a $0.54 loss. Revenue, meanwhile, was up 6% to $382.4 million, ahead of expectations at $381.1 million, but same-store sales declined 0.4%. Further encouraging investors was management's decision to lift its guidance to $3.15-$3.28 from a previous range of $3.05-$3.20. Management also now sees EPS of $1.83-$1.89.
Now what: The second quarter is a seasonally weak one for The Children's Place, so the quarterly loss should be seen in that light. However, the guidance lift is a little odd, as management dialed back its same-store sales forecast for the year, saying it now expects a drop in the low single digits. EPS have also been inflated by an aggressive buyback, an odd choice given that the company is in the midst of a transition, closing 100 of its underperforming stores over the next three years. Considering that transition and the declining same-store sales, shares seem overbought after today's rally, especially with a P/E of 17 based on this year's earnings projection.
Editor's note: A previous version of this article reported a $0.43-per-share loss. The Fool regrets the error.
The article Why Children's Place Shares Jumped originally appeared on Fool.com.Fool contributor Jeremy Bowman and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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