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Children's Place (PLCE) Rides on Robust Demand, Digital Sales

The Retail - Apparel And Shoes industry is brimming with optimism, courtesy of rapid inoculation drive and relaxation in pandemic-induced restrictions. The gradual return to active social lifestyle, events and occasions have spurred demand, and The Children's Place, Inc. PLCE looks well-poised to tap the same. The company has been constantly deploying resources to expand product offerings, upgrade distribution channels, create seamless omni-channel capabilities and deepen engagement with customers.

Shares of Children's Place have exhibited an outstanding run on the bourses so far this year. In the said period, shares of this Zacks Rank #1 (Strong Buy) company have surged about 62.3% compared with the industry’s growth of 4%.

Additionally, the Zacks Consensus Estimate for the current and next financial year have increased about 20.2% and 17% to $10.28 and $10.25, respectively, over the past 30 days. The company has a long-term earnings growth rate of 8%.

Digitization Holds the Key

Children's Place has been aggressively adopting strategies and making planned investments to cater to consumer demand and behavior. It has been focusing on superior product strategy to resonate well with millennial customers, and advancing omni-channel capabilities and augmenting the supply chain. The company’s $50 million digital transformation investment is reaping benefits. Markedly, it has one of the highest digital penetrations in the industry.

Looking at Children's Place digitization endeavors, it has rolled out "BOPIS" (Buy Online, Pick Up in Store) and “Save the Sale” functionality. It has also launched “BOSS” or Buy Online, Ship to Store capabilities, the response to which has been encouraging. The company has introduced Afterpay, a buy now pay later option, for its customers. Impressively, management intends to allocate a major portion of its fiscal 2021 capital expenditures to digital and supply chain fulfillment initiatives.

We note that digital sales represented 43% of total net sales during the second quarter of fiscal 2021 with more than 70% of digital business now coming through a mobile device. The company notified that its active mobile users were up double digits. The expansion of digital business along with the significant sales transfer rate that the company is attaining owing to its strategic decision to shutter 300 stores are resulting in long-term steady state annual digital penetration of 50%.

 


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With changing consumer shopping patterns, the company has been making efforts to lower dependency on brick-and-mortar platform and shift toward digitization. It anticipates a mall-based brick-and-mortar portfolio to account for less than 25% of revenues entering fiscal 2022.

With respect to its store fleet optimization strategy, The Children’s Place permanently shuttered 42 stores during the six months period ended Jul 31, 2021. The company now plans to shutter additional 81 stores in fiscal 2021. This will take the total store closure count to 300.

Closing Remarks

Digital transformation, superior product assortment and sturdy demand — as people gradually resume active social lifestyles and schools start in-person classes — are likely to play a vital role in revenue generation.

Markedly, Children's Place commenced the third quarter on a strong note and remains well on track to accelerate operating margin expansion in fiscal 2021 and beyond. Industry experts foresee sales opportunities and operational efficiencies when social distancing measures and other restrictions such as limited-hour operations are further removed and the company’s stores and distribution centers operate normally.

3 More Stocks Looking Red Hot

Abercrombie & Fitch Co. ANF has a long-term earnings growth rate of 18%. It presently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Foot Locker, Inc. FL has a trailing four-quarter earnings surprise of 73.1%, on average. It currently carries a Zacks Rank #1.

The Buckle, Inc. BKE has a trailing four-quarter earnings surprise of 42.1%, on average. The stock currently carries a Zacks Rank #2 (Buy).


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