Children’s Place cautions on holiday; on track to close 300 stores by 2021

The Children’s Place is approaching its critical fourth quarter with caution as it deals with a range of factors, from “historically low demand” for holiday dress-up to rising COVID-19 cases to added delivery costs. It also has moved up its holiday shipping cutoff date.  

“We're approaching the fourth quarter with heightened caution and expect both sales and profitability to be under pressure due to the numerous headwinds created by the pandemic, specifically the meaningfully reduced demand for dress-up product, significantly reduced store traffic, the recent nationwide spikes in COVID-19 cases resulting in additional temporary store closures, social distancing requirements and reduced mall operating hours.

Jane Elfers, president and CEO Children’s Place, said on the company’s earnings call. 

Elfers told analysts that the company reduced its dress-up receipts by last April, and now expects the fourth quarter to represent “historically low demand” for dress-up product due to the pandemic.

In addition, the “unprecedented” level of expected online demand and the related freight surcharges imposed by its major carriers will put additional pressure on sales and margins during fourth quarter, Elfers said.

To ensure on-time holiday delivery, Children’s Place has been advised by its carriers to move its standard shipping cutoff up by three days, from its original date of 12/18 to 12/15, due to capacity constraints across the domestic transportation network.

The country’s largest specialty childrenswear retailer said it remains on track to close 300 stores by the end of fiscal 2021, with a plan of 200 store closures in fiscal 2020, including the 118 stores that have permanently closed in the first nine months of 2020. It will close 100 stores next year.  

Children’s Place reported net income of $13.3 million, or $0.91 per diluted share, in the quarter ended Oct. 30, compared to net income of $43.0 million, or $2.77 per diluted share, in the year-ago quarter. Adjusted net income was $21.1 million, or $1.44 per diluted share, better than analysts had expected. 

Net sales decreased 19% to $425.6 million, but were ahead of estimates for $392.0 million. The company attributed the decline primarily to a decrease in back-to-school sales as schools adopted remote and hybrid learning models and the impact of permanent and temporary store closures.

Children’s Place said its digital sales penetration increased to 44% in the third quarter, with year-to-date digital sales representing 55% of total sales.

“Since the onset of the COVID-19 pandemic in March, we have increased the number of new digital customers versus last year by approximately 100%, converted over 800,000 of our store-only customers to omnichannel customers, and increased our mobile app downloads by over 60% versus last year,” stated Jane Elfers, president and CEO. “Combined, these metrics provide a strong foundation for continued digital growth as digital adoption, accelerated by the COVID-19 pandemic, continues to drive online sales to an increasingly greater share of total sales.”