Children’s Place swings to Q2 loss; sees ‘significantly reduced’ Black Friday

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Children’s Place swings to Q2 loss; sees ‘significantly reduced’ Black Friday

By Marianne Wilson - 08/25/2020

Children’s Place reported a wider-than-expected loss and a 12% sales decline for its second quarter amid a decrease in back-to-school spending that started in July. 

The children’s apparel retailer also said it closed 98 stores during the quarter, part of its plan to close 300 locations by the end of 2021 as it shifts focus to digital sales. Children’s Place, which ended the quarter with 824 stores, has targeted 200 stores closures this year and 100 additional closures in fiscal 2021). 

“By the end of fiscal 2021, we continue to expect to greatly reduce our reliance on our brick-and-mortar channel resulting in a smaller, more profitable store footprint, and positioning us to enter fiscal 2022 with less than an estimated 25% of our total revenue in traditional malls,” Children’s Place COO and CFO Mike Scarpa told analysts during the chain’s earnings call.

On the same call, Children’s Place president and CEO Jane Elfers said she anticipates a “significantly reduced” Black Friday event this year.

“We're not even sure if there will even be a traditional in-store Black Friday this year,” she added. “[It’s] certainly not appropriate to have doorbusters and drive large amounts of traffic into the store. We think families will be very reticent to pack the malls on Black Friday, and also in some of those big December weekends.”

Children’s Place posted a net loss of $46.6 million, or $3.19 per share, in the quarter ended Aug. 1, compared to net income of $1.5 million, or $0.10 per share, last year. Adjusted losses of $1.48 per share, more than the loss of $1.14 per share analysts had expected.
Sales fell 12.3% to $368.9 million, below expectations. The retailer attributed the loss primarily to the impact of temporary store closures and a decrease in back-to-school sales beginning in mid-July. 

“Due to the large majority of schools adopting remote or hybrid learning models for the start of the school year, our back-to-school sales have been significantly impacted and we anticipate a meaningful negative impact on our Q3 results," stated Elfers.

The one bright spot for Children’s Place in the second quarter was e-commerce, with online sales up 118%. 

“We have clearly benefited from our $50 million digital transformation investment, which provided us with the omnichannel capabilities necessary to fulfill our strong online demand,” said Elfers. “Since the temporary store closures in March, we have increased new customers to our digital file by approximately 175%, converted our store-only customers to omnichannel customers at a rate approximately 3 times the pre-pandemic rate and increased our app downloads by nearly 115 percent. Combined, these 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 and provides us with a long-term market share opportunity.”

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