Shares of The Children’s Place Drop Thanks to Grim Holiday Forecast

The company’s shares are currently down 42% from a year earlier.

On Wednesday, The Children’s Place reported its third-quarter earnings, and the results were not what analysts were hoping to see. The company managed to barely beat earnings expectations, but its revenue fell short of Wall Street’s guidance. 

And management painted a grim outlook for its holiday sales, saying competition from stores like Target could derail sales. This caused the company’s shares to drop more than 20% on Wednesday.

Here is a closer look at the company’s problematic third-quarter, and what we can expect from The Children’s Place going forward.

The Children’s Place misses Q3 targets

It wasn’t all bad news for The Children’s Place during the third quarter. The retailer did manage to beat earnings expectations, and the company’s revenue and comparable sales are up from a year earlier.

But that’s pretty much where the good news ends. The company’s revenue rose 0.4% to reach $524.8 million, but that’s a far cry from forecasts of $534 million. 

And while The Children’s Place saw its comparable sales rise 0.8%, this falls short of the company’s own guidance of between 3% and 4%. But the company’s low fourth-quarter guidance is the main culprit for its declining shares.

Management expects its fourth-quarter revenue to fall between $504 million and $509 million. This number is substantially lower than the previous revenue estimates of $555.1 million. 

Final thoughts

The Children’s Place CEO Jane Elfers said the company had a robust back-to-school season but blamed the revenue miss on warm weather and declining mall traffic. 

Warm weather seems like an unlikely culprit, but declining mall traffic is a very real problem for The Children’s Place. And it has the potential to derail the company’s relaunch of the Gymboree brand. 

Not to mention, the company faces stiff competition from stores like Target and Gap, which offer their own children’s clothing lines. Overall, The Children’s Place is considered a hold on Wall Street with a potential upside of 7%.