Wedbush Lowers Children's Place Price Target After Disappointing Results, Guidance

Children’s Place Inc (NASDAQ: PLCE) is likely to continue facing marketplace challenges in the near-term, but the future of the company seems brighter, according to Wedbush.

The Analyst

Wedbush’s Jen Redding maintained an Outperform rating on Children’s Place and reduced the price target from $165 to $130.

The Thesis

Children’s Place reported fourth-quarter EPS of $1.10 Monday, in-line with expectations.

Not surprisingly, the company suffered soft holiday sales, with its direct competitor Gymboree liquidating 560 co-located mall stores, Redding said in a Wednesday note. 

The company guided to a first-quarter EPS loss of 70 to 40 cents. The full-year projections missed even conservative expectations.

The retailer anticipates volatility in the first half of the year given the uncertainty surrounding a delay in tax refunds; a later Easter; the potential for unusual weather conditions; and the continued impact from Gymboree and Crazy 8 store liquidations, the analyst said. 

The future for Children’s Place does seem brighter, Redding said.

The competitive landscape will become “fundamentally more favorable,” and the store closures have given the company the opportunity to purchase customer data, real estate, other assets and even IP — including rights to the Gymboree and Crazy 8 brands — at very low costs, according to Wedbush. 

Price Action

Children's Place shares were up 3.15 percent at $92.48 at the time of publication. 

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