Specialty apparel retailer Children's Place Retail Stores, Inc. (PLCE) on Thursday reported a 19 percent decline in profit for the first quarter, as higher expenses and restructuring charges offset an increase in sales. However, earnings per share beat analysts' expectations, while revenues missed their estimates.
Looking ahead, the company forecasts loss for the second quarter to be wider than analysts' estimates, but raised the lower end of its 2012 earnings outlook.
Comparable store sales for the latest quarter decreased 0.7 percent. Comparable store sales or comps is a key retail industry performance metric to gauge activity at store locations that have been open for at least a year.
Children's Place undertook several actions during the quarter to reduce operating costs going forward. This includes consolidation of U.S. distribution centers, streamlining of its field workforce and restructuring corporate headquarters, which is expected to result in annual savings of about $9 million.
Children's Place incurred expenses of some $2.8 million associated with these actions during the first quarter which it deems to be unusual in nature.
Also in the quarter, the company also impaired an oversized store, incurred accelerated depreciation for seven Canadian store remodels, and wrote off obsolete supplies and fixture costs.
Jane Elfers, president and chief executive officer of Children's Place said, "We made good progress in the first quarter - tightly managing our inventory, reducing expenses and improving operational efficiencies across the organization - and we delivered adjusted earnings per share consistent with last year, in spite of significantly higher product costs."
The Secaucus, New Jersey-based retailer of children's merchandise posted net income for the first quarter of $23.59 million or $0.96 per share, down from $29.08 million or $1.10 per share in the prior-year quarter.
Excluding items, adjusted income declined to $27.11 million from $29.08 million in the year-ago period. However, earnings per share were flat with the prior-year period at $1.10 per share.
On average, 16 analysts polled by Thomson Reuters expected the company to earn $1.05 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter rose 2 percent to $438.51 million from $430.81 million in the same period last year, but missed analysts' consensus estimate of $446.99 million.
The company opened 18 stores and closed 5 in the quarter, ending the quarter with 1,062 stores.
Looking ahead to the second quarter, Children's Place forecasts adjusted loss per share between $0.65 and $0.70, assuming positive low-single digit comparable retail sales. Analysts estimate loss of $0.50 per share for the quarter.
For fiscal 2012, Children's Place now forecasts adjusted earnings per share of $3.15 to $3.30, compared to the prior range of $3.10 to $3.30 per share. The outlook assumes comparable retail sales growth in the positive low-single digits.
Analysts expect earnings of $3.23 per share for the year.
PLCE closed Wednesday's trading at $44.53, down $0.32 on a volume of 727,100 shares. In Thursday's pre-market, the stock is down $0.28 or 0.63 percent to $44.25.
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