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Children’s Place CEO Confident COVID-19 Won’t Disrupt China Supply

The Children’s Place Inc. topped sales and earnings estimates in FY19 but withheld guidance for FY20, citing pandemic-driven uncertainty.

In a Nutshell: In the fourth quarter, the children’s specialty retailer relaunched the Gymboree brand to a “positive” initial response after acquiring the rights to the intellectual property in 2019.

The company’s consolidated comparable sales growth was in the low-single digits in Q1 despite the early impacts of COVID-19, president and CEO Jane Elfers said.

“However, since then, the impact on demand from the evolving COVID-19 pandemic has become significantly greater,” Elfers said. “We have taken preventative measures across all of our stores in the U.S. and Canada through a combination of store closures and reduced hours based on direction from local government officials and health authorities to ensure the safety and well-being of our associates and our customers.”

The company doesn’t expect any product delivery issues or delays from China, thanks to sourcing diversification and strong vendor partnerships, Elfers added.

The children’s wear retailer has implemented cost-reduction strategies and will reduce capital expenditures in all functional areas. Inventory management and strong relationships with partnerships will become the main focus areas, the company said.

Sales: Totaling $513 million, net sales decreased by 3.3 percent in the fourth quarter. Comparable retail sales decreased by 3.6 percent but surpassed the Wall Street consensus of $510.69 million.

For fiscal 2019, The Children’s Place recorded $1.871 million in net sales, a drop of 3.5 percent from the comparable period but on target with Wall Street estimates. Comparable sales also fell by 2.7 percent during the course of the year.

Earnings: Fourth-quarter adjusted earnings per diluted share of $1.85 came in well above the $1.57 Wall Street estimate at The Children’s Place.

In FY19, net income of $73.3 million lead to earnings per diluted share of $4.68, compared to net income of $101 million and diluted EPS of $6.01 in the previous year.

CEOs Take: “We delivered Q4 EPS significantly above the high-end of our guided range. Sales exceeded our expectations with our digital business representing 31 percent of our total sales in Q4,” Elfers said.

“With respect to our supply chain, due to our long-standing diversification strategy, our outstanding team, and our strong vendor partnerships, we currently do not foresee any issues with product deliveries or product delays as a result of the disruption in China,” she added.