Children's Place (PLCE) Q4 Off to Strong Start, but Risk-Reward Provides Limited Upside - Stifel

Stifel affirms its Hold rating on The Children's Place (NASDAQ: PLCE) following Q3 results and update issued earlier.

Analyst Richard Jaffe commented, As we expected, unseasonably warm weather held back sales in the quarter (comps decreased 3%). Cold weather merchandise comped negative in the high-double digits (about 12% by our estimation). However, with the aid of the company’s assortment planning tool, management bought significantly fewer units of cold weather goods, enabling management to clear through the merchandise profitably.

On Q4-to-date performance: Comparable retail sales are running positive 4.5% quarter to date, representing approximately 50% of the company’s planned sales volume for the 4Q. We believe sales are being driven by increased average unit retail and conversion as traffic remains weak. Management established 4Q EPS guidance of $0.93-$1.03, compared to consensus at $0.98 and our estimate of $1.02. 4Q guidance includes a $0.03 negative impact from foreign exchange and assumes a low-single digit comp.

Jaffe affirms his Hold rating on PLCE, noting that expense reductions, ral estate rationalizations, and improved systems will help improve profitability moving froward. But, at the current share price, the risk-reward ratio isn't terribly favorable.

For an analyst ratings summary and ratings history on The Children's Place click here. For more ratings news on The Children's Place click here.

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