Childrens Place, Inc. (PLCE) SEC Filing 10-Q Quarterly report for the period ending Saturday, November 3, 2018

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Exhibit 99.1

 

 

 

THE CHILDREN’S PLACE REPORTS THIRD QUARTER 2018 RESULTS

 

Delivers Q3 Comparable Retail Sales Increase of 9.5%

 

Digital Sales Increased 38% to 29% of Net Sales

 

Reports Q3 GAAP Earnings per Diluted Share of $3.03 vs $2.44 in Q3 2017, a 24% increase

 

Q3 Adjusted Earnings per Diluted Share of $3.07 vs $2.58 in Q3 2017, a 19% increase

 

Updates FY 2018 Adjusted EPS Guidance to $7.69 to $7.79

 

Secaucus, New Jersey – December 6, 2018 – The Children’s Place, Inc. (Nasdaq: PLCE),

the largest pure-play children’s specialty apparel retailer in North America, today announced financial results for the thirteen weeks ended November 3, 2018.

 

Jane Elfers, President and Chief Executive Officer announced, “For Q3, we delivered adjusted EPS of $3.07, the high-end of our guidance range. Led by surging demand in our digital channels, we delivered an industry-leading 9.5% comp on top of a positive 5.1% comp last year. Our digital channels delivered a 38% increase, representing 29% of our net sales for the quarter. Our strategy to take market share continues to produce meaningful results; we delivered positive traffic in our brick-and-mortar stores and generated positive comps every month in the quarter. Importantly, our customer file increased five percent in Q3, which provides us with increased visibility into future sales.”

 

Ms. Elfers continued, “Moving on to Q4, due to stronger than anticipated digital demand in the back-half of 2018, we were forced to accelerate online access to our brick-and-mortar inventory and our ship from store fulfillment capabilities, resulting in an anticipated incremental fulfillment cost of $5 million, or $0.24 in EPS in Q4. These capabilities allow our digital customers to access our brick-and-mortar inventory, which helped fuel high teens growth in our digital channels over the extended Thanksgiving holiday weekend. We ended the month of November with comparable retail sales up low-single digits. Additionally, given recent competitor news, our updated outlook also assumes the sales and margin impact of potentially significant liquidation events.”

 

Ms. Elfers concluded, “We are uniquely positioned from a competitive standpoint to gain additional market share by leveraging our accelerated digital transformation investment. We are focused on driving customer acquisition, improving customer retention and increasing customer engagement through our digital transformation investments and the results are tangible. We have significant runway ahead of us through the continued successful execution of our multi-year strategic growth initiatives.”

 

Financial Results

The Company’s results are reported in this press release on a GAAP and as adjusted, non-GAAP basis. A reconciliation of non-GAAP to GAAP financial information is provided at the end of this press release.

 

Third Quarter 2018 Results

 

Net sales increased by $32.5 million, or 6.6%, to $522.5 million during the third quarter 2018 from $490.0 million during the third quarter 2017. This increase was primarily driven by a positive comparable retail sales increase of 9.5% and approximately $5.0 million due to the new revenue recognition rules, partially offset by an approximately a $14.0 million adverse impact from the calendar shift related to the 53rd week in fiscal 2017.

 


The following information was filed by Childrens Place, Inc. on Thursday, December 6, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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  • 18487872_80
    Financial - Shares / Equity
    For Performance Awards issued during fiscal 2018 (the "2018 Performance Awards"), an employee may earn from 0% to 250% of their Target Shares based on the cumulative adjusted earnings per share achieved for the three-year performance period, adjusted operating margin expansion achieved for the three-year performance period, adjusted ROIC achieved as of the end of the performance period, and the ranking of our adjusted ROIC relative to that of companies in our peer group as of the end of the performance period.
  • 18487872_77
    Financial - Shares / Equity
    For Performance Awards issued during fiscal 2016 and fiscal 2017 (the "2016 and 2017 Performance Awards"), an employee may earn from 0% to 200% of their Target Shares based on the cumulative adjusted earnings per share achieved for the three-year performance period, adjusted operating margin expansion achieved for the three-year performance period, and adjusted return on invested capital ("adjusted ROIC") achieved at the end of the performance period.
  • 18487872_224
    Other - Other
    This change was primarily due to a net redemption of short-term investments into cash and cash equivalents during Year-To-Date 2018 compared to a net purchase of short-term investments during Year-To-Date 2017 and increased capital expenditures, primarily related to our business transformation initiatives.
  • 18487872_143
    Other - Other
    We believe that our e-commerce and brick-and-mortar retail store operations are highly interdependent, with both sharing common customers purchasing from a common pool of product inventory.
  • 18487872_170
    Other - Other
    We believe that our e-commerce and brick-and-mortar retail store operations are highly interdependent, with both sharing common customers purchasing from a common pool of product inventory.
  • 18487872_168
    Revenue - Product
    The net sales increase was primarily driven by a Comparable Retail Sales increase of 6.7%, the adoption of Topic 606, and a positive impact resulting from the calendar shift related to the 53rd week in fiscal 2017.
  • 18487872_192
    Financial - Income
    The effective tax rate was lower for the Year-To-Date 2018 primarily due to a lower U.S. Federal tax rate in fiscal 2018 due to the Tax Act and a favorable mix of income generated in foreign jurisdictions subject to lower tax rates, partially offset by a reserve release of $4 million in the first quarter of fiscal 2017.
  • 18487872_213
    Other - Other
    The amount available for loans and letters of credit under the Credit Agreement is determined by a borrowing base consisting of certain credit card receivables, certain trade and franchise receivables, certain inventory and the fair market value of certain real estate, subject to certain reserves.
  • 18487872_93
    Revenue - Product
    If external factors should change unfavorably, if actual sales should differ from our projections, or if our ability to control costs is insufficient to sustain the necessary cash flows, future impairment charges could be material.
  • 18487872_226
    Financial - Shares / Equity
    The increase primarily resulted from an increase in purchases of our common stock, primarily related to our accelerated share repurchase program and shares repurchased to cover tax withholdings associated with the vesting of equity awards.
  • 18487872_135
    Financial - Earnings
    For example, gross profit decreased approximately 220 basis points to 39.1% of net sales during the Third Quarter 2018 from 41.3% during the Third Quarter 2017.
  • 18487872_227
    Other - Other
    We anticipate that total capital expenditures will be approximately $70-75 million in fiscal 2018, primarily related to our business transformation initiatives, compared to $59 million in fiscal 2017.
  • 18487872_122
    Other - Other
    The standard is effective for the Company beginning in its fiscal year 2019, including interim periods within those fiscal years, and early adoption is permitted.
  • 18487872_127
    Other - Other
    The standard is effective for the Company beginning in its fiscal year 2019, including interim periods within those fiscal years, and early adoption is permitted.
  • 18487872_173
    Revenue - Product
    This increase primarily resulted from a U.S. Comparable Retail Sales increase of 7.5% and the adoption of Topic 606.
  • 18487872_145
    Revenue - Product
    The Children?s Place U.S. net sales increased $33.7 million, or 7.9%, to $461.3 million in the Third Quarter 2018 compared to $427.6 million in the Third Quarter 2017.
  • 18487872_172
    Revenue - Product
    The Children?s Place U.S. net sales increased $106.6 million, or 9.3%, to $1.256 billion during Year-To-Date 2018 compared to $1.150 billion during Year-To-Date 2017.
  • 18487872_174
    Revenue - Product
    The Children?s Place International net sales increased $0.6 million, or 0.4%, to $151.2 million during Year-To-Date 2018 compared to $150.6 million during Year-To-Date 2017.
  • 18487872_204
    Other - Other
    At November 3, 2018, we had $65.0 million of outstanding borrowings and $178.0 million available for borrowing.
  • 18487872_69
    Financial - Expense
    A 0.5% difference in our shrinkage rate as a percentage of cost of goods sold could impact each quarter's net income by approximately $0.7 million.
  • 18487872_142
    Revenue - Product
    Total e-commerce sales, which include postage and handling, increased to approximately 29% of net sales during the Third Quarter 2018 from approximately 22% during the Third Quarter 2017.
  • 18487872_169
    Revenue - Product
    Total e-commerce sales, which include postage and handling, increased to approximately 27% of net sales during Year-To-Date 2018 from approximately 23% during Year-To-Date 2017.
  • 18487872_197
    Financial - Dividend
    Our primary uses of cash are for working capital requirements, which are principally inventory purchases, and the financing of capital projects, including investments in new systems, and the repurchases of our common stock and payment of dividends.
  • 18487872_29
    Revenue - Product
    Operating Highlights Our Comparable Retail Sales increased 9.5% and 6.7% during the Third Quarter 2018 and Year-To-Date 2018, respectively.
  • 18487872_33
    Financial - Expense
    Selling, general, and administrative expenses increased $4.9 million to $123.2 million during the Third Quarter 2018 from $118.3 million during the Third Quarter 2017.
  • 18487872_154
    Financial - Expense
    Selling, general, and administrative expenses increased $4.9 million to $123.2 million during the Third Quarter 2018 from $118.3 million during the Third Quarter 2017.
  • 18487872_181
    Financial - Expense
    Selling, general, and administrative expenses increased $27.3 million to $365.9 million during Year-To-Date 2018 from $338.6 million during Year-To-Date 2017.
  • 18487872_30
    Revenue - Product
    Net sales increased by $32.5 million, or 6.6%, to $522.5 million during the Third Quarter 2018.
  • 18487872_140
    Revenue - Product
    Net sales increased by $32.5 million, or 6.6%, to $522.5 million during the Third Quarter 2018 from $490.0 million during the Third Quarter 2017.
  • 18487872_167
    Revenue - Product
    Net sales increased by $107.2 million, or 8.2%, to $1.408 billion during Year-To-Date 2018 from $1.300 billion during Year-To-Date 2017.
  • 18487872_232
    Revenue - Geography
    We are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates attributable to inventory purchases denominated in a foreign currency.
  • 18487872_46
    Other - Other
    During the remainder of fiscal 2018, we plan to continue to develop several new capabilities, including: a new pricing and promotional system that will enable us to deliver personalized offers to our customers, improvements to our e-commerce platform, a new loyalty system that will deliver real-time personalized communication and promotions, and buy-online-ship-to-store.
  • 18487872_97
    Other - Other
    We may revise our estimates as we finalize our accounting during a measurement period of up to one year from the enactment of the Tax Act.
  • 18487872_149
    Financial - Earnings
    Gross profit increased by $1.9 million to $204.4 million during the Third Quarter 2018 from $202.4 million during the Third Quarter 2017.
  • 18487872_176
    Financial - Earnings
    Gross profit increased by $18.0 million to $519.4 million during Year-To-Date 2018 from $501.4 million during Year-To-Date 2017.
  • 18487872_88
    Financial - Cash Flow
    If the undiscounted cash flows are less than the related net book value of the long-lived assets, they are written down to their fair market value.
  • 18487872_44
    MA - Other
    With respect to digital transformation, our goal is to deliver one to one personalization focusing on improving customer acquisition and increasing customer engagement with our brand and to continue to gain market share.
  • 18487872_128
    Other - Other
    We are executing against our implementation plan and gathering information to assess which of our real estate, personal property and other arrangements may meet the definition of a lease as contemplated in the guidance.
  • 18487872_203
    Other - Other
    Our credit facility provides for borrowings up to the lesser of $250 million or our borrowing base, as defined by the credit facility agreement (see "Credit Facility" below).
  • 18487872_144
    Revenue - Product
    Accordingly, we believe that consolidated omni-channel reporting presents the most meaningful and appropriate measure of our performance, including Comparative Retail Sales and revenues.
  • 18487872_171
    Revenue - Product
    Accordingly, we believe that consolidated omni-channel reporting presents the most meaningful and appropriate measure of our performance, including Comparative Retail Sales and revenues.
  • 18487872_2
    Other - Other
    These forward-looking statements are based upon the Company's current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results and performance to differ materially.
  • 18487872_49
    Other - Other
    We continue to evaluate our store fleet as part of our fleet optimization initiative to improve store productivity and plan to close approximately 300 stores through fiscal 2020, which includes the 195 stores closed since the announcement of this initiative.
  • 18487872_75
    Financial - Shares / Equity
    Performance-based stock awards are granted in the form of restricted stock units which have a performance criteria that must be achieved for the awards to be earned in addition to a service period requirement ("Performance Awards") and each Performance Award has a defined number of shares that an employee can earn (the "Target Shares").
  • 18487872_37
    Other - Other
    Our effective tax rate was 21.7% and 31.2% in the Third Quarter 2018 and the Third Quarter 2017, respectively.
  • 18487872_162
    Other - Other
    Our effective tax rate was 21.7% and 31.2% in the Third Quarter 2018 and the Third Quarter 2017, respectively.
  • 18487872_191
    Other - Other
    Our effective tax rate was 7.0% and 13.4% during Year-To-Date 2018 and Year-To-Date 2017, respectively.
  • 18487872_121
    Other - Other
    The amendments in the guidance expand and refine hedge accounting for both non-financial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.
  • 18487872_214
    Financial - Debt
    The outstanding obligations under the Credit Agreement may be accelerated upon the occurrence of certain events, including, among others, non-payment, breach of covenants, the institution of insolvency proceedings, defaults under other material indebtedness and a change of control, subject, in the case of certain defaults, to the expiration of applicable grace periods.
  • 18487872_198
    Financial - Shares / Equity
    Our working capital decreased $126.9 million to $135.6 million at November 3, 2018 compared to $262.5 million at October 28, 2017, primarily due to the purchase of common stock related to our share repurchase programs.
  • 18487872_38
    Financial - Income
    The effective tax rate was lower primarily as a result of a lower U.S. Federal tax rate in fiscal 2018 due to the Tax Act and a favorable mix of income generated in foreign jurisdictions subject to lower tax rates.
  • 18487872_163
    Financial - Income
    The effective tax rate was lower primarily as a result of a lower U.S. Federal tax rate in fiscal 2018 due to the Tax Act and a favorable mix of income generated in foreign jurisdictions subject to lower tax rates.
  • 18487872_41
    Financial - Earnings
    This increase in earnings per share is due to the factors noted above and a lower weighted average common shares outstanding of approximately 1.6 million, which is the result of our share repurchase program.
  • 18487872_166
    Financial - Earnings
    This increase in earnings per share is due to the factors noted above and a lower weighted average common shares outstanding of approximately 1.6 million, which is the result of our share repurchase program.
  • 18487872_195
    Financial - Earnings
    This increase in earnings per share is due to the factors noted above and a lower weighted average common shares outstanding of approximately 1.2 million, which is the result of our share repurchase program.

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  • Form Type: Quarterly
  • Number of times amended: 0
  • Accession Number: 0001628280-18-014866
  • Submitted to the SEC: Thursday, December 6, 2018 4:10:31 PM EST
  • Accepted by the SEC: Thursday, December 6, 2018
  • Period ending: November 2018
  • Industry: Retail Family Clothing Stores