Children’s Center (NASDAQ:PLCE) fell nearly 15% in pre-market declines after the youth-focused retailer pulled back in full-year earnings forecasts.
For the third quarter, the retailer exceeded revenue expectations, but fell short of EPS estimates. Management criticizes persistence supply chain stress and rising costs, combined with advertising, for a disappointing final report. Product categories were up 24% compared to the previous quarter, which led to continued demand for advertising.
“Sales were down significantly in the last two weeks of October,” said CEO Jane Elfers. “Gross margin was about 300 basis points below our expectations due to long-term pressure from rising inventory, distribution, and transportation.”
While he highlighted strong digital marketing and successful marketing, Elfers cautioned about what’s to come.
“We have lowered our expectations for the fourth quarter and the full year, due to the combination of economic challenges and continued pressure on commodity prices,” he said. “Sales in the first two weeks of November were unexpected and we expect that the price hikes affecting our consumers will continue to result in lower demand this holiday season. We are now preparing for a strong marketing campaign in the fourth quarter, and we are focusing on our product growth this quarter.” and we expect that, as a result of our plans, our inventory will improve by ending Q4 in the high single digits.”
Management expects net sales of between $460M to $470M for the fourth quarter, below consensus estimates of $480.09M. Meanwhile, guidance for adjusted earnings per diluted share of between $0.50 and $0.75 is well below the $2.34 consensus among “reasonable growth” stocks.
For the full year, total sales of $1.713B to $1.723B were adjusted from the $1.73B initial expectation and $1.72B consensus. Earnings per share expectations were reduced due to a very weak Q4 EPS guidance to $4.05 to $4.30 from the forecast of $7.00. Wall Street was expecting $6.27.
Parts of the Children’s Area fell 14% shortly before the seal began to control the losses to approx 5.9% about 90 minutes before the opening bell on Thursday. Trading volume remained light in the premarket segment.
Check the details of the results.