Children’s Place Inc.’s stock dropped 19% on Tuesday after the struggling store’s profit almost halved from the same time last year. The company continued to cut costs and pull away from businesses that weren’t making money to try to make more money.
Gymboree, Sugar & Jade, and PJ Place are all owned by the Secaucus, NJ-based company PLCE -22.60%. The company has been trying to turn things around since February, when Saudi Arabia’s Mithaq Capital bought a 54% stake and fired the company’s senior CEO.
Muhammad Umair, who has a background in finance and was put on the company’s board of directors by Mithaq, was made interim CEO. He said that the company continued to build on its efforts to make more money during the quarter.
As we’ve already talked about, Umair said in prepared comments, “We expected that our strategic changes would put pressure on topline sales. However, we are laser-focused on profitability and willing to proactively sacrifice unprofitable sales to improve operating results for our shareholders.”
For the quarter ending November 2, the company made $20.1 million, or $1.57 per share. This was less than the $38.5 million, or $3.05 per share, it made during the same time last year. After one-time things were taken into account, the company had EPS of $2.04.
Last year’s sales were $480.2 million, but this year they were only $390.2 million. Same-store sales dropped 17.1%, mostly due to a sharp drop in e-commerce income. This was because the company got rid of sales that weren’t making money, cut back on marketing costs that were too high, and stopped “free shipping” orders.
There aren’t any good FactSet consensus forecasts for the business.
Umair talked about a new deal that Children’s Place has made with the Chinese ultra-cheap shopping site Shein. He said that this deal will bring the store customers “that would not normally be found in our customer file.”
Brick-and-mortar sales dropped for the company in the quarter because there were fewer stores and fewer purchases.
The good news is that the company was able to bring down its sales, general, and management costs to their lowest level in over 15 years. That was done by cutting the salaries of people who worked in stores and from home and getting rid of some marketing costs.
The net interest costs went up from $7.9 million to $10.1 million last year. This was mostly because the average interest rates on loans given by Mithaq and on its open credit facility went up.
Children’s Place closed five stores in the third quarter, leaving them with 510 stores and 2.4 million square feet of space. In the Garden State Plaza Mall, the company opened its first store in more than two years. It was a Gymboree shop.
Year-to-date, the stock has dropped 43%, while the S&P 500 has gone up 27%.
