The accelerated digital transformation at The Children’s Place has the specialty chain doing more with less.
In a Nutshell: “It’s clear to us that because we accelerated our digital transformation and our fleet optimization strategies, we are more efficient and streamlined and can now operate the company more effectively with less resources, less stores, less inventory, less people, and less expense—resulting in what we believe will translate to more consistent and sustainable results,” president and CEO Jane Elfers told investors in a second-quarter earnings conference call Thursday morning.
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The quarter exceeded company guidance for both top and bottom lines, with the sales beat the result of “strong digital performance fueled by a strong start to back-to-school,” she said.
Almost all new digital buyers are Gen Z consumers who prefer to shop using their smartphones. “The importance of the digitally native Gen Z demographic to our future business cannot be underestimated. And that is why we prioritized mobile first as the cornerstone of our digital transformation several years ago,” Elfers said.
Brand president Maegan Markee shared how new digital marketing investments spurred growth. Now, “57 percent of our acquisitions coming through our digital channels, versus 37 percent pre-pandemic,” she said.
The Children’s Place launched a back-to-school campaign with the Jonas Brothers earlier than usual this summer to capture “market demand and market share,” Markee said.
The retailer’s Amazon partnership is also yielding results. “We believe we have significant opportunity for continued wholesale wholesale growth in the back half of this year and beyond with this important partner,” she said.
And Sheamus Toal, chief operating officer and chief financial officer, said the company plans to close 80-100 doors, mostly by the end of the year, leaving it with 500 locations. This means it will have closed 600 stores since 2016.
“The composition of our new 500-store base is much more heavily weighted towards outlets versus pre-pandemic,” Toal said. “Outlets are our most productive and profitable store type.”
Outlets stores will make up 22 percent of The Children’s Place fleet and 30 percent of store sales, up from 14 percent and 20 percent, respectively, in 2019, Toal said.
The owner of The Children’s Place, Baby Place, Gymboree, Sugar & Jade and PJ Place banners said in June that it was laying off a good portion of its workforce.
Net Sales: For the three months, net sales fell 9.3 percent to $345.6 million from $380.9 million in the year-ago period. Comparable retail sales for the quarter fell 9 percent.
Elfers said e-commerce “represented an industry leading 51 percent of our retail sales in Q2, up from 47 percent last year and 30 percent in 2019.”
For the six months, net sales fell 10.2 percent to $667.2 million from $743.2 million.
Earnings: The company posted a wider loss for the quarter to $35.4 million, or $2.82 a diluted share, from a loss of $13.3 million, or $1.01, a year ago.
The company guided its third quarter adjusted diluted loss per share in the range of $3.55 to $3.65 on net sales between $470 million to $475 million.
For the full year 2023, the company narrowed its guidance and forecasted net income per diluted share between $1 and $1. 25 on net sales between $1.58 billion and $1.59 billion.
For the six months, the net loss was $64.2 million, or $5.16 a diluted share, against net income of $6.5 million, or 48 cents, a year ago.
CEO’s Take: “We believe that market share gains, not hoping for a baby boom, is what will move the needle for our business. And we believe that in order to gain share in the future. Digital needs to be our top priority,” Elfers said. “The digital channels are where our current core millennial customer prefers to shop for her kids.”
She added, “Gen Z digital buyers will surge from 45 million today to over 61 million in 2027.”
