Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of specialty retailer The Children's Place Retail Stores
So what: Children's Place shares have held up nicely over the past few months, but the fourth-quarter cut -- management now sees EPS of $0.85-$0.90 versus its prior view $1.19-$1.24 -- suggests that things aren't so positive. While the company has been able to lure customers away from larger rivals such as Target and Gap with big discounts, shrinking margins are triggering worries over its long-term profitability.
Now what: I'd look into this plunge as a possible buying opportunity. Sliding margins are definitely a concern, but with CEO Jane Elfers expecting a strong rollout in 2012, as well as a drop in input costs in the second half of the year, current buyers might have some legitimate tailwinds working in their favor. More importantly, with a cheapish forward P/E of 12 and a debtless balance sheet, the downside seems decently protected.
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