November 15, 2012
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 children's apparel retailer The Children's Place (Nasdaq: PLCE ) sank 15% today, after its full-year outlook missed Wall Street estimates.
So what: Third-quarter results -- EPS rose to $1.44 from $1.33 a year earlier -- were in line with expectations, but downbeat guidance for 2012 is forcing analysts to lower their valuation estimates. Management blamed the cut largely on increased promotions after superstorm Sandy pummeled the northeast, however, giving investors some hope that the trouble is just a short-term blip.
Now what: Management now sees full-year 2012 EPS of $3.10-$3.15, down from its prior view of $3.20-$3.30, and below the consensus of $3.31. According to CEO Jane Elfers:
Entering the fourth quarter, Hurricane Sandy had a devastating impact on our region. We still expect to deliver positive comparable retail sales, but we are adjusting the margin and earnings outlook ... due to the heightened promotional environment post-Sandy.
Couple that short-term turbulence with the already-intense nature of the kids' apparel space, and I'd wait for an even bigger pullback before jumping into the stock.
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