Children's Place Earnings: An Early Look

Earnings season is just about over, with almost all companies already having reported their quarterly results. But there are still a few companies left to report, and Children's Place (NASDAQ: PLCE  ) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Children's apparel is one of the most important niches in the retail space, as the speed with which kids grow out of clothes can lead to frequent repeat-business among loyal customers. Children's place has more than 1,100 stores tailored to try to build that loyalty among shoppers. Let's take an early look at what's been happening with Children's Place over the past quarter and what we're likely to see in its quarterly report on Tuesday.

Stats on Children's Place

Analyst EPS Estimate

$1.04

Change From Year-Ago EPS

20%

Revenue Estimate

$496 million

Change From Year-Ago Revenue

8.4%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Children's Place have a growth spurt this quarter?
Over the past few months, analysts have had mixed views on Children's Place's earnings. They've held steady on their calls for the just-finished holiday quarter, but they've pulled back their earnings-per-share estimates for the full 2014 fiscal year by $0.06. The stock has barely budged, climbing just half a percent since mid-December.

The holiday quarter is nearly always the most important time of the year for retailers, which get a disproportionately large amount of their annual sales then. That's somewhat less true for Children's Place because of the year-round need for different kinds and sizes of clothes, but it's still vulnerable to the same challenges that other retailers face. According to one analyst, early channel checks of Children's Place suggested that high inventory levels and heavy discounting during the post-Christmas shopping rush might hold back the retailer.

One big problem facing Children's Place is that higher payroll taxes and weak wage growth are leaving its core customers cash-strapped, with less discretionary income to spend. That has left rival Carter's (NYSE: CRI  ) , Children's Place, and their peers fighting over a smaller piece of consumers' wallets, as lower-priced options like thrift stores force new-clothing retailers to offer more attractive discounts to boost sales. At the same time, greater competition from broader-line retailers has posed an additional challenge for Children's Place, especially given Gap's (NYSE: GPS  ) resurgence over the past year as it has reorganized its various brands and targeted profitable niches.

In its quarterly report, watch Children's Place closely to see how much of its results came from discounting. Any disparity between revenue growth and margin contraction could indicate trouble ahead for the retailer.

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