What happened
Shares of apparel company The Children's Place (PLCE -1.75%) plummeted on Tuesday, after the company reported results for the second quarter of 2020. Net sales dropped 12% for the quarter and are down 25% so far in 2020. But investors are likely more concerned that the upcoming third quarter is still being negatively impacted by the COVID-19 pandemic.
As of 10:15 a.m. EDT, The Children's Place stock was down 19% for the day, and it's now down 80% from 52-week highs.
So what
It's not a surprise to see the company struggling. All brick-and-mortar clothing retailers are in the same boat, with the COVID-19 pandemic closing stores and shifting demand online. The company closed all stores on March 18, but most have now been reopened.
The Children's Place business just isn't snapping back to normal. Fiscal Q2 ran from May to Aug. 1, a time period where many stores were reopened. However, this company depends a lot on back-to-school shopping. It was prepared for a sales bump that never materialized; schools aren't back to prepandemic norms.
In Q2, the retailer's net sales fell 12% year over year to $369 million. This decline in sales led to a massive $47 million net loss, or a loss of $3.19 per share. So far in 2020, the company has accrued a $11.09 loss per share.
Image source: Getty Images.
Now what
Looking ahead to Q3, it's not looking much better for The Children's Place. CEO Jane Elfers said, "our back to school sales have been significantly impacted and we anticipate a meaningful negative impact on our Q3 results." Considering its mounting losses and having little to look forward to next quarter, it's not surprising to see the stock sell off.
For now, The Children's Place is focusing on optimizing its real estate portfolio. It's already permanently closed 102 locations so far this year, with its sights set on 200 total closures by year's end. Next year it plans to close 100 more as it seeks to become less reliant on physical retail locations and pivot toward digital channels.
