2021 was a banner year for The Children's Place (PLCE 0.55%), as shares in the children's apparel retailer jumped 58% according to data from S&P Global Market Intelligence.
The company made a strong recovery from the pandemic and easily beat analyst estimates throughout the year as apparel sales in general recovered from a disastrous 2020. As the chart below shows, the stock surged through the first half of the year, but gave up some of those gains at the end of the year amid broad pressure on retail stocks due to supply chain challenges and labor shortages.
Children's Place came into the year looking undervalued after sluggish sales during 2020, and the stock surged nearly 50% in January even though there was no major news out on the company; investors seemed to anticipate strong sales following signs of an e-commerce boom during the holidays.
Indeed, the company did crush analyst expectations in its fourth-quarter report in March, but by then the market seemed to expect the strong beat. Sales fell 8% due to pandemic headwinds to $472 million, but that was still well ahead of the consensus of $420.2 million, while its per-share profit of $1.01 outpaced expectations of a $0.23 per-share loss.
After trading around $75 for most of the next two months, the stock surged 16% on May 17 on a smashing first-quarter earnings report. Sales of $435 million topped pre-Covid levels and topped estimates of $354.8 million. Meanwhile, its $3.25 in earnings per share, a record for any quarter, was well ahead of estimates of $0.06.
The stock got some analyst upgrades in June, but in August, it pulled back as the company missed revenue estimates in spite of a strong second-quarter earnings report.
Finally, the stock briefly popped in November after the company set another adjusted earnings-per-share record of $5.43 against expectations of $4.40, and set records for gross margin and operating margin. However, shares slumped over the rest of the year as supply chain woes dashed hopes for a strong holiday season.
After sliding by about 10% in the first week of the year, Children's Place stock now trades at a price-to-earnings ratio of less than 6 based on this year's expected earnings. In other words, the market has low confidence that its current profits will persist, but the company's strategy of closing stores and pivoting to e-commerce has paid off.
At the current price, the stock looks like an unbelievable steal.