What happened

Shares of The Children's Place (PLCE -2.88%) are falling today after the company's first-quarter results missed expectations. The retailer's stock was down 20.5% as of 11:45 a.m. ET on Wednesday, according to data from S&P Global Market Intelligence.

The Children's Place recorded a loss of $2 per share on revenue of $321.6 million in the first quarter, falling short of the average Wall Street analyst's call for a per-share loss of $1.78 on sales of $338.46 million. Making matters worse, the company also issued substantial downward revisions for its full-year sales and earnings targets.

So what

Driven by a roughly 8% decline for same-store sales and a reduced store count, The Children's Place saw revenue decline 11.2% year over year in the first quarter. Gross profit margins also sank significantly, falling to 30% from 39.2% in the prior-year period.

The retailer says that it's facing some significant macroeconomic headwinds, and consumers are cutting back on spending. In response to these pressures, management cut its full-year performance targets for 2023. 

Now what

For the full year, The Children's Place is now guiding for earnings per share (EPS) between $1 and $1.50 on sales between $1.575 billion and $1.59 billion. This represents a substantial step-down from previous guidance for EPS between $2.50 and $3 on sales between $1.62 billion and $1.66 billion. The new targets also fell far short of the average Wall Street target for EPS of $2.34 on revenue of $1.65 billion.

Management's new guidance shocked the market, and business performance will likely be rough in the current quarter, but the company does see some improvements coming in the latter half of the year. With some costs on track to decrease and expectations for inventory levels to decline compared to the prior-year period, The Children's Place is guiding for a double-digit operating-income margin in the second half of the year. Still, the dramatic cut in its earnings target makes it clear the business is struggling right now.