The last time we checked in on children's apparel specialist Children's Place
The acquisition of Disney's
However, a modest slowdown in that key metric shouldn't necessarily come as a surprise, as the company is now overlapping some challenging comparisons. The 13% first-quarter improvement is stacked on top of a hefty 16% gain from a year ago. Meanwhile, rival Gymboree
Net income for the quarter fell 11% to $10.2 million, with most of the shortfall attributed to a one-time $1.2 million inventory-related charge. Nevertheless, earnings of $0.36 came in ahead of expectations as well as internal targets, and full-year guidance of $2.15 to $2.25 -- a 40% increase from last year -- was left intact. The impact of the Disney stores is clearly weighing on earnings, as the acquisition explained much of the 340-basis-point drop in gross margins to 38.3%. However, Children's Place is only six months into the repositioning of the franchise, and on the conference call management expressed confidence that operating margins at both concepts could rise into the double-digits.
After peaking at more than 700 stores several years ago, there are only around 300 Disney outlets today. However, two new stores have recently opened in high-profile locations, and another 40 are expected to be either opened or remodeled later this year. There are encouraging signs that during this learning process, the company is finding new ways to better leverage the rights to many of the world's most beloved characters in time for the pivotal fourth quarter.
In the meantime, Children's Place stores continue to bully their rivals, taking away a remarkable 120 basis points in market share over the past year. Over that same span, the company's shares have more than doubled, but still trade at a very reasonable enterprise value-to-free cash flow ratio of less than eight. Like an energetic child, Children's Place may be relatively small, but it is still clearly being heard.
Do you have a little one? Get some tips on the Fool's Parents and Expecting Parents discussion board.
Fool contributor Nathan Slaughter is in desperate need of a professional house cleaner. He owns shares of Children's Place, but none of the other companies mentioned.