B. Riley Downgrades Children’s Place on Margin and Cost Pressures
November 21, 2023
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B. Riley has recently downgraded Children’s Place ($NASDAQ:PLCE), a leading children’s clothing retailer, due to increasing costs and shrinking margins. This downgrade is particularly concerning for Children’s Place shareholders, as the company has been struggling to remain competitive in the highly saturated retail industry. However, in recent years, rising costs have hindered the company’s ability to generate profits. Additionally, the competition from online retailers has further squeezed their margins.
Share Price
On Monday, B. Riley analyst Jeff Van Sinderen downgraded CHILDREN’S PLACE stock from “neutral” to “sell”, citing increasing margin and cost pressures. The stock opened at $18.0 and closed at $19.3, up by 1.2% from the last closing price of $19.1. He added that the company’s ability to weather the current challenges is uncertain given its weak financials and lack of strategic focus. Live Quote…
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for Children’s Place. More…
| Total Revenues | Net Income | Net Margin |
| 1.6k | -76.23 | -4.5% |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for Children’s Place. More…
| Operations | Investing | Financing |
| -33.88 | -38.88 | 67.09 |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for Children’s Place. More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 973.38 | 855.31 | 6.89 |
Key Ratios Snapshot
Some of the financial key ratios for Children’s Place are shown below. More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| 0.9% | -74.4% | -5.4% |
| FCF Margin | ROE | ROA |
| -3.0% | -63.1% | -5.6% |
Analysis
GoodWhale has analyzed the financials of CHILDREN’S PLACE and classified them as an ‘elephant’, a type of company that is rich in assets after subtracting liabilities. As illustrated on the Star Chart, CHILDREN’S PLACE is strong in liquidity, medium in asset, profitability and weak in dividend and growth. Its intermediate health score of 5/10 with regard to its cashflows and debt indicates that it should be able to pay off its debt and fund future operations. These results make CHILDREN’S PLACE an attractive target for value investors, who are looking for companies with good liquidity but may not have the highest growth rates. They may also be of interest to income investors looking for a steady source of dividend income from a company with strong profitability. More…
Peers
The company operates over 1,000 stores in the United States and Canada under The Children’s Place, Place, and Baby Place banners. Children’s Place is the largest pure-play children’s specialty apparel retailer in North America. Abercrombie & Fitch Co., Christopher & Banks Corp., and Gap Inc. are its competitors.
– Abercrombie & Fitch Co ($NYSE:ANF)
Abercrombie & Fitch Co is an American apparel retailer. The company operates in the United States and internationally. The company was founded in 1892 and is headquartered in New Albany, Ohio. The company operates over 800 stores globally. The company’s products are targeted at the teenage and young adult market. The company’s brands include Abercrombie & Fitch, abercrombie kids, and Hollister Co.
– Christopher & Banks Corp ($OTCPK:CBKCQ)
Christopher & Banks Corporation is a specialty retailer of private label and exclusive brand women’s apparel, accessories, and gifts. The company operates in three segments: Retail Stores, Outlets, and E-commerce. As of January 30, 2021, it operated 546 stores in 44 states. The company was founded in 1956 and is headquartered in Plymouth, Minnesota.
– Gap Inc ($NYSE:GPS)
Gap Inc is a leading global retailer with a market cap of 3.9 billion as of 2022. The company has a return on equity of -10.09%. Gap Inc operates over 3,700 stores in more than 90 countries. The company offers apparel, accessories, and personal care products for men, women, and children under the Gap, Banana Republic, Old Navy, Athleta, and Intermix brands.
Summary
B. Riley recently downgraded Children’s Place due to concerns about widening margins and increasing costs. The company is expected to face difficulties in sustaining its current profitability levels, as competition in the retail sector has become increasingly intense. Consumers are becoming more price-sensitive, driving down margins and making it difficult for Children’s Place to remain profitable.
Additionally, rising costs have led to a decrease in earnings. B. Riley suggests that these factors will continue to affect Children’s Place in the near future and may lead to further downgrades in the company’s stock. Investors should proceed with caution when considering investing in Children’s Place due to the current conditions of the retail sector.
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