The Children’s Place Q2 comparable sales down 3.5 percent

The *Children's Place, *announcing its financial results for the thirteen weeks ended August 1, 2015 said that net sales were 366.5 million dollars including the negative impact of approximately 6.4 million dollars from currency exchange rate fluctuations. This compares to net sales of 384.6 million dollars for the second quarter of 2014. Comparable retail sales decreased 3.5 percent during the quarter under review.

”We delivered an adjusted loss per diluted share of 0.33 dollar in the quarter compared to 0.37 dollars in the second quarter of 2014. Comparable retail sales were negative, primarily driven by a significant deceleration of consumer traffic as the quarter progressed, resulting in a more intense promotional environment than anticipated, which was further exacerbated by the continuing west coast port issues experienced by our competitive set,” said Jane Elfers, President and Chief Executive Officer of The Children’s Place.

Net loss widens against last year

Net loss was 13.7 million dollars, or 0.67 dollar per diluted share, in the second quarter, compared to net loss of 10.7 million dollars, or 0.49 dollars per diluted share, the previous year. Adjusted net loss was 6.8 million dollars, or 0.33 dollar per diluted share, inclusive of a negative 0.02 dollar impact due to foreign exchange, compared to 8.2 million dollars, or 0.37 dollar per diluted share, in the second quarter last year.

Gross profit and adjusted gross profit were 115 million dollars this year, compared to 119.1 million dollars last year, and leveraged 40 basis points to 31.4 percent of sales. Operating loss was 20.1 million dollars, compared to 16.5 million dollars in the second quarter of 2014. Adjusted operating loss in the second quarter was 8.9 million dollars compared to an adjusted operating loss of 12.5 million dollars in the second quarter last year, and leveraged 80 basis points to 2.4 percent of sales.

The company opened one store and closed seven stores and ended the second quarter with 1,086 stores, a decrease of 2.8 percent compared to the prior year. The company's international franchise partners opened six stores in the second quarter, and the company ended the quarter with 85 international franchise stores open and operated by its franchise partners in 11 countries.

Net sales decline in the first half

Net sales declined 3 percent to 771.3 million dollars, compared to 794.8 million dollars in the first half of the prior year. Comparable retail sales declined 1.3 percent. Year to date sales include the negative impact of approximately 11.2 million dollars from currency exchange rate fluctuations.

Net income was 1.9 million dollars, or 0.09 dollar per diluted share, compared to net income of 2.9 million dollars, or 0.13 dollar per diluted share, the previous year. Adjusted net income was 10.9 million dollars, or 0.52 dollar per diluted share, inclusive of a negative 0.03 dollar impact due to foreign exchange.

Gross profit was 267.1 million dollars in the first half of 2015, compared to 267.4 million dollars last year. Adjusted gross profit was 267.4 million dollars, or 34.7 percent of net sales, an increase of 100 basis points compared to last year.

Update on Q3 and FY15 earnings outlook

The company is updating its outlook for fiscal 2015 and now expects adjusted net income per diluted share to be in the range of 3.35 dollars to 3.45 dollars, inclusive of a 0.15 dollar negative impact from foreign exchange. This compares to the company's previous guidance of 3.30 dollars to 3.45 dollars per diluted share and to adjusted net income per diluted share of 3.05 dollars in fiscal 2014. This guidance assumes that comparable retail sales for the year will be approximately flat compared to fiscal 2014.

For the third quarter of 2015, the company expects adjusted net income per diluted share between 1.90 dollars and 1.96 dollars, inclusive of an estimated 0.07 dollar negative impact from foreign exchange. This compares to adjusted net income per diluted share of 1.82 dollars in the third quarter of 2014. This guidance assumes that comparable retail sales for the third quarter will increase by approximately 1 percent.