Children’s Place stock soars 49% after surprise profit

SECAUCUS, N.J. – Shares of The Children’s Place (NASDAQ:) surged nearly 49% in premarket trading after the children’s apparel retailer reported a surprise profit for the second quarter, defying analyst expectations of a loss.

The company posted adjusted earnings of $0.30 per share for the quarter ended August 3, compared to the consensus estimate of a $1.05 per share loss. Revenue came in at $319.7 million, slightly below analysts’ projections of $320.14 million but down 7.5% year-over-year.

Despite the revenue decline, Children’s Place significantly improved its profitability, with gross margin expanding 960 basis points to 35%. The company attributed this to lower input costs and more rational promotional strategies.

“During the second quarter we proactively made certain strategic and operational changes to improve the profitability of the business and provide a foundation for future growth and we were pleased with the results,” said Muhammad Umair, President and Interim CEO.

The retailer slashed selling, general and administrative expenses to $88.3 million, the lowest level in over 15 years for a second quarter. This helped drive adjusted operating income of $14.2 million, compared to a $25 million loss in the year-ago period.

While e-commerce sales declined as the company reduced unprofitable promotions, brick-and-mortar stores saw positive comparable sales for the first time in 10 quarters.

Children’s Place also recorded a $28 million impairment charge on its Gymboree tradename due to reduced sales forecasts.

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