The Children's Place Stock Drops -12% After Earnings Miss

The Children’s Place (NASDAQ:PLCE) released its Q4 and full year 2018 results today, resulting in a sharp drop in its stock. The retail stock dropped over -12% today, as investors responded to the earnings miss. The company also announced that it would acquire its rivals Gymboree and Crazy 8.

The Children’s Place Fiscal 2018 and Q4 Earnings

The children’s retailer brought in $530.6 million in Q4 2018, which is down -6.9% from the previous year of $570 million. The company’s comparable retail sales decreased by -0.6% in Q4, and US comparable retail sales dropped -8.2%. The Children’s Place saw an 11% decrease in the weeks leading up to Christmas, and for the quarter, store traffic was down -3%.

Despite the rocky store sales, the company’s e-commerce site saw an increase of +20.1%, which accounted for 27% of its sales. The company saw a net income of $12 million this quarter, compared to its net loss of -$9.9 million the previous year. The company had a rough Q4 2018 and investors sold off its stock for that very reason.

However, The Children’s Place net sales for fiscal 2018 rose 3.6% compared to the previous year to $1.93 billion from $1.87 billion. The company’s net income was $101 million in fiscal 2018, compared to $84.7 million the previous year.

The retail company closed 16 stores in Q4 2018 and didn’t open any new ones. The Children’s Place ended 2018 with 972 retail stores.

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Gymboree and Crazy 8 Acquisitions

The Children’s Place will pay $76 million for the rights associated with both the Crazy 8 brand and Gymboree, according to a bankruptcy court document. In addition to the two takeovers, it will also take over a contract with Singapore-based Zeavion Holdings. Back in 2016, Zeavion acquired a subsect of Gymboree Play and Music Business.

Both transactions must still be approved by a bankruptcy court. Despite the losses in Q4 2018, The Children’s Place shows positive movement forward with these acquisitions. It seems investors wanted immediate results and dumped the stock based on its Q4 revenue.