- The Children's Place barreled through its second quarter and back-to-school season, posting a 20.1% year-over-year spike in net sales, which totaled $448.7 million, according to a company release. Comparable sales were up 13.2% in Q2, partly due to a strong traffic increase at its brick-and-mortar stores and digital sales increases.
- Net income in Q2 fell by nearly half, to $7.5 million, partly from costs related to the children apparel retailer's "transformation" efforts, while operating income more than tripled to $10 million. The retailer handily beat FactSet consensus estimates on earnings, sales and comps, according to MarketWatch.
- The retailer, which has already benefited from Gymboree's bankruptcy and downsizing, put its competitor on notice that it wasn't finished. "[W]e have made the decision to aggressively pursue market share from Gymboree in the locations where we are co-located," Children's Place CEO Jane Elfers said Thursday on a conference call, according to a Seeking Alpha transcript. She added that "with several of our new digital abilities now up and running, we can and are successfully targeting their customers."
Children's Place in recent years has offered the retail world a clinic on how to adapt to a fast-moving landscape. The company emerged from the doldrums and a proxy fight — sparked by its poor performance — just a few years ago and has reshaped its business by investing in e-commerce, supply chain and strategic closures of its brick-and-mortar stores.
Many analysts and observers put the credit for the turnaround at Children's Place squarely with Elfers, who has been CEO since 2010. The retailer has also benefited from the travails of some of its competitors in the sector, including Toys R Us and Gymboree.
Gymboree filed for bankruptcy last year, closing more than 300 stores in the process. After an orderly Chapter 11, Gymboree emerged quickly and this July tried to reboot its brand and fortunes, following years of sputtering, with an overhaul of its assortment. But some customers balked at the changes and told Gymboree on social media that they would be shopping elsewhere.
"You lost me, Gymboree," one parent told the company on Facebook in a post about the retailer's new clothing lines. "No longer interested in liking a page with overpriced clothes that lost what made them special in the first place." Another wrote: "I guess it's official my kids will be naked now since Gymboree has NOTHING cute to buy and I bought 90% of our clothes there. If i wanted to look like cat and jack or gap i [sic] would have shopped there." And there were plenty more like that.
Elfers and her team noticed. Pointing to changes in Gymboree's pricing and products, Elfers told analysts Thursday, "We believe that their new strategy could result in an acceleration of their store closure timelines, giving us the potential for additional market share opportunity."
Nor does the retailer plan on stopping with Gymboree. Elfers on Thursday essentially put all sellers of children's clothing on notice that her company wanted their market share. "Many of our competitors have been forced into playing varying degrees of defense as they come to realize that significant parts of their strategic growth plans are not delivering the intended results," Elfers said. "Some had or have serious financial issues, and most have been unable to deliver product that resonates with their target customer from all of their brand portfolios at the same time."
She added much more in that vein, including that one of Children's Place's competitors — which she did not name but identified as having been "unsuccessfully trying to resuscitate itself for about a decade, with no luck" — has been copying "everything The Children's Place does down to our e-mail layout." The upshot of the discussion was that the retailer has competitors suffering from "self-inflicted" missteps that "have led to on-the-fly strategy shift to try to make up for unanticipated growth gap" and switching to defense.
All of these flubs by competitors open up "additional market share opportunities for The Children's Place," Elfers said.