SECAUCUS, N.J., May 17, 2018 (GLOBE NEWSWIRE) The Children’s Place, Inc. (Nasdaq:PLCE), the largest pure-play children’s specialty apparel retailer in North America, today announced financial results for the thirteen weeks ended May 5, 2018.

                                                                                                                                               
Jane Elfers, President and Chief Executive Officer announced, “Our ability to sell seasonal product in the first quarter was severely hampered by the combination of a record number of winter storms and the unseasonably cold temperatures that persisted across our major markets. We generated comparable retail sales of negative (1.8%) in the first quarter vs. a positive 6.1% comp in the first quarter of 2017. However, when the weather improved across the country in the 13th week of the quarter, our sales turned aggressively positive. The strong sales momentum has continued and quarter to date, we are currently running a positive 24% comp. We expect that this pent up demand for seasonal product will continue and enable us to deliver strong second quarter results.”

Ms. Elfers continued, “We remain focused on our accelerated digital transformation, with the goal of one to one personalization. This is our single biggest top and bottom line opportunity and our digital investments, with the goal of continuing to gain market share, are focused on improving customer retention, driving customer acquisition and increasing customer engagement with our brand. We are uniquely well-positioned internally and from a competitive standpoint to deliver the next phase of our strategic growth plan.  Based upon our consistently compelling product offering, our proven ability to grow market share, our strong operating fundamentals, our best-in-class management team, and most importantly, our long and consistent track record of delivering results, we expect to achieve a 12% operating margin and $12.00 in EPS by the end of 2020.”

Financial Results
The Company’s results are reported in this press release on a GAAP and as adjusted, non-GAAP basis. A reconciliation of non-GAAP to GAAP financial information is provided at the end of this press release.

First Quarter 2018 Results
Net sales decreased (0.1%) to $436.3 million and comparable retail sales decreased (1.8%) in the first quarter of 2018.

Net income was $31.5 million, or $1.78 per diluted share, in the first quarter of 2018, compared to net income of $36.2 million, or $1.97 per diluted share, the previous year.  Adjusted net income was $33.2 million, or $1.87 per diluted share, compared to adjusted net income of $35.9 million, or $1.95 per diluted share, in the first quarter last year.

Gross profit was $160.2 million in the first quarter, compared to $170.6 million in the first quarter of 2017. Adjusted gross profit was $161.5 million in the first quarter, compared to $171.0 million last year, and deleveraged 220 basis points to 37.0% of sales. Lower than expected traffic in the quarter pressured gross margin as the Company lowered AUR’s to clear merchandise, resulting in on plan inventory levels at the end of the quarter. Gross margin rate in the quarter was also negatively impacted by the increase in penetration of our digital business to 26% from 23% last year. Our digital business operates at a lower gross margin rate due to higher fulfillment costs but is accretive to operating margin. The negative comp also resulted in deleverage of fixed expenses. Gross margin rate was positively impacted by the reclassification of certain items due to the new revenue recognition rules.

Selling, general and administrative expenses were $118.5 million compared to $112.1 million in the first quarter of 2017. Adjusted SG&A was $118.7 million compared to $106.9 million in the first quarter last year and deleveraged 270 basis points as a percentage of net sales primarily as a result of the incremental investment in our transformation initiatives and the reclassification of certain items due to the new revenue recognition rules, partially offset by lower incentive compensation expenses.

Operating income was $23.1 million, compared to operating income of $42.3 million in the first quarter of 2017. Adjusted operating income in the first quarter of 2018 was $25.4 million, or 5.8% of net sales, compared to adjusted operating income of $48.4 million in the first quarter last year, deleveraging 530 basis points compared to last year.

Adjusted tax rate was negative (32.4)% for the quarter vs. positive 25.7% last year, primarily due to the impact of the accounting rules related to the income tax impact on share base compensation and the impact of the lower corporate tax rate. The income tax impact on share based compensation contributed $0.80 cents to adjusted EPS in the first quarter compared to $0.19 cents in the first quarter of 2017, due to the timing of share vesting.

For the first quarter, the Company’s adjusted results exclude net expenses of approximately $1.7 million, compared to excluded net income of approximately $0.3 million in the first quarter of 2017, comprising certain items which the Company believes are not reflective of the performance of its core business. For the first quarter of 2018, these excluded items are primarily related to restructuring costs, including an inventory write-off associated with the transition of our China business to a franchise partner, and asset impairment charges, partially offset by income associated with insurance proceeds related to a claim settlement. For the first quarter of 2017, these excluded items are primarily related to income associated with the release of reserves for prior year uncertain tax positions, partially offset by charges related to a provision for a legal settlement resulting from a pricing litigation.

Store Openings and Closures
Consistent with the Company’s store fleet optimization initiative, the Company closed 12 stores and did not open any stores during the first quarter of 2018. The Company ended the first quarter with 1,002 stores and square footage of 4.7 million, a decrease of 2.7% compared to the prior year. Since our fleet optimization initiative was announced in 2013, the Company has closed 181 stores.

The Company’s international franchise partners opened 11 points of distribution and closed 1 in the first quarter, and the Company ended the quarter with 200 international points of distribution open and operated by its 8 franchise partners in 20 countries.

Capital Return Program
During the first quarter of 2018, the Company repurchased 1.03 million shares for approximately $162 million, inclusive of shares repurchased under an accelerated share repurchase program and shares surrendered to cover tax withholdings associated with the vesting of equity awards held by management. The Company also paid a quarterly dividend of approximately $8 million, or $0.50 per share, in the quarter.

Since 2009, the Company has repurchased approximately $1.03 billion of its common stock and, since 2014, paid approximately $75 million in dividends. At the end of the first quarter of 2018, approximately $332 million remained available for future share repurchases under the Company’s existing share repurchase programs.

The Company’s Board of Directors authorized a dividend of $0.50 per share, payable on June 29, 2018 to shareholders of record at the close of business on June 18, 2018.

Outlook
For fiscal 2018, the Company is reaffirming its outlook for adjusted net income per diluted share in the range of $7.95 to $8.20. This compares to adjusted net income per diluted share of $7.91 in fiscal 2017. We expect total net sales for the year to be in the range of $1.920 billion to $1.935 billion. This guidance assumes a comparable retail sales increase of approximately 3.5% to 4.5%. The Company now expects adjusted operating margin to be in the range of 8.5% to 8.7%, reflecting lower adjusted operating income compared to its previous outlook. The Company expects this shortfall to be offset by a lower tax rate.

The Company expects net income per diluted share in the second quarter of 2018 to be in the range of $0.51 to $0.61 based upon a high single digit comparable retail sales increase. This compares to adjusted net income per diluted share of $0.86 in the second quarter of 2017.

Additional details underlying the Company’s outlook for the second quarter and full year 2018 will be provided on the conference call and will also be available in the conference call transcript which will be posted on our website. An audio archive will also be available on the Company’s website.

Conference Call Information
The Children’s Place will host a conference call today at 8:00 a.m. Eastern Time to discuss its first quarter 2018 results and the Company’s outlook. The call will be broadcast live at http://investor.childrensplace.com. An audio archive will be available on the Company’s website approximately one hour after the conclusion of the call. A conference call transcript will also be posted on our website.

Financial Results
The Company’s results are reported in this press release on a GAAP and as adjusted, non-GAAP basis. Adjusted net income, adjusted net income per diluted share, adjusted gross profit, adjusted SG&A, and adjusted operating income are non-GAAP measures, and are not intended to replace GAAP financial information and may be different from non-GAAP measures reported by other companies. The Company believes the income and expense items excluded as non-GAAP adjustments are not reflective of the performance of its core business and that providing this supplemental disclosure to investors will facilitate comparisons of the past and present performance of its core business.  The Company uses non-GAAP measures to evaluate and measure operating performance, including, to measure performance for purposes of the Company’s annual bonus and long-term incentive compensation plans. A reconciliation of non-GAAP to GAAP financial information is provided at the end of this press release.

About The Children’s Place, Inc.
The Children’s Place is the largest pure-play children’s specialty apparel retailer in North America.  The Company designs, contracts to manufacture, sells at retail and wholesale, and licenses to sell fashionable, high-quality merchandise at value prices, primarily under the proprietary “The Children’s Place,” “Place” and “Baby Place” brand names.  As of May 5, 2018, the Company operated 1,002 stores in the United States, Canada and Puerto Rico, an online store at www.childrensplace.com, and had 200 international points of distribution open and operated by its 8 franchise partners in 20 countries.

Robert Vill, Group Vice President, Finance, (201) 453-6693
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