Children's Place Sees Strong Holiday Quarter, Shares +14%

Orlando, FL 11/17/11 (StreetBeat) --Children's Place Retail Stores Inc (Nasdaq: PLCE) is eyeing a strong end to the year as it expects to keep a tight leash on its merchandise, helping it ride through a highly promotional holiday season with improved margins.

Shares of the company were up more than 14 percent at $51.46 on Thursday, recovering their losses since May when it had forecast a weak second quarter.

Children's Place, which competes with chains like Target Corp (NYSE: TGT) and Gap Inc's (NYSE: GPS) Old Navy, caters to households with a median annual dual income of about $70,000 -- or people who are still leaning on deals and discounts for their shopping.

"We have a stronger promotional strategy in place for fourth quarter versus last year," Chief Executive Jane Elfers said on a conference call with analysts. In the past, the company has made inventory and merchandise missteps that had often led the retailer to discount heavily at the end of each season to get rid of unsold merchandise, hurting margins. Elfers, who took charge of the company last year, has been working to correct those issues with revamped styles in clothes and deals. The company recently appointed former Pepsico Inc (NYSE: PEP) official Lori Tauber Marcus as its marketing chief.

"Barring a material weakening of the economy, we firmly believe that the significant progress we have made ... will result in positive comp sales growth, continued gross margin expansion and operating margin expansion in fiscal 2012," she said.

For the third quarter ended October 29, which takes into account sales during the back-to-school-season, the kids' clothes retailer saw gross margins expanding 110 basis points to 41.3 percent, and expects them to grow 30-50 basis points in the fiscal year.

Margins were helped by higher prices on products, but CEO Eflers said even with the new price tags, Children's Place is priced notably below the mall-based competition by about 30 percent, and in line with other value retailers.

The Secaucus, New Jersey-based company also expects to earn more than its earlier forecast this fiscal year.

For the third quarter, the company earned $33.7 million, or $1.33 a share, topping analyst estimates, according to Thomson Reuters I/B/E/S. Sales rose 7 percent to $484.1 million.

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