Children’s Place shares surge 49% after surprise profit by Investing.com

SECAUCUS, NJ – Shares of The Children’s Place (NASDAQ: ) surged nearly 49% in premarket trading after the children’s clothing retailer reported a surprise second-quarter profit, defying analysts’ expectations of a loss.

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

Despite the decline in revenue, Children’s Place significantly improved its profitability, with gross margin expanding 960 basis points to 35%. The company attributed this to lower entry 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, Interim President and CEO.

The retailer cut selling, general and administrative expenses to $88.3 million, a 15-year low for the second quarter. This helped generate adjusted operating income of $14.2 million, compared to a loss of $25 million in the year-ago period.

While e-commerce sales fell as the company cut back on unprofitable promotions, brick-and-mortar stores posted positive comparable sales for the first time in 10 quarters.

Children’s Place also took a $28 million impairment charge on its Gymboree trade name due to lower sales forecasts.

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