24/7 Wall St.

The Children’s Place Retail Stores, Inc. (NASDAQ:PLCE) just can’t seem to get it right.  The company posted a 4% September sales gain to $217.8 million, but its same store sales came in at -3% (compared to a 16% gain last year).  To top it off, it now anticipates that earnings per share for the third quarter will come in at least 60% below the low end of its previous guidance of $0.94 to $1.02 given on August 23, 2007. Included in this new outlook is an estimated charge of approximately $0.07 per share related to severance payments to be made to the former chief executive officer pursuant to the terms of his employment agreement.  This will drag down its annual guidance significantly as well, and it does not plan to offer further guidance for Q4 or the fiscal year.  Of course the ‘unseasonally warm temperatures’ was also thrown out there as part of the excuse as well.

Children’s Place had to take significant inventory markdowns and expects these trends to continue for the remainder of the year.  Chuck Crovitz, the interim CEO, is actively engaged with other members of management in overseeing the updating and completion of the Company’s delinquent SEC filings.  The Board of Directors has established a Search Committee to find a permanent CEO. Despite noting that it is reviewing inventory strategy, it will likely take several quarters to make adjustments to the extent they are necessary.

After the prior reduction and disclosure of being out of compliance with its Disney deal, it’s hard to want to endorse this regardless of a low trailing P/E.  Shares are hitting another 52-week low at $20.56 pre-market, and the 52-week trading range is $23.86 to $71.81.  It sure sounds like this company better find a permanent CEO rather fast.

Jon Ogg
October 9, 2007

Jon Ogg produces the "Special Situation Investing Newsletter" and he does not own securities in the companies he covers.