Children’s Place Retail Stores Executive Insights: Guidance and Margins

On Thursday, Children’s Place Retail Stores, Inc. (NASDAQ:PLCE) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared.


Adrienne Tennant – Janney Capital: Let me say that the product does look much improved in spring. Jane, one of my questions is on the comp guidance, what gives you the confidence that the comp should be positive low single-digit, and for the year, I agree with that but for second quarter, it sound likes some of the issues that are pressuring the comps still exist in very much the same order of magnitude as maybe they did in the first quarter perhaps Canada getting better. And then also specifically with the product, the Big Girl, Big Boy obviously there has been a lot of focus on that you can absolutely see it. Is there something with the target income demographic that may not be rising to the new price points and how do you prospect to get maybe a less price-sensitive consumer who really appreciates all that you are doing in increasing the value proposition?

Jane Elfers – President and CEO: Sure. Well, I think, on the comp guidance, we thought that we would be flat to around positive 1 for Q1, and we were pretty close at negative 0.7. When you look at really what happened in the first quarter we were running low single digit comps through Easter, and then in the post-Easter business, particularly in the baby side of the business was a lot tougher once we got into the April time period. I think, when you look at second quarter, we feel very strongly that Canadian turnaround that began in a significant way in Q1 is going to continue strongly through Q2 and into the second half of the year. And as John mentioned, outlets was negative double digit decline in comp and we think that that turnaround, as we’ve been saying, you are going to start to see that with the back-to-school floor set. So, we feel strongly about that. In addition, we are up against the lowest – the easiest, I should say, compared from last year with the negative fixed comp in the second quarter, so we think to be take into account all those things and we believe that the Big businesses as you mentioned will continue to stay strong. To answer your question on the product in Big, we’ve really been focusing a lot on Big products since I arrived. I think we mentioned a couple of years ago, when you look at the demographics 2007 was the highest birthrate year and then has been going down since and it is not projected to even achieve 2008 or 2009 levels until maybe the earliest 2015. So, those babies born in 2007 are turning 5 this year and one of the strengths of our model is that we go after that 0 to 10 year old. So, we are starting to see what we believe will be a continued run of strength in those Big zones, and as I said, we’ve been focus a lot not just on the apparel, but on the accessories and shoes that also appeal to that little bit of an older customer. So, we don’t think that there is a price sensitivity issue with this customer. We were able to increase AUR overall 6% in the first quarter and significantly higher in the Big businesses, and we’ve had a little bit of a run the last six quarters of AUR increases. So, we think that what we put into the product the customer is certainly responding to and will continue to hold that outlook for the foreseeable future.


Dorothy Lakner – Caris: Just to follow-up a bit on your last comments, Jane, so do you see the store sort of flexing to represent more of the Big product using less base for the more promotional area in Baby? Is that something that we should see going forward? Then secondly, on the outlet business, I wondered if you could just update us a bit on margins in that business and the progress that’s been made in the quarter and where the made-for-outlet product will be by the time we get to back-to-school?

Jane Elfers – President and CEO: Sure. On the flexing question, as I said, one of the beauties of our model is that we do appeal to a broad range and age range of kids and we are able to flex it. If you take the back-to-school time period for instance, we learned last year that we probably put too much emphasis on Baby during the back-to-school time period and not enough emphasis on Big so when you see our back-to-school floor-sets that start on (7/9). You’ll see that we are devoting more floor space from that (7/9) to let’s say 9/15 time period to the Big businesses and I think we’ll see the return on that. So we will continue to make those trade-offs in those options where we see fit. As far as the outlet margins we had about 200 basis point increase in outlet margins in Q1 and we expect to see those margins continue to strengthen throughout 2012 and beyond. As far need for outlet product we’ll be over 50% when we get to the back-to-school setup and closer to 80% when we end the year in ’12.