Earnings Preview: The Children’s Place might not get a treat this quarter

The Children’s Place (PLCE) is scheduled to report second quarter earnings on Thursday before the bell. In the first quarter, the company’s net sales inched down 0.1% and comparable sales dropped 1.8%. Children’s Place also saw decreases in profits during the first quarter compared to the prior-year period. Gross margins saw pressure from lower traffic.

For full-year 2018, the company guided for net sales to be between $1.92 billion to $1.93 billion and adjusted EPS to be in the range of $7.95 to $8.20. It also guided the second quarter profit to be in the range of $0.51 to $0.61 based upon a high-single-digit comparable retail sales growth. Analysts expect Q2 sales to increase over 14% to around $428 million. Profit is expected to come in at around $0.59 a share.

The Children’s Place is facing a tough situation in the current retail environment with heavy competition and slow traffic. Comp sales have been seeing pressure and it is likely to see a drop for this quarter too. Keeping in line with the ongoing retail trends, the company is investing significantly in its digital channels and expects revenues from these channels to increase meaningfully over the next two years.

The New Jersey-based company is looking to strengthen its position in the US as well as broaden its reach internationally. As part of its fleet optimization initiative, the retailer closed 12 stores last quarter. Overall, The Children’s Place is likely to see a dip in profits and comp sales in the second quarter and the pressure on margins might continue for some more time going forward.

The stock, which is down about 5% so far this year, was slightly up by 0.55% to $137.50 when the market closed today.