In a bold display of faith in her company’s future, Jane Elfers, CEO of The Children’s Place (PLCE), recently invested more than $1 million in the retailer’s shares. According to insider transactions reports compiled by Fintel, Elfers purchased 43,000 shares of PLCE stock at $23.70 in May, boosting her ownership of the company to a whopping total of 370,033 shares.
The buy comes as PLCE stock is down more than 25% for the year to date, heading into a back-to-school season that by all indications will be “challenging” after eight years of steady growth, according to the National Retail Federation. According to the NRF website, 83% of shoppers expect to see higher prices on clothing and accessories this year.
Despite initial misses on first-quarter results, with the company recording revenue of $322 million and an EBITDA loss of $13 million, contrasting consensus estimates, management remains assured about the firm’s strategic transformation. The chart below from the Fintel financial metrics and ratios page for PLCE shows the rise and fall of sales and profitability during the pandemic.
Changing Operating Model
Amid considerable reductions in primarily corporate headquarters personnel and early termination of its corporate HQ lease, the company is evolving its operating model, shifting from a traditional, store-based, fixed-cost operating structure to a digitally oriented, more-variable cost operating structure.
The strategic restructuring has already started yielding benefits, with an estimated $12 million to $18 million in annual fixed cost savings, and has amplified the probability of the company achieving its 2H23 guidance.
Furthermore, the company’s innovative positioning of its brands allows it to tap into a larger market, from infants to tweens, and even adults, helping it overcome the structural challenge of declining birth rates.
Successful campaigns with partners like Amazon (AMZN) and privately held Gymboree, along with in-house brands such as Sugar & Jade and PJ Place, are expected to drive improved sales trends. This should also help the company control its product cost inflation and arrange better inventory management in the second half of FY23.
Short Interest Spike
Fintel’s short interest data reveals a recent 7.6% rise in PLCE stock’s short interest during June, currently standing at 3.81 million shares out of around 12.4 million outstanding.
With roughly 32% of the float shorted, this could potentially signal an anticipated correction, further propelled by Elfers’ massive buy-in. The chart below shows the correlation with spikes in volume driven by short covering over the last year.
Fintel’s Short Squeeze Leaderboard gives PLCE a score of 88.21, ranking the stock in 81st place out of 4,604 screened companies for the possible likelihood of a short covering event occurring.
Following the group’s weak Q1 update in late May, UBS analyst Jay Sole slashed his target to $20 from $40 per share on his ‘neutral’ call for PLCE stock. Sole urged caution, noting that if the U.S. was to experience a worse-than-expected recession, the retailer could suffer more than anticipated.
When looking at Fintel’s consensus target price of $29.32 it suggests the broader market thinks the stock could rise 23% over the next year. The chart below from the platform shows the forward sales expectations by analysts in the market with a bleak view that sales could stay on this stagnated path over the medium term.
The CEO’s vote of confidence, paired with the company’s ongoing transformative measures and ambitious H2 outlook, sends a strong message to the market about the resilience and potential of The Children’s Place in navigating the post-pandemic retail landscape.
Elfers’ bet on her company seems to illustrate the credence in the adage: In the midst of change lies opportunity.
This article originally appeared on Fintel
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