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5 Retail Stocks That Could Struggle During the Back-to-School Season

Hot temperatures might hurt consumer spending this Q3

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The Children’s Place

PLCEWhile it’s common for Q3 to be retailers’ second-strongest quarter — behind the holiday-driven Q4 — it’s especially important for The Children’s Place (PLCE). Last year (and for the past three years), around 28% of the company’s full-year sales took place during the third quarter — higher than teen-targeting names like Aeropostale (ARO) and American Eagle (AEO).

That slightly outsized chunk naturally has a big effect on the bottom line. The third quarter made up around 55% of PLCE’s unadjusted EPS last year, and around 44% in 2011.

That’s not a good thing in the face of potentially penny-pinching shoppers. While they still might hit up The Children’s Place for new gear, they might opt for marked-down offerings, as opposed to the usual high-margin, promoted back-to-school styles.

Analysts are already predicting a slight slowdown for The Children’s Place this quarter, too. Sales are only supposed to grow by 1.6% year-over-year, compared to improvements of over 3% and nearly 6% the two prior back-to-school quarters.

As a result, EPS estimates have been gradually pared back during the past three months. Hot temperatures could keep that unfavorable trend going, all while the stock’s market-beating 22% year-to-date climb leaves plenty of room for a cooldown.

Article printed from InvestorPlace Media,

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