Children's Place Bucks the Dismaying Trends of Mall-Based Retailers

Mall-based retailers have been crushed in the wake of first-quarter earnings reports from members of the group, the average of which missed targets by nearly 4%. One exception: Children's Place (PLCE) - Get Report .

Shares of the children's apparel retailer climbed another 6% in Tuesday's trading, adding $4 a share to reach $72.50. This despite the gains logged this year -- with shares up 24% for calendar 2016 -- that recently prompted some analysts to express some reservations about valuation. In fact, shares are off 18% from last month's year high of $85. Yet the price-to-earnings ratio isn't that out of touch with the broad market at about 18 times forward-year earnings.

And the earnings recorded Tuesday were, according to Piper Jaffray, a "substantial" beat of expectations: at $1.32 a share, the results thumped estimates of $1.03, and came in well ahead of year-earlier performance, when the company posted 83 cents. Same-store sales comparisons registered growth of 5%, well above the negative year-over-year sales tallied by the average of mall-based retailers.

If there's one thing that's a hesitation, it's that, even with the substantial profit outperformance for the first quarter, Children's Place, based in Secaucus, N.J., moved the needle on the full-year outlook by a relatively modest factor. The company said it now sees fiscal 2016 totals at $4.17 to $4.27 a share, vs. prior forecasts of $4 to $4.10, and analysts' projections of $4.09. Skeptics could argue that even the top end of the range only allows for the measure by which Children's Place beat its first-quarter bottom line.

Of course, optimists could suggest that Children's Place is just managing expectations, and that rather than going hog wild with its outlook for 2016 with just one quarter's performance under its belt -- and its release didn't hint at second-quarter to-date performance -- the company is simply leaving itself a little room to string together a series of forecast improvements. In its note, Piper called the conservatism in guidance "prudent."

Mall traffic remains a headwind, and weather-related demand -- one of the factors that crippled winter sales of warm-weather gear for many retailers the last six months -- could be an issue in the near term, Piper said in its note.

But the firm said it was encouraged to see Children's Place beating negative mall trends, and said the business model increasingly seemed "productive" and "profitable."

Coming off a year in which Children's Place implemented new strategies aimed at driving top-line and bottom-line growth -- an initiative that played out in the preceding quarter, when the retailer reported its first quarter of positive sales trends in two years -- the company seems to be sticking to its guns. It continues to deliver high-quality products and innovative technology, and to focus on growing alternative sales channels.

For investors looking for a retailer bucking the dismaying trends of most mall-based merchants, "with a clear pathway to improving model internals on systems and working capital advancements, we recommend" Children's Place, Piper said.