Children's Place second-quarter net loss widens

NEW YORK (Reuters) - Children's Place Retail Stores Inc (PLCE.O) on Thursday posted a preliminary quarterly net loss that nearly doubled, hurt by fees related to a stock option probe and said its license agreement with Walt Disney Co (DIS.N) could be jeopardized by several missed deadlines.

The deadlines pertain to remodeling and maintenance of the Disney Store chain that Children's Place operates and were set forth in a June agreement with Disney. The missed deadlines entitle Disney to actions including possible termination of the license agreement.

Shares fell 13.5 percent in early electronic trading.

The retailer also said it will likely miss future deadlines and has discussed with Disney the possibility of delaying the due dates of certain of its remodeling obligations until later this year and into the next two years.

The company has not yet filed its 2007 annual report or quarterly reports for the second and third quarters of 2006 and first quarter of 2007 and said it may not be able to complete the filings by August 31 as it had previously said. The company does not expect to make the delinquent filings until it finishes negotiating with Disney.

Children's Place also said it has identified certain violations of its policies and procedures by two executives of the company, but did not elaborate.

The retailer said its net loss widened to $27.1 million for the second quarter ended August 4 from $15.2 million a year earlier.

Since the results are preliminary and subject to change until the company files the delinquent reports, it did not provide earnings per share figures.

But earlier this month the company said it expected to report a net loss of 94 to 98 cents per share.

The retailer said during the quarter it incurred $1.8 million in professional fees related to the stock option probe.

The company said net sales were $424.3 million in the quarter, up from $395.6 million a year before. Sales rose 8 percent at The Children's Place and 6 percent at the Disney Store.

Same-store sales fell 1 percent.

"We remain cautiously optimistic regarding the second half and are pleased with month-to-date sales trends," said Chief Executive Ezra Dabah. "However, in view of the sales and margin trends we have experienced through the first half, we believe it's best to take a conservative view for the remainder of the year."

The company said it expects earnings per share of 94 cents to $1.02 for the third quarter, $1.79 to $1.86 for the fourth quarter, and $2.25 to $2.40 for the full year.

Disney and Children's Place have also been discussing changes that would allow Disney to relocate its flagship store in Manhattan.

Shares were down $4.47 to $28.55 in early electronic trading.

(Reporting by Martinne Geller)