Children's Place profit beats targets

NEW YORK (Reuters) - Children's Place Retail Stores Inc (PLCE.O: Quote, Profile, Research, Stock Buzz) reported a greater-than-expected rise in quarterly profit on Thursday, helped by a robust increase in sales, sending its shares up as much as 18 percent.

The children's clothing retailer said net income rose to $19.5 million, or 67 cents per share, in the first quarter ended May 3. In the year-earlier quarter, net income was $14.7 million, or 49 cents per share, which included a 15 cent per share loss from discontinued operations.

Income from continuing operations was 66 cents per share, up from 64 cents per share a year before, the company said. That compared with the 51 cents per share expected by analysts, on average, according to Reuters Estimates.

"While recent business trends are encouraging, our outlook has to remain cautions since most of our business is done in the second half of the year," said Interim Chief Executive Chuck Crovitz during a conference call with analysts.

Net sales rose 12 percent in the quarter to $400.2 million as same-store sales, a key gauge of retail performance that measures sales at stores open at least a year, rose 5 percent.

The company, which operates approximately 900 Children's Place stores, said it was "encouraged" by customer response to its summer merchandise and said sales were buoyed by a 70 percent rise in sales from the Internet.

"It seems some of their merchandising initiatives are working," said Morningstar analyst Michelle Chang, who cited the company's new focus on more colorful basics. "They had a few bad fashion misses in prior quarters."

"With a 5 percent comp (increase in comparable store sales) they can leverage store expenses ... which helps to maintain margins," Chang added.

Children's Place is weighing a possible sale of the company under pressure from its biggest shareholder, former Chief Executive Ezra Dabah, who is also a board member. Dabah already owns a 17 percent stake in the retailer and has said he might offer to buy it outright for $24 a share.