Children's Place Is On A 'Slippery Slope,' Says Bearish Analyst: 'There's Little Margin For Error'

Shares of Children's Place Inc PLCE tanked in premarket trading on Tuesday as shares declined by 30.7% to $11.36 at last check Tuesday.

The retailer likely needs $50 million to $75 million in funding to run the business with the “proper inventory and resource levels,” according to B Riley Securities analyst Jeff Lick.

The Children's Place Analyst: Lick downgraded the rating for Children's Place from Neutral to Sell, while lowering the price target from $19 to $4.

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The Children's Place Thesis: Any new funding that flows into the company is likely to be “extremely dilutive to the current equity,” Lick said in the downgrade note.

A portion of the money could be “self-fund via increased availability as inventory builds” in the first half of 2024, covering 60% to 70% of inventory needs, the analyst stated. “This leaves little margin for error in the case of outsized operating losses in PLCE’s seasonally weakest quarter, 2Q,” he added.

“The reinforcing cycle of distress (stretched payables, delayed shipments, low employee morale, high employee turnover, increased shrink) would likely weigh heavily on PLCE in this scenario,” Lick wrote, terming the situation as a risky and “slippery slope” for the company.

PLCE Price Action: Shares of Children's Place opened at $13.68 on Tuesday. By noon, the stock was trading at $11.14.

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