Children's Place Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of specialty retailer The Children's Place Retail Stores (NAS: PLCE) sank 11% today after lowering its current-quarter profit guidance.

So what: Children's Place shares have held up nicely over the past few months, but the fourth-quarter cut -- management now sees EPS of $0.85-$0.90 versus its prior view $1.19-$1.24 -- suggests that things aren't so positive. While the company has been able to lure customers away from larger rivals such as Target and Gap with big discounts, shrinking margins are triggering worries over its long-term profitability.

Now what: I'd look into this plunge as a possible buying opportunity. Sliding margins are definitely a concern, but with CEO Jane Elfers expecting a strong rollout in 2012, as well as a drop in input costs in the second half of the year, current buyers might have some legitimate tailwinds working in their favor. More importantly, with a cheapish forward P/E of 12 and a debtless balance sheet, the downside seems decently protected.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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