2024 Annual Report
THE CHILDREN’S PLACE, INC.
2024 ANNUAL REPORT
TABLE OF CONTENTS
Chairman’s Letter* ..........................................................................................................................................................
1 - 12
Form 10-K –
Part I
Business .....................................................................................................................................................................
K-3
Risk Factors ...............................................................................................................................................................
K-12
Unresolved Staff Comments ......................................................................................................................................
K-26
Cybersecurity .............................................................................................................................................................
K-27
Properties ...................................................................................................................................................................
K-28
Legal Proceedings......................................................................................................................................................
K-29
Mine Safety Disclosures ............................................................................................................................................
K-30
Part II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ............
K-31
[Reserved]..................................................................................................................................................................
K-33
Management’s Discussion and Analysis of Financial Condition and Results of Operations .....................................
K-34
Quantitative and Qualitative Disclosures About Market Risk ...................................................................................
K-47
Financial Statements and Supplementary Data ..........................................................................................................
K-48
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .....................................
K-48
Controls and Procedures ............................................................................................................................................
K-48
Other Information ......................................................................................................................................................
K-49
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections .......................................................................
K-49
Part III
Directors, Executive Officers and Corporate Governance .........................................................................................
K-50
Executive Compensation ...........................................................................................................................................
K-50
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...................
K-50
Certain Relationships and Related Transactions, and Director Independence ...........................................................
K-50
Principal Accountant Fees and Services ....................................................................................................................
K-50
Part IV
Exhibits and Financial Statement Schedules .............................................................................................................
K-51
Form 10-K Summary .................................................................................................................................................
K-92
*Copyright© 2025 By Turki S. AlRajhi
All Rights Reserved
1
THE CHILDREN’S PLACE, INC.
To Our Shareholders:
The full transition of governance of The Children’s Place, Inc. (“TCP” or the “Company”) was
made on March 8, 2024. We took governance in the faith that we can protect and compound, at a
reasonable rate of return, the per-share intrinsic value of TCP benefitting all fellow shareholders
with whom I am aligned. This letter is intended for long-term shareholders who have a serious
interest in their holdings, as distinguished from speculators. Had our positions been reversed, this
Honest-to-God letter would have been what I wanted.
* * * * * * * * * * * *
Point to Ponder
Companies governed by a controlled shareholder can make change happen decisively and quickly.
In last year's letter to fellow shareholders, I stated the following:
“We will take steps to shape a culture where talented individuals, i.e., intelligent, energetic and
ethical who think like owners can prosper. A decentralized culture assumes autonomy, and that
can’t be achieved without trust in team leaders … We will seek to create a culture that can
attract, empower, retain and incentivize such first-class worthy individuals so that we sail in the
same boat, and maintain a competitive edge in the ever-evolving business landscape. Eventually,
we will seek for TCP to have a culture of a seamless web of deserved trust, ownership mentality
and a sense of responsibility.”
We have taken a complete 180° top-down approach to restructuring the senior leadership team.
Only three out of the former ten senior executives remain in TCP. I believe the present senior
leadership team is ethical, energetic and anti-bureaucratic, qualities which are much needed in
transformational reforms, turnaround situations, and to effect change in general.
As companies grow, they often risk losing the very essence of what made them successful—
entrepreneurial spirit. The agility, adaptability, relentless execution, bold decision-making and
willingness to take risks that define a startup can fade under the weight of bureaucracy and
institutional inertia. Scaling while maintaining that drive can help extend a company’s shelf life.
A fish rots from the head down, old saying goes. I reckon culture has to come from the top, as it
has a trickle-down effect, and talented individuals thrive in a trust-based culture where recognition,
accountability and fairness are the norm. We have zero tolerance for dishonest and toxic behaviors,
and people prefer to deal with those who keep their word. I steadily believe a TCP leader should
do what is right even if no one is looking, and his and/or her word should be their bond, always.
When we do things the right way, i.e., treat people fairly and squarely, make thoughtful decisions,
and uphold the highest ethical standards, we can create lasting value that stands the test of time.
Good behavior never expires, and good intentions draw the universe to reward you in return.
Nothing is more rewarding than the immense joy of seeing first-class, worthy employees succeed.
If we surround ourselves with good people and engage with those who share a win-win mentality,
I am optimistic that our long-term performance will be decent. True ownership promotes long-
term thinking, and we are taking moderate, incremental steps to extend TCP's shelf life and lay the
foundation for a high-quality and free-cash-flow generative business.
2
Transforming an organization's culture is a marathon, and we are comfortable with the pace and
magnitude of our progress so far. None of this would have happened without the support of
Muhammad Umair and Jared Shure. As you continue to observe cultural improvements and SG&A
rationalization along with an increase in productivity, you know who deserves the credit!
* * * * * * * * * * * *
Historical Facts
Below is a summary of selective historical financial data of The Children's Place, Inc.:
Fiscal
Year**
Total
Revenue*
Cash From
Operations*
SG&A
Expenses*
Free Cash
Flows*
Profit
After Tax*
Gross
Profit
Margin*
Return on
Invested
Capital***
2014
1,761.3
161.4
470.7
89.2
56.9
35.3%
9.4%
2015
1,725.8
182.7
469.9
140.5
57.9
36.2%
10.3%
2016
1,785.3
199.3
454.1
164.6
102.3
37.6%
19.0%
2017
1,870.3
214.4
476.5
155.7
84.7
38.0%
15.7%
2018
1,938.1
139.9
498.3
68.8
101.0
35.3%
26.3%
2019
1,870.7
177.9
478.1
120.4
73.3
35.0%
19.0%
2020
1,522.6
(35.7)
428.2
(66.3)
(140.4)
21.9%
(42.3%)
2021
1,915.4
133.3
459.2
104.0
187.2
41.5%
41.3%
2022
1,708.5
(8.2)
461.0
(53.8)
(1.1)
30.1%
1.7%
2023
1,602.5
92.8
447.3
65.2
(154.5)
27.8%
(27.8%)
2024
1,386.3
(117.6)
405.6
(133.4)
(57.9)
33.1%
(5.5%)
*: Source: Public filings. All numbers are United States Dollars in Millions, rounded to the first decimal place.
**: Fiscal Year 2024 means the accounting year ended on February 1, 2025 (FY2023 ended on February 3, 2024).
***: Source: Bloomberg. Invested Capital is reduced by short- and long-term operating lease liabilities under ASC 842.
§
TCP loss after tax for FY2024 was approx. $57.9 million compared to FY2023’s loss of
approx. $154.5 million, primarily driven by strategic changes and operational efficiencies
to improve profitability.
§
TCP recorded an additional tax expense of approx. $68 million in FY2023, due to the
valuation allowance on its deferred tax assets, which increased by a further $18 million in
FY2024. The remaining balance of U.S. federal net operating losses of approx. $19 million
is available to be utilized against future taxable income, subject to certain limitations.
§
TCP total revenue declined by 13.5% in FY2024 compared to FY2023, primarily driven
by proactively sacrificing unprofitable sales and prioritizing profitable sales.
§
TCP SG&A expenses decreased by approx. $41.7 million in FY2024 compared to FY2023,
primarily due to rationalizing marketing, cost structure and offshoring initiatives.
§
TCP has high debt exposure currently, and the net interest expense was approx. $35.7
million for FY2024, compared to approx. $30 million for FY2023.
§
TCP gross margins improved to 33.1% compared to FY2023’s 27.8%.
§
TCP e-commerce as a percentage of retail sales remained over 53%.
§
TCP maintained a total liquidity of approx. $85.5 million as of the end of FY2024.
3
The fiscal year 2024 has been transformative for TCP history. We are pleased but not satisfied.
We urge you to lower expectations; we have a long way to go, and there is still work to be done to
turn TCP into a cash-generative business, so shareholders’ patience is the most logical course…
* * * * * * * * * * * *
Thoughts and Strategic Initiatives
Rationalizing Sales, Promotions, Inventory, and Margins: Many companies prioritize growth at
the expense of profitability—sometimes justifiably but often to excess. At TCP, we strive to strike
the right balance, i.e., ensuring both that sales are profitable and that each incremental investment
continues to generate strong, sustainable, long-term returns.
After implementing the minimum shipping threshold of $20 on February 1, 2024, and then
increasing it to $40 on May 31, 2024, many customers responded positively by increasing their
units per transaction to qualify for free shipping. This led to a natural decline in small-ticket orders,
which we fully embraced. Additionally, we tested various minimum free shipping thresholds
throughout the year to gauge customers’ reactions. We will continue to adjust the minimum order
limit for free shipping based on our order fulfillment costs. This has already proven successful in
lowering operating expenses for our e-commerce channel.
We seek to limit (gross) loss-making sales!
In recent years, TCP has heavily relied on promotional strategies to grow its digital presence and
market share. However, this heavy reliance has not only eroded profit margins but has also
significantly altered customers’ perceptions of both The Children’s Place and Gymboree brands.
While there have been gains in our average unit retail, I believe that TCP has unintentionally
cultivated behavioral habits among customers that encourage shopping during clearance and
promotional events, shaping a perception that could undermine our core brand identity.
We have taken steps to optimize our promotion strategy, including redesigning banners on our
website and in our stores, as well as changing the visual appearance and feel of our website from
that of a “hard discounter” to a value brand where customers can find great designs at value prices.
However, since U.S. consumers are driven in part by promotions, promotions remain a crucial
element in the competitive landscape. According to a recent Circana survey, the industry average
for sales vs. not-on-sales is around 43%, and TCP has a higher promotional rate than the market
average. We will continue to strive for the right balance for promotions and profitability through
further investments in technology to optimize pricing decisions.
TCP’s inventory turnover has been on a declining trajectory since its inception. From 1997 to
2007, annual inventory turnover was approx. 5x to 6x; it dropped to 4.5x from 2008 to 2013,
dropped again to 3.6x to 4x from 2014 to 2020, and now stands at approx. 2.8x. This decline has
been caused by several factors, including but not limited to the mix of basics and fashion products,
the heavy shift from stores to e-commerce, wholesale business with Amazon, channel-centric
buying, and an inventory glut due to COVID-related supply chain challenges. I believe that we are
on a path to optimizing inventory levels that will position TCP to increase inventory turns without
compromising our revolving credit facility with banks.
4
The preceding commentary regarding sales promotions and inventory turnover remains valid under
a normal business environment. However, in light of the evolving reciprocal tariffs, the existing
excess low-cost inventory has become a valuable asset to TCP. We are continuously assessing the
effect of newly announced tariffs from various countries and aim to adjust our strategies to sell the
current low-cost inventory effectively and wisely.
Sales Channel Strategy: One of the first things we did was to dive deeper into understanding the
unit economics of each channel's performance, which has also encouraged the respective teams to
take ownership and accountability for their channels. We are still committed to following a digital-
first omni-channel strategy. However, we plan to be opportunistic and seek to avoid blindly
doubling down on one channel.
We plan to fine-tune our digital dependence by optimizing our efforts toward a more balanced
model that includes strategic store expansion to strengthen brand presence and marketplace growth
to reach new customer segments.
TCP generates 91% of its revenue from the United States and 9% from the rest of the world.
Therefore, we are actively exploring new channels and seeking to enhance existing ones, including
by more fully leveraging the benefits of TCP-owned brands through franchises globally and new
marketplaces.
Channel diversification remains a central pillar to us, and we are focused on channel strategies that
will leverage key partnerships, add new geographies, explore licensing and compelling
collaborations to create culturally relevant moments that drive traffic and conversion and improve
the average dollar sale. Several strategic collaborations are underway, and no spoilers just yet—
but we look forward to making announcements in due course.
The Orphan “Brick and Mortar” Channel: I believe that the appearance and poor condition of
TCP’s stores detract from the shopping experience of store customers and convey a single,
unfortunate reality: our stores have become an orphan channel.
Over the past several years, no significant capital expenditures were directed towards our stores,
aside from minor maintenance tasks. In my opinion, since COVID, TCP has not only closed too
many stores too quickly but also transitioned too heavily from long-term to short-term leases for
the remaining locations, leading landlords to shop us around.
Consequently, TCP was compelled to close dozens of profitable stores that we could not relocate
within the same area. TCP had 924 stores at the end of FY2020 and 495 stores at the end of
FY2024, a 46.4% decline. Approximately 300 of those stores that closed were profitable at the
time of closure.
We are taking significant steps to stabilize our fleet of stores. We have hired Philip Ende as Head
of Real Estate. Since November 2024, we have been making timely payments to landlords and
have improved our success in renegotiating maturing leases. If you observe stability and
potential growth in our profitable fleet, you know who deserves the credit!
5
In FY2024, we have not only rationalized store closures and repaired relationships with many
landlords but also secured long-term leases for many of our profitable stores, recognizing over
$3.9 million in net rent reductions through these renegotiations.
Historically, TCP stores were a key entry point for first-time shoppers. The reduction in our
physical store locations has impacted traffic and first-time purchases, shifting the burden to digital
acquisition. Fewer in-store visits mean fewer opportunities for cross-selling and basket-building,
traditionally strong drivers of incremental revenue at TCP.
Coming out of the pandemic, we doubled down on e-commerce, which has helped sustain sales.
TCP has a 54.5% e-commerce penetration as a percentage of retail sales in FY2024, which means
we rely more heavily on paid digital marketing to drive customer acquisition, engagement and
retention. However, as online competition has grown, advertising on social media platforms has
become more expensive, which may erode margins.
In contrast, store sales remove these extra costs and serve as a cost-effective marketing tool,
creating sensory experiences that can encourage impulse purchases and first-time purchases. While
e-commerce is a TCP strength, it also places TCP in a highly competitive and cost-intensive battle.
In the absence of strong product differentiation, loyalty programs, or pricing advantages,
maintaining healthy long-term margins in e-commerce is challenging.
Therefore, we will strive to find the right balance between stores and e-commerce, and we will
seek not to neglect our physical locations. From the acquisition of Gymboree in April 2019 until
last year, we had not opened a standalone store as an independent brand. As a first step, we opened
the first-ever standalone Gymboree store in November 2024. Thanks to our passionate
associates—this opening wouldn’t be possible without you!
Time has come to rebuild the fleet and embark on a spree of opportunistically opening new stores.
We plan to close the remaining few unprofitable stores, seek to improve low-contribution stores,
protect our top-performing stores, and invest in improving and refreshing the fleet's overall
appearance.
Depending on the macroeconomic environment and TCP’s liquidity, we plan to open 15 new stores
across Gymboree and The Children’s Place brands by the end of FY2025. We are also exploring
the idea of side-by-side stores, with the first of its kind expected to debut at Woodbury Common
Premium Outlets in New York by the back half of FY2025.
We are working with a leading retail and architectural design firm to redesign our stores, creating
a renewed visual experience for The Children's Place and Gymboree as independent brands. The
objective is to craft something that attracts, retains, and delights customers of these two distinct
brands, addressing the needs of two different sets of customers.
We plan to make decisions on every detail, including but not limited to colors, lighting, materials,
and store layout. We also plan to make deliberate decisions to enhance product display, assortment,
the circulation of main zones and all operational necessities. Making both stores lively is much
needed, and the work we are doing now will set the cornerstone and serve as a guidebook for a
scalable rollout.
6
We expect the redesign of the concept to be complete by the third quarter of FY2025.
We also added an AI tool to assist with real estate. This isn’t sales talk to impress AI enthusiasts.
The benefits of this tool are numerous, including but not limited to access to customer traffic data
(mall vs. our store), customer demographics (age, income, gender), insights on where our
customers are coming from and/or going to, customer dwell time in our stores/malls, trade area
analysis, event impact analysis for marketing campaigns, heat maps of foot traffic, a site selection
tool, and economic development insights and traffic across other industries.
“Newness” in Designs and Product Mix: As TCP’s basic inventory penetration has grown, truly
new designs in fashion have declined as a percentage of the total mix. TCP’s truly new designs
have decreased in scale, particularly since the pandemic, which has partially contributed to sales
decline, shorter customer retention, lower conversion rates (since fashion products tend to attract
customers back more frequently than basic products), lower margins (since fashion products tend
to have higher margins than basic products), and lower inventory turnover (since fashion
products tend to turn over many times faster than basic products).
Due to the absence of truly new designs, a shift from stores to e-commerce within a short period,
and Amazon’s significant share in the wholesale channel, TCP, in my opinion, has become more
of a retailer offering basic products than a destination where customers hunt for fashion products.
TCP also moved away from exclusive designs for stores to exclusive designs online only, resulting
in a decline in customer traffic, conversion rates and sales at our physical locations. Early last year,
we began testing an increase in fashion inventory at selected stores, and after observing improved
sales and margins, we rolled this strategy out to the entire fleet.
We are updating and changing our product offering. We are restoring a balanced product mix of
basics and fashion-forward products, with a focus on higher margins, new designs, implementing
good/better/best assortment tiers, and testing strategies.
As part of our overall strategy to strengthen brand positioning, drive cultural relevance, and
modernize the look and feel of the brand across all consumer touchpoints, Claudia Lima-Guinehut,
our Brand President, and Jennifer Groves, our Senior Vice President of Design and Brand, are
tirelessly working to bring fresh designs and an exciting new product mix to TCP customers. If
you discover and love the new designs and collaborations in late 2025 and beyond, you know
who deserves the credit!
Our Brands and The Hidden Gem “Gymboree”: TCP launched Sugar & Jade in 2021 as a direct-
to-consumer sub-brand to enhance customer lifetime value and retention. Sugar & Jade offers
trend-driven fashion tailored to tween girls, with key categories including dresses, swimwear,
fashion tops and bottoms. It was available exclusively online. We are evolving Sugar & Jade into
an omni-channel brand with a target to be present in 50 of The Children's Place stores by Spring
2025, as this may strengthen our position in the tween market, helping us retain customers as
they transition out of our core brand. The testing has been quite successful, with Sugar & Jade
ranking among the top-performing products in dresses and swimwear within the test stores. We
plan to continue this rollout into additional locations through Fall 2025 and Spring 2026.
7
PJ Place was originally introduced to capitalize on the success of adult sleepwear in our family's
sleepwear collection. Launched ahead of the holiday season in 2022 as a distinct brand for teens
and young adults, we are now transitioning PJ Place from a sub-brand to a strategic sub-category,
to align it more closely with our core business. We intend for PJ Place to reinforce our leadership
in kids' and family sleepwear, especially during the holiday season, when the demand for
coordinated family sleepwear peaks. By leveraging our existing customer base and optimizing our
sleepwear offerings, we aim to establish PJ Place as the premier destination for sleepwear within
The Children’s Place ecosystem.
This strategic evolution of Sugar & Jade and PJ Place is intended to strengthen our ability to retain
customers longer, drive incremental revenue, and maximize lifetime value across our portfolio of
brands. Both brands' revenue as a percentage of TCP’s total revenue is currently not significant.
Sugar & Jade currently accounts for 1.5% of the total revenue, while PJ Place is less than 1%.
However, our total annual sleep volume remains a significant part of our total sales, which is why
PJ Place is well-positioned to serve as a marketing tool for us and as a one-stop shop for parents.
PJ Place is currently exclusively online, while Sugar & Jade is just expanding into stores this
Spring. For reference, 30% of total Sugar & Jade sales are now generated from stores, highlighting
the opportunity for expansion.
Gymboree, on the other hand, was once a very strong player with a loyal customer base. I believe
that TCP, owning a portfolio of brands, should be conscious of the value propositions it offers
between The Children’s Place and Gymboree brands. The former is a value brand serving value-
conscious customers, and the latter is a premium brand serving high-end customers.
Before Gymboree filed for bankruptcy in early 2017, it had annualized revenue of approximately
$1.2 billion, of which approximately 64% ($768 million) belonged to the Gymboree brand, and
the rest came from Crazy 8 and others. There were approximately 760 Gymboree stores at the
time, which translated into $1 million in revenue per store per annum.
In April 2019, TCP paid $76 million in cash to acquire the intellectual property of Gymboree and
Crazy 8. It took some time for TCP to relaunch Gymboree products; finally, in February 2020,
TCP introduced Gymboree products in TCP’s own stores (shop-in-shop strategy). In August 2022,
TCP also launched Gymboree on Amazon.
I believe that the shop-in-shop strategy while providing additional sales volume in certain stores,
was not the most effective way to scale the brand from a brick-and-mortar perspective, partially
because The Children’s Place and Gymboree brands have different customer segments and shop-
in-shops do not allow the brands to be differentiated from each other.
At Gymboree, we plan to shift away from the promotional mentality. At TCP, we are in the process
of building a “Chinese wall” between Gymboree and other brands internally so that each gets the
right attention in terms of positioning, design, pricing, and overall strategy.
Gymboree will position itself as a semi-luxury children’s brand centered on everyday luxury and
timeless outfits, not fast fashion. We will prioritize quality over price competition and fleeting
trends, distancing ourselves from the mass market. Our products will emphasize craftsmanship,
timeless style, and premium quality designed to last at an affordable price. Gymboree currently
accounts for just 5.5% of total revenue, and we intend to increase the size of this pie.
8
Efficient Marketing Spend: Historically, TCP spent 2.7% to 3.3% of its revenue on advertising
during the FY2003 to FY2009 period, which decreased to a range of 1.5% to 2.3% during FY2010
to FY2021. In the last three years, TCP’s advertising spending rose to 3.2%, 6.2% and 5%, of its
revenue in FY2022, FY2023, and FY2024, respectively.
Our closest competitor, despite having a different sales channel mix, manages its advertising
expenditure under 3% of its revenue. While TCP has a higher proportion of revenue from e-
commerce compared to its past and in relation to its closest peer, we aim to achieve more with
less capital and without losing momentum.
We will seek to prioritize the highest return on advertising spend, focus on the most efficient
performance channels, and reduce wasteful spending. We are willing to increase our advertising
expenditure if it leads to higher profitable sales.
To improve customer retention and conversion rates, we intend to enhance brand relevance and
awareness with compelling products and precise segmentation to target the right consumer cohorts.
Our past marketing efforts have been too broad, limiting core customer growth. We recently hired
Smeeta Khetarpaul as Head of Marketing to lead efforts in this area. If you see efficient marketing
spending alongside stronger sales, you know who deserves the credit!
Segmentation and Customer Service: We are in the process of conducting a new customer
segmentation study and brand positioning to identify audience opportunities to distinguish The
Children's Place from Gymboree as well as improve brand differentiation against our peers. This
study is expected to be activated by the fourth quarter of FY2025 and will help ensure that we
drive personalization, creative needs, and messaging across all channels.
We are making significant changes to serve customers, intended to evolve from transactional
interactions to journey interactions and solution-oriented problem-solving. During 2024,
customers may have experienced difficulties reaching Customer Service, leading to a negative and
frustrating experience. However, in early 2025, 99.35% of calls were answered within 3 minutes
of dialing our Customer Service line. Our geographic relocation and offshoring have enabled us to
increase headcount at a lower labor cost.
In the past, business hours of our call center were from Monday to Friday, 9 am to 5 pm, 65% of
calls were answered within 3 minutes, the average handle time was 8.31 minutes, Google reviews
were ignored, there was no dedicated email team and the email response time was on average more
than 10 days.
Currently, however, business hours are from Monday to Friday, 9 am to 9 pm, and on Saturday
from 9 am to 5 pm, 99.35% of calls are answered within 3 minutes, the average handle time is 6.57
minutes, we seek to respond to all new Google reviews, we have a dedicated email team and emails
are generally responded to within 24-48 hours.
Customer lifetime value has been in constant decline over several years. We are seeking to rebuild
customer lifetime value by serving customers right, introducing new designs, expanding stores to
drive omni-channel customer growth, and strengthening the loyalty program. I believe that in
everything, we must start with customers, TCP’s oxygen, and look into every way to delight them.
9
A New Loyalty Program and Unified Data: As digital penetration increases, the ability to
personalize, engage, and retain customers through loyalty and customer relationship management
initiatives has become more critical than ever. In its current form, our loyalty program is not user-
friendly and is not integrated with our Private Label Credit Card (“PLCC”). We also lack relevant
rewards and real-time customer insights, limiting personalization and targeting.
85% of our customers are loyalty members; although we had a slightly better retention rate in
FY2024 than FY2023, active rates, redemption rates, and repeat purchases have generally been
underperforming.
PLCC customers are higher spenders and represent 18% of our total sales, shopping 4.8x per
annum vs. 2.1x for non-loyalty customers, and only 10% of active customers have a PLCC.
Historically, stores were a strong driver of PLCC sign-ups, so with a lower store count, we reduced
our ability to market our PLCC.
We are investing in a new loyalty program powered by a first-class unified customer data platform.
The objective is to unify all customer data from various sources (e.g., e-commerce, stores, loyalty,
customer relationship management) into one platform for a 360-degree customer view, allowing
personalized experience and rewards based on preferences and interactions.
Currently, we are not measuring customer satisfaction, but we will seek to do so as part of our new
loyalty program. We also aim to leverage data analytics to guide decisions across product
development, marketing, and customer service, enhancing our omni-channel experience and
improving targeting for better retention and repeat purchases.
The new loyalty program will allow us to evolve from a transactional model to an integrated one
with tiered memberships, exclusive perks, and increased rewards to drive higher spending. We
plan to incorporate gamification to encourage engagement through check-in incentives and
personalized challenges, alongside a focus on socially responsible rewards and community
initiatives to enhance brand affinity beyond discounts.
Additionally, we will integrate it with our PLCC to boost cardholder benefits to drive adoption
and cardholder retention. We expect the new loyalty program to be operational by the fourth
quarter of FY2025.
Moving forward, introducing compelling designs and product mix, efficient marketing spending,
strategic collaborations, expanding stores, revitalizing the loyalty program, and enhancing digital
engagement and personalization will be crucial for improving retention, increasing conversion
rates, and maximizing customer lifetime value.
Expansion of South East Distribution Center (the “SEDC”): Upon completion, this expansion is
expected to save us approx. $7 million in rent paid to third parties and offsite warehouses.
Additionally, we anticipate significantly higher annualized benefits by improving the fulfillment
cost per unit. Based on our estimates and pending negotiations, the payback period for this capital
allocation is projected to be less than three years.
We expect the SEDC expansion to be completed in early 2026.
10
TCP collaborated with the City of Fort Payne, DeKalb County, the State of Alabama, and the
Tennessee Valley Authority, our electricity provider, to maximize available incentives for the
SEDC expansion. Through these joint efforts, we have secured approx. $8.9 million in total
incentives spread over several years.
We appreciate the support from these esteemed entities and the relentless efforts of Vincent
Williams, Dale Reece, and Sahil Patel under the leadership of Rajat Jain.
Sourcing: Over the last several years, partially due to supply chain challenges stemming from
COVID, TCP has not really focused on challenging the competitiveness of its sourcing function.
The Children’s Place is a value brand (excluding Gymboree, of course), and thus, we must
religiously save every single penny we can in various cost components, out of which sourcing is
the largest component.
Efficiency is essential for maintaining a competitive edge as a low-cost producer and value brand;
therefore, we intend to champion and strengthen our vendor relationships and ensure goods are
sourced at optimal speed and cost.
We intend to create a vendor self-certification program to bring cost efficiencies in quality control.
We are also doing a complete review of other cost components in sourcing, e.g., duties and
logistics, with the objective of making cost per unit more competitive and optimizing savings.
I believe part of the reason for TCP’s excessive inventory and low inventory turns was the heavy
channel-centric inventory sourcing. This not only resulted in an over-inventory of certain products
but also caused operational inefficiencies at the distribution center.
We have taken steps to address this matter. Currently, with the exception of Amazon exclusives,
inventory sourcing and management are omni-channel. We believe that the expansion of SEDC,
once completed and fully operational, will further resolve these challenges and unlock benefits.
In today's rapidly changing global landscape, shaped by reciprocal tariffs imposed by various
nations, the sourcing function within a US retail company like TCP has become increasingly
crucial. We recently hired Kristin Clifford as Head of Sourcing to lead efforts in this area. As the
sourcing cycle in retail companies requires considerable lead times, we expect it will take a few
quarters before the results of these efforts are reflected. If our average unit cost decreases and the
gross margins improve as a result, you know who deserves the credit!
Digital Transformation: TCP has 54.5% e-commerce penetration as a percentage of retail sales.
Therefore, we regard information technology as a core function rather than a support function.
Despite spending approximately $1 billion on information technology over the past 15 years, TCP
still has many manual processes that need upgrading and/or automation.
The work is still in progress, but we intend to digitally transform TCP by partnering with strategic
resources to help TCP save costs, drive efficiency, reduce operating costs wherever possible,
digitize workflows, and ultimately develop solutions/products tailored to TCP.
* * * * * * * * * * * *
11
Other Information
We were able to raise additional capital of $90 million, of which $29.8 million in gross cash
proceeds (Mithaq contributed $5.08 million in cash, and the rest came from other shareholders)
was substantially used to prepay our revolving credit facility, and the remaining $60.2 million was
used to pay off a substantial portion of Mithaq’s first term loan. While the rights offering was
commenced in the fourth quarter, it was only completed after year-end on February 6, 2025, such
that it will only be reflected in our balance sheet in the first quarter of fiscal 2025. Nevertheless,
its successful closure has allowed us to improve our current liquidity position and gearing ratios.
To all subscribing shareholders, thank you for your trust!
After reviewing various proposals, TCP’s Audit Committee has chosen BDO USA, P.C. as the
independent accounting firm for the audit of FY2024. They served for the quarter ending August
3, 2024, and the remainder of the fiscal year ending February 1, 2025.
Those who do not thank people do not thank God. TCP is fortunate to have my long-term partner,
Muhammed Asif Seemab, serving on its board. Few men are like him; he dedicates countless hours
that exceed the expectations and understanding of ordinary boardrooms. Above all else, he is a
model of unwavering integrity and is a man of virtue.
I will always seek to follow a tell-it-like-it-is policy, and we reckon, this is the best form of proper
communication and is important, particularly when things do not go well, which is inevitable from
time to time. We, like all candid boards and management, are not infallible.
Being designated as your Executive Chairman doesn't change my promise from last year; I have
waived and will continue to waive all and any form of salary, fee, or compensation for my services.
I do not need any monetary motivation other than to enhance the per-share intrinsic value of TCP.
Real rewards are derived from delaying gratification and prioritizing long-term outcomes.
Ultimately, share price volatility in public companies tends to take care of itself. I believe that,
over time, a company's share price tends to reflect its underlying operating performance.
Therefore, we urge current and prospective shareholders to focus on the underlying fundamentals
of the business rather than get too concerned with the price quotations presented by Mr. Market1.
Our Annual Report on Form 10-K and other public filings filed with the U.S. Securities and
Exchange Commission (“SEC”) set forth additional important information regarding our business,
including our audited financial statements. Shareholders can access these documents on our
website https://corporate.childrensplace.com and the SEC’s website https://www.sec.gov/edgar/.
April 11, 2025
Turki S. AlRajhi
Executive Chairman
1 Mr. Market: In 1949, Professor Benjamin Graham coined the term “Mr. Market” in his famous book, The Intelligent Investor.
He elaborated on this concept in detail in Chapter 8, “The Investor and Market Fluctuations”. The “Mr. Market” metaphor
represents the irrational or contradictory traits of the stock market and the risks of following groupthink. The seductive fellow
named “Mr. Market” will knock on your door every day and offer you a price to either buy or sell your interest in a business,
and investors have the liberty to either take the offer or ignore it. “Mr. Market” does not express any positive or negative
feelings about your actions. The point is that price and value may disconnect widely, and intelligent investors should make
rational decisions and never fall under the influence of “Mr. Market” while buying or selling any business.
12
General Note and Forward-Looking Statements
The statements set forth in this letter consist in large part of observations, opinions and assessments of the
author regarding the past, present and future operational and financial performance of the Company that are
inherently subjective and/or forward-looking in nature. Investors should form their own observations,
opinions and assessments regarding such statements and consider such statements in the context of the
below and the Company’s public filings. This letter contains forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not
limited to statements relating to the executive chairman of the Company’s current observations, opinions,
assessments and future expectations with respect to the operational and financial performance of the
Company and the Company’s strategic initiatives and results of operations, including total revenue, cash
from operations, SG&A expenses, free cash flows, profits after tax, gross profit margin, return on invested
capital, components of the foregoing, and reasons for the foregoing. Forward-looking statements typically
are identified by use of terms such as “may,” “will,” “should,” “plan,” “project,” “expect,” “anticipate,”
“estimate” “target,” “believes,” “continues,” “trends,” “potential,” “strategies,” “goal” and similar words,
although some forward- looking statements are expressed differently. These forward-looking statements
are based upon the Company’s current expectations and assumptions and are subject to various risks and
uncertainties that could cause actual results and performance, and/or actual plans and actions taken by the
Company, to differ materially from those described in this letter. Some of these risks and uncertainties are
described in the Company’s filings with the Securities and Exchange Commission, including in the “Risk
Factors” section of its annual report on Form 10-K for the fiscal year ended February 1, 2025. Included
among the risks and uncertainties that could cause actual results and performance to differ materially are
the risk that the Company will be unable to achieve operating results at levels sufficient to fund and/or
finance the Company’s current level of operations and repayment of indebtedness, the risk that changes in
trade policy and tariff regimes, including newly imposed U.S. tariffs and any responsive non-U.S. tariffs,
may impact our international manufacturing and operations or our customers’ discretionary spending
habits, the risk that the Company will be unsuccessful in gauging fashion trends and changing consumer
preferences, the risks resulting from the highly competitive nature of the Company’s business and its
dependence on consumer spending patterns, which may be affected by changes in economic conditions
(including inflation), the risk that changes in the Company’s plans and strategies with respect to pricing,
capital allocation, capital structure, investor communications and/or operations may have a negative effect
on the Company’s business, the risk that the Company’s strategic initiatives to increase sales and margin,
improve operational efficiencies, enhance operating controls, decentralize operational authority and
reshape the Company’s culture are delayed or do not result in anticipated improvements, the risk of
delays, interruptions, disruptions and higher costs in the Company’s global supply chain, including
resulting from disease outbreaks, foreign sources of supply in less developed countries, more politically
unstable countries, or countries where vendors fail to comply with industry standards or ethical business
practices, including the use of forced, indentured or child labor, the risk that the cost of raw materials or
energy prices will increase beyond current expectations or that the Company is unable to offset cost
increases through value engineering or price increases, various types of litigation, including class action
litigations brought under securities, consumer protection, employment, and privacy and information
security laws and regulations, risks related to the existence of a controlling shareholder, and the
uncertainty of weather patterns, as well as other risks discussed in the Company’s filings with the SEC
from time to time. Readers are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date they were made. The Company undertakes no obligation to release
publicly any revisions to these forward-looking statements (or any other observations, opinions and
assessments of the executive chairman of the Company set forth in this letter) that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or any
other change in the observations, opinions and assessments of the executive chairman of the Company.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fifty-two weeks ended February 1, 2025
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-23071
THE CHILDREN’S PLACE, INC.
(Exact name of registrant as specified in its charter)
Delaware
31-1241495
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
500 Plaza Drive
Secaucus, New Jersey
07094
(Address of principal executive offices)
(Zip Code)
(201) 558-2400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.10 par value
PLCE
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None.
___________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting
company
☒
Emerging growth
company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of common stock held by non-affiliates was $42,121,234 at the close of business on August 3, 2024 (the last business day of the
registrant’s fiscal 2024 second fiscal quarter) based on the closing price of the common stock as reported on the Nasdaq Global Select Market. For purposes of this
disclosure, shares of common stock held by persons who hold more than 10% of the outstanding shares of common stock and shares held by executive officers and
directors of the registrant have been excluded because such persons may be deemed affiliates. This determination of executive officer or affiliate status is not
necessarily a conclusive determination for other purposes.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: Common Stock, par value $0.10
per share, outstanding at April 11, 2025: 22,036,982.
Documents incorporated by reference: Portions of The Children’s Place, Inc. definitive proxy statement for its annual meeting of stockholders to be held on
May 7, 2025 are incorporated by reference into Part III.
Table of Contents
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
FOR THE FIFTY-TWO WEEKS ENDED FEBRUARY 1, 2025
TABLE OF CONTENTS
PAGE
PART I
Item 1.
Business.
3
Item 1A. Risk Factors.
12
Item 1B. Unresolved Staff Comments.
26
Item 1C. Cybersecurity.
27
Item 2.
Properties.
28
Item 3.
Legal Proceedings.
29
Item 4.
Mine Safety Disclosures.
30
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
31
Item 6.
[Reserved]
33
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
34
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
47
Item 8.
Financial Statements and Supplementary Data.
48
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
48
Item 9A. Controls and Procedures.
48
Item 9B. Other Information.
49
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
49
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
50
Item 11. Executive Compensation.
50
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
50
Item 13. Certain Relationships and Related Transactions, and Director Independence.
50
Item 14. Principal Accountant Fees and Services.
50
PART IV
Item 15. Exhibits and Financial Statement Schedules.
51
Item 16. Form 10-K Summary.
92
Table of Contents
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
The Business section and other parts of this Annual Report on Form 10-K may contain certain forward-looking
statements regarding future circumstances. Forward-looking statements provide current expectations of future events based on
certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking
statements can also be identified by words such as “anticipates”, “believes”, “estimates”, “expects”, “intends”, “plans”,
“predicts”, and similar terms. These forward-looking statements are based upon current expectations and assumptions of The
Children’s Place, Inc. and its subsidiaries (the “Company”) and are subject to various risks and uncertainties that could cause
actual results to differ materially from those contemplated in such forward-looking statements including, but not limited to,
those discussed in the subsection entitled “Risk Factors” under Part I, Item 1A of this Annual Report on Form 10-K. Actual
results, events, and performance may differ significantly from the results discussed in the forward-looking statements. Readers
of this Annual Report on Form 10-K are cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to release publicly any revisions to these forward-
looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events. The inclusion of any statement in this Annual Report on Form 10-K does not constitute an admission by
the Company or any other person that the events or circumstances described in such statement are material.
The following discussion should be read in conjunction with the Company’s audited financial statements and notes
thereto included elsewhere in this Annual Report on Form 10-K.
PART I
ITEM 1.
BUSINESS.
As used in this Annual Report on Form 10-K, references to the “Company”, “The Children’s Place”, “we”, “us”,
“our”, and similar terms refer to The Children's Place, Inc. and its subsidiaries. Our fiscal year ends on the Saturday on or
nearest to January 31. Other terms that are commonly used in this Annual Report on Form 10-K are defined as follows:
•
Fiscal 2025 — The fifty-two weeks ending January 31, 2026
•
Fiscal 2024 — The fifty-two weeks ended February 1, 2025
•
Fiscal 2023 — The fifty-three weeks ended February 3, 2024
•
Fiscal 2022 — The fifty-two weeks ended January 28, 2023
•
SEC — U.S. Securities and Exchange Commission
•
U.S. GAAP — Generally Accepted Accounting Principles in the United States
•
FASB — Financial Accounting Standards Board
•
FASB ASC — FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP,
except that rules and interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC
registrants
Table of Contents
3
•
Comparable Retail Sales — Net sales, in constant currency, from stores that have been open for at least 14
consecutive months and from our e-commerce store, excluding postage and handling fees. Store closures in the
current fiscal year will be excluded from Comparable Retail Sales beginning in the fiscal quarter in which the
store closes. A store that is closed for a substantial remodel, relocation, or material change in size will be
excluded from Comparable Retail Sales for at least 14 months beginning in the fiscal quarter in which the closure
occurred. However, stores that temporarily close will be excluded from Comparable Retail Sales until the store is
re-opened for a full fiscal month
General
The Children’s Place, Inc. and its subsidiaries (collectively, the “Company”) is the largest pure-play children’s specialty
retailer in North America with an omni-channel portfolio of brands. We design, contract to manufacture, and sell fashionable,
high-quality apparel, accessories and footwear predominantly at value prices, primarily under our proprietary brands: “The
Children’s Place”, “Gymboree”, “Sugar & Jade”, and “PJ Place”. Our global retail and wholesale network includes two digital
storefronts, 495 stores in North America, wholesale marketplaces, 190 international points of distribution in 13 countries
through six international franchise partners, and social media channels on Instagram, Facebook, X, formerly known as Twitter,
YouTube and Pinterest. Our physical stores offer a friendly and convenient shopping environment, segmented into departments
that serve the wardrobe needs of girls and boys (sizes 4-18), toddler girls and boys (sizes 6 months-5T), and baby (sizes 0-24
months). Our digital storefronts are at www.childrensplace.com and www.gymboree.com, where our customers are able to shop
online for the same merchandise available in our physical stores, but also certain exclusive merchandise only available at our e-
commerce sites.
The Children’s Place was founded in 1969. The Company became publicly traded on the Nasdaq Global Select Market in
1997. During Fiscal 2024, Mithaq Capital SPC, a Cayman segregated portfolio company (“Mithaq”), acquired more than 50%
of The Children’s Place, Inc.’s outstanding shares of common stock and became a controlling shareholder of the Company.
As part of the Company’s business strategy in this ever-evolving retail environment, our senior management team has
established several key priorities:
1.
Superior Product - Product remains our number one priority. We are focused on providing the right product, in the
right channels of distribution, at the right time. We offer a full line of apparel, footwear and accessories so busy
moms can quickly and easily put together head-to-toe outfits. Our design, merchandising, sourcing, and planning
teams strive to ensure that our product is trend-right, while at the same time balancing fashion and fashion basics
with more frequent, wear-now deliveries. We reintroduced the Gymboree brand in February 2020 on an enhanced
Gymboree website and in November 2024, we opened our first Gymboree stand-alone store at Garden State Plaza
in Paramus, New Jersey. We also launched the Sugar & Jade brand in November 2021 which is targeted at the
girls’ “tween” market and is offered exclusively online, and launched the PJ Place brand in October 2022, which
is a sleepwear lifestyle brand targeted towards millennial and Gen Z customers, and is offered exclusively online.
We are focused on optimizing our assortment and purchasing inventory at levels which will drive margin growth.
2.
Digital Expansion - Our digital capabilities continue to expand with the development of completely redesigned
responsive sites and mobile applications, providing an online shopping experience geared toward the needs of our
“on-the-go” customers with expanded customer personalization, which delivers unique, relevant content designed
to drive sales, loyalty and retention, and the ability to have our entire store fleet equipped with ship-from-store
capabilities.
3.
Omni-Channel Customer Experience - We continue to transform our omni-channel experience by making
shopping even more effortless, accessible and exciting to our customers through our brick-and-mortar retail
channel, our digital presence, and our wholesale channels. We have a renewed focus on our store portfolio and are
exploring opportunities for expanding and refurbishing our current fleet and strengthening our landlord
relationships. Our wholesale business includes our relationship with Amazon, which is an important customer
acquisition vehicle. We are exploring opportunities to expand our wholesale relationships and identify
opportunities with licensing partners and new revenue streams that can drive further revenue growth and
profitability. We have 190 international points of distribution (stores, shop-in-shops, e-commerce sites) with six
international franchise partners operating in 13 countries. We generate revenues from our franchisees from the
sale of products and sales royalties.
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4
In addition to the above discussed key priorities, we will continue to transform our marketing strategies to better position
us to maximize our interactions with our younger, digitally savvy core millennial and Gen Z customers, and to support top-line
opportunity by increasing new customer acquisition, increasing customer retention and loyalty, and significantly increasing
customer lifetime value. We have refined our approach so as to eliminate previously inflated and unprofitable marketing costs.
Our marketing transformation includes strategic investments across key areas of the marketing organization: our teams – both
internal and external, our research and processes, and implementation of new, state-of-the-art, marketing tools and systems. We
are confident in our ability to conceptualize, build, deploy and optimize fully integrated creative marketing strategies paired
with a robust media mix, aimed to reach, inspire and convert our shoppers at every stage of their purchase journey with The
Children’s Place family of brands, comprised of “The Children’s Place”, “Gymboree”, “Sugar & Jade”, and “PJ
Place” (“Family of Brands”), and continue to position marketing as a key growth lever in Fiscal 2025 and beyond.
Overlaying these strategic initiatives is talent. Talent ultimately defines our success, and we have built a best-in-class
management team. We believe that our talented team is a significant competitive advantage for our Company.
Underlying these growth initiatives is a commitment to operational excellence. The Company’s commitment to
operational excellence includes disciplined expense management and a focus on ongoing improvement in store and e-commerce
operations, and combined with our finance, human resources, compliance and legal areas, form the strong base necessary to
support our long-term growth initiatives.
Segment Reporting
We report segment data based on geography: The Children’s Place U.S. and The Children’s Place International. Each
segment includes an e-commerce business located at www.childrensplace.com and www.gymboree.com. Included in The
Children’s Place U.S. segment are our U.S. and Puerto Rico-based stores and revenue from our U.S.-based wholesale business.
Included in The Children’s Place International segment are our Canadian-based stores and revenue from international
franchisees. We measure our segment profitability based on operating income (loss), defined as income (loss) before interest
and taxes. Net sales and direct costs are recorded by each segment. Certain inventory procurement functions such as production
and design, as well as corporate overhead, including executive management, finance, real estate, human resources, legal, and
information technology services, are managed by The Children’s Place U.S. segment. Expenses related to these functions,
including depreciation and amortization, are allocated to The Children’s Place International segment based primarily on net
sales. The assets related to these functions are not allocated. We periodically review these allocations and adjust them based
upon changes in business circumstances. Net sales to external customers are derived from merchandise sales, and we have one
U.S. wholesale customer that individually accounted for more than 10% of our net sales.
See “Note 17. Segment Information” of the Consolidated Financial Statements, “Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations,” and “Item 8. Financial Statements and Supplementary Data” of this
Form 10-K for further segment financial data.
Key Capabilities
Our objective is to sell fashionable, high-quality apparel, accessories and footwear predominately at value prices across
our Family of Brands. Our merchandise assortment offers one stop shopping across apparel, footwear, and accessories.
Merchandising Strategy
Our merchandising strategy delivers a compelling and coordinated assortment of apparel, footwear, and accessories that
encourage the purchase of head-to-toe outfits. We merchandise our deliveries by season and flow new product monthly.
High Quality and Value
We believe that offering high-quality apparel, accessories and footwear predominantly at value prices across our Family
of Brands is a competitive advantage.
Brand Image
We focus on our brand image and strengthening our customer loyalty by:
•
Consistently offering high quality and age-appropriate products and trend-right fashion predominantly at value
prices online and in our stores;
•
Providing coordinated outfits and accessories for our customers’ lifestyle needs;
Table of Contents
5
•
Providing exclusive products on our e-commerce sites to expand the breadth of our offerings;
•
Creating strong merchandising and visual presentations to create compelling online and in-store experiences;
•
Emphasizing our great value fashion in marketing visuals to convey a consistent message across our brands;
•
Leveraging our customer database to communicate with our customers and personalize communications to
maximize customer satisfaction, engagement and retention;
•
Utilizing our MyPLACE Loyalty Rewards program and private label credit card to drive customer engagement
and retention; and
•
Optimizing our fully integrated creative marketing strategies paired with a robust media mix, aimed to reach,
inspire and convert our shoppers at every stage of their purchase journey with our Family of Brands.
Low-Cost Global Sourcing
We design, source, and contract to manufacture the substantial majority of the Company’s branded products. We believe
that this is essential to assuring the consistency and quality of our merchandise, as well as our ability to deliver value to our
customers. We have strong multi-year relationships with the substantial majority of our vendors. Through these relationships
and our extensive knowledge of low cost sourcing on a global scale, we are able to offer our customers high-quality products at
predominantly value prices. We maintain a network of sourcing offices globally in order to manage our vendors efficiently and
respond to changing business needs effectively. Our sourcing offices in Hong Kong, India, Kenya, Ethiopia, China, and
Indonesia give us access to a wide range of vendors and allow us to work to maintain or reduce our merchandise costs by
capitalizing on new sourcing opportunities while maintaining our high standard for product quality.
Merchandising Process
The strong collaboration between our cross-functional teams in design, merchandising, sourcing, and planning have
enabled us to build our brands.
Design
The design team gathers information from trends, color services, research, and trade shows.
Merchandising
Each quarter, we develop seasonal merchandising strategies.
Planning and Allocation
The planning and allocation organization works collaboratively with the merchandising, finance, and global sourcing
teams to develop seasonal sales and margin plans to support our financial objectives and merchandising strategies. Further, this
team plans the flow of inventory to ensure that we are adequately supporting store floor sets, online demand, and key selling
periods.
Production, Quality Assurance, and Responsible Sourcing
During Fiscal 2024, we engaged independent contract vendors located primarily in Asia and Africa. We continue to
pursue global sourcing opportunities to support our inventory needs and seek to reduce merchandise costs. We contract for the
manufacture of the substantial majority of the products we sell. We do not own or operate any manufacturing facilities.
During Fiscal 2024, we sourced all of our merchandise directly without the use of third-party commissioned buying
agents for our branded product. We source from a diversified network of vendors, purchasing primarily from Bangladesh,
Vietnam, India, Kenya, Ethiopia, China, and Indonesia. Bangladesh and Vietnam accounted for more than 15% of our
production.
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6
In addition to our quality assurance procedures, we conduct a responsible sourcing program that seeks to protect our
Company, enhance our brands and address the well-being of the people who make our products by providing guidance in line
with industry standards to our vendors in their efforts to provide safe and appropriate working conditions for their employees.
These efforts are part of an ongoing process to encourage our vendors to continually assess, and where appropriate, improve
factory working conditions, and well-being of their employees who make our product. Additionally, under our responsible
sourcing program, we monitor changes in local laws and other conditions (e.g., worker safety, workers’ rights of association,
and political and social instability) in the countries from which we source in order to identify and assess potential risks to our
sourcing capabilities.
Environmental, Social & Governance
We published our latest Environment, Social & Governance (“ESG”) Report, now called our Sustainability and Social
Impact Update, in October 2024, which is available at http://corporate.childrensplace.com under the Corporate Sustainability
tab.
In terms of environmental initiatives, we believe that purpose-led companies such as ours have the opportunity and
responsibility to work to ensure that our business contributes to a healthy planet. We focus on topics that are important to our
long-term success and where we believe we can have the most positive impact.
In terms of social initiatives, our commitment to positive social practices includes our responsible sourcing activities in
our global supply chain, where we partner with our third-party vendors and factories, non-governmental organizations and
others in supporting workers’ health, safety and well-being. We monitor compliance by our third-party vendors and factories
with our Vendor Code of Conduct, local laws and ethical business practices to help ensure fair and safe work conditions for the
people who make our products. We also recognize the importance of eliminating forced labor within the supply chain and its
increasing significance in light of reports of human rights abuses in various regions of the world. In addition, we support and
sponsor a number of worker well-being programs designed to improve the daily lives of the workers who make our products.
Our commitment to having a positive social influence also extends to our charitable mission of supporting children and families
in need.
Human Capital Management
As of February 1, 2025, we had approximately 7900 employees, approximately 1460 of whom were based at our
corporate offices and distribution centers. Approximately 1070 were full-time store employees and approximately 5370 were
part-time and seasonal store employees. None of our employees are covered by a collective bargaining agreement.
The Human Capital & Compensation Committee is actively engaged in overseeing our human capital management
strategies, including our talent and succession planning initiatives designed to attract, develop, engage, reward and retain top
retail, digital and business leaders, who can drive our financial performance and strategic growth initiatives and contribute to
building long-term stockholder value. The Human Capital & Compensation Committee’s involvement in leadership
development and succession planning is systematic and ongoing, culminating in an annual review by our board of directors
(“Board of Directors”) of succession plans for all of our senior leaders, inclusive of development strategies for top talent within
the Company.
Company Stores
The following section highlights various store information for The Children’s Place operated stores as of February 1,
2025.
Existing Stores
As of February 1, 2025, we had a total of 495 stores in the United States, Canada, and Puerto Rico, including our first
Gymboree stand-alone store at Garden State Plaza in Paramus, New Jersey, which was opened in November 2024, and our
online stores at www.childrensplace.com and www.gymboree.com. In addition, our six international partners operated 190
international points of distribution in 13 countries.
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The following table sets forth the number of stores in the U.S., Canada, and Puerto Rico as of the current and prior fiscal
year end:
Number of Stores
Location
February 1,
2025
February 3,
2024
United States
431
454
Canada
58
63
Puerto Rico
6
6
Total Stores
495
523
At The Children’s Place, our store concepts consist of multiple formats with an average of approximately 4,900 square
feet, which have evolved over time in response to market trends, and are strategically placed within each market. We try to
create an open and brightly lit environment for customers. Our stores typically feature white fixtures to ensure the merchandise
is the focal point, using color to brand and create shop identifiers.
E-commerce Sales
Each of our U.S. and International segments includes an e-commerce business located at www.childrensplace.com and
www.gymboree.com and digital growth remains one of our top strategic priorities. We are committed to delivering a best-in-
class, end-to-end user experience, from product assortment and website operation, to order fulfillment and customer service.
We are further committed to delivering these experiences to our customers when, where, and how they are looking to access our
brands, accounting for cross-channel behavior, growth of mobile devices, and the growing interest in our brands from
international consumers. We believe that the critical investments made in areas such as e-commerce infrastructure and mobile
optimization, as well as additional front-end website features, have improved our customer experience.
We continue to explore opportunities to enhance our online presence by partnering with well-established online
marketplaces. For instance, on October 30, 2024, we announced our partnership with global fashion and lifestyle online retailer,
SHEIN. This collaboration brings our apparel to SHEIN’s platform, opening up opportunities for us to reach customers outside
our typical customer file.
Wholesale and International Franchisees
Our wholesale business includes our relationship with Amazon, which is an important customer acquisition vehicle. We
are exploring opportunities to expand our wholesale relationships and identify opportunities with licensing partners and new
revenue streams that can drive further revenue growth and profitability. We generate revenues from our franchisees from the
sale of products and sales royalties.
Store Operations
The Children’s Place store operations are organized by geographic region. Our U.S. Vice Presidents and Canada
Regional Director oversee a number of district managers residing within each region. We have a centralized corporate store
operations function which supports the operations of our stores. Our stores are staffed by store managers and full-time and part-
time sales associates, with additional temporary associates hired to support seasonal needs. Our store managers spend a high
percentage of their time on the store’s selling floor providing direction, motivation, and development to store associates. To
maximize selling productivity, our teams emphasize greeting, replenishment, presentation standards, procedures, and controls.
In order to motivate our store management, we offer a monthly incentive compensation plan that awards bonuses for achieving
certain financial goals.
Seasonality
Our business is subject to seasonal influences, with historically heavier concentrations of sales during the back-to-school
and holiday seasons. Our first fiscal quarter results are dependent upon sales during the period leading up to the Easter holiday,
our second and third fiscal quarter results are dependent upon back-to-school sales, and our fourth fiscal quarter results are
dependent upon sales during the holiday season. The business is also subject to shifts due to unseasonable weather conditions.
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The following table shows the quarterly distribution, as a percentage of the full year, of net sales, and the quarterly
distribution of operating income (loss):
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Net sales as a percentage of full year
Fiscal 2024
19.3 %
23.1 %
28.1 %
29.5 %
Fiscal 2023
20.0 %
21.6 %
30.0 %
28.4 %
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(in thousands)
Operating income (loss)
Fiscal 2024
$ (27,988)
$ (21,776)
$ 29,258
$ 6,805
Fiscal 2023
(30,067)
(36,941)
44,967
(61,757)
For more information regarding the seasonality of our business, refer to “Part II, Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations - Quarterly Results and Seasonality.”
Marketing
The Children’s Place and Gymboree are well-recognized brands, with a trend-right offering and a compelling value
proposition. Our direct marketing program utilizes both on-line and off-line channels. We relaunched the Gymboree brand in
February 2020 with a meaningfully improved digital experience on www.gymboree.com, complemented by shop-in-shop
locations in certain co-branded stores in the U.S. and Canada, by successfully executing on the specific design, sourcing, and
merchandising characteristics that create Gymboree’s elevated, playful collections, and in November 2024, we opened our first
Gymboree stand-alone store. We also launched the Sugar & Jade brand in November 2021 which is targeted at the girls’
“tween” market and is offered exclusively online, and launched the PJ Place brand in October 2022, which is a sleepwear
lifestyle brand targeted towards millennial and Gen Z customers, and is offered exclusively online. We are focused on
optimizing our assortment and purchasing inventory at levels which will drive margin growth.
We have a customer loyalty program and a private label credit card program. At the end of Fiscal 2024, members of our
MyPLACE Rewards loyalty program and/or private label credit card program accounted for approximately 85% of sales. Our
private label credit card is issued to our customers for use exclusively at The Children’s Place stores and online at
www.childrensplace.com and www.gymboree.com, and credit is extended to such customers through a third-party financial
institution on a non-recourse basis to us. Additionally, in our effort to reach an even wider customer base who are digitally
savvy and to utilize other forms of spending arrangements available, we have partnered with Afterpay to allow our customers to
purchase our merchandise on a “buy-now-pay-later” program. We promote affinity and loyalty through our marketing programs
by utilizing specialized incentive programs. We continue to focus on enhancing our loyalty programs to meet our customers’
needs.
Distribution
In the United States, we own and operate a 700,000 square foot distribution center in Alabama, which supports our retail
store operations, e-commerce, and wholesale operations both in the U.S. and in Canada. We use a third-party provider operating
a 315,000 square foot distribution center in Indiana and a 184,000 square foot distribution center in Ontario, Canada to support
our U.S. and Canadian e-commerce fulfillment operations, respectively. We utilize additional facilities in Alabama to support
further warehousing needs, including offsite storage. We also use a third-party provider of warehousing and logistics services in
both Malaysia and China to support our international franchise business.
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Competition
The children’s apparel, footwear, and accessories retail markets are highly competitive. Our primary competitors are
specialty stores, mass merchants, and off-price stores, including Carter’s, Inc., Target Corporation, Old Navy, GapKids, and
babyGap (each of which is a division of The Gap, Inc.), T.J. Maxx and Marshall’s (each of which is a division of TJX
Companies, Inc.), Burlington Coat Factory, Inc., Kohl’s Corporation, Walmart Stores, Inc., and other department stores. We
also compete with regional retail chains, catalog companies, and e-commerce retailers. One or more of our competitors are
present in substantially all of the areas in which we have stores.
Trademarks and Service Marks
“The Children’s Place”, “Gymboree”, “Sugar & Jade”, “PJ Place” “Crazy 8”, “Place”, “Baby Place”, and certain other
marks have been registered as trademarks and/or service marks with the United States Patent and Trademark Office and in
Canada and other foreign countries. During the first quarter of fiscal year 2019, the Company acquired certain intellectual
property and related assets of Gymboree Group, Inc. and related entities, which included the worldwide rights to the names
“Gymboree” and “Crazy 8” and other intellectual property, including trademarks, domain names, copyrights, and customer
databases. In November 2021, we launched the Sugar & Jade brand, and in October 2022, we launched the PJ Place brand.
Registration of our trademarks and the service marks may be renewed to extend the original registration period indefinitely,
provided the marks are still in use. We intend to continue to use and protect our trademarks and service marks and maintain
their registrations. We have also registered our trademarks in other countries where we source our products and where we have
established and possibly may establish franchising operations.
Government Regulation
We are subject to extensive federal, state, local, provincial, and other foreign laws and regulations affecting our business,
including product testing and safety, consumer protection, privacy, truth-in-advertising, accessibility, customs, wage and hour
laws and regulations, and zoning and occupancy ordinances that regulate retailers generally and/or govern the promotion and
sale of merchandise and the operation of retail stores and e-commerce sites. We also are subject to similar international laws
and regulations affecting our business. We believe that we are in material compliance with these laws and regulations.
We are committed to product quality and safety. We focus our efforts to adhere to all applicable laws and regulations
affecting our business, including the provisions of the U.S. Consumer Product Safety Improvement Act of 2008 (“CPSIA”), the
Federal Hazardous Substances Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the Canada
Consumer Product Safety Act (“CCPSA”), the Canadian Textile Labelling Act, the Canadian Care Labelling Program, and
various environmental laws and regulations. Each of our product styles currently covered by the CPSIA and the CCPSA is
appropriately tested to meet current standards.
Virtually all of our merchandise is manufactured by third-party factories located outside of the United States. These
products are imported and are subject to U.S. and Canadian customs laws and regulations, which restrict the importation of and
impose tariffs, anti-dumping and countervailing duties on, certain imported products, including textiles, apparel, footwear, and
accessories. We currently are not restricted by any such anti-dumping and countervailing duties in the operation of our business.
Internet Access to Reports
We are a public company and are subject to the disclosure requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Accordingly, we file periodic reports, proxy statements, and other information with the SEC.
Such reports, proxy statements, and other information may be obtained by visiting the SEC website (http://www.sec.gov) that
contains reports, proxy, and information statements and other information regarding us and other issuers that file electronically.
Our corporate website address is http://corporate.childrensplace.com. We make available, without charge, through our
website, copies of our Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon
as reasonably practicable after such reports are filed with or furnished to the SEC. Our ESG Report is also available on our
corporate website under the Corporate Sustainability tab. References in this document to our websites are not and should not be
considered part of this Annual Report on Form 10-K, and the information on our websites is not incorporated by reference into
this Annual Report on Form 10-K.
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We also make available our corporate governance materials, including our corporate governance guidelines and our code
of business conduct, on our website. If we make any substantive amendments to our code of business conduct or grant any
waiver, including any implicit waiver, from a provision of the code for the benefit of our President and Interim Chief Executive
Officer, we will disclose the nature of such amendment or waiver on our corporate website or in a Current Report on Form 8-K.
Controlled Company Status
In light of Mithaq’s ownership of more than 50% of the Company’s outstanding shares of common stock, The Children’s
Place, Inc. is a “controlled company” within the meaning of Rule 5615(c)(1) of the Nasdaq Listing Rules, and our Board of
Directors has chosen to rely on the “controlled company” exemption under the Nasdaq Listing Rules that would otherwise
require the Company to have a majority independent board and fully independent Human Capital and Compensation Committee
and Corporate Responsibility, Sustainability and Governance Committee. See “Risk Factors – Risks Related to Legal and
Regulatory Matters – We have exercised our option for the “controlled company” exemption under Nasdaq rules”.
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ITEM 1A. RISK FACTORS.
Investors in the Company should consider the following risk factors as well as the other information contained herein:
RISKS RELATED TO BUSINESS STRATEGIES AND GLOBAL OPERATIONS
We depend on generating sufficient cash flows, together with our existing cash balances and availability under our
credit facilities, to fund our ongoing operations, capital expenditures, debt service requirements, and any future share
repurchases or payment of dividends.
Our ability to fund our ongoing operations, capital expenditures, debt service requirements, and any future share
purchase programs or payment of dividends will depend on our ability to generate cash flows. Our cash flows are dependent on,
and are affected by, many factors, including:
•
seasonal fluctuations in our net sales and net income;
•
the continued operation of our store fleet and e-commerce websites;
•
the timing of inventory purchases for upcoming seasons, such as when to purchase merchandise for the back-to-school
season;
•
vendor and other supplier terms and related conditions, which may be less favorable to us as a smaller company in
comparison to larger companies; and
•
consumer sentiment, general business conditions, including the high levels of inflation experienced in Fiscal 2024,
macroeconomic uncertainties or slowdowns, the imposition of tariffs, and geopolitical conditions, including as a result
of events such as acts of terrorism, effects of war, pandemics, or other health issues.
Most of these factors are beyond our control. It is difficult to predict the impact that general economic conditions,
including the effects of inflation, tariffs and geopolitical conditions, will continue to have on consumer spending and our
financial results. However, we believe that they could continue to result in reduced spending by our target customer, which
would reduce our revenues and our cash flows from operating activities from those that otherwise would have been generated.
In addition, steps that we may take to limit cash outlays, such as delaying the purchase of inventory, may not be successful or
could delay the arrival of merchandise for future selling seasons, which could reduce our net sales or profitability. If we are
unable to generate sufficient cash flows, we may not be able to fund our ongoing operations, planned capital expenditures, debt
service requirements, or any future share repurchases, and we may be required to seek additional sources of liquidity as we did
in Fiscal 2024.
We require continued access to capital and our business and operating results have been and can be affected by factors
such as the availability, terms of and cost of capital, increases in interest rates or a reduction in credit rating. We are party to an
Amended and Restated Credit Agreement dated May 9, 2019 (as amended from time to time, the “Credit Agreement”), with
Wells Fargo, National Association (“Wells Fargo”), Bank of America, N.A., HSBC Bank (USA), N.A., JPMorgan Chase Bank,
N.A., Truist Bank and PNC Bank, National Association, as lenders (collectively, the “Credit Agreement Lenders”), and Wells
Fargo, as Administrative Agent, Collateral Agent and Swing Line Lender. Under the Credit Agreement we use our asset-based
revolving credit facility (the “ABL Credit Facility”) to finance our ongoing operations and our future growth, and some of the
aforementioned factors have already affected our business, and could continue to: cause our cost of doing business to increase,
limit our ability to pursue business opportunities, reduce cash flow used for sales and marketing, and place us at a competitive
disadvantage. Our historical operating results, including the operational losses experienced in Fiscal 2024, macroeconomic
uncertainties or slowdowns, volatility in the financial markets, significant losses in financial institutions’ U.S. retail portfolios,
or environmental and social concerns, are all factors that may lead to a contraction in credit availability impacting our ability to
finance our operations or our ability to refinance our ABL Credit Facility or other outstanding indebtedness.
Separately, we have also entered into a commitment letter (the “Commitment Letter”) for a $40.0 million senior
unsecured credit facility with Mithaq (the “Mithaq Credit Facility”), as an additional source of liquidity for the Company.
While credit availability under the Mithaq Credit Facility is not dependent on our business performance, borrowings under this
credit facility will require monthly payments equivalent to interest charged.
Any increase in interest rates could increase our interest expense and materially adversely affect our financial condition.
These increased costs have, and could continue to, reduce our profitability and/or impair our ability to meet our debt obligations
and to conduct ongoing operations. An increase in interest rates also could limit our ability to refinance existing debt upon
maturity or cause us to pay higher rates upon refinancing. A significant reduction in cash flow from operations or the
availability of credit could materially and adversely affect our cash available and our operating results, by inhibiting our ability
to conduct ongoing operations and carry out our development plans.
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Furthermore, as a retail company, we are inherently subject to the risk of inventory loss and theft. These losses may be
caused by error or misconduct of associates, customers, vendors or other third parties, including through organized retail crime
and professional theft. Since the occurrence of the COVID-19 pandemic, the retail industry has generally experienced an
increase in inventory shrinkage, and there can be no assurance that the measures we are taking will effectively reduce inventory
shrinkage. Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience
higher rates of inventory shrinkage or incur increased security costs to combat inventory theft, it could have a material adverse
effect on our business, financial condition, results of operations and cash flows.
We may not be able to successfully execute our business strategies.
Our strategic initiatives currently involve a focus on (i) delivery of product of a quality and value that resonates with our
customers, (ii) scaling and optimizing our infrastructure to support our e-commerce business given the continued shift in our
customers’ shopping patterns to online shopping, and (iii) expanding and refurbishing our North American retail store fleet.
We will continue to implement and refine our business systems transformation initiatives designed to increase sales and
profitability. Our business transformation through technology initiative has two key components: digital expansion and
inventory management. With respect to digital expansion, we continue to implement a personalized customer contact strategy
and are scaling our digital infrastructure to support increased digital demand. These initiatives require the execution of complex
projects involving significant systems and operational changes, which place considerable demands on our management and our
information and other systems. Our ability to successfully implement and capitalize on these projects is dependent on
management’s ability to manage these projects effectively and implement and operate them successfully, without adversely
affecting the subject and/or other systems, and on our employees’ ability to operationalize the required changes. If we fail to
implement these projects effectively, including aligning them with our sourcing, distribution and logistics operations, if we
experience significant delay, cost overruns, or unforeseen costs, or if the necessary operational changes and change
management are not enacted properly, we may not realize the return on our investments that we anticipate, and we may
adversely affect the operation of other systems, and our business, financial position, results of operations, and cash flows could
be materially adversely affected.
Failure to properly identify or measure underperforming retail stores, failure to achieve anticipated sales transfer rates
from closed stores to remaining retail stores and/or e-commerce sales, and failure to properly identify and analyze customer
segmentation and spending patterns could have a material adverse effect on our business, financial position, results of
operations, and cash flows. In addition, pursuant to U.S. GAAP, we are required to recognize an impairment charge when
circumstances indicate that the carrying value of long-lived assets may not be recoverable. If a determination is made that the
carrying value of a long-lived asset is not recoverable over its estimated useful life, the asset is written down to its estimated fair
value.
On the other hand, failure to achieve anticipated sales targets in newly-opened stores, and failure to properly identify
customer segmentation and spending patterns to select optimal locations for the opening of new stores, could also have a
material adverse effect on our business, financial position, results of operations, and cash flows.
Consumer demand, behavior, taste, and purchasing trends, as well as geopolitical conflicts and economic and political
stability may differ in international markets and/or in the distribution channels through which our wholesale customers sell
products, and, as a result, sales of our products may not be successful or meet our expectations, or the margins on those sales
may not be in line with those we currently anticipate. We may also face difficulties integrating foreign business operations and/
or wholesaling operations with our current sourcing, distribution, information technology systems, and other operations. In
addition, our expanded marketing and advertising strategies to promote sales, including the sponsorship of sweepstakes,
contests and donations, and an increased online presence through collaborations with social media influencers, may not
generate sufficient interest in our products while exposing us to other risks. Any of these challenges could hinder our success in
new and existing markets or new and existing distribution channels. There can be no assurance that we will successfully
complete any planned expansion or that any new business will be profitable or meet our expectations.
In addition, a wholly-owned subsidiary of the Company acquired certain intellectual property and related assets of
Gymboree Group, Inc. and related entities, including worldwide rights to the name “Gymboree”. We have relaunched the
Gymboree brand to expand our business across our retail stores, e-commerce, international, and wholesale businesses, and in
November 2024, we opened our first Gymboree stand-alone store in Paramus, New Jersey. We also launched the Sugar & Jade
brand in November 2021 and launched the PJ Place brand in October 2022. The positioning of the Gymboree, Sugar & Jade
and PJ Place brands and their products, relative to our existing products, the fashion choices we make with respect to our
products, and our ability to integrate the Gymboree, Sugar & Jade and PJ Place brands and their products into our existing
marketing, sourcing, inventory, sales/e-commerce, customer relations, and logistics operations and systems will be critical to
our ability to leverage all of these brands to expand our business.
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In addition, pursuant to U.S. GAAP, we are required to recognize an impairment charge when circumstances indicate
that the carrying value of our indefinite-lived Gymboree tradename asset may not be recoverable. If a determination is made
that the carrying value of the Gymboree tradename asset is not recoverable, the asset is written down to its estimated fair value.
In Fiscal 2024, we recorded an impairment charge of $28.0 million on the Gymboree tradename, primarily due to reductions in
Gymboree sales forecasts.
A failure to properly execute our plans and business strategies, delays in executing our plans and business strategies,
increased costs associated with executing on our plans and business strategies, or failure to identify alternative strategies could
have a material adverse effect on our business, financial position, results of operations, and cash flows.
A wide variety of factors can cause a decline in consumer confidence and spending which could have a material
adverse effect on the retail and apparel industries and our business, financial position, results of operations, and cash flows.
The apparel industry is cyclical in nature and is particularly affected by adverse trends in the general economy. Purchases
of apparel and related merchandise are generally discretionary and, therefore, tend to decline during recessionary, inflationary
and weak economic periods and also may decline at other times. This is particularly true with our target customer who is a
value-conscious, lower- to middle-income mother buying for infants and children based on need rather than based on fashion,
trend, or impulse. High inflation, high unemployment levels, increases in tariffs and tax rates, declines in real estate values,
availability of credit, volatility in the global financial markets, and the overall level of consumer confidence have negatively
impacted, and could in the future negatively impact, the level of consumer spending for discretionary items. This could
adversely affect our business as it is dependent on consumer demand for our products. In North America, we have experienced
and continue to experience a decrease in customer traffic, including at shopping malls, and a highly promotional environment.
If the current macroeconomic environment deteriorates further, there will likely be a negative effect on our revenues, operating
margins, and earnings which could have a material adverse effect on our business, financial position, results of operations, and
cash flows.
In addition to the economic environment, there are a number of other factors that could contribute to reduced customer
traffic and/or reduced levels of consumer confidence and spending, such as actual or potential terrorist acts, including domestic
terrorism, natural disasters, severe weather, pandemics or other health issues, political disruption, war, or geopolitical conflicts.
These occurrences create significant instability and uncertainty in the United States and elsewhere in the world, causing
consumers to defer purchases or to not shop in retail stores in shopping malls, or preventing our suppliers and service providers
from providing required products, services, or materials to us. These factors could have a material adverse effect on our
business, financial position, results of operations, and cash flows.
Fluctuations in the prices of raw materials, labor, energy, and services could result in increased product and/or
delivery costs. Our profitability and cash flows may decline as a result of increasing pressure on margins.
The apparel industry is subject to significant pricing pressure caused by many factors, including intense competition, the
highly promotional retail environment, the financial health of competitors, changes in consumer demand, and macroeconomic
conditions. If these factors cause us to reduce our sales prices and we fail to sufficiently reduce our product costs or operating
expenses, our profitability and cash flows could decline.
Increases in the price of raw materials, including cotton and other materials used in the production of fabric, clothing,
footwear, and accessories, as well as volatility and increases in labor (including increases in minimum wages and wage rates as
a result of changes in laws or business practices), energy, shipping or distribution costs, the imposition of new or higher tariffs,
the occurrence of pandemics or other health issues, and other costs, have resulted, and could continue to result, in significant
increases in operating costs, as well as cost increases for our products and their importation from our foreign sources of supply
and their distribution to our and our third-party partners’ distribution centers, retail locations, international franchise partners,
and wholesale and retail customers. To the extent we are unable to offset any such increased costs through value engineering or
price increases, such increased costs could have a material adverse effect on our business, financial position, results of
operations, and cash flows.
In addition, a shortage of labor or an increase in the cost of labor for our retail stores and/or such distribution centers
could also have a material adverse effect on our business, financial position, results of operations, and cash flows. Particularly,
with the increased prevalence of e-commerce, many companies are no longer restricted geographically to where their customers
are located. These companies now have the freedom to seek more cost-efficient leases in states such as Alabama, and are hence
competing with us in the same labor pool.
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Damage to, or a prolonged interruption of activities at, any facility that we use in our business operations could have
a material adverse effect on our business.
Our single U.S. corporate headquarters is located in Secaucus, New Jersey. One of our company-operated distribution
centers is located in Fort Payne, Alabama and supports our stores, wholesale, and e-commerce shipments both in the U.S and
Canada. We also use a third-party warehouse provider, with distribution centers located in Brownsburg, Indiana, to support our
U.S. e-commerce operations, and Mississauga, Ontario to support our Canadian e-commerce operations Our international
franchise partners receive the vast majority of shipments of merchandise from our third-party warehouse provider located in
Asia. On occasion, we may utilize additional facilities to support our seasonal warehousing needs. Damage to, or prolonged
interruption of operations at, any of the Company-operated or third-party facilities due to a work stoppage, pandemics or other
health issues, weather conditions such as a tornado, hurricane or flood, other natural disaster, fire, or other event could have a
material adverse effect on our business, financial position, results of operations, and cash flows.
We depend on our relationships with unaffiliated manufacturers, suppliers, and transportation companies, both
domestically and internationally. Our inability to maintain relationships with any of these entities, the disruption to or
failure of any of their businesses, their failure to operate in a lawful or ethical manner, and the risks associated with
international business, could have a material adverse effect on our business, financial position, results of operations, and
cash flows.
We do not own or operate any manufacturing facilities and, therefore, are dependent upon independent third parties for
the manufacture of all of our products. The vast majority of our products are currently manufactured to our specifications,
pursuant to purchase orders, by independent manufacturers located primarily in Asia and Africa. We have no exclusive or long-
term contracts with our manufacturers. We compete with other companies for manufacturing facilities, many of which have
greater financial resources than we have or pay a higher unit price than we do. If an existing manufacturer of merchandise must
be replaced for any reason, we will have to find alternative sources of manufacturing or increase purchases from our other third-
party manufacturers, and there is no assurance we will be able to do so or do so on terms that are acceptable to us.
We do not use commissioned buying agents to source any products. Although we believe that we have the in-house
capability to more efficiently source all of our products, our inability to do so, or our inability to find adequate sources to
support our current needs for merchandise and future growth, could have a material adverse effect on our business, financial
position, results of operations, and cash flows.
Our merchandise is shipped directly from manufacturers through third-party logistics providers to our or our third-party
providers’ distribution and fulfillment centers, and in turn, to our stores, our e-commerce customers, and our international
franchise partners and wholesale customers. Our operating results depend, in material part, on the orderly, timely, and accurate
operation of our shipping, receiving, and distribution processes, which depends, in material part, on our manufacturers’
adherence to shipping schedules, the availability of ships, shipping containers and shipping routes, and our third-party
providers’ effective management of our domestic and international shipping functions, distribution processes, facilities, and
capacity.
If our agents, manufacturers, suppliers or freight operators experience negative financial consequences, our inability to
use or find substitute providers to support our manufacturing and distribution needs in a timely manner could have a material
adverse effect on our business, financial position, results of operations, and cash flows.
Additionally, given that virtually all of our merchandise is purchased from foreign suppliers, we are subject to various
risks of doing business in foreign markets and importing merchandise from abroad, including from less politically or socially
stable and/or less developed countries, such as:
•
new or higher tariffs or imposition of duties, taxes, and other charges on or costs of relying on imports;
•
foreign governmental regulations, including, but not limited to, changing requirements in the course of dealing with
regard to product safety, product testing, environmental matters, employment, taxation, and language preference;
•
the failure of a direct or indirect vendor or supplier to comply with local laws or industry standards or ethical business
practices, including worker safety (e.g., fire safety and building codes), worker rights of association, freedom from
harassment and coercion, unauthorized subcontracting or use of forced, indentured or child labor, social compliance
with health and welfare standards, and environmental matters;
•
financial, political, or societal instability, or military action, war or other conflict;
•
the rising cost of doing business in particular countries;
•
pandemics or other health issues;
•
bankruptcy or insolvency of our vendors;
•
fluctuation of the U.S. dollar against foreign currencies;
•
pressure from or campaigns by non-governmental organizations or other persons, including on social media;
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•
customer acceptance of foreign produced merchandise;
•
developing countries with less or inadequate infrastructure;
•
new and existing legislation relating to use of forced, indentured or child labor by unaffiliated manufacturers or
suppliers, import quotas or other restrictions that may limit or prevent the import of our merchandise;
•
changes to, or repeal, suspension or discontinuation of, trade agreements, trade legislation and/or trade preferences;
•
significant delays in the manufacture, transportation and delivery of cargo due to epidemics or pandemics, port
security considerations, political unrest, war, weather conditions, or cyber-security events;
•
disruption of imports by labor disputes and local business or unethical practices;
•
regulations under the United States Foreign Corrupt Practices Act; and
•
increased costs of or shortages of equipment, containers for shipments, or transportation.
In addition to the above, it is possible that other events beyond our control, both domestically and internationally, such as
labor disputes, cybersecurity events or allegations of misconduct or unethical behavior affecting our unaffiliated manufacturers,
suppliers, or transportation companies, a terrorist or similar act, military action, strike, weather conditions, natural disasters,
pandemics or other health issues, or government spending cuts, could result in delays or disruptions in the production,
transportation and/or delivery of merchandise to our distribution centers or our stores, international franchise partners and
wholesale customers, or the fulfillment of e-commerce orders to our customers, or require us to incur substantial additional
costs, including in air freight, to ensure timely delivery. Any such event could have a material adverse effect on our business,
financial position, results of operations, and cash flows.
In an attempt to mitigate the above risks within any one region or one country, we maintain relationships with many
manufacturers and suppliers in various countries. We cannot predict the effect that this, or the other factors noted above, in any
region or country from which we import products could have on our business. If any of these factors rendered the conduct of
business in a particular region or country undesirable or impractical, or if our current foreign manufacturing and supply sources
ceased doing business with us or we ceased doing business with them for any reason and we were unable to find alternative
sources of supply, we could experience a material adverse effect on our business, financial position, results of operations, and
cash flows.
Our vendor guidelines and code of conduct are designed to promote compliance with applicable law and industry
standards and ethical business practices. We monitor our vendors’ practices; however, we do not control these independent
manufacturers, their business practices, their labor practices, their health and safety practices, the physical condition of their
factories, worker dormitories or other facilities, the integrity of their information or other business systems, or from where they
buy or otherwise source their raw materials or labor. The failure of our third-party manufacturers or suppliers, which we do not
control, to address the risks described above, could result in accidents and practices that cause material disruptions or delays in
production or delivery, the imposition of governmental penalties or restrictions, and/or material harm to our reputation, any of
which could have a material adverse effect on our business, financial position, results of operations, and cash flows.
We may experience disruptions at ports used to export our products from Asia, Africa, and other regions, or along the
various shipping routes, or used as ports of entry in the United States and Canada.
We currently ship the vast majority of our products by ocean. If a disruption occurs in the operation of ports through
which our products are exported or imported, or along the various shipping routes, we and our vendors may have to ship some
or all of our products from Asia, Africa, and other regions by air freight or to or from alternative shipping destinations in the
United States or in foreign countries. Shipping by air is significantly more expensive than shipping by ocean and our
profitability could be materially reduced. Similarly, shipping to or from alternative destinations could lead to significantly
increased costs for our products. A disruption at ports (domestic or abroad) through which our products are exported or
imported or along the various shipping routes could have a material adverse effect on our business, financial position, results of
operations, and cash flows.
Because certain of our subsidiaries operate outside of the United States, some of our revenues, product costs, and
other expenses are subject to foreign economic and currency risks.
We have store operations in Canada, a sourcing office in Hong Kong, sourcing operations in various locations in Asia
and Africa, and store operations internationally through franchisees.
The currency market has seen significant volatility in the value of the U.S. dollar against other foreign currencies. While
our business is primarily conducted in U.S. dollars, we purchase virtually all of our products overseas, and we generate
significant revenues in Canada in Canadian dollars. Cost increases caused by currency exchange rate fluctuations could make
our products less competitive or have a material adverse effect on our profitability. Currency exchange rate fluctuations could
also disrupt the business of the third-party manufacturers that produce our products, or franchisees that purchase our products,
by making their purchases of raw materials or products more expensive and more difficult to finance.
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Changes in currency exchange rates affect the U.S. dollar value of the Canadian dollar denominated prices at which our
Canadian business sells product. As a result, fluctuations in exchange rates impact the amount of our reported sales and
expenses, which could have a material adverse effect on our business, financial position, results of operations, and cash flows.
Additionally, we have foreign currency denominated receivables and payables that are not hedged against foreign currency
fluctuations. When settled, these receivables and payables could result in significant transaction gains or losses.
Acts of terrorism, effects of war, pandemics or other health issues, natural disasters, other catastrophes, or political
unrest could have a material adverse effect on our business.
Threatened or actual acts of terrorism, including U.S. domestic terrorism, continue to be a risk to the U.S. and global
economies. Terrorism and potential military responses, political unrest, war and other conflicts, natural disasters, pandemics or
other health issues, have disrupted and could disrupt commerce and impact our or our franchisees’ ability to operate our stores
in affected areas, produce our products in foreign countries, import our products from foreign countries, or provide critical
functions necessary to the operation of our business. A disruption of commerce, or an inability to recover critical functions from
such a disruption, could interfere with the production, shipment, or receipt of our merchandise in a timely manner or increase
our costs to do so. Consequently, any such disruption could undermine consumer confidence, which could negatively impact
consumer spending patterns or customer traffic, and thus have a material adverse effect on our business, financial position,
results of operations, and cash flows.
We have franchise partners located in Middle-Eastern countries. When the current Israel-Palestine conflict began, our
franchise partner in Israel had to shutter its stores temporarily, and we provided a temporary hiatus on the collection of royalty
payments from this franchise partner until December 2024. If the conflict continues or expands further into other countries, it
could adversely affect our sales with this franchise partner and all other franchise partners in Middle-Eastern countries, and it
could have a material adverse effect on our business, financial position, results of operations, and cash flows.
Our success depends upon the service and capabilities of our management team. Changes in management or in our
organizational structure, particularly in the most senior positions, or inadequate or ineffective management, could have a
material adverse effect on our business.
Our business and success are materially dependent on retaining members of our senior leadership team and other key
individuals within the organization, to formulate and execute the Company’s strategic and business plans. Leadership changes
can be inherently difficult to manage and may cause material disruption to our management team or our business operations and
financial results. Senior level management establishes the “tone at the top” by which an environment of ethical values,
operating style, and management philosophy is fostered. Changes in senior management could lead to an environment that lacks
inspiration and/or a lack of commitment by our employees, which could have a material adverse effect on our business.
Any disruption in, or changes to, our consumer credit arrangements, including our private label credit card
agreement, may adversely affect the ability of our customers to obtain consumer credit.
Credit card operations are subject to numerous federal and state laws that impose disclosure and other requirements upon
the origination, servicing, and enforcement of credit accounts and limitations on the maximum amount of finance charges that
may be charged by a credit provider, such as the Consumer Financial Protection Bureau’s amendment to Regulation Z in 2023
to limit the dollar amounts credit card companies can charge for late fees, which we expect could have a material adverse effect
on the income and cash flow from our private label credit card program. Additionally, during periods of increasing consumer
credit delinquencies, financial institutions may reexamine their lending practices and procedures. There can be no assurance
that the delinquencies being experienced by providers of consumer credit generally would not cause providers of third-party
credit offered by us to decrease the availability of, or increase the cost of, such credit.
Any of the above risks, individually or in aggregation, could have a material adverse effect on the way we conduct
business and could materially negatively impact our business, financial position, results of operations, and cash flows.
We are subject to customer payment-related risks that could increase our operating costs, expose us to fraud or theft,
subject us to potential liability and potentially disrupt our business.
We accept payments using a variety of methods, including cash, checks, credit and debit cards, Afterpay, ApplePay,
PayPal, our private label credit card, and gift cards. Acceptance of these payment options subjects us to rules, regulations,
contractual obligations and compliance requirements, including payment card association operating rules, certification
requirements and operating guidelines, data security standards and certification requirements, and rules governing electronic
funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or costly.
Although no system can completely prevent theft, security countermeasures have been deployed to reduce the potential for
fraud and theft by criminals. If we fail to comply with applicable rules and regulations, we may be subject to fines or higher
transaction fees and may lose our ability to accept online payments or other payment card transactions. If any of these events
were to occur, our business, financial position, results of operations, and cash flows could be adversely affected.
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We self-insure certain risks and may be impacted by unfavorable claims.
We self-insure and purchase insurance policies to provide for workers’ compensation, general liability and property
losses, cyber-security coverage, as well as director and officers’ liability, vehicle liability, and employee medical benefits.
Claims are difficult to predict and may be volatile. Any adverse claims experience could have a material adverse effect on our
business, financial position, results of operations, and cash flows.
RISKS RELATED TO THE RETAIL AND APPAREL INDUSTRIES
We may suffer material adverse business consequences if we are unable to anticipate, identify, and respond to
merchandise trends, marketing and promotional trends, changes in technology, or customer shopping patterns. Profitability
and our reputation could be materially negatively impacted if we do not adequately forecast the demand for our products
and, as a result, create significant levels of excess inventory or insufficient levels of inventory.
The apparel industry is subject to rapidly changing fashion trends and shifting consumer preferences, including the
increase in online shopping. Our success depends, in material part, on the ability of our design, merchandising and IT teams to
anticipate and respond to these changes for our brands and our global sourcing team to source from vendors that produce
merchandise which has a compelling quality and value proposition for our customers. Our design, manufacturing, and sourcing
process generally takes up to one year, during which time fashion trends and consumer preferences may further change. If we
miscalculate either the demand for our merchandise or our customers’ tastes or purchasing habits, we could experience
materially increased costs and lower selling prices due to a need to dispose of excess inventory. Conversely, if we forecast
demand for our products that is lower than actual demand, we may experience insufficient levels of inventory, increased costs
to fulfill demand from alternative locations of inventory, and reputational damage. Further, it is necessary to develop and
implement uses and scaling of technology addressing changes in customer buying behaviors and/or successful customer
marketing programs, including loyalty and private label credit card programs and “buy-now-pay-later” programs. Failure to
address any of the above risks could have a material adverse effect on our business, financial position, results of operations, and
cash flows.
Product liability costs, related claims, and the cost of compliance with consumer product safety laws in the U.S. and in
Canada or our inability to comply with such laws could have a material adverse effect on our business and reputation.
We are subject to regulation by the Consumer Product Safety Commission (“CPSC”) in the U.S., Health Canada in
Canada, and similar state, provincial, and international regulatory authorities. Although we test the products sold in our stores,
on our website, and to our international franchise partners and our wholesale customers, concerns about product safety,
including, but not limited to, concerns about those manufactured in developing countries, may lead us to recall selected
products, either voluntarily or at the direction of a governmental authority, and may lead to a lack of consumer acceptance or
loss of consumer trust. Product safety concerns, recalls, or the failure to properly manage recalls, defects, or errors could result
in governmental fines, rejection of our products by customers, damage to our reputation, lost sales, product liability litigation,
and increased costs, any or all of which could harm our business and have a material adverse effect on our business, financial
position, results of operations, and cash flows.
The cost of compliance with current requirements and any future requirements of the CPSC, Health Canada, or other
federal, state, provincial, or international regulatory authorities, consumer product safety laws, including initiatives labeled as
“green chemistry” and regulatory testing, certification, packaging, labeling, and advertising and reporting requirements, or
changes to existing laws could have a material adverse effect on our business, financial position, results of operations, and cash
flows. In addition, any failure to comply with such requirements could result in significant penalties, litigation, or require us to
recall products, any or all of which could have a material adverse effect on our business, reputation, financial position, results of
operations, and cash flows.
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We face significant competition in the retail and apparel industries, which could negatively impact our business.
The children’s apparel retail market is highly competitive, and we face heightened price and promotional competition.
We compete in substantially all of our markets with Target Corporation, Old Navy, GapKids, and babyGap (each of which is a
division of The Gap, Inc.), Carter’s, Inc., T.J. Maxx and Marshall’s (each of which is a division of TJX Companies, Inc.),
Burlington Coat Factory, Inc., Kohl’s Corporation, Walmart Stores, Inc., and other department stores. We also compete with a
wide variety of specialty stores, other national and regional retail chains, catalog companies, and e-commerce retailers,
including on Amazon and SHEIN. One or more of our competitors are present in virtually all of the areas in which we have
stores. E-commerce only retailers generally do not incur the geographical limitations suffered by traditional brick and mortar
stores, giving e-commerce only retailers a competitive advantage to and imposing significant pricing pressure on brick and
mortar stores. In addition, while we view our business as a single omni-channel business, our e-commerce stores may divert
sales from our brick and mortar stores. Many of our competitors are larger than us and have access to significantly greater
financial, marketing, and other resources than we have. Increased competition, increased promotional activity, continuing
economic pressure on and inflation affecting value-seeking consumers, and liquidation activities by bankrupt and other
struggling retailers, including selling apparel, footwear, and accessory merchandise at substantial discounts, could also have a
material adverse effect on our ability to compete successfully, and could have a material adverse effect on our business,
reputation, financial position, results of operations, and cash flows. We may not be able to continue to compete successfully
against existing or future competition.
If our landlords should suffer financial difficulty or if we are unable to successfully negotiate acceptable lease terms,
it could have a material adverse effect on our business, financial position, results of operations, and cash flows.
If any of our landlords or their substantial tenants, such as anchor department stores, should suffer financial difficulty, it
could render our landlords unable to fulfill their duties under our lease agreements and/or could render certain malls to
experience reduced customer traffic. Such duties include providing a sufficient number of mall co-tenants, common area
maintenance, utilities, and payment of real estate taxes. While we have certain remedies under our lease agreements, the loss of
business that could result if a shopping center should close or if customer traffic were to significantly decline as a result of lost
tenants or improper care of the facilities or due to macroeconomic effects, including inflation, could have a material adverse
effect on our business, financial position, results of operations, and cash flows.
The leases for a substantial number of our retail stores come up for renewal each year. If we are unable to continue to
negotiate acceptable lease and renewal terms, it could have a material adverse effect on our business, financial position, results
of operations, and cash flows.
RISKS RELATED TO OUR STOCK AND STOCK PRICE
Changes in our sales, comparable retail sales, margins, operating income, earnings per share, cash flows, and/or
other results of operations could have a material adverse effect on the market price of our common stock, which
subsequently could lead to litigation.
Numerous factors affect our sales, comparable retail sales, margins, operating income, earnings per share, cash flows,
and other financial results, including unseasonable weather conditions, merchandise assortment and product acceptance, the
retail price of our merchandise, fashion trends, customer traffic, number of visits to our e-commerce site, as well as related
conversion, economic conditions in general, including inflation and consumer confidence, and the retail sales environment in
particular, calendar shifts of holidays or seasonal periods, birth rate fluctuations, timing or extent of promotional events by our
Company or by competitors and other competitive factors, including competitor bankruptcies, fluctuations in currency
exchange rates, the imposition of new or higher tariffs, macro-economic conditions, and our success in and the cost of
executing our business strategies.
Unseasonable weather, for example, warm weather in the winter or cold weather in the spring over an extended period of
time, or the occurrence of frequent or severe storms, may adversely affect our sales and, therefore, our comparable retail sales,
operating income and earnings per share. The nature of our target customer heightens the effects of unseasonable weather on
our sales. Our target customer is a value-conscious, lower- to middle-income mother buying for infants and younger children
primarily based on need rather than based on fashion, trend, or impulse. Therefore, for example, our target customer may not
purchase warm weather spring clothing during an extended period of unseasonably cold weather occurring in what otherwise
should be warmer weather months, particularly since infants and younger children tend to outgrow clothing at a faster rate than
older children and adults.
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Our sales, comparable retail sales, margins, operating income, earnings per share, cash flows, and other financial results
have fluctuated significantly in the past (including during Fiscal 2024) due to the factors cited above, and we anticipate that
they may continue to fluctuate in the future, particularly in the highly competitive retail environment in which we operate,
which may result in declines or delays in consumer spending. The investment and analyst community follows all of these
financial markers closely and fluctuations in these results, or the failure of our results to meet investors’ or analysts’ models or
expectations, have had, and may continue to have, a significant adverse effect on the price of our common stock.
Following any such change in the price of our common stock, we have, and could in the future, be subject to litigation
from our stockholders. For example, in February 2024, a putative class action was filed against us for violations of federal
securities laws in the United States District Court of New Jersey. The complaint purported to assert claims under the federal
securities laws, alleging that we had made materially false and/or misleading statements, and failed to disclose material adverse
facts to our investors such that the price of our common stock dropped as a result. As of November 20, 2024, this case has been
dismissed in its entirety, with prejudice. See “Item 3. Legal Proceedings” of this Form 10-K for further information. Any
adverse results and/or settlements from such litigation could have a material adverse effect on our business, financial position,
results of operations, and cash flows.
We have a controlling stockholder who owns a majority of our outstanding shares of common stock, and as a result
controls all matters requiring stockholder approval.
Mithaq owns and controls the voting power of 62.2% of our outstanding shares of common stock as of February 6, 2025,
subsequent to the completion of our recent rights offering. As long as Mithaq continues to control a majority of our outstanding
shares of common stock, it will be able to determine the outcome of all corporate actions requiring stockholder approval.
Mithaq and its affiliates engage in a broad spectrum of activities. In the ordinary course of their business activities,
Mithaq and its affiliates may engage in activities where their interests may not be the same as, or may conflict with, our
interests or the interests of our other stockholders. Other stockholders will not be able to affect the outcome of any stockholder
vote while Mithaq controls the majority of the voting power of our outstanding shares of common stock. As a result, Mithaq
will be able to control, directly or indirectly and subject to applicable law, the composition of our Board of Directors, which in
turn will be able to control all matters over which we have control, including, among others:
•
any determination with respect to our business direction and policies, including the appointment and removal of
officers and directors;
•
the adoption of amendments to our certificate of incorporation or our bylaws;
•
any determinations with respect to financing, mergers, business combinations or dispositions of assets;
•
our financing and dividend policy, and the payment of dividends on our common stock, if any;
•
compensation and benefit programs and other human resources policy decisions;
•
changes to any other agreements that may adversely affect us; and
•
determinations with respect to tax matters.
Because Mithaq’s interests may differ from ours or from those of our other stockholders, Mithaq’s decisions on these
matters may be contrary to other stockholders’ expectations or preferences, and they may take actions that could be contrary to
other stockholders’ interests. So long as Mithaq beneficially owns a majority of our outstanding shares of common stock, it will
be able to control the outcome of all corporate actions requiring shareholder approval.
Our share price may be volatile.
Our common stock is quoted on the Nasdaq Global Select Market. Stock markets in general have experienced, and are
likely to continue to experience, price and volume fluctuations, which could have a material adverse effect on the market price
of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly
fluctuations in our financial results, other risk factors identified here, announcements or actions by other competitors, the
overall economy, legislative, regulatory and other actions resulting from the Presidential administration or U.S. Congress, and
the geopolitical environment could individually or in aggregation cause the price of our common stock to fluctuate
substantially.
We have experienced, and may experience, large “short” positions in our common stock relative to other publicly traded
companies in our industry. The existence of a relatively large short position may result in substantial volatility in the trading
price of our common stock, including due to an adverse impact on investors’ and analysts’ perceptions of our business and its
prospects or due to “short covering” (relatively large purchases of our common stock). Purchasers of our common stock during
periods of volatility, including as a result of “short covering” when the price of our common stock may rise rapidly, could later
experience a significant decrease in stock price, eventually leading to a significant loss in value.
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Declarations of quarterly cash dividends, and the establishment of future record and payment dates, are at the discretion
of our Board of Directors based on a number of factors, including future financial performance, general business and market
conditions, and other investment priorities. If payment of dividends is resumed, any subsequent reduction or discontinuance by
us of the payment of quarterly cash dividends could cause the market price of our common stock to decline.
We have no current plans to pay regular cash dividends on our common stock for the foreseeable future.
We have no current plans to pay regular cash dividends on our common stock for the foreseeable future. Declarations of
cash dividends, and the establishment of future record and payment dates, are at the discretion of our Board of Directors based
on a number of factors, including future financial performance, general business and market conditions, and other investment
priorities. If payment of dividends is resumed, any subsequent reduction or discontinuance by us of the payment of quarterly
cash dividends could cause the market price of our common stock to decline.
Our actual operating results may not meet or exceed our guidance and investor expectations, which would likely
cause our stock price to decline.
From time to time, we may release guidance in our earnings releases, earnings conference calls or otherwise, regarding
our future performance that represent our management’s estimates as of the date of release. If given, this guidance, which will
include forward-looking statements, will be based on projections prepared by our management. Projections are based upon a
number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of which are beyond our control. Our actual results
could differ materially from such projections. Factors that could cause or contribute to such differences include, but are not
limited to, those identified in this “Risk Factors” section. The principal reason that we expect to release guidance is to provide a
basis for our management to discuss our business outlook with analysts and investors. With or without our guidance, analysts
and other investors may publish expectations regarding our business, financial performance and results of operations. Guidance
is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us
will not materialize or will vary significantly from actual results. If our actual performance does not meet or exceed our
guidance or investor expectations, the trading price of our common stock may decline.
An active, liquid trading market for our common stock may not be sustained.
Although our common stock is currently listed on the Nasdaq Global Select Market under the symbol “PLCE,” an active
trading market for our shares may not be sustained. Accordingly, if an active trading market for our common stock is not
sustained, the liquidity of our common stock would be limited, and holders of our common stock may not be able to sell their
shares when desired. Moreover, the prices that they may obtain for their shares would be adversely affected. An inactive market
may also impair our ability to raise capital to continue to fund operations by issuing shares and may impair our ability to
acquire other companies by using our shares as consideration.
If securities or industry analysts do not publish research or reports about our business, if they adversely change their
recommendations regarding our shares or if our results of operations do not meet their expectations, our stock price and
trading volume could decline.
The trading market for our shares is influenced by the research and reports that industry or securities analysts publish
about us or our business. We do not have any control over these analysts. If one or more of these analysts cease coverage of us
or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock
price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results
of operations do not meet their expectations, our stock price could decline.
RISKS RELATED TO CYBERSECURITY, DATA PRIVACY, INFORMATION TECHNOLOGY AND E-
COMMERCE
A privacy breach, through a cybersecurity incident or otherwise, or failure to comply with privacy laws could have a
material adverse effect on our business.
As part of normal operations, we and our third-party vendors, consultants and other partners receive and maintain
confidential and personally identifiable information about our customers and employees, and confidential financial, intellectual
property, and other proprietary information. We regard the protection of our customer, employee, and Company information as
critical. The regulatory environment surrounding information security and privacy is very demanding, with the frequent
imposition of new and changing significant requirements, some of which involve significant costs to implement and significant
penalties if not followed properly. A significant breach of federal, state, provincial, local, or international privacy laws could
have a material adverse effect on our business, reputation, financial position, results of operations, and cash flows.
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A cybersecurity breach, whether targeted, random, or inadvertent, and whether at the hands of cyber criminals, hackers,
rogue employees, hostile agents of foreign governments, or other persons, may occur and could go undetected for a period of
time. Any cybersecurity incident could result in any or all of the following:
•
theft, destruction, loss, misappropriation, or release of confidential financial and other data, intellectual property,
customer awards or loyalty points, or customer, employee or vendor information, including personally identifiable
information such as payment card information, bank account information, email addresses, passwords, social
security numbers, home addresses, or health information;
•
operational or business delays resulting from the disruption of our e-commerce site, computer network, or the
computer networks of our third-party vendors, consultants and other partners and subsequent material clean-up
and mitigation costs and activities;
•
negative publicity resulting in material reputation or brand damage with our investors, customers, vendors, third-
party partners, or industry peers;
•
loss of sales, including those generated through our e-commerce websites; and
•
governmental penalties, fines and/or enforcement actions, payment and industry penalties and fines, and/or class
action and other lawsuits.
Our efforts and technology to secure our computer network and systems may not be sufficient to defend us against all
unauthorized attempts to access our employees’, customers’, vendors’ and/or our information. We have been and may be
subject to attempts to gain unauthorized access to our computer network and systems, including emails. Similarly, a breach to
the computer networks and systems of our third-party vendors, consultants or other partners, including those that are cloud-
based, may also occur. Any such breach could lead to a material disruption of our computer network and/or the areas of our
business dependent on the support, services, and other products provided by these third-party vendors, consultants and other
partners, subsequently resulting in the events described above. To date, prior attempts to gain unauthorized access to the
networks and systems of the Company, our third-party vendors, consultants or other partners have not had a material adverse
effect on us.
Our systems and procedures are required to meet the Payment Card Industry (“PCI”) data security standards, which
require periodic audits by independent third-parties to assess compliance. Failure to comply with the security requirements or
rectify a security issue may result in substantial fines and the imposition of material restrictions on our ability to accept payment
by credit or debit cards. There can be no assurance that we will be able to satisfy PCI security standards or to identify security
issues in a timely fashion. In addition, PCI are controlled by a limited number of vendors who have the ability to impose
changes in PCI’s fee structure and operational requirements on us without negotiation. Such changes in fees and operational
requirements may result in our failure to comply with PCI security standards, as well as significant unanticipated expenses.
Any of the above risks, individually or in aggregation, could result in significant costs and/or materially damage our
reputation and result in lost sales, governmental and payment card industry fines, and/or class action and other lawsuits, which
in turn could have a material adverse effect on our business, financial position, results of operations, and cash flows. Although
we carry cybersecurity insurance, in the event of a cyber-incident, that insurance may not be extensive enough or adequate in
scope of coverage or amount to reimburse us for damages we may incur.
Our failure to successfully manage our e-commerce business could have a material adverse effect on our business.
The successful operation of our e-commerce business depends on our ability to conduct an efficient and uninterrupted
operation of our online order-taking and our fulfillment operations, whether from our or our third-party provider’s distribution
centers, and on our ability to provide a shopping experience that will generate orders and return visits to our site, including by
updating our e-commerce platform to stay abreast of changing consumer shopping habits such as the significantly increased use
of mobile devices and apps to shop online. Risks associated with our e-commerce business include:
•
risks associated with the failure of the computer systems that operate our website or the failure or disruption of our
information technology and other business systems, including, but not limited to, inadequate system capacity,
security breaches, computer viruses, human error, changes in programming, failure of third-parties to continue to
support older systems or system upgrades, or unintended disruptions occasioned as a result of such upgrades, or
migration of these services to new systems, including to the cloud;
•
increased or unplanned costs associated with order fulfillment and delivery of merchandise to our customers;
•
inadequacy of disaster recovery processes and the failure to align these processes with business continuity plans;
•
the integration of the Gymboree brand in our stores and via our e-commerce website, the continued progress of
our Sugar & Jade and PJ Place brands;
•
consumer privacy and information security concerns and regulation;
•
changes in applicable federal, state, provincial, local, or international regulations;
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•
disruptions in telephone service or power outages;
•
reliance on third parties for computer hardware and software, cloud-based computing services, updates (patches),
as well as delivery of merchandise to our customers;
•
rapid technology changes and changes in consumer shopping habits, such as the significant increase in online
shopping, including through the use of mobile devices and apps;
•
credit or debit card fraud;
•
the diversion of sales from our physical stores;
•
natural disasters or adverse weather conditions;
•
negative publicity related to the social media influencers we have engaged;
•
negative customer reviews or influencer reviews on social media; and
•
liability for online advertising and content.
Problems in any one or more of these areas, individually or in aggregation, could have a material adverse effect on our
business, financial position, results of operations, and cash flows, and could damage our reputation and brands.
A material disruption in, failure of, inability to upgrade, or inability to properly implement disaster recovery plans for,
our information technology or other business systems could have a material adverse effect on our business, financial
position, results of operations, and cash flows.
We rely heavily on various information and other business systems to manage our complex operations, including our
online business, management of our global supply chain, merchandise assortment planning, inventory allocation and
replenishment, order management, warehousing, distribution and shipping activities, point-of-sale processing in our stores,
including credit and debit card processing, gift cards, our private label credit card, our customer loyalty program, and various
other processes and transactions. We continue to evaluate and implement upgrades and changes to our information technology
(“IT”) and other business systems.
Operation of our IT and/or implementation of upgrades and changes to our IT and other business systems carries
substantial risk, including failure to operate as designed, failure to properly integrate with, or disruption of, other systems,
potential loss of data or information, cost overruns or unforeseen costs, implementation delays, disruption of operations,
inability to properly train associates on new processes, inability to properly direct change management, lower customer
satisfaction resulting in lost customers or sales, inability to deliver the optimal level of merchandise to our stores in a timely
manner, inventory shortages, inventory levels in excess of customer demand, inability to meet the demands of our international
franchise partners or our wholesale and retail customers, and the inability to meet financial, regulatory, and other reporting
requirements. Further, disruptions or malfunctions affecting our current or new information or other business systems could
cause critical information upon which we rely to be lost, delayed, unreliable, corrupted, insufficient, or inaccessible. See also
the risks associated with the risk factor above, “Our failure to successfully manage our e-commerce business could have a
material adverse effect on our business.”
We continue to focus on the implementation of IT disaster recovery and/or implementation of high availability readiness
with regard to our e-commerce, finance, reporting, distribution, logistics, store operations, merchandising, sourcing, and other
key systems in order to protect against the loss or corruption of critical data. There can be no assurance that we will be
successful in implementing or executing on the appropriate disaster recovery plans or high availability readiness to protect
against such loss or corruption. There is also no assurance that a successfully implemented system will deliver or continue to
deliver any anticipated sales or margin improvements or other benefits to us. The failure to do so could have a material adverse
effect on our business, financial position, results of operations, and cash flows.
We also rely on third-party vendors and outsourcing partners to design, program, implement, maintain, and service our
existing and planned information systems, including those operated through cloud-based technology. Any failures of these
vendors to properly deliver their services in a timely fashion, any determination by those vendors to stop supporting certain
systems or components, or any failure of these vendors to protect our competitively sensitive data, or the personal data of our
customers or employees, or to prevent the unauthorized access to, or corruption of, such data, whether in their possession,
through our information systems or cloud-based technology utilized by us, could have a material adverse effect on our business,
financial position, results of operations, and cash flows.
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RISKS RELATED TO LEGAL AND REGULATORY MATTERS
We have exercised our option for the “controlled company” exemption under Nasdaq rules.
The Company has exercised its right to the “controlled company” exemption under Nasdaq rules, which enables us to
forgo certain Nasdaq requirements which include: (i) maintaining a majority of independent directors; and (ii) electing a Human
Capital and Compensation Committee and a Corporate Responsibility, Sustainability and Governance Committee composed
solely of independent directors. Accordingly, during any time while we remain a controlled company relying on the exemption
and, if applicable, during any transition period following a time when we are no longer a controlled company, you would not
have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance
requirements. Our status as a controlled company could cause our common stock to look less attractive to certain investors or
otherwise reduce the trading price of our common stock.
We are subject to the requirements of Section 203 of the DGCL, which limits our ability to engage in certain
transactions with Mithaq.
We are subject to the requirements of Section 203 of the Delaware General Corporation Law (the “DGCL”), which
provides that a corporation shall not engage in any business combination with any interested stockholder for a period of three
years following the time that such stockholder became an interested stockholder, unless (1) prior to such time the Board of
Directors of the corporation approved either the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder; (2) upon consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding
voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii)
employee stock plans in which employee participants do not have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer; or (3) at or subsequent to such time the business combination
is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66.67% of the outstanding voting stock which is not owned by the interested
stockholder. These restrictions are subject to certain exceptions specified in Section 203(b) of the DGCL. The term “interested
stockholder” is generally defined by Section 203 of the DGCL as any person that (i) is the owner of 15% or more of the
outstanding voting stock of the corporation, or (ii) is an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within the three-year period immediately prior to the date on
which it is sought to be determined whether such person is an interested stockholder, and the affiliates and associates of such
person. The term “business combination” is broadly defined under Section 203 of the DGCL to include mergers, asset sales and
other transactions in which the interested stockholder receives or could receive a financial benefit on other than a pro rata basis
with other stockholders, as further described in the section entitled “Description of Capital Stock”.
Without having obtained the prior approval of our Board of Directors or meeting the other conditions described above,
Mithaq became an “interested stockholder” with respect to the Company upon its acquisition of more than 15% of our shares of
common stock in February 2024. As a result, prior to February 2027, Mithaq will generally be prevented from engaging in any
business combination (as defined for purposes of Section 203 of the DGCL) with us, in the absence of the approval of our
Board of Directors and the affirmative vote of at least two-thirds of our outstanding shares of common stock not owned by
Mithaq.
We may be unable to protect our trademarks and other intellectual property rights.
We believe that our trademarks and service marks are important to our success and our competitive position due to their
name recognition with our customers. We devote substantial resources to the establishment and protection of our trademarks
and service marks on a worldwide basis, including in the countries from which we source our merchandise and in which we
have business operations or plan to have business operations, including through foreign franchise partners. We are not aware of
any material claims of infringement or material challenges to our right to use any of our trademarks in the United States or
Canada. Nevertheless, the actions we have taken, including to establish and protect our trademarks and service marks, may not
be adequate to prevent others from imitating our products or to prevent others from seeking to block sales of our products. Also,
others may assert proprietary rights in our intellectual property, or may assert that we are engaging in activities that infringe on
their own intellectual property, and we may not be able to successfully resolve these types of claims, any of which could have a
material adverse effect on our business, financial position, results of operations, and cash flows. In addition, the laws of certain
foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States, and we may not
be successful in obtaining our trademarks in foreign countries where we plan to conduct business. Our failure to protect our
intellectual property rights could diminish the value of our brands, weaken our competitive position, and could have a material
adverse effect on our business, reputation, financial position, results of operations, and cash flows.
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Federal tax and other legislation have had and will continue to have a material effect on our business, financial
position, results of operations, and cash flows. In addition, changes in current tax law could adversely impact our business,
financial position, results of operations, and cash flows. Other legislative, regulatory, and other actions which might be
taken by federal or state governments are unpredictable and could have unforeseen consequences having a material adverse
effect on our business.
We are subject to income taxes in the United States and foreign jurisdictions, including Canada and Hong Kong. Our
provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors, including, but
not limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than
anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and
changes in tax laws, regulations, accounting principles or interpretations thereof, which could adversely impact our business,
financial position, results of operations, and cash flows in future periods.
In addition, we are subject to the examination of our income tax returns by the Internal Revenue Service, Canada
Revenue Agency, and other state, local and foreign tax authorities. We regularly assess the likelihood of adverse outcomes
resulting from these examinations to determine the adequacy of our provision for income and other taxes. There can be no
assurance that the outcomes from these continuous examinations will not have a material adverse effect on our business,
financial position, results of operations, and cash flows.
Legislative, regulatory, and other actions, such as minimum wage requirements or overtime regulation and other wage
and hour regulations, continue to be unpredictable and could have unforeseen consequences. Such changes could impact our
relationship with our workforce, increase our expenses and have a material adverse effect on our business, financial position,
results of operations, and cash flows. None of our employees is currently represented by a collective bargaining agreement.
However, from time to time there have been efforts to organize our employees at various locations. There is no assurance that
our employees will not unionize in the future.
Our failure to comply with federal, state or local law, and litigation involving such laws, or changes in such laws,
could materially increase our expenses and expose us to legal risks and liability.
If we fail to comply with applicable laws and regulations, particularly wage and hour, accessibility, privacy and
information security, product safety, and pricing, children’s online privacy protection, advertising, sweepstakes, contests, and
marketing laws, we could be subject to legal and reputational risk, government enforcement action, and class action civil
litigation, which could have a material adverse effect on our business, financial position, results of operations, and cash flows.
Changes in regulation and how regulations are enforced, such as taxes, tariffs, privacy and information security, product safety,
trade, consumer credit, pricing, advertising, and marketing, healthcare or environmental protection, among others, could cause
our expenses to increase, margins to decrease, or tax deductible expenses to decrease, which could lead to a material adverse
effect on our business, financial position, results of operations, and cash flows.
Legal and regulatory actions are inherent in our business and could have a material adverse effect on our business,
reputation, financial position, results of operations, and cash flows.
We are, and in the future may be, subject to legal and regulatory actions in the ordinary course of our business. Some of
these proceedings have been, and in the future may be, brought on behalf of various alleged classes of complainants. The
plaintiffs may seek large and/or indeterminate amounts, including treble, punitive, or exemplary damages and/or payment of
legal fees in these proceedings. Substantial legal liability could have a material adverse effect on our business, financial
position, results of operations, and cash flows or cause us material reputational harm, which in turn could materially harm our
business prospects.
Our litigation and regulatory enforcement and other matters are subject to many uncertainties, and given their complexity
and scope, their outcome cannot be predicted. Our reserves for litigation and regulatory and enforcement matters may prove to
be inadequate. In light of the unpredictability of our litigation and regulatory and enforcement matters, it is also possible that in
certain cases an ultimately unfavorable resolution of, or decision in, one or more litigation or regulatory and enforcement
matters could have a material adverse effect on our reputation and/or our business, financial position, results of operations, and
cash flows.
Legislative actions and new accounting pronouncements could result in us having to increase our administrative
expenses to remain compliant and could have other material adverse effects.
In order to comply with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010, accounting guidance or disclosure requirements by the SEC, guidance that may
come from the Public Company Accounting Oversight Board (“PCAOB”), or changes in listing standards by the Nasdaq Global
Select Market, we may be required to enhance our internal controls, hire additional personnel, and utilize additional outside
legal, accounting, and advisory services, all of which could cause our general and administrative expenses to increase
materially.
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Changes to existing tax or other laws, authoritative or regulatory guidance, and regulations may have a material adverse
effect on our financial statements. The Financial Accounting Standards Board is continuing its convergence efforts with its
international counterpart, the International Accounting Standards Board, to converge U.S. and international standards into one
uniform set of accounting rules. The effect of changes in tax and other laws or changes in accounting rules or regulatory
guidance on our financial statements could be significant. Changes to our financial position, results of operations, or cash flows
could impact our debt covenant ratios or a lender’s perception of our financial statements causing an adverse effect on our
ability to obtain credit, or could adversely impact investor analyses and perceptions of our business causing the market value of
our stock to decrease. In addition, any changes in the current accounting rules, including legislative and other proposals, could
increase the expenses we report under U.S. GAAP and have a material adverse effect on our business, financial position, results
of operations, and cash flows.
If we fail to maintain effective internal controls, our ability to produce accurate and timely financial statements could
be impaired, which could harm our operating results, our ability to operate our business and our reputation with investors,
ultimately leading to a decline in the price of our common stock.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the
rules and regulations of the applicable listing standards of the Nasdaq Global Select Market. In particular, Section 404 of the
Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal controls over financial reporting.
It also requires our independent registered public accounting firm to attest to our evaluation of our internal controls over
financial reporting if we were a large accelerated or accelerated filer. If any of our internal controls and systems do not perform
as expected, we may experience material weaknesses in our internal controls. While we continually undertake steps to improve
our internal control over financial reporting as our business changes, we may not be successful in making the improvements and
changes necessary to be able to identify and remediate control deficiencies or material weaknesses on a timely basis. It is
possible that our current internal controls and any new internal controls that we develop may become inadequate in the future
because of changes in conditions in our business.
If we have difficulty implementing and maintaining effective internal controls over financial reporting, or if we identify a
material weakness in our internal controls over financial reporting in the future, we may not detect errors on a timely basis, such
that it could harm our operating results, adversely affect our reputation, cause our stock price to decline, or result in inaccurate
financial reporting or material misstatements in our annual or interim financial statements. We may be unable to maintain
compliance with securities laws, stock exchange listing requirements and debt instruments’ covenants regarding the timely
filing of accurate periodic reports, which could lead to investigations by Nasdaq, the SEC or other regulatory authorities or
litigations with our creditors and/or stockholders, hence requiring additional management attention and impairing our ability to
operate our business. Our liquidity, access to capital markets and perceptions of our creditworthiness may be adversely affected.
We could be required to implement expensive and time-consuming remedial measures. Our independent registered public
accounting firm may issue reports that are adverse in the event it is not satisfied with the level at which our internal control over
financial reporting is documented, designed, or operating, or if it is not satisfied with our remediation of any identified material
weaknesses. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a
material adverse effect on our business, financial position, results of operations, and cash flows.
ITEM 1B.
UNRESOLVED STAFF COMMENTS.
None.
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ITEM 1C. CYBERSECURITY.
Risk Management and Strategy
We consider cybersecurity and privacy to be important issues affecting the enterprise both in terms of reputational risk
and economic risk. To effectively assess, identify, and manage material risks from cybersecurity threats, we maintain a
cybersecurity risk management program, which is led by our Chief Technology, Logistics & Stores Officer (“CTO”) and our
Vice President, Information Security & IT Risk (“VP, IT”), as a part of the Company’s overall risk management and
compliance programs. To keep pace with ever-evolving threats and industry best practices, we have made, and will continue to
make, sizable investments in building and developing cybersecurity talent and expertise and implementing state-of-the-art
systems and tools, to detect, identify, classify and mitigate cybersecurity and other data privacy risks within our environment.
We employ benchmarking to understand best practices and industry trends. We conduct security and compliance assessments
throughout each year to validate the efficacy of our programs and practices. We also engage an independent third party expert
to assess our cybersecurity maturity periodically against the retail industry. The results of these assessments inform our
cybersecurity development roadmap going forward and are presented to the Audit Committee and the Board of Directors. We
also maintain cybersecurity insurance as part of our comprehensive insurance portfolio.
We believe that we employ appropriate standards, guidelines and best practices to manage cybersecurity-related risk and
have implemented comprehensive controls consistent with the requirements of the International Organization for
Standardization (“ISO”) and assess our cybersecurity maturity levels against the National Institute of Standards and Technology
(“NIST”) framework, including, but not limited to, the following:
•
Intrusion prevention controls (such as network segmentation and firewalls);
•
Access controls (such as identity and access management and multi-factor authentication on critical applications
and systems);
•
Detection controls (such as endpoint threat detection and response, and logging and monitoring involving the use
of a third-party for security information and event management, with reports and alerts provided by the third-party
to the CTO’s team); and
•
Threat protection controls (such as mandatory cyber-threat training and simulated phishing campaigns with
employees, vendor management programs, and vulnerability and patch management).
In an effort to ensure that our associates are knowledgeable about our data security and protection policies, and to enable
them to proficiently handle the threat of cyber-attacks, all associates are required to participate in a cybersecurity awareness
training program annually. Financial, IT and other associates who have access to sensitive information are also required to
attend additional training courses during the year. We also conduct frequent phishing simulations throughout the year to test our
employees’ responses to suspicious emails and to better inform our cyber awareness training program.
We circulate cyber awareness materials on a periodic basis on our intranet and hold a “Cyber Awareness Month” each
year to promote the importance of cybersecurity topics. In addition, members of senior management participate in periodic
crisis management exercises with third-party experts on crisis management best practices to apply their learnings to the
Company’s business continuity management program. In particular, in Fiscal 2023, the table-top exercise that was conducted
for senior management focused on the handling of a cyber-security incident.
Because we are aware of the risks associated with third-party service providers, we also have implemented processes to
oversee and manage these risks. We conduct security assessments of third-party providers before engagement and maintain
ongoing monitoring to help ensure compliance with our cybersecurity standards. In addition, we perform periodic risk
assessments of key vendors. This approach is designed to mitigate risks related to potential data breaches or other security
incidents originating from or at third-party service providers.
We have experienced targeted and non-targeted cybersecurity attacks and incidents in the past, and we could in the future
experience similar attacks. As of Fiscal 2024, we have not identified any risks from cybersecurity threats, including as a result
of any previous cybersecurity incidents, that have materially affected us, our business strategy, results of operations or financial
condition. For more information about the Company’s assessment of cybersecurity risks, see the risk factor titled “A privacy
breach, through a cybersecurity incident or otherwise, or failure to comply with privacy laws could have a material adverse
effect on our business” in Part I, Item 1A, “Risk Factors”.
We are committed to maintaining the trust we have established with our customers and associates. They expect that we
will protect their personal information. Our comprehensive privacy program includes standards and practices focused on
keeping data we collect secure and reflects our commitment to respecting privacy rights. Our Privacy Policy is available on our
website and we continually assess and update this Policy to reflect industry best practices and applicable laws and regulations.
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Governance
Our Board of Directors recognizes the important role of information security and mitigating cybersecurity and other data
security threats, as part of our efforts to protect and maintain the confidentiality and security of customer, employee and vendor
information, as well as non-public information about our Company. Although the Board of Directors as a whole is ultimately
responsible for the oversight of our risk management function, the Board of Directors uses its committees to assist in its risk
oversight function. The Audit Committee of our Board of Directors has primary responsibility for our cybersecurity risk
identification and mitigation activities, and that Committee and senior management provide reports regularly to the Board of
Directors.
The Audit Committee receives periodic reports from management, including our CTO and VP, IT. These reports
encompass a broad range of topics, such as our cybersecurity risks, the current cybersecurity landscape and the status of
ongoing cybersecurity initiatives. Furthermore, management informs the Audit Committee as deemed necessary, about any
notable cybersecurity incidents.
Our management team, including our CTO and VP, IT, is responsible for assessing and managing our material risks from
cybersecurity threats. The VP, IT’s team has primary responsibility for the day-to-day operation and implementation of our
overall cybersecurity risk management program and supervises both our internal cybersecurity team and our retained external
cybersecurity consultants. The VP, IT’s team also supervises efforts to prevent, detect, mitigate, and remediate cybersecurity
risks and incidents through various means, which may include briefings from internal security personnel, threat intelligence and
other information obtained from governmental, public or private sources, including external consultants engaged by us, and
alerts and reports produced by security tools deployed in the IT environment.
Our CTO’s background includes more than 20 years of experience in the technology domain, with 15 years in the retail
industry, leading e-commerce implementations and large scale transformation projects such as adopting cybersecurity best
practices. Our VP, IT has more than 30 years of experience implementing security in complex manufacturing and retail
environments. Their combined in-depth knowledge and experience are instrumental in developing and executing our
cybersecurity risk management program.
The Company’s management maintains and implements a written Cyber Security Incident Response Policy and Cyber
Security Incident Response Plan, both of which are reviewed and updated on a periodic basis. In the event we identify a
potential cybersecurity, privacy or other data security issue, we have defined procedures for responding to such issues,
including procedures that address when and how to engage with Company management, the Audit Committee, our Board of
Directors, other stakeholders and law enforcement when responding to such issues.
ITEM 2.
PROPERTIES.
We lease all of our existing store locations in the United States, Puerto Rico, and Canada, with lease terms expiring
through 2032. The average unexpired lease term for our stores is approximately 1.9 years in the United States, Puerto Rico, and
Canada. Generally, we enter into initial lease terms for our stores ranging between 1 - 10 years at inception and provide for
contingent rent based on sales in excess of specific minimums. We anticipate that we will be able to extend those leases which
we wish to extend on satisfactory terms as they expire or relocate to more desirable locations.
The following table sets forth information with respect to certain of our non-store locations as of February 1, 2025:
Location
Use
Approximate
Sq. Footage
Current Lease
Term Expiration
Fort Payne, AL (1)
Store Distribution Center / E-commerce
Fulfillment Center
700,000
Owned
Stevenson, AL (1)
Offsite Storage
450,000
1/31/2026
Oxford, AL (1) (5)
Offsite Storage
122,000
3/31/2025
Scottsboro, AL (1)
Offsite Storage
303,000
7/31/2026
Fort Payne, AL (1) (2)
Offsite Storage
569,000
1/31/2027
Hong Kong, China (3)
Product Support
11,000
4/30/2027
500 Plaza Drive, Secaucus, NJ (3)
Corporate Offices
120,000
5/31/2037
Lahore, Pakistan (4)
Corporate Offices
20,000
11/30/2034
____________________________________________
(1)
Supports our stores, wholesale, and e-commerce business in both the U.S. and Canada.
(2)
Includes four separate offsite storage facility locations.
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(3)
Supports our U.S. stores, our e-commerce business, our Canadian stores, our international franchisees, and wholesale business.
(4)
Supports back-office functions, sourcing services and other business and corporate matters as needed. The corporate office is expected to be fully
operational in the second quarter of Fiscal 2025.
(5)
The current lease expired on March 31, 2025 and is expected to be renewed until June 30, 2025.
We also use a third-party provider operating a 315,000 square foot distribution center in Indiana and 184,000 square foot
distribution center in Ontario, Canada to support our U.S. and Canadian e-commerce fulfillment operations, respectively.
ITEM 3.
LEGAL PROCEEDINGS.
The Company is a defendant in Rael v. The Children’s Place, Inc., a purported class action, pending in the U.S. District
Court, Southern District of California. In the initial complaint filed in February 2016, the plaintiff alleged that the Company
falsely advertised discount prices in violation of California’s Unfair Competition Law, False Advertising Law, and Consumer
Legal Remedies Act. The plaintiff filed an amended complaint in April 2016, adding allegations of violations of other state
consumer protection laws. In August 2016, the plaintiff filed a second amended complaint, adding an additional plaintiff and
removing the other state law claims. The plaintiffs’ second amended complaint sought to represent a class of California
purchasers and sought, among other items, injunctive relief, damages, and attorneys’ fees and costs.
The Company engaged in mediation proceedings with the plaintiffs in December 2016 and April 2017. The parties
reached an agreement in principle in April 2017, and signed a definitive settlement agreement in November 2017, to settle the
matter on a class basis with all individuals in the U.S. who made a qualifying purchase at The Children’s Place from February
11, 2012 through January 28, 2020, the date of preliminary approval by the court of the settlement. The Company submitted its
memorandum in support of final approval of the class settlement on March 2, 2021. On March 29, 2021, the court granted final
approval of the class settlement and denied plaintiff’s motion for attorney’s fees, with the amount of attorney’s fees to be
decided after the class recovery amount has been determined. The settlement provides merchandise vouchers for qualified class
members who submit valid claims, as well as payment of legal fees and expenses and claims administration expenses. Vouchers
were distributed to class members on November 15, 2021 and they were eligible for redemption in multiple rounds through
November 2023. On February 23, 2024, a hearing on motion for preliminary injunction and permanent injunction and to
enforce judgement and settlement agreement was held. Pending receipt of the court’s ruling, upon the court’s order, the plaintiff
filed a renewed motion for attorneys’ fees, costs and incentive awards on March 4, 2024, to which the Company filed a
statement of non-opposition on April 1, 2024. Because the plaintiff was seeking less than the maximum amount agreed to in the
settlement, the Company requested that such difference in amount be distributed as vouchers to authorized class members,
pursuant to the settlement agreement. The hearing for the motion for attorneys’ fees, costs, and incentive awards resulted in the
court granting the plaintiff’s counsel approximately $0.3 million in fees, costs and incentive awards. The balance of funds
initially reserved for the plaintiff counsel’s fees and costs have now been issued as a single, final round of merchandise
vouchers for qualified class members, which expired in March 2025. In connection with the settlement, the Company recorded
a reserve for $5.0 million in its consolidated financial statements in fiscal year 2017. Following the court’s recent decision(s),
the Company released $2.3 million from its previously established reserve during Fiscal 2024.
Similar to the Rael case above, the Company is also a defendant in Gabriela Gonzalez v. The Children’s Place, Inc., a
purported class action, pending in the U.S. District Court, Central District of California. The plaintiff alleged that the Company
had falsely advertised discounts that do not exist, in violation of California’s Unfair Competition Laws, False Advertising Law
and the California Consumer Legal Remedies Act. The Company filed a motion to compel arbitration, which the plaintiff did
not oppose, and the court granted the motion on August 17, 2022—staying the case pending the outcome of the arbitration. The
demand for arbitration was filed on October 4, 2022, in connection with the individual claim of the plaintiff. A mass arbitration
firm associated with plaintiff’s counsel then conducted an advertising campaign for claimants to conduct a mass arbitration. In
part, to avoid the mass arbitration, the parties stipulated to return the original plaintiff’s claim to court to proceed as a class
action. Accordingly, the arbitration would not be proceeding and the Company’s response to the original plaintiff’s complaint
in court was filed on July 20, 2023. On August 16, 2023, however, the Company began to receive notices regarding an initial
tranche of approximately 1,300 individual demands that were filed with Judicial Arbitration and Mediation Services, Inc.
(“JAMS”) as part of a related mass arbitration claim. The parties participated in mediation proceedings on November 15, 2023
and February 9, 2024. The parties agreed to further discuss settlement options in May 2024, which occurred without resolution.
In late May, due to the judge’s retirement, the Gonzalez action was transferred and reassigned to a different judge. Deadlines
were therefore reset, including the Company’s motion to dismiss. On June 10, 2024, JAMS advised that it would be pausing its
administration of the claims until the parties resolve their dispute over which set of arbitration terms apply to the case. The
Company’s motion to dismiss was denied in November 2024. Any liability arising out of these proceedings is not expected to
have a material adverse effect on the Company's financial position, results of operations, or cash flows.
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The Company is also involved in various legal proceedings arising in the normal course of business. In the opinion of
management, any ultimate liability arising out of these proceedings will not have a material adverse effect on the Company’s
financial position, results of operations, or cash flows.
ITEM 4.
MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is listed on the Nasdaq Global Select Market, or Nasdaq, under the symbol “PLCE”. Mithaq Capital
SPC, a Cayman segregated portfolio company (“Mithaq”) currently holds more than 50% of our outstanding shares of common
stock and is a controlling stockholder of the Company. On April 11, 2025, the number of holders of record of our common
stock was 34. The majority of holders of our common stock are “street name” or beneficial holders, whose shares of record are
held by banks, brokers, and other financial institutions.
In November 2021, our Board of Directors authorized a $250.0 million share repurchase program (the “Share
Repurchase Program”). Under this program, we may repurchase shares on the open market at current market prices at the time
of purchase or in privately negotiated transactions. The timing and actual number of shares repurchased under the program will
depend on a variety of factors, including price, corporate and regulatory requirements, and other market and business
conditions. We may suspend or discontinue the program at any time and may thereafter reinstitute purchases, all without prior
announcement. Currently, given the terms of our credit agreement, dated as of May 9, 2019, (as amended from time to time, the
“Credit Agreement”), by and among the Company and certain of its subsidiaries, and the lenders party thereto (collectively, the
“Credit Agreement Lenders”), as amended by its seventh amendment to the Credit Agreement (the “Seventh Amendment”),
dated as of April 18, 2024, described in “Note 9. Debt” of the Consolidated Financial Statements, “Item 8. Financial Statements
and Supplementary Data” of this Form 10-K, the repurchase of any shares would require fulfilling the heightened payment
conditions under our Credit Agreement, except that repurchases of shares as described below, pursuant to our practice as a
result of our insider trading policy, are expressly permitted. As of February 1, 2025, there was $156.5 million remaining
availability under the Share Repurchase Program.
Pursuant to our practice, including due to restrictions imposed by our insider trading policy during black-out periods, we
withhold and repurchase shares of vesting stock awards and make payments to taxing authorities as required by law to satisfy
the withholding tax requirements of all equity award recipients. Our payment of the withholding taxes in exchange for the
surrendered shares constitutes a repurchase of our common stock. We also acquire shares of our common stock in conjunction
with liabilities owed under our deferred compensation plan, which are held in treasury.
The following table summarizes our share repurchases:
Fiscal Years Ended
February 1, 2025
February 3, 2024
Shares
Amount
Shares
Amount
(in thousands)
Share repurchases related to:
Share repurchase program
71 $
674
210 $ 7,131
Shares acquired and held in treasury
5 $
66
8 $
245
The following table provides a fiscal month-to-month summary of our share repurchase activity during the 13 weeks
ended February 1, 2025:
Period
Total Number of
Shares Purchased
Average Price Paid
per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Approximate Dollar
Value (in
thousands) of
Shares that May Yet
Be Purchased
Under the Plans or
Programs
November 3, 2024 through November 30, 2024
—
—
—
$
156,657
December 1, 2024 through January 4, 2025 (1)
6,691
16.15
6,691
156,549
January 5, 2025 through February 1, 2025
—
—
—
156,549
Total
6,691 $
16.15
6,691
$
156,549
____________________________________________
(1)
Includes 6,691 shares withheld to cover taxes in conjunction with the vesting of stock awards.
Table of Contents
31
Equity Plan Compensation Information
On May 20, 2011, our stockholders approved the 2011 Equity Incentive Plan (the “2011 Equity Plan”). The following
table provides information as of February 1, 2025, about the shares of our common stock that may be issued under our equity
compensation plans.
COLUMN (A)
COLUMN (B)
COLUMN (C)
Plan Category
Securities to be issued
upon exercise of
outstanding options
Weighted average
exercise price of
outstanding options
Securities remaining
available for future
issuances under
equity compensation
plans (excluding
securities reflected in
Column (A))
Equity Compensation Plans
Approved by Security Holders
N/A
N/A
278,400
Equity Compensation Plans Not
Approved by Security Holders
N/A
N/A
N/A
Total
N/A
N/A
278,400
Table of Contents
32
ITEM 6.
[RESERVED]
Table of Contents
33
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion should be read in conjunction with our audited financial statements and notes thereto included
in Part IV, Item 15. Exhibits and Financial Statement Schedules. This Annual Report on Form 10-K contains or may contain
forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995, including but not limited to statements relating to the Company’s strategic initiatives and results of operations, including
adjusted net income (loss) per diluted share. Forward-looking statements typically are identified by use of terms such as
“may,” “will,” “should,” “plan,” “project,” “expect,” “anticipate,” “estimate,” “believe,” and similar words, although some
forward-looking statements are expressed differently. These forward-looking statements are based upon the Company’s current
expectations and assumptions and are subject to various risks and uncertainties that could cause actual results and
performance to differ materially. Some of these risks and uncertainties are described in the Company’s filings with the
Securities and Exchange Commission, including in Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K for the
fiscal year ended February 1, 2025. Included among the risks and uncertainties that could cause actual results and
performance to differ materially are the risk that the Company will be unable to achieve operating results at levels sufficient to
fund and/or finance the Company’s current level of operations and repayment of indebtedness, the risk that the Company will
be unsuccessful in gauging fashion trends and changing consumer preferences, the risks resulting from the highly competitive
nature of the Company’s business and its dependence on consumer spending patterns, which may be affected by changes in
economic conditions (including inflation), the risk that changes in the Company’s plans and strategies with respect to pricing,
capital allocation, capital structure, investor communications and/or operations may have a negative effect on the Company’s
business, the risk that the Company’s strategic initiatives to increase sales and margin, improve operational efficiencies,
enhance operating controls, decentralize operational authority and reshape the Company’s culture are delayed or do not result
in anticipated improvements, the risk of delays, interruptions, disruptions and higher costs in the Company’s global supply
chain, including resulting from disease outbreaks, foreign sources of supply in less developed countries, more politically
unstable countries, or countries where vendors fail to comply with industry standards or ethical business practices, including
the use of forced, indentured or child labor, the risk that the cost of raw materials or energy prices will increase beyond current
expectations or that the Company is unable to offset cost increases through value engineering or price increases, various types
of litigation, including class action litigation brought under securities, consumer protection, employment, and privacy and
information security laws and regulations, the imposition of regulations affecting the importation of foreign-produced
merchandise, including duties and tariffs, risks related to the existence of a controlling stockholder, and the uncertainty of
weather patterns, as well as other risks discussed in the Company’s filings with the SEC from time to time. Readers are
cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made.
The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made
to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
As used in this Annual Report on Form 10-K, references to the “Company”, “The Children’s Place”, “we”, “us”,
“our”, and similar terms refer to The Children’s Place, Inc. and its subsidiaries. Our fiscal year ends on the Saturday on or
nearest to January 31. Other terms that are commonly used in our Management’s Discussion and Analysis of Financial
Condition and Results of Operations are defined as follows:
•
Fiscal 2025 — The fifty-two weeks ending January 31, 2026
•
Fiscal 2024 — The fifty-two weeks ended February 1, 2025
•
Fiscal 2023 — The fifty-three weeks ended February 3, 2024
•
Fiscal 2022 — The fifty-two weeks ended January 28, 2023
•
SEC — U.S. Securities and Exchange Commission
•
U.S. GAAP — Generally Accepted Accounting Principles in the United States
•
FASB — Financial Accounting Standards Board
•
FASB ASC — FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP,
except that rules and interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC
registrants
•
AUR — Average unit retail price
Table of Contents
34
•
Comparable Retail Sales — Net sales, in constant currency, from stores that have been open for at least 14
consecutive months and from our e-commerce store, excluding postage and handling fees. Store closures in the
current fiscal year will be excluded from Comparable Retail Sales beginning in the fiscal quarter in which the
store closes. A store that is closed for a substantial remodel, relocation, or material change in size will be
excluded from Comparable Retail Sales for at least 14 months beginning in the fiscal quarter in which the closure
occurred. However, stores that temporarily close will be excluded from Comparable Retail Sales until the store is
re-opened for a full fiscal month
•
Cost of Sales — Cost of inventory sold, including certain buying, design, and distribution expenses, and shipping
and handling costs on merchandise sold.
•
Gross Margin — Gross profit expressed as a percentage of net sales
•
SG&A — Selling, general, and administrative expenses
OVERVIEW
Our Business
We are the largest pure-play children’s specialty retailer in North America with an omni-channel portfolio of brands. We
design, contract to manufacture, and sell fashionable, high quality apparel, accessories and footwear predominantly at value
prices, primarily under our proprietary brands: “The Children’s Place”, “Gymboree”, “Sugar & Jade”, and “PJ Place”. Our
global retail and wholesale network includes two digital storefronts, 495 stores in North America, wholesale marketplaces, 190
international points of distribution in 13 countries through our six franchise partners, and social media channels on Instagram,
Facebook, X, formerly known as Twitter, YouTube and Pinterest. Our digital storefronts are at www.childrensplace.com and
www.gymboree.com, where our customers are able to shop online for the same merchandise available in our physical stores, but
also certain exclusive merchandise only available at our e-commerce sites.
Segment Reporting
In accordance with FASB ASC 280—Segment Reporting, we report segment data based on geography: The Children’s
Place U.S. and The Children’s Place International. Each segment includes an e-commerce business located at
www.childrensplace.com and www.gymboree.com. Included in The Children’s Place U.S. segment are our U.S. and Puerto
Rico-based stores and revenue from our U.S.-based wholesale business. Included in The Children’s Place International segment
are our Canadian-based stores and revenue from international franchisees. We measure our segment profitability based on
operating income (loss), defined as income (loss) before interest and taxes. Net sales and direct costs are recorded by each
segment. Certain inventory procurement functions such as production and design, as well as corporate overhead, including
executive management, finance, real estate, human resources, legal, and information technology services, are managed by The
Children’s Place U.S. segment. Expenses related to these functions, including depreciation and amortization, are allocated to
The Children’s Place International segment based primarily on net sales. The assets related to these functions are not allocated.
We periodically review these allocations and adjust them based upon changes in business circumstances. Net sales to external
customers are derived from merchandise sales, and we have one U.S. wholesale customer that individually accounted for more
than 10% of our net sales during Fiscal 2024. Refer to “Note 17. Segment Information” of the Consolidated Financial
Statements of this Form 10-K for more information.
Recent Developments
Macroeconomic conditions, including inflationary pressures, higher interest rates, and other domestic and geopolitical
factors, continued to adversely affect our core customer in Fiscal 2024. While some of these inflationary pressures, including
freight input costs and product input costs, had improved in Fiscal 2024, we may continue to experience inflationary pressures
on our product input costs and distribution costs. In Fiscal 2024, these pressures contributed to a decrease in consumer
discretionary apparel purchases. We expect these macroeconomic conditions, including but not limited to increased product
input costs, transportation costs, distribution costs, and geopolitical conditions like changes in foreign policies of the United
States, and other inflationary pressures, to continue to have an impact during Fiscal 2025.
In February and March 2025, the U.S. government announced the intention to impose tariffs on certain goods imported
from Canada, Mexico and China. On April 2, 2025, it was further announced that tariffs would be applied to all countries
importing goods to the United States. We continue to monitor the impact of any of these tariffs that become effective, as well as
potential retaliatory tariffs imposed by other countries. These tariffs could have a material adverse impact on the global retail
industry, supply chains worldwide, and other political and macroeconomic conditions, which could increase our product input
costs in Fiscal 2025 and beyond, and also affect customer sentiment in deciding whether to purchase U.S. goods as opposed to
other alternatives.
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35
On February 6, 2025, we completed a rights offering (“Rights Offering”) pursuant to which we distributed to the holders
of record of our Common stock as of the close of business on December 13, 2024, the record date for the Rights Offering, non-
transferable subscription rights to purchase, in the aggregate, up to 9.2 million shares of Common stock. Each subscription right
entitled its holder to purchase 0.7220 shares of Common stock at a subscription price of $9.75 per whole share of Common
stock. Additionally, rights holders who fully exercised their basic subscription rights were entitled to subscribe for additional
shares of Common stock that remained unsubscribed as a result of any unexercised basic subscription rights. The subscription
price was payable by rights holders (i) in cash, (ii) by delivery in lieu of cash of an equivalent amount of any indebtedness for
borrowed money (principal and/or accrued and unpaid interest) owed by us to such rights holder, or (iii) by delivery of a
combination of cash and such indebtedness. Upon the completion of the Rights Offering, we issued 9.2 million shares of
Common stock for a total purchase price of $90.0 million.
Mithaq Capital SPC, a Cayman segregated portfolio company (“Mithaq”), which is a controlling stockholder of the
Company, purchased 6.7 million of shares of Common stock pursuant to the Rights Offering and as of February 6, 2025, it
owns and controls the voting power of 62.2% of our outstanding shares of Common stock. Mithaq paid (i) $5.1 million of the
subscription price for such shares in cash and (ii) the remaining $60.2 million of the subscription price for such shares by
delivery of indebtedness for borrowed money owed by us to Mithaq pursuant to that certain interest-free unsecured promissory
note for a $78.6 million term loan (the “Initial Mithaq Term Loan”), dated February 29, 2024, by and among us, certain
subsidiaries of the Company, and Mithaq. Accordingly, the aggregate outstanding indebtedness owed by us to Mithaq pursuant
to both of our term loans from Mithaq, collectively, has been reduced to $108.4 million as of February 6, 2025. We received
approximately $29.8 million in gross cash proceeds from the Rights Offering on February 6, 2025. Substantially all of the gross
cash proceeds from the Rights Offering were used towards prepaying our asset-based revolving credit facility (the “ABL Credit
Facility”) under our Amended and Restated Credit Agreement dated May 9, 2019 (as amended from time to time, the “Credit
Agreement”), with Wells Fargo, National Association (“Wells Fargo”), Bank of America, N.A., HSBC Bank (USA), N.A.,
JPMorgan Chase Bank, N.A., Truist Bank and PNC Bank, National Association, as lenders (collectively, the “Credit
Agreement Lenders”), and Wells Fargo, as Administrative Agent, Collateral Agent and Swing Line Lender.
On March 17, 2025, we announced that John Szczepanksi has been appointed Chief Financial Officer, effective March
31, 2025.
Pillar Two Model Rules
The Organization for Economic Cooperation and Development (“OECD”) has introduced a global minimum corporate
tax rate of 15% under its Pillar Two initiative (“Pillar Two”), effective for tax years beginning in January 2024. Although the
U.S. and Hong Kong had not yet adopted the Pillar Two rules in 2024, other regions where we conduct business, primarily
Canada, have begun to enact such legislation. The implementation of the Pillar Two rules in each jurisdiction in which it
operates is not expected to have a material impact on our effective tax rate. We are closely monitoring legislative developments
globally to evaluate potential impacts on our financial statements as more regions implement the Pillar Two rules.
Operating Highlights
Net sales decreased 216239000, or 13.5%, to $1.386 billion during Fiscal 2024 from $1.603 billion during Fiscal 2023,
primarily due to anticipated declines in e-commerce demand due to the rationalization of promotions, reductions in inflated and
unprofitable marketing spend, and the strategic decision to change “free shipping” offers, as we proactively sacrificed
unprofitable sales in an effort to improve profitability. The Company also experienced a decrease in brick-and-mortar revenue
due to a lower store count and lower sales volume. This was partially offset by an increase in wholesale revenue, as we continue
to strengthen relationships with our partners. During Fiscal 2024, we closed 29 stores and opened one Gymboree stand-alone
store in Paramus, New Jersey. Comparable retail sales decreased 13.4 for Fiscal 2024, largely due to the planned decrease in e-
commerce revenue.
Gross profit increased $14.2 million, or 3.2%, to $459.5 million during Fiscal 2024 from $445.3 million during Fiscal
2023. Gross margin increased 530 basis points to 33.1% during Fiscal 2024, compared to 27.8% during Fiscal 2023. The
increase in gross margin was primarily due to reductions in product input costs, including cotton and supply chain costs, which
negatively impacted margins in the prior year. These improvements in input costs were combined with the success of our
strategies to rationalize profit-draining promotions and limit unprofitable shipping offers, in addition to optimized shipping
carrier rates, which resulted in a significant reduction in freight costs.
Operating loss was $(13.7) million during Fiscal 2024 compared to $(83.8) million during Fiscal 2023. Operating margin
leveraged 420 basis points to (1.0)% of net sales.
Net loss was $(57.8) million, or $(4.53) per diluted share, during Fiscal 2024 compared to $(154.5) million, or $(12.34)
per diluted share, during Fiscal 2023, due to the factors discussed above.
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36
RESULTS OF OPERATIONS
We believe that our e-commerce and brick-and-mortar retail store operations are highly interdependent, with both
sharing common customers purchasing from a common pool of product inventory. Accordingly, we believe that consolidated
omni-channel reporting presents the most meaningful and appropriate measure of our performance, including net sales.
The following table sets forth, for the periods indicated, selected data from our Consolidated Statements of Operations
expressed as a percentage of Net sales. We primarily evaluate the results of our operations as a percentage of Net sales rather
than in terms of absolute dollar increases or decreases by analyzing the year over year change in our business expressed as a
percentage of Net sales (i.e., “basis points”).
Fiscal Year
Ended
Fiscal Year
Ended
Variance
February 1,
2025
% of Net
Sales
February 3,
2024
% of Net
Sales
$
%
% of Net
Sales
(amounts in thousands)
Net sales
$
1,386,269
100.0 % $
1,602,508
100.0 % $ (216,239) (13.5) %
— %
Cost of sales (exclusive of depreciation
and amortization)
926,808
66.9 %
1,157,234
72.2 % (230,426) (19.9) %
(5.3) %
Gross profit
459,461
33.1 %
445,274
27.8 %
14,187
3.2 %
5.3 %
Selling, general, and administrative
expenses
405,550
29.3 %
447,343
27.9 %
(41,793)
(9.3) %
1.4 %
Depreciation and amortization
39,612
2.9 %
47,186
2.9 %
(7,574) (16.1) %
— %
Asset impairment charges
28,000
2.0 %
34,543
2.2 %
(6,543) (18.9) %
(0.2) %
Operating loss
(13,701)
(1.0) %
(83,798)
(5.2) %
70,097
(83.6) %
4.2 %
Related party interest expense
(6,493)
(0.5) %
—
— %
(6,493) (100.0) %
(0.5) %
Other interest expense, net
(29,254)
(2.1) %
(30,000)
(1.9) %
746
(2.5) %
(0.2) %
Loss before provision for income taxes
(49,448)
(3.6) %
(113,798)
(7.1) %
64,350
(56.5) %
3.5 %
Provision for income taxes
8,371
0.6 %
40,743
2.5 %
32,372
(79.5) %
(1.9) %
Net loss
$
(57,819)
(4.2) % $
(154,541)
(9.6) % $
96,722
(62.6) %
5.4 %
Non-GAAP Reconciliation
We have presented certain measures on a non-GAAP basis. Adjusted net loss, adjusted net loss per diluted share,
adjusted selling, general, and administrative expenses, and adjusted operating income (loss) are non-GAAP measures. These
measures are not intended to replace GAAP financial information, and may be different from non-GAAP measures reported by
other companies. The most comparable GAAP measures are net loss, net loss per diluted share, selling, general, and
administrative expenses, and operating income (loss), respectively. We believe the income and expense items excluded as non-
GAAP adjustments are not reflective of the performance of our core business, and that providing this supplemental disclosure
to investors will facilitate comparisons of the past and present performance of our core business.
Fiscal 2024 Compared to Fiscal 2023
Net sales decreased 216239000, or 13.5%, to $1.386 billion during Fiscal 2024 from $1.603 billion during Fiscal 2023,
primarily due to anticipated declines in e-commerce demand due to the rationalization of promotions, reductions in inflated and
unprofitable marketing spend, and the strategic decision to change “free shipping” offers, as we proactively sacrificed
unprofitable sales in an effort to improve profitability. We also experienced a decrease in brick-and-mortar revenue due to a
lower store count and lower sales volume. This was partially offset by an increase in wholesale revenue, as we continue to
strengthen relationships with our partners. Comparable retail sales decreased 13.4 for Fiscal 2024, largely due to the planned
decrease in e-commerce revenue.
Gross profit increased $14.2 million, or 3.2%, to $459.5 million during Fiscal 2024 from $445.3 million during Fiscal
2023. Gross margin increased 530 basis points to 33.1% of net sales during Fiscal 2024, compared to 27.8% during Fiscal 2023.
The increase in gross margin was primarily due to reductions in product input costs, including cotton and supply chain costs,
which negatively impacted margins in the prior year. These improvements in input costs were combined with the success of our
strategies to rationalize profit-draining promotions and limit unprofitable shipping offers, in addition to optimized shipping
carrier rates, which resulted in a significant reduction in freight costs.
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37
Gross profit is calculated as consolidated net sales less cost of goods sold. Gross margin is calculated as gross profit
divided by consolidated net sales. Gross profit as a percentage of net sales is dependent upon a variety of factors, including
changes in the relative sales mix among distribution channels, changes in the mix of products sold, the timing and level of
promotional activities, changes in foreign currency exchange rates, and fluctuations in input costs. These factors, among others,
may cause gross profit as a percentage of net sales to fluctuate from period to period.
Selling, general, and administrative expenses were $405.6 million during Fiscal 2024, compared to $447.3 million
during Fiscal 2023. The decrease in SG&A was due to significant reductions in marketing expenses of $31.0 million, as we
eliminated inflated and unprofitable marketing costs and to a lesser extent, due to reductions in store payroll and corporate
payroll. We were successful in reducing SG&A expenses by 41693000 despite an increase in incentive compensation and
equity compensation of 21025211.0. Fiscal 2024 results included incremental operating expenses of 35270113, including
restructuring costs of 11678810, primarily due to changes in our senior leadership team, non-cash equity compensation charges
of $9.9 million and other fees of $3.8 million associated with the change of control, financing-related charges of 7007803,
lender required consulting fees of 2389403, fleet optimization costs of 1427810, costs associated with the closure of our Canada
distribution center of 781208, and other professional and consulting fees of 579996, partially offset by the reversal of a legal
settlement accrual of 2279394. Fiscal 2023 results included incremental operating expenses of $14.9 million, including
restructuring costs of $10.5 million, fleet optimization costs of $3.1 million, a reserve of $3.0 million for a customer lawsuit,
contract termination costs of $3.0 million, professional and consulting fees of $1.8 million, partially offset by a settlement
payment received of $6.5 million. Excluding the impact of these charges, Adjusted SG&A expenses were 370280380 during
Fiscal 2024, compared to 432537123 during Fiscal 2023, and leveraged 30 basis points to 27 of net sales. This represents the
lowest level of Adjusted selling, general, and administrative expenses in over 15 years for a full fiscal year.
Depreciation and amortization was $39.6 million during Fiscal 2024, compared to 47186000 during Fiscal 2023. This
decrease was primarily driven by reduced depreciation of capitalized software and the permanent closure of 29 stores during
Fiscal 2024.
Asset impairment charges were $28.0 million during Fiscal 2024 due to the reduction in fair value of the Gymboree
tradename, which was primarily due to reductions in Gymboree sales forecasts. Asset impairment charges were 34543000
during Fiscal 2023 for long-lived assets, inclusive of ROU assets. These charges were due to the reduction in fair value of the
Gymboree tradename attributable to an increase in the discount rate used to value the tradename and reductions in Gymboree
sales forecasts. The remaining impairment charges were related to underperforming stores identified in our ongoing store
portfolio evaluation primarily as a result of decreased net sales and cash flow projections.
Operating loss was $(13.7) million during Fiscal 2024, compared to $(83.8) million during Fiscal 2023. The Fiscal 2024
results were impacted by incremental operating expense of 66421164, including SG&A expenses of 35270113, as described
above, asset impairment charges of 28000000 on the Gymboree tradename, accelerated depreciation of 2245870, and additional
change in control charges impacting gross margin of 905180. The Fiscal 2023 results were impacted by incremental operating
expenses of $51.3 million, including SG&A expenses of $14.9 million, as described above, asset impairment charges of $34.5
million, and accelerated depreciation of $2.0 million. Excluding the impact of these incremental charges, Adjusted operating
income was 52719847 during Fiscal 2024, compared to an Adjusted operating loss of (32490062) and leveraged 580 basis
points to 3.8 of net sales.
Related party interest expense was $6.5 million during Fiscal 2024, due to interest-equivalent charges from loans entered
into with Mithaq during Fiscal 2024. There was no related party interest expense during Fiscal 2023.
Other interest expense, net was $29.3 million during Fiscal 2024, compared to $30.0 million during Fiscal 2023. The
decrease was primarily due to the paydown of the $50.0 million term loan (the “2021 Term Loan”) under our Credit
Agreement, partially offset by higher average interest rates associated with our ABL Credit Facility.
Provision for income taxes was $8.4 million during Fiscal 2024, compared to $40.7 million during Fiscal 2023. Our
effective tax rate was a provision of (16.9)% and (35.8)% during Fiscal 2024 and Fiscal 2023, respectively. The change in our
effective tax rate and income tax provision for Fiscal 2024 compared to Fiscal 2023 was primarily driven by the establishment
of a valuation allowance against our net deferred tax assets in Fiscal 2023 and a shift in the jurisdictional earnings mix in Fiscal
2024. We continue to adjust the valuation allowance based on ongoing operating results.
Net loss was $(57.8) million, or $(4.53) per diluted share, during Fiscal 2024, compared to $(154.5) million, or $(12.34)
per diluted share, during Fiscal 2023, due to the factors described above. Adjusted net income was 5489077, or 0.43 per diluted
share during Fiscal 2024, compared to Adjusted net loss of (103312529), or (8.25) per diluted share, during Fiscal 2023 due to
factors described above, in addition to the impact of income taxes of 3 million on the non-GAAP charges.
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38
The following table sets forth Net sales and Operating loss, respectively, by segment, for the periods indicated:
Fiscal Years Ended
February 1,
2025
February 3,
2024
(in thousands)
The Children’s Place U.S.
$ 1,266,500 $ 1,457,352
The Children’s Place International (1)
119,769
145,156
Total net sales
$ 1,386,269 $ 1,602,508
___________________________________________
(1)
The Company’s foreign subsidiaries, primarily in Canada, have operating results based in foreign currencies and are thus subject to the fluctuations of the
corresponding translation rates into U.S dollars.
Fiscal Years Ended
February 1,
2025
February 3,
2024
(in thousands)
The Children’s Place U.S.
$
(3,746)
$
(86,482)
The Children’s Place International
(9,955)
2,684
Total segment operating loss
$
(13,701)
$
(83,798)
The Children’s Place U.S.
(0.3) %
(5.9) %
The Children’s Place International
(8.3) %
1.8 %
Total segment operating loss as a percentage of net sales
(1.0) %
(5.2) %
The Children’s Place U.S. Net sales decreased 190852000, or 13.1%, to 1.266 billion during Fiscal 2024, compared to
1.457 billion during Fiscal 2023, primarily due to anticipated declines in e-commerce demand due to the rationalization of
promotions, reductions in inflated and unprofitable marketing spend, and the strategic decision to change “free shipping” offers,
as we proactively sacrificed unprofitable sales in an effort to improve profitability. We also experienced a decrease in brick-
and-mortar revenue due to a lower store count and lower sales volume. This was partially offset by an increase in wholesale
revenue, as we continue to strengthen relationships with our partners.
The Children’s Place International Net sales decreased 25387000, or 17.5%, to 119768779 during Fiscal 2024, compared
to 145155569 during Fiscal 2023, primarily due to anticipated declines in e-commerce demand due to the rationalization of
promotions, reductions in inflated and unprofitable marketing spend, and the strategic decision to change “free shipping” offers,
as we proactively sacrificed unprofitable sales in an effort to improve profitability. We also experienced a decrease in brick-
and-mortar revenue due to a lower store count and lower sales volume.
The Children’s Place U.S. Operating loss was (3746471) during Fiscal 2024, compared to (86482222) during Fiscal
2023. The Children’s Place U.S. operating margin improved during Fiscal 2024 primarily due to the success of our strategies to
rationalize profit-draining promotions and limit unprofitable shipping offers, in addition to optimized shipping carrier rates,
which resulted in a significant reduction in freight costs. We were also able to significantly reduce marketing expenses, as we
eliminated inflated and unprofitable marketing costs and to a lesser extent, by reductions in store payroll and corporate payroll.
The Children’s Place International Operating loss was (9954846) during Fiscal 2024, compared to Operating income of
2683954 during Fiscal 2023. The Children’s Place International operating margin was negatively impacted during Fiscal 2024
due to shifts in our supply chain which resulted in increased freight, duty and commission costs to transfer inventory from the
U.S. into Canada, partially offset by occupancy cost savings achieved due to the closure of our distribution center in Toronto,
Canada.
Fiscal 2023 Compared to Fiscal 2022
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the
Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2024 for the Fiscal 2023 to Fiscal 2022
comparative discussion.
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39
QUARTERLY RESULTS AND SEASONALITY
Our quarterly results of operations have fluctuated and are expected to continue to fluctuate materially depending on a
variety of factors, including overall economic conditions, the timing and number of store openings and closures, increases or
decreases in Comparable Retail Sales, weather conditions (such as unseasonable temperatures or storms), and changes in our
merchandise mix and pricing strategy, including changes to address competitive factors. The combination and severity of one or
more of these factors could result in material fluctuations in our results of operations.
In connection with the completion of our Rights Offering on February 6, 2025, our diluted weighted average common
shares outstanding and diluted earnings (loss) per common share were retroactively adjusted for all periods presented by a
factor of 1.002. Refer to “Note 18. Subsequent Events” of the Consolidated Financial Statements of this Form 10-K for more
information.
The following table sets forth certain statement of operations data for each of our last four fiscal quarters. The quarterly
statement of operations data set forth below reflect, in our opinion, all adjustments (consisting only of normal recurring
adjustments) necessary to fairly present the results of operations for these fiscal quarters (unaudited):
Fiscal Year Ended February 1, 2025
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(in thousands, except diluted earnings (loss) per common share)
Net sales
$
267,878 $
319,655 $
390,173 $
408,562
Cost of sales (exclusive of depreciation and amortization)
175,137
207,861
251,832
291,977
Gross profit
92,741
111,794
138,341
116,585
Selling, general, and administrative expenses
109,094
96,065
99,817
100,574
Depreciation and amortization
11,635
9,505
9,266
9,206
Asset impairment charges
—
28,000
—
—
Operating income (loss)
(27,988)
(21,776)
29,258
6,805
Related party interest expense
(389)
(2,087)
(2,078)
(1,939)
Other interest expense, net
(7,332)
(7,144)
(8,000)
(6,778)
Income (loss) before provision (benefit) for income taxes
(35,709)
(31,007)
19,180
(1,912)
Provision (benefit) for income taxes
2,086
1,107
(900)
6,078
Net income (loss)
$
(37,795) $
(32,114) $
20,080 $
(7,990)
Diluted earnings (loss) per common share
$
(2.98) $
(2.51) $
1.57 $
(0.62)
Diluted weighted average common shares outstanding
12,665
12,793
12,822
12,805
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Our working capital needs typically follow a seasonal pattern, peaking during the third fiscal quarter based on seasonal
inventory purchases. Our primary uses of cash are for working capital requirements, which consist primarily of inventory
purchases, rent and marketing expenses; the payment of interest expense on our ABL Credit Facility, and the financing of
capital projects.
During Fiscal 2024, we entered into an interest-free, unsecured and subordinated promissory note with Mithaq for a
78600000 Initial Mithaq Term Loan and an unsecured and subordinated 90000000 term loan (the “New Mithaq Term Loan”;
and together with the Initial Mithaq Term Loan, collectively, the “Mithaq Term Loans”). As of February 6, 2025, $60.2 million
under the Initial Mithaq Term Loan was repaid pursuant to the completion of the Rights Offering, leaving an aggregate of
$108.4 million outstanding under the Mithaq Term Loans.
As of February 1, 2025, we had $245.7 million of outstanding borrowings under our $433.0 million ABL Credit Facility
and no borrowings under our 40000000 senior unsecured credit facility with Mithaq (the “Mithaq Credit Facility”).
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Our working capital deficit decreased $114.2 million to $50.1 million at February 1, 2025, compared to $164.3 million at
February 3, 2024, primarily reflecting a decrease in our accounts payable balances as we paid down past due vendors, partially
offset by an increase in our inventory and accounts receivable balances.
As of February 1, 2025, we had total liquidity of $85.5 million, including $40.2 million of availability under our ABL
Credit Facility, 40000000 of availability under our Mithaq Credit Facility and $5.3 million of cash on hand. At February 1,
2025, we had $16.0 million of outstanding letters of credit with an additional $9.0 million available for issuing letters of credit
under our ABL Credit Facility.
We expect to be able to meet our working capital and capital expenditure requirements for at least the next twelve
months from the date that our consolidated financial statements for Fiscal 2024 were issued, by using our cash on hand, cash
flows from operations, and availability under our ABL Credit Facility and Mithaq Credit Facility.
Share Repurchase Program
In November 2021, the board of directors (the “Board of Directors”) authorized a $250.0 million share repurchase
program (the “Share Repurchase Program”). Currently, given the terms of our Credit Agreement, as amended by the seventh
amendment to the Credit Agreement (the “Seventh Amendment”), dated as of April 18, 2024, the repurchase of any shares
would require fulfilling the heightened payment conditions under our Credit Agreement, except that repurchases of shares as
described above in “Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities”, pursuant to our practice as a result of our insider trading policy, are expressly permitted. During Fiscal 2024,
we repurchased approximately 0.1 million shares of our common stock for $0.7 million, consisting of shares surrendered to
cover tax withholdings associated with the vesting of equity awards. During Fiscal 2023, we repurchased approximately 0.2
million shares for $7.1 million, consisting of shares surrendered to cover tax withholding associated with the vesting of equity
awards. As of February 1, 2025, there was $156.5 million remaining availability under the Share Repurchase Program.
Cash Flows and Capital Expenditures
Cash used in operating activities was $117.6 million during Fiscal 2024, compared to $92.8 million of cash provided by
operating activities during Fiscal 2023. Cash used in operating activities during Fiscal 2024 was primarily the result of a
decrease in accounts payable as we paid down past due vendors and an increase in inventory. Cash provided by operating
activities of $92.8 million during Fiscal 2023 was primarily the result of a lower inventory balance, reflecting lower average
unit costs, and improved inventory management, as well as an increase in accounts payable and other planned changes in
working capital.
Cash used in investing activities was $15.8 million during Fiscal 2024, compared to $27.8 million during Fiscal 2023.
The decrease was driven by lower capital expenditures incurred during the year.
Cash provided by financing activities was $128.4 million during Fiscal 2024, compared to cash used in financing
activities of $68.3 million during Fiscal 2023. The increase primarily resulted from proceeds from higher net borrowings under
our ABL Credit Facility and the Mithaq Term Loans, partially offset by the repayment of the 2021 Term Loan.
Our ability to continue to meet our capital requirements in Fiscal 2025 depends on our cash on hand, our ability to
generate cash flows from operations, and available borrowings under our ABL Credit Facility and Mithaq Credit Facility. Cash
flows generated from operations depends on our ability to achieve our financial plans. We believe that our cash on hand, cash
generated from operations, and funds available to us through our ABL Credit Facility and Mithaq Credit Facility will be
sufficient to fund our capital and other cash requirements for the foreseeable future.
Selected Consolidated Balance Sheets Data
Certain components of our Consolidated Balance Sheets as of February 1, 2025 and February 3, 2024 were as follows:
Fiscal Years Ended
February 1,
2025
February 3,
2024
(in thousands)
Accounts receivable
$
42,701 $
33,219
Inventories
399,602
362,099
Accounts payable
126,716
225,549
Accounts receivable were 42701000 at February 1, 2025, compared to $33.2 million at February 3, 2024. The increase of
9482000.0, or 28.5, was primarily driven by the timing of wholesale customer shipments and associated payments.
Inventories were $399.6 million at February 1, 2025, compared to $362.1 million at February 3, 2024. The increase of
37503000.0, or 10.4, was primarily the result of a higher number of units on hand.
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Accounts payable were $126.7 million at February 1, 2025, compared to $225.5 million at February 3, 2024. The
decrease of 98833000.0, or 43.8, was primarily the result of paying down past due vendors that existed at the end of Fiscal
2023.
ABL Credit Facility and 2021 Term Loan
We and certain of our subsidiaries maintain the 433.0 million ABL Credit Facility and, before it was fully repaid,
maintained the 2021 Term Loan under our Credit Agreement. The ABL Credit Facility will mature and, before it was fully
repaid, the 2021 Term Loan would have matured, in November 2026.
As of April 18, 2024, which is the effective date of the Seventh Amendment, the ABL Credit Facility includes a $25.0
million Canadian sublimit and a $25.0 million sublimit for standby and documentary letters of credit.
Under the ABL Credit Facility, borrowings outstanding bear interest, at the Company’s option, at:
(i)
the prime rate per annum, plus a margin of 2.000; or
(ii) the Secured Overnight Financing Rate (“SOFR”) per annum, plus 0.100%, plus a margin of 3.000.
Prior to April 18, 2024, we were charged a fee of 0.200% on the unused portion of the commitments. As of April 18,
2024, based on the size of the unused portion of the commitments, we are charged a fee ranging from 0.250% to 0.375%. Letter
of credit fees are at 1.125% for commercial letters of credit and 1.750% for standby letters of credit. The amount available for
loans and letters of credit under the ABL Credit Facility is determined by a borrowing base consisting of certain credit card
receivables, certain trade receivables, certain inventory, and the fair market value of certain real estate, subject to certain
reserves and an availability block.
From and after February 4, 2025 and on the first day of each fiscal quarter thereafter, based on the amount of our average
daily excess availability under the facility, borrowings outstanding under the ABL Credit Facility will bear interest, at the
Company’s option, at:
(i)
the prime rate per annum, plus a margin of 1.750% or 2.000%; or
(ii) the SOFR per annum, plus 0.100%, plus a margin of 2.750% or 3.000%.
Letter of credit fees will range from 1.000% to 1.125% for commercial letters of credit and will range from 1.500% to
1.750% for standby letters of credit. Letter of credit fees will be determined based on the amount of our average daily excess
availability under the facility.
For Fiscal 2024, Fiscal 2023, and Fiscal 2022, we recognized $25.0 million, $24.2 million, and $10.2 million,
respectively, in interest expense related to the ABL Credit Facility.
Prior to April 18, 2024, when the 2021 Term Loan was fully repaid, credit extended under the ABL Credit Facility was
secured by a first priority security interest in substantially all of our U.S. and Canadian assets other than intellectual property,
certain furniture, fixtures, equipment, and pledges of subsidiary capital stock, and a second priority security interest in our
intellectual property, certain furniture, fixtures, equipment, and pledges of subsidiary capital stock. As of April 18, 2024, the
ABL Credit Facility is secured on a first priority basis by all of the foregoing collateral.
The outstanding obligations under the ABL Credit Facility may be accelerated upon the occurrence of certain customary
events of default, as described below. We are not subject to any early termination fees.
The ABL Credit Facility contains covenants, which include conditions on stock buybacks and the payment of cash
dividends or similar payments. These covenants also limit our ability and our subsidiaries’ ability to incur certain liens, to incur
certain indebtedness, to make certain investments, acquisitions, or dispositions or to change the nature of our business. Pursuant
to the Seventh Amendment, the requisite payment condition thresholds for some of these covenants have been heightened,
resulting in certain actions such as the repurchase of shares and payment of cash dividends becoming more difficult to perform.
Additionally, if we are unable to maintain a certain amount of excess availability for borrowings (the “excess availability
threshold”), we may be subject to cash dominion.
The ABL Credit Facility contains customary events of default, which include (subject in certain cases to customary grace
and cure periods) nonpayment of principal or interest, breach of covenants, failure to pay certain other indebtedness, and certain
events of bankruptcy, insolvency or reorganization, such as a change of control.
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42
The tables below present the components of our ABL Credit Facility as of the end of Fiscal 2024 and Fiscal 2023:
February 1,
2025
February 3,
2024
(in millions)
Total borrowing base availability (1)
$
301.9
$
258.4
Credit facility availability (1)
433.0
400.5
Maximum borrowing availability (2)
301.9
258.4
Outstanding borrowings
245.7
226.7
Letters of credit outstanding—standby
16.0
7.4
Utilization of credit facility at end of period
261.7
234.1
Availability (3)
$
40.2 $
24.3
Interest rate at end of period
7.6%
8.1%
February 1,
2025
February 3,
2024
(in millions)
Average end-of-day loan balance during the period
$
284.5
$
315.5
Highest end-of-day loan balance during the period
$
366.9
$
379.4
Average interest rate
8.7%
7.5%
____________________________________________
(1)
In Fiscal 2023, the total borrowing base availability and credit facility availability were both calculated net of the excess availability threshold under the
Credit Agreement, as prior to the Seventh Amendment, crossing that threshold would have resulted in cash dominion, which would have triggered a fixed
charge coverage ratio covenant test and would likely have led to a default under the Credit Agreement. As of the Seventh Amendment, the fixed charge
coverage ratio covenant has been removed from the Credit Agreement, and entering into cash dominion by crossing the excess availability threshold no
longer poses the same risk of default under the Credit Agreement.
(2)
The lower of the credit facility availability and the total borrowing base availability.
(3)
The sub-limit availability for letters of credit was $9.0 million at February 1, 2025 and $42.6 million at February 3, 2024.
The 2021 Term Loan bore interest, payable monthly, at (i) the SOFR per annum plus 2.750% for any portion that was a
SOFR loan, or (ii) the base rate per annum plus 2.000% for any portion that was a base rate loan. The 2021 Term Loan was pre-
payable at any time without penalty, and did not require amortization. For Fiscal 2024, Fiscal 2023, and Fiscal 2022, we
recognized $1.1 million, $4.0 million, and $2.3 million respectively, in interest expense related to the 2021 Term Loan.
As of April 18, 2024, the 2021 Term Loan was fully repaid.
As of February 1, 2025 and February 3, 2024, unamortized deferred financing costs amounted to 3.8 million and 2.2
million, respectively, related to our ABL Credit Facility.
Mithaq Term Loans
Mithaq is a controlling stockholder of the Company. We and certain of our subsidiaries maintain the Initial Mithaq Term
Loan, consisting of (i) a first tranche in an aggregate principal amount of $30.0 million (the “First Tranche”) and (ii) a second
tranche in an aggregate principal amount of $48.6 million (the “Second Tranche”). We received the First Tranche on February
29, 2024 and the Second Tranche on March 8, 2024.
The Initial Mithaq Term Loan matures on February 15, 2027. The Initial Mithaq Term Loan is guaranteed by each of our
subsidiaries that guarantee our ABL Credit Facility.
We and certain of our subsidiaries also maintain the New Mithaq Term Loan.
The New Mithaq Term Loan matures on April 16, 2027, and requires monthly payments equivalent to interest charged at
the SOFR plus 4.000% per annum, with such monthly payments to Mithaq deferred until April 30, 2025. The New Mithaq
Term Loan is guaranteed by each of our subsidiaries that guarantee our ABL Credit Facility. For Fiscal 2024, we recognized
6492884 in deferred interest-equivalent expense related to the New Mithaq Term Loan.
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The Mithaq Term Loans are subject to an amended and restated subordination agreement (as amended from time to time,
the “Subordination Agreement”), dated as of April 16, 2024, by and among the Company and certain of our subsidiaries, Wells
Fargo and Mithaq, pursuant to which the Mithaq Term Loans are subordinated in payment priority to the obligations of us and
our subsidiaries under the Credit Agreement. Subject to such subordination terms, the Mithaq Term Loans are prepayable at any
time and from time to time without penalty and do not require any mandatory prepayments.
The Mithaq Term Loans contain customary affirmative and negative covenants substantially similar to a subset of the
covenants set forth in the Credit Agreement, including limits on our ability and our subsidiaries’ ability to incur certain liens, to
incur certain indebtedness, to make certain investments, acquisitions, dispositions or restricted payments, or to change the
nature of our business. The Mithaq Term Loans, however, do not provide for any closing, prepayment or exit fees, or other fees
typical for transactions of this nature, do not impose additional reserves on borrowings under the Credit Agreement, and do not
contain certain other restrictive covenants.
The Mithaq Term Loans contain certain customary events of default, which include (subject in certain cases to
customary grace periods), nonpayment of principal, breach of other covenants of the Mithaq Term Loans, inaccuracy in
representations or warranties, acceleration of certain other indebtedness (including under the Credit Agreement), certain events
of bankruptcy, insolvency or reorganization, such as a change of control, and invalidity of any part of the Mithaq Term Loans.
As of February 1, 2025, unamortized deferred financing costs amounted to 2625911 related to the Mithaq Term Loans.
Maturities of our principal debt payments on the Mithaq Term Loans as of February 1, 2025 are as follows:
February 1, 2025
(in thousands)
2025
$
—
2026
—
2027
168,600
Thereafter
—
Total related party debt
$
168,600
As of February 6, 2025, $60.2 million under the Initial Mithaq Term Loan was repaid pursuant to the completion of the
Rights Offering, leaving an aggregate of $108.4 million outstanding under the Mithaq Term Loans, payable in fiscal year 2027.
Refer to “Note 18. Subsequent Events” of the Consolidated Financial Statements for additional detail.
Mithaq Commitment Letter
On May 2, 2024, we entered into a commitment letter (the “Commitment Letter”) with Mithaq for a 40000000 Mithaq
Credit Facility. Under the Mithaq Credit Facility, we had the ability to request for advances at any time prior to July 1, 2025.
On September 10, 2024, we and Mithaq entered into an Amendment No. 1 to the Commitment Letter, that extended the
deadline for requesting advances until July 1, 2026.
If any debt is incurred under the Mithaq Credit Facility, it shall require monthly payments equivalent to interest charged
at the SOFR plus 5.000% per annum. Such debt shall be unsecured and shall be guaranteed by each of our subsidiaries that
guarantee our ABL Credit Facility. Similar to the Mithaq Term Loans, such debt shall also be subject to the Subordination
Agreement, contain customary affirmative and negative covenants substantially similar to a subset of the covenants set forth in
the Credit Agreement, and contain certain customary events of default. Additionally, such debt shall require no mandatory
prepayments and shall mature no earlier than July 1, 2026. As of February 1, 2025, no debt had been incurred under the Mithaq
Credit Facility.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
For a discussion of our contractual obligations and commercial commitments, see “Note 8. Leases”, “Note 9. Debt”, and
“Note 10. Commitments and Contingencies” of the Consolidated Financial Statements, “Item 8. Financial Statements and
Supplementary Data” of this Form 10-K.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with
unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results
of operations.
CRITICAL ACCOUNTING ESTIMATES
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The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial
statements, and the amounts of revenues and expenses reported during the period. We continuously review the appropriateness
of the estimates used in preparing our financial statements; however, estimates routinely require adjustment based on changing
circumstances and the receipt of new or better information. Consequently, actual results could differ materially from our
estimates. “Note 1. Basis of Presentation and Summary of Significant Accounting Policies” of the Consolidated Financial
Statements, “Item 8. Financial Statements and Supplementary Data” of this Form 10-K describes the significant accounting
policies and methods used in the preparation of the Company’s consolidated financial statements.
The accounting estimates discussed below include those that we believe are the most critical to aid in fully understanding
and evaluating our financial results. Senior management has discussed the development and selection of our critical accounting
estimates with the Audit Committee of our Board of Directors, which has reviewed our related disclosures herein.
Impairment of Long-Lived Assets
We periodically review our long-lived assets for impairment when events indicate that their carrying value may not be
recoverable. Such events include a historical or projected trend of cash flow losses or a future expectation that we will sell or
dispose of an asset significantly before the end of its previously estimated useful life. In reviewing for impairment, we group
our long-lived assets at the lowest possible level for which identifiable cash flows are largely independent of the cash flows of
other assets and liabilities.
We review all stores that have reached comparable sales status for impairment on at least an annual basis, or sooner if
circumstances so dictate. We believe waiting this period of time allows a store to reach a maturity level where a more
comprehensive analysis of financial performance can be performed. For each store that shows indications of impairment, we
perform a recoverability test comparing estimated undiscounted future cash flows to the carrying value of the related long-lived
assets. If the undiscounted future cash flows are less than the related net book value of the long-lived assets, they are written
down to their fair market value. We primarily use discounted future cash flows directly associated with those assets, which
consist principally of property and equipment and right-of-use (“ROU”) lease assets, to determine their fair market values.
Estimating the fair market value of long-lived assets using the discounted cash flow model requires management to estimate
future revenues, expenses, discount rates, long-term growth rates, and other factors in order to project future cash flows. The
assumptions used to evaluate future cashflows consider external and internal factors. External factors comprise the local
environment in which the store resides, including mall traffic, competition, and their effect on sales trends, as well as
macroeconomic factors, such as inflationary pressures impacting our customer, and changes in product input costs,
transportation costs, distribution costs and wage rates. Internal factors include our ability to gauge the fashion taste of our
customers, control over variable costs such as cost of sales and payroll, and in certain cases, our ability to renegotiate lease
costs. In addition, the Company utilizes market-corroborated inputs, including sales per square foot and cost of occupancy rates,
in its calculation of the fair value of its ROU assets and any necessary discounting required for rent rates based on
macroeconomic conditions or local mall conditions. If external factors should change unfavorably, if actual sales should differ
from our projections, or if our ability to control costs is insufficient to sustain the necessary cash flows, changes in these
estimates can have a significant impact on the assessment of fair market value, which could result in material impairment
charges.
Impairment of Indefinite-Lived Intangible Assets
Our intangible assets with an indefinite life consists of the acquired Gymboree tradename, and it is tested for impairment
using a qualitative assessment to determine whether its fair value is below its carrying value. If there are indicators of
impairment, we perform a quantitative assessment to estimate the fair value of these intangible assets based on an income
approach using the relief-from-royalty method. Estimating the fair value of indefinite-lived intangible assets using the relief-
from-royalty method requires management to estimate future revenues, royalty rates, discount rates, long-term growth rates,
and other factors in order to project future cash flows. If macroeconomic conditions deteriorate, if interest rates increase, or if
actual sales should differ from our projections, changes in these estimates can have a significant impact on the assessment of
fair value, which could result in material impairment charges.
We identified an indicator of impairment in our qualitative assessment performed during Fiscal 2024, primarily due to
reductions in Gymboree sales forecasts, and performed a quantitative impairment assessment of the Gymboree tradename.
Based on this assessment, we recorded an impairment charge of $28.0 million, primarily due to reductions in Gymboree sales
forecasts and a reduction in the royalty rate used to value the tradename, which reduced the carrying value to its fair value of
$13.0 million as of August 3, 2024. As of February 1, 2025, the tradename’s carrying value was $13.0 million.
Unfavorable changes in certain of our key assumptions may affect future testing results. For example, keeping all other
assumptions constant, a 100-basis point increase in the discount rate or a 10% decrease in forecasted revenue would result in
further impairment charges of approximately $1.0 million.
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45
Income Taxes
We utilize the asset and liability method of accounting for income taxes as set forth in FASB ASC 740—Income Taxes.
Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement
and tax basis of assets and liabilities, as well as for net operating losses and tax credit carryforwards. Deferred tax assets and
liabilities are measured using currently enacted tax rates applied to taxable income in effect for the years in which the basis
differences and tax assets are expected to be realized. Although we believe our assumptions, judgments and estimates are
reasonable, changes in tax laws or our interpretation of tax laws and the resolution of any tax audits could significantly impact
the amounts reflected for income taxes in our consolidated financial statements.
A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.
In determining the need for valuation allowances, we consider projected future taxable income, the availability of tax planning
strategies, taxable income in prior carryback years, and future reversals of existing taxable temporary differences. The
assumptions utilized in determining future taxable income require significant judgment. Actual operating results in future years
could differ from our current assumptions, judgments and estimates. If we determine that we would not be able to realize our
recorded deferred tax assets, an increase in the valuation allowance would decrease earnings in the period in which such
determination is made. As of February 1, 2025, we believe it is not more likely than not that future taxable income will be
sufficient to allow us to recover substantially all of the value assigned to our deferred tax assets. Thus, in Fiscal 2024, we
increased our valuation allowance to 88148000, primarily related to assets in the U.S.
We assess our income tax positions and record tax benefits for all years subject to examination based upon our
evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more
likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50%
likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.
For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been
recognized in the consolidated financial statements. Due to uncertainties in any income tax audit, our assumptions regarding the
ultimate settlement of unrecognized tax positions may change and the actual tax benefits may differ significantly from current
estimates.
Stock-Based Compensation
We account for stock-based compensation according to the provisions of FASB ASC 718— Compensation-Stock
Compensation. We grant time-vesting and performance-based stock awards to employees at senior management levels. We also
grant time-vesting stock awards to our non-employee independent directors. Time-vesting awards are granted in the form of
restricted stock units that require each recipient to complete a service period (“Deferred Awards”). Performance-based stock
awards are granted in the form of restricted stock units, which have performance criteria that must be achieved for the awards to
be earned, in addition to a service period requirement (“Performance Awards”), and each Performance Award has a defined
number of shares that an employee can earn (the “Target Shares”). With the approval of the Human Capital & Compensation
Committee, we may settle vested Deferred Awards and Performance Awards in shares, in a cash amount equal to the market
value of such shares at the time all requirements for delivery of the award have been met, or in part shares and cash. In Fiscal
2024, there was a change of control of the Company, which triggered a conversion of all then-outstanding Performance Awards
into service-based Performance Awards in accordance with their terms. As a result, the Fiscal 2023, Fiscal 2022, and fiscal year
2021 Performance Awards will all vest or have vested, as applicable, at their Target Shares on their respective vesting dates
without regard to the achievement of any of the performance metrics associated with those awards, provided that the recipient
be employed at the Company on each such vesting date. In Fiscal 2024, the stock awards granted to employees at senior
management levels were a combination of both Deferred Awards and Performance Awards. The Deferred Award portion has a
one-year vesting schedule, while the Performance Award portion is subject to graded vesting over the subsequent two years of
the stock award, whereby employees may earn from 0% to 200% of their Target Shares in each of those years, based on the
terms of the award and our achievement of certain performance goals established for such Performance Awards. The expense
recognized for Performance Awards throughout the service period and the number of shares that are projected to ultimately
vest, are based on the estimated degree to which the related performance metrics are expected to be achieved. Actual
performance may differ from such projections, which would impact the number of shares that vest and the total amount of
expense recognized for the related Performance Awards, which could have a material impact on our consolidated financial
statements.
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46
Inventory Valuation
We value inventory at the lower of cost or net realizable value, with cost determined using an average cost method. The
estimated market value of inventory is determined based on an analysis of historical sales trends of our individual product
categories, the impact of market trends and economic conditions, and a forecast of future demand, as well as plans to sell
through inventory. Estimates may differ from actual results due to the quantity, quality, and mix of products in inventory,
consumer and retailer preferences, market conditions, and other catastrophic events. Reserves for inventory shrinkage,
representing the risk of physical loss of inventory, are estimated based on historical experience and are adjusted based upon
physical inventory counts. Our historical estimates for inventory obsolescence and shrinkage have not differed materially from
actual results.
Recently Issued Accounting Standards
Refer to “Note 1. Basis of Presentation and Summary of Significant Accounting Policies” of the Consolidated Financial
Statements, “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for discussion regarding the impact of
recently issued accounting standards on our consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In the normal course of business, our financial position and results of operations are routinely subject to market risk
associated with interest rate movements on borrowings and investments and currency rate movements on non-U.S. dollar
denominated assets, liabilities, income, and expenses. We utilize cash from operations and short-term borrowings to fund our
working capital and investment needs.
Cash and Cash Equivalents
Cash and cash equivalents are normally invested in short-term financial instruments that will be used in operations within
90 days of the balance sheet date. Because of the short-term nature of these instruments, changes in interest rates would not
materially affect their fair values.
Interest Rates
Until February 4, 2025, our ABL Credit Facility bears interest at a floating rate equal to the prime rate plus 2.000% or
SOFR, plus 0.1000%, plus 3.000%. As of February 1, 2025, we had $245.7 million in borrowings under our ABL Credit
Facility. A 10% change in the prime rate or SOFR would not have had a material impact on our interest expense.
Our 2021 Term Loan bore interest, payable monthly, at (i) the SOFR per annum plus 2.750% for any portion that was a
SOFR loan, or (ii) the base rate per annum plus 2.000% for any portion that was a base rate loan. As of April 18, 2024, our
2021 Term Loan was fully repaid.
The New Mithaq Term Loan requires monthly payments equivalent to interest charged at the SOFR per annum plus
4.000% per annum, with such monthly payments to Mithaq having been deferred until April 30, 2025. As of February 6, 2025,
$60.2 million under the Initial Mithaq Term Loan was repaid pursuant to the completion of the Rights Offering, leaving an
aggregate of $108.4 million outstanding under the Mithaq Term Loans. A 10% change in the prime rate or SOFR would not
have had a material impact on our interest expense.
As of February 1, 2025, we had no borrowings under our Mithaq Credit Facility. If any debt is incurred under the Mithaq
Credit Facility, it shall require monthly payments equivalent to interest charged at the SOFR plus 5.000% per annum. A 10%
change in the prime rate or SOFR would not have had a material impact on our interest expense.
Assets and Liabilities of Foreign Subsidiaries
Assets and liabilities outside the United States are primarily located in Canada and Hong Kong, where our investments in
our subsidiaries are considered long-term. As of February 1, 2025, net liabilities in Canada and Hong Kong amounted to 22.2
million. A 10% increase or decrease in the Canadian and Hong Kong foreign currency exchange rates would increase or
decrease the corresponding net investment by 2.2 million. All changes in the net investments in our foreign subsidiaries are
recorded in other comprehensive loss.
As of February 1, 2025, we had 3700000 of our cash and cash equivalents held in foreign subsidiaries, of which 1125988
was in China, 789689 was in India, 609299 was in Canada, 205590 was in Hong Kong, and 1046597 was held in other foreign
countries.
We have subsidiaries whose operating results are based in foreign currencies and are thus subject to the fluctuations of
the corresponding translation rates into U.S. dollars. The table below summarizes the average translation rates that most
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47
significantly impact our operating results:
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
Average Translation Rates (1)
Canadian dollar
0.7252
0.7414
0.7469
Hong Kong dollar
0.1282
0.1277
0.1277
____________________________________________
(1)
The average translation rates are the average of the monthly translation rates used during each fiscal year to translate the respective income statements.
Each rate represents the U.S. dollar equivalent of the respective foreign currency.
Foreign Operations
We have exchange rate exposure primarily with respect to certain revenues and expenses denominated in Canadian and
Hong Kong dollars. As a result, fluctuations in exchange rates impact the amount of our reported sales and expenses. Assuming
a 10% change in foreign currency exchange rates, Fiscal 2024 net sales would have decreased or increased by approximately
10.8 million, and total costs and expenses would have decreased or increased by approximately 14.5 million. Additionally, we
have foreign currency denominated receivables and payables that, when settled, result in transaction gains or losses. A 10%
change in foreign currency exchange rates would not result in a significant transaction gain or loss in earnings.
We import a vast majority of our merchandise from foreign countries, primarily Bangladesh, Vietnam, India, Kenya,
Ethiopia, China, and Indonesia. Consequently, any significant or sudden change in the political, foreign trade, financial,
banking, currency policies and practices, or the occurrence of significant labor unrest in these countries or changes in foreign
policies of the United States, could have a material adverse impact on our business, financial position, results of operations, and
cash flows.
Other Risks
We enter into various purchase order commitments with our suppliers. We have the ability to cancel these arrangements,
although in some instances we may either continue to be liable for payment of the entirety of the purchase order commitment
despite cancellation, or be subject to a termination charge reflecting a percentage of work performed prior to cancellation.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item is incorporated herein by reference to the consolidated financial statements and
supplementary data set forth in “Item 15. Exhibits and Financial Statement Schedules” of Part IV of this Form 10-K.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed only to provide “reasonable assurance” that the controls and procedures
will meet their objectives. A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within our Company have been detected.
Management, including our President and Interim Chief Executive Officer, and Chief Accounting Officer and Interim
Chief Financial Officer as of February 1, 2025, evaluated the effectiveness of our disclosure controls and procedures as defined
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48
in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of February 1,
2025.
Based on that evaluation, our President and Interim Chief Executive Officer, and Chief Accounting Officer and Interim
Chief Financial Officer as of February 1, 2025, concluded that our disclosure controls and procedures were effective at the
reasonable assurance level, as of February 1, 2025, to ensure that all information required to be disclosed in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in
SEC rules and forms, and is accumulated and communicated to our management, including our principal executive, principal
accounting, and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as
defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process to provide reasonable assurance
regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally
accepted in the U.S. Because of its inherent limitations, internal control over financial reporting is not intended to provide
absolute assurance that a misstatement of our financial statements would be prevented or detected.
Under the supervision and with the participation of our management, including our President and Interim Chief
Executive Officer, and Chief Accounting Officer and Interim Chief Financial Officer as of February 1, 2025, we conducted an
evaluation of the design and effectiveness of our internal control over financial reporting based on the criteria set forth in
Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”). Based on our evaluation under the Internal Control-Integrated Framework, our management concluded
that our internal control over financial reporting was effective as of February 1, 2025.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our most recently
completed fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION.
Not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
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49
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required to be included by Item 10 of Form 10-K will be set forth in the Company’s proxy statement for
its 2025 annual meeting of stockholders to be filed with the SEC within 120 days after February 1, 2025 (the “Proxy
Statement”) and is incorporated by reference herein.
We have adopted an insider trading policy governing the purchase and sale of our securities by our directors, executive
officers, and employees, and by the Company. A copy of our insider trading policy is filed as Exhibit 19.1 to this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information required to be included by Item 11 of Form 10-K will be set forth in the Proxy Statement and is
incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information required to be included by Item 12 of Form 10-K will be set forth in the Proxy Statement and is
incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required to be included by Item 13 of Form 10-K will be set forth in the Proxy Statement and is
incorporated by reference herein.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required to be included by Item 14 of Form 10-K will be set forth in the Proxy Statement and is
incorporated by reference herein.
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50
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)(1) Financial Statements
The following documents are filed as part of this report:
Report of Independent Registered Public Accounting Firm (PCAOB ID: 243)
52
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
54
Consolidated Balance Sheets as of February 1, 2025 and February 3, 2024
55
Consolidated Statements of Operations for the fiscal years ended February 1, 2025, February 3, 2024, January
28, 2023
56
Consolidated Statements of Comprehensive Loss for the fiscal years ended February 1, 2025, February 3, 2024,
and January 28, 2023
57
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the fiscal years ended February 1,
2025, February 3, 2024, and January 28, 2023
58
Consolidated Statements of Cash Flows for the fiscal years ended February 1, 2025, February 3, 2024, and
January 28, 2023
59
Notes to Consolidated Financial Statements
60
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51
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
The Children’s Place, Inc.
Secaucus, New Jersey
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of The Children’s Place, Inc. (the “Company”) as of
February 1, 2025, the related consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash
flows for the year then ended, and the related notes to the consolidated financial statements (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company at February 1, 2025, and the results of its operations and its cash flows for the year ended
February 1, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our
opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of Gymboree Tradename
As described in Notes 1, 4, and 14 to the consolidated financial statements, the Company’s Gymboree Tradename had a
carrying value of $13.0 million as of February 1, 2025. The indefinite-lived tradename is evaluated for impairment annually or
more frequently if events or changes in circumstances indicate that a decline in value may have occurred. An impairment loss is
recognized when the estimated fair value of tradename is less than the carrying value. The Company recorded an impairment
charge related to the Gymboree tradename of $28.0 million in the second quarter of fiscal year 2024, which reduced its carrying
value to $13.0 million. The determination of the fair value of the Gymboree Tradename requires management to make
significant estimates and assumptions related to future cash flows, royalty rate and the discount rate used in the valuation
model.
We identified certain assumptions used in the determination of the fair value of the Gymboree tradename, specifically
the revenue growth rate, royalty rate, and the discount rate as a critical audit matter. The principal consideration for our
determination is the judgment used to evaluate the revenue growth rate, royalty rate, and the discount rate in the fair value
determination of the Gymboree Tradename. Auditing these assumptions involved especially challenging and subjective auditor
judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skills
and knowledge needed.
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52
The primary procedures we performed to address this critical audit matter included:
•
Obtaining an understanding of management's process related to the Gymboree tradename impairment assessment and
the determination of the estimated fair value of the tradename including the revenue growth rate, royalty rate, and the
discount rate.
•
Performing a sensitivity analysis of the significant assumptions to evaluate the change in the estimated fair value that
would result from changes in the significant assumptions.
•
Evaluating the revenue growth rate used in the determination of the estimated fair value related to the Gymboree
tradename by comparing the revenue growth rate against historical financial results, guideline companies, and industry
information.
•
Utilizing personnel with specialized knowledge and skills in valuation to evaluate the royalty rate and discount rate
used in the determination of the estimated fair value related to the Gymboree tradename.
•
Evaluating on a sample basis, the completeness and accuracy of the underlying data used by the Company used to
develop the revenue growth rate and royalty rate.
/S/ BDO USA, P.C.
We have served as the Company’s auditor since 2024.
Woodbridge, New Jersey
April 17, 2025
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53
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of The Children’s Place, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of The Children’s Place, Inc. and subsidiaries (the
Company) as of February 3, 2024, the related consolidated statements of operations, comprehensive loss, changes in
stockholders’ equity (deficit) and cash flows for each of the two years in the period ended February 3, 2024, and the related
notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at February 3, 2024 and the results of its operations
and its cash flows for each of the two years in the period ended February 3, 2024, in conformity with U.S. generally accepted
accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/S/ Ernst & Young, LLP
We have served as the Company’s auditor from 2018 to 2024.
Iselin, New Jersey
May 3, 2024,
except for Note 17 and the effects of the rights offering described in Note 13, as to which the date is
April 17, 2025.
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54
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
February 1,
2025
February 3,
2024
(in thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents
$
5,347 $
13,639
Accounts receivable
42,701
33,219
Inventories
399,602
362,099
Prepaid expenses and other current assets
20,354
43,169
Total current assets
468,004
452,126
Long-term assets:
Property and equipment, net
97,487
124,750
Right-of-use assets
161,595
175,351
Tradenames, net
13,000
41,123
Other assets
7,466
6,958
Total assets
$
747,552 $
800,308
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Revolving loan
$
245,659 $
226,715
Accounts payable
126,716
225,549
Current portion of operating lease liabilities
67,407
69,235
Income taxes payable
2,441
5,297
Accrued expenses and other current liabilities
75,895
89,608
Total current liabilities
518,118
616,404
Long-term liabilities:
Long-term debt
—
49,818
Related party long-term debt
165,974
—
Long-term portion of operating lease liabilities
107,287
118,073
Income taxes payable
—
9,486
Other tax liabilities
5,291
4,664
Other long-term liabilities
10,293
10,882
Total liabilities
806,963
809,327
Commitments and contingencies (see Note 10)
Stockholders’ deficit:
Preferred stock, $1.00 par value, 1,000 shares authorized, 0 shares issued and outstanding
—
—
Common stock, $0.10 par value, 100,000 shares authorized; 12,785 and 12,585 issued;
12,782 and 12,529 outstanding
1,279
1,259
Additional paid-in capital
151,485
141,083
Treasury stock, at cost (3 and 56 shares)
(90)
(2,909)
Deferred compensation
90
2,909
Accumulated other comprehensive loss
(19,491)
(16,496)
Accumulated deficit
(192,684)
(134,865)
Total stockholders’ deficit
(59,411)
(9,019)
Total liabilities and stockholders’ deficit
$
747,552 $
800,308
See accompanying notes to these consolidated financial statements.
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55
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
(in thousands, except loss per common share)
Net sales
$
1,386,269 $
1,602,508 $
1,708,482
Cost of sales (exclusive of depreciation and amortization)
926,808
1,157,234
1,194,320
Gross profit
459,461
445,274
514,162
Selling, general, and administrative expenses
405,550
447,343
460,972
Depreciation and amortization
39,612
47,186
51,464
Asset impairment charges
28,000
34,543
3,256
Operating loss
(13,701)
(83,798)
(1,530)
Related party interest expense
(6,493)
—
—
Other interest expense
(29,301)
(30,087)
(13,324)
Interest income
47
87
92
Loss before provision (benefit) for income taxes
(49,448)
(113,798)
(14,762)
Provision (benefit) for income taxes
8,371
40,743
(13,624)
Net loss
$
(57,819) $
(154,541) $
(1,138)
Loss per common share
Basic
$
(4.53) $
(12.34) $
(0.09)
Diluted
$
(4.53) $
(12.34) $
(0.09)
Weighted average common shares outstanding
Basic
12,766
12,522
13,063
Diluted
12,766
12,522
13,063
See accompanying notes to these consolidated financial statements.
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56
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
(in thousands)
Net loss
$
(57,819) $
(154,541) $
(1,138)
Other comprehensive loss:
Foreign currency translation adjustment
(2,995)
(249)
(2,061)
Total comprehensive loss
$
(60,814) $
(154,790) $
(3,199)
See accompanying notes to these consolidated financial statements.
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57
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
Accumulated
Total
Additional
Other
Stockholders'
Common Stock
Paid-In
Deferred
Accumulated
Comprehensive
Treasury Stock
Equity
(in thousands)
Shares
Amount
Capital
Compensation
Deficit
Loss
Shares
Amount
(Deficit)
Balance, January 29, 2022
13,964
$ 1,396
$ 160,348
$
3,443
$
77,914
$
(14,186)
(61) $ (3,443) $
225,472
Vesting of stock awards
281
28
(28)
—
—
—
—
—
—
Stock-based compensation expense
—
—
29,150
—
—
—
—
—
29,150
Purchase and retirement of common stock
(1,953)
(195)
(38,514)
—
(54,236)
—
—
—
(92,945)
Other comprehensive loss
—
—
—
—
—
(2,061)
—
—
(2,061)
Deferral of common stock into deferred
compensation plan
—
—
—
293
—
—
(6)
(293)
—
Net loss
—
—
—
—
(1,138)
—
—
—
(1,138)
Balance, January 28, 2023
12,292
$ 1,229
$ 150,956
$
3,736
$
22,540
$
(16,247)
(67) $ (3,736) $
158,478
Vesting of stock awards
503
51
(51)
—
—
—
—
—
—
Stock-based compensation benefit
—
—
(5,576)
—
—
—
—
—
(5,576)
Purchase and retirement of common stock
(210)
(21)
(4,246)
—
(2,864)
—
—
—
(7,131)
Other comprehensive loss
—
—
—
—
—
(249)
—
—
(249)
Distribution of common stock into deferred
compensation plan, net of deferrals
—
—
—
(827)
—
—
11
827
—
Net loss
—
—
—
—
(154,541)
—
—
—
(154,541)
Balance, February 3, 2024
12,585
$ 1,259
$ 141,083
$
2,909
$
(134,865) $
(16,496)
(56) $ (2,909) $
(9,019)
Vesting of stock awards
278
28
(28)
—
—
—
—
—
—
Stock-based compensation expense
—
—
12,786
—
—
—
—
—
12,786
Purchase and retirement of common stock
(78)
(8)
(666)
—
—
—
—
—
(674)
Stock issuance costs
—
—
(1,690)
—
—
—
—
—
(1,690)
Other comprehensive loss
—
—
—
—
—
(2,995)
—
—
(2,995)
Distribution of common stock from deferred
compensation plan, net of deferrals
—
—
—
(2,819)
—
—
53
2,819
—
Net loss
—
—
—
—
(57,819)
—
—
—
(57,819)
Balance, February 1, 2025
12,785
$ 1,279
$ 151,485
$
90
$
(192,684) $
(19,491)
(3) $
(90) $
(59,411)
See accompanying notes to these consolidated financial statements.
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58
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(57,819) $
(154,541) $
(1,138)
Reconciliation of net loss to net cash (used in) provided by operating
activities:
Non-cash portion of operating lease expense
76,963
83,591
88,936
Depreciation and amortization
39,612
47,186
51,464
Non-cash stock-based compensation expense (benefit), net
12,786
(5,576)
29,150
Asset impairment charges
28,000
34,543
3,256
Deferred income tax provision (benefit)
—
36,975
(13,675)
Other non-cash charges, net
2,782
729
601
Changes in operating assets and liabilities:
Inventories
(38,297)
85,307
(20,741)
Accounts receivable and other assets
(8,461)
21,305
(28,143)
Prepaid expenses and other current assets
1,152
1,855
10,440
Income taxes payable, net of prepayments
9,933
(2,199)
14,690
Accounts payable and other current liabilities
(107,861)
39,955
(41,734)
Lease liabilities
(75,791)
(93,396)
(102,522)
Other long-term liabilities
(593)
(2,934)
1,198
Net cash (used in) provided by operating activities
(117,594)
92,800
(8,218)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(15,830)
(27,559)
(45,577)
Change in deferred compensation plan
—
(231)
(371)
Net cash used in investing activities
(15,830)
(27,790)
(45,948)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility
1,249,913
579,655
713,718
Repayments under revolving credit facility
(1,230,968)
(639,931)
(602,046)
Proceeds from issuance of related party term loans
168,600
—
—
Repayment of term loan
(50,000)
—
—
Payment of debt issuance costs
(6,784)
(861)
—
Payment of stock issuance costs
(1,690)
—
—
Purchase and retirement of common stock, including shares surrendered for
tax withholdings and transaction costs
(673)
(7,131)
(94,616)
Net cash provided by (used in) financing activities
128,398
(68,268)
17,056
Effect of exchange rate changes on cash and cash equivalents
(3,266)
208
(988)
Net decrease in cash and cash equivalents
(8,292)
(3,050)
(38,098)
Cash and cash equivalents, beginning of period
13,639
16,689
54,787
Cash and cash equivalents, end of period
$
5,347 $
13,639 $
16,689
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Net cash (received) paid for income taxes
$
(1,726) $
5,775 $
(14,969)
Cash paid for interest
27,007
29,038
12,354
Purchases of property and equipment not yet paid
3,454
7,156
9,801
See accompanying notes to these consolidated financial statements.
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59
1.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The Children’s Place, Inc. and its subsidiaries (collectively, the “Company”) is the largest pure-play children’s specialty
retailer in North America with an omni-channel portfolio of brands. The Company designs, contracts to manufacture, and sells
fashionable, high-quality apparel, accessories and footwear predominantly at value prices, primarily under the Company’s
proprietary brands “The Children’s Place”, “Gymboree”, “Sugar & Jade”, and “PJ Place”. Its global retail and wholesale
network includes two digital storefronts, 495 stores in North America, wholesale marketplaces, 190 international points of
distribution in 13 countries through six international franchise partners and social media channels on Instagram, Facebook, X,
formerly known as Twitter, YouTube and Pinterest. The Company’s digital storefronts are at www.childrensplace.com and
www.gymboree.com, where its customers are able to shop online for the same merchandise available in its physical stores, but
also certain exclusive merchandise only available at our e-commerce sites.
The Company classifies its business into two segments: The Children’s Place U.S. and The Children’s Place
International. Included in The Children’s Place U.S. segment are the Company’s U.S. and Puerto Rico-based stores and revenue
from its U.S.-based wholesale business. Included in The Children’s Place International segment are its Canadian-based stores
and revenue from international franchisees. Each segment includes an e-commerce business located at www.childrensplace.com
and www.gymboree.com.
Terms that are commonly used in the notes to the Company’s consolidated financial statements are defined as follows:
•
Fiscal 2025 - The fifty-two weeks ending January 31, 2026
•
Fiscal 2024 - The fifty-two weeks ended February 1, 2025
•
Fiscal 2023 - The fifty-three weeks ended February 3, 2024
•
Fiscal 2022 - The fifty-two weeks ended January 28, 2023
•
SEC - U.S. Securities and Exchange Commission
•
U.S. GAAP - Generally Accepted Accounting Principles in the United States
•
FASB - Financial Accounting Standards Board
•
FASB ASC - FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP,
except that rules and interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC
registrants
Fiscal Year
The Company’s fiscal year is a 52-week or 53-week period ending on the Saturday on or nearest to January 31. Fiscal
2024 was a 52-week year, Fiscal 2023 was a 53-week year, and Fiscal 2022 was a 52-week year.
Basis of Presentation
The consolidated financial statements and accompanying notes to consolidated financial statements are prepared in
accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. Intercompany
balances and transactions have been eliminated. As of February 1, 2025 and February 3, 2024, the Company did not have any
investments in unconsolidated affiliates. FASB ASC 810—Consolidation is considered when determining whether an entity is
subject to consolidation.
Certain prior period financial statements disclosures have been conformed to the current period presentation.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
60
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements, and amounts of revenues and expenses reported during the period. Actual results could differ from the
assumptions used and estimates made by management, which could have a material impact on the Company’s financial position
or results of operations. Critical accounting estimates inherent in the preparation of the consolidated financial statements
include impairment of long-lived assets, impairment of indefinite-lived intangible assets, income taxes, stock-based
compensation, and inventory valuation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash
equivalents.
Accounts Receivable
Accounts receivable consists of credit and debit card receivables, wholesale and franchisee receivables, and other
miscellaneous items. Credit and debit card receivables represent credit and debit card sales, inclusive of private label credit card
sales, for which the respective third-party service company has yet to remit the cash. The unremitted balance approximates the
last few days of related credit and debit card sales for each reporting period. Wholesale and franchisee receivables represent
product sales and sales royalties in which cash has not yet been remitted by our partners. Bad debt associated with all sales has
not been material.
Inventories
Inventories, which consist primarily of finished goods, are stated at the lower of cost or net realizable value, with cost
determined on an average cost basis. The Company capitalizes certain buying, design, and supply chain costs in inventory, and
these costs are reflected within Cost of sales as the inventories are sold. The Company establishes reserves based on an analysis
of historical sales trends of its individual product categories, the impact of market trends and economic conditions, and a
forecast of future demand, as well as plans to sell through inventory. Inventory shrinkage is estimated based upon the historical
results of physical inventory counts in the context of current year facts and circumstances.
Deferred Financing Costs
The Company capitalizes costs directly associated with acquiring third-party financing. Deferred financing costs for the
asset-based revolving credit facility are included in Other assets and deferred financing costs for the term loans are recorded in
Long-term debt as a reduction of the related term loan. These costs are amortized as Interest expense over the term of the
related indebtedness.
Property and Equipment, Net
Property and equipment are stated at cost. Leasehold improvements are depreciated on a straight-line basis over the
shorter of the life of the lease or the estimated useful life of the asset. All other property and equipment is depreciated on a
straight-line basis based upon estimated useful lives, with furniture and fixtures and equipment generally ranging from 3 to 10
years and buildings and improvements generally ranging from 20 to 25 years. Repairs and maintenance are expensed as
incurred.
The Company accounts for internally developed software intended for internal use in accordance with provisions of
FASB ASC 350—Intangibles-Goodwill and Other. The Company capitalizes development-stage costs such as direct external
costs and direct payroll related costs. When development is substantially complete and the software is ready for its intended use,
the Company amortizes the cost of the software on a straight-line basis over the expected life of the software, which is generally
3 to 10 years. Preliminary project costs and post-implementation costs such as training, maintenance, and support are expensed
as incurred.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
61
Intangible Assets
The Company’s intangible assets include both indefinite-lived and finite-lived assets. Intangible assets with an indefinite
life consists of the acquired Gymboree tradename, and is tested for impairment using a qualitative assessment to determine
whether its fair value is below its carrying value. If there are indicators of impairment, the Company performs a quantitative
assessment to estimate the fair value of this intangible asset based on an income approach using the relief-from-royalty method.
The Company’s finite-lived intangible assets consist primarily of customer lists and other acquisition-related assets. Finite-lived
intangible assets are amortized over their estimated useful economic lives and are reviewed for impairment when factors
indicate that an impairment may have occurred. The Company recognizes an impairment charge when the estimated fair value
of the intangible asset is less than the carrying value.
Impairment of Long-Lived Assets
The Company periodically reviews its long-lived assets for impairment when events indicate that their carrying value
may not be recoverable. Such events include historical trends or projected trends of cash flow losses or a future expectation that
the Company will sell or dispose of an asset significantly before the end of its previously estimated useful life. In reviewing for
impairment, the Company groups its long-lived assets at the lowest possible level for which identifiable cash flows are largely
independent of the cash flows of other assets and liabilities.
The Company reviews all stores that have reached comparable sales status for impairment on at least an annual basis, or
sooner if circumstances so dictate. The Company believes waiting this period of time allows a store to reach a maturity level
where a more comprehensive analysis of financial performance can be performed. For each store that shows indications of
impairment, the Company performs a recoverability test comparing estimated undiscounted future cash flows to the carrying
value of the related long-lived assets. If the undiscounted cash flows are less than the related net book value of the long-lived
assets, they are written down to their fair market value. The Company primarily uses discounted future cash flows directly
associated with those assets, which consist principally of property and equipment and right-of-use (“ROU”) assets, to determine
their fair market values. In evaluating future cash flows, the Company considers external and internal factors. External factors
comprise the local environment in which the store resides, including mall traffic, competition, and their effect on sales trends, as
well as macroeconomic factors, such as inflationary pressures impacting our customer, and changes in product input costs,
transporting costs, distribution costs and wage rates. Internal factors include the Company’s ability to gauge the fashion taste of
its customers, control variable costs such as cost of sales and payroll, and in certain cases, its ability to renegotiate lease costs.
In addition, the Company utilizes market-corroborated inputs, including sales per square foot and cost of occupancy rates, in its
calculation of the fair value of its ROU assets and any necessary discounting required for rent rates based on macroeconomic
conditions or local mall conditions.
Insurance and Self-Insurance Reserves
The Company self-insures and purchases insurance policies to provide for workers’ compensation, general liability and
property losses, cyber-security coverage, as well as director and officers’ liability, vehicle liability, and employee medical
benefits. The Company estimates risks and records a liability based on historical claim experience, insurance deductibles,
severity factors, and other actuarial assumptions. The Company records the current portions of employee medical benefits,
workers compensation, and general liability reserves within Accrued expenses and other current liabilities.
Leases
The Company has operating leases for retail stores, corporate offices, distribution facilities, and certain equipment. The
Company’s leases have remaining lease terms ranging from less than one year up to 12 years, some of which include options to
extend the leases for up to five years, and some of which include options to terminate the lease early.
The lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease
commencement date. For operating leases, the ROU asset is initially and subsequently measured throughout the lease term at
the carrying amount of the lease liability, plus initial direct costs, less any accrued lease payments and unamortized lease
incentives. For finance leases, the ROU asset is initially measured at cost and subsequently amortized using the straight-line
method, generally from the lease commencement date to the earlier of the end of its useful life or the end of the lease term.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
62
The discount rate is the rate implicit in the lease, unless that rate cannot be readily determined. In that case, the Company
is required to use its incremental borrowing rate. The discount rate for a lease is determined based on the information available
at lease commencement. The Company accounts for the underlying leased asset and applies a discount rate at the lease level.
However, there are certain non-real estate leases for which the Company utilizes the portfolio method by aggregating similar
leased assets based on the underlying lease term.
The Company has made an accounting policy election by class of underlying asset to not apply the recognition
requirements of FASB ASC 842—Leases (“Topic 842”) to leases with an initial term of 12 months or less. Leases with an
initial lease term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these
leases on a straight-line basis over the lease term.
The Company has lease agreements with lease and non-lease components. The Company has elected a policy to account
for lease and non-lease components as a single component for all asset classes.
In certain leases, the Company has the right to exercise lease renewal options. Renewal option periods are included in the
measurement of lease liability and related ROU asset where the exercise is reasonably certain to occur.
As of the periods presented, the Company’s finance leases were not material to the Consolidated Balance Sheets,
Consolidated Statements of Operations, or Consolidated Statements of Cash Flows.
The Company has certain lease agreements structured with both fixed base rent and contingent rent based on a
percentage of sales over contractual levels, others with only contingent rent based on a percentage of sales, and some with a
fixed base rent adjusted periodically for inflation or changes in fair market value of the underlying real estate. Contingent rent is
recognized as sales occur. The Company’s lease agreements do not contain any material residual value guarantees or material
restrictive covenants.
The Company records all occupancy costs in Cost of sales, except costs for administrative office buildings, which are
recorded in Selling, general, and administrative expenses.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss primarily consists of cumulative translation adjustments.
Treasury Stock
Treasury stock is recorded at acquisition cost. Gains and losses on disposition are recorded as increases or decreases to
Additional paid-in capital with losses in excess of previously recorded gains charged directly to Accumulated deficit. When
treasury shares are retired and returned to authorized but unissued status, the carrying value in excess of par is allocated to
Additional paid-in capital and Accumulated deficit on a pro rata basis.
Income Taxes
The Company utilizes the asset and liability method of accounting for income taxes as set forth in FASB ASC 740—
Income Taxes. Under the asset and liability method, deferred taxes are determined based on the temporary differences between
the financial statement and tax basis of assets and liabilities, as well as for net operating losses and tax credit carryforwards.
Deferred tax assets and liabilities are measured using currently enacted tax rates applied to taxable income in effect for the
years in which the basis differences and tax assets are expected to be realized.
A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.
In determining the need for valuation allowances, the Company considers projected future taxable income, the availability of
tax planning strategies, taxable income in prior carryback years, and future reversals of existing taxable temporary
differences. The assumptions utilized in determining future taxable income require significant judgment. Actual operating
results in future years could differ from current assumptions, judgments and estimates. If the Company determines that it would
not be able to realize its recorded deferred tax assets, an increase in the valuation allowance would decrease earnings in the
period in which such determination is made.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
63
The Company assesses income tax positions and records tax benefits for all years subject to examination based upon the
Company’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where
it is more likely than not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a
greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all
relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no
tax benefit has been recognized in the consolidated financial statements. The Company recognizes accrued interest and
penalties for its unrecognized tax benefits as a component of tax expense.
The Company accounts for the tax effects of the tax on global intangible low-taxed income (“GILTI”) of certain foreign
subsidiaries in the income tax provision in the period the tax arises.
Deferred Compensation Plan
The Company has a deferred compensation plan (the “Deferred Compensation Plan”), which is a nonqualified, unfunded
plan, for eligible senior level employees. Under the Deferred Compensation Plan, a participant may elect to defer up to 80% of
his or her base salary and/or up to 100% of his or her bonus to be earned for the year following the year in which the deferral
election is made. The Deferred Compensation Plan also permits members of the Board of Directors to elect to defer payment of
all or a portion of their retainer and other fees to be earned for the year following the year in which a deferral election is made,
and they may elect to defer payment of any shares of Company stock that are earned with respect to deferred stock awards.
Directors may elect to have all or a portion of their fees earned for their service on the Board invested in shares of the
Company’s common stock. The Deferred Compensation Plan does not allow for the deferral of the Company’s common stock
by employee participants. The Company is not required to contribute to the Deferred Compensation Plan, but at its sole
discretion, can make additional contributions on behalf of the participants. Deferred amounts are not subject to forfeiture and
are deemed invested among investment funds offered under the Deferred Compensation Plan, as directed by each participant.
Payments of deferred amounts (as adjusted for earnings and losses) are payable following separation from service or at a date or
dates elected by the participant at the time the deferral is elected. Payments of deferred amounts are generally made in either a
lump sum or in annual installments over a period not exceeding 15 years. All deferred amounts are payable in the form in which
they were made, except for Board of Directors fees invested in shares of the Company’s common stock, which are settled in
shares of Company common stock. Earlier distributions are not permitted, except in the case of an unforeseen hardship.
The Company has established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan
liability. The assets of the rabbi trust are general assets of the Company and, as such, would be subject to the claims of creditors
in the event of bankruptcy or insolvency. Investments of the rabbi trust consist of mutual funds and Company common stock.
The Deferred Compensation Plan liability, excluding Company common stock, is included within Other long-term liabilities,
and changes in the balance, except those relating to payments, are recognized as compensation expense within Selling, general,
and administrative expenses. The value of the mutual funds in the rabbi trust is included in Other assets and related earnings
and losses are recognized as investment income or loss, within Selling, general, and administrative expenses. Company stock
deferrals are included within the equity section of the Company’s Consolidated Balance Sheets as Treasury stock and as
Deferred compensation. Deferred stock is recorded at fair market value at the time of deferral, and any subsequent changes in
fair market value are not recognized.
Legal Contingencies
The Company reserves for the outcome of litigation and contingencies when it determines an adverse outcome is
probable and can estimate losses. Estimates are adjusted as facts and circumstances require. The Company expenses the costs to
resolve litigation as incurred, net of amounts, if any, recovered through insurance coverage.
Foreign Currency Translation and Transactions
The Company has determined that the local currencies of its Canadian and Asian subsidiaries are their functional
currencies. In accordance with FASB ASC 830—Foreign Currency Matters, the assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the current rates of exchange existing at period-end, and revenues and expenses are
translated at average monthly exchange rates. Related translation adjustments are reported as a separate component of
stockholders’ equity (deficit). The Company also transacts certain business in foreign denominated currencies primarily with its
Canadian subsidiary purchasing inventory in U.S. dollars, and there are intercompany charges between various subsidiaries.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
64
Revenues
Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in
an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
The Company recognizes revenue, including shipping and handling fees billed to customers as applicable, upon purchase
at the Company’s retail stores or when received by the customer if the product was purchased via e-commerce, net of coupon
redemptions and anticipated sales returns. The Company deferred sales of $3.2 million and $3.1 million within Accrued
expenses and other current liabilities as of February 1, 2025 and February 3, 2024, respectively, based upon estimated time of
delivery, at which point control passes to the customer. Sales tax collected from customers is excluded from revenue.
For its wholesale business, the Company recognizes revenue, when title of the goods passes to the customer, net of
commissions, discounts, operational chargebacks, and cooperative advertising. The allowance for wholesale revenue included
within Accounts receivable was $8.7 million and $9.0 million as of February 1, 2025 and February 3, 2024, respectively.
For the sale of goods to retail customers with a right of return, the Company recognizes revenue for the consideration it
expects to be entitled to and calculates an allowance for estimated sales returns based upon the Company’s sales return
experience. Adjustments to the allowance for estimated sales returns in subsequent periods have not been material based on
historical data, thereby reducing the uncertainty inherent in such estimates. The allowance for estimated sales returns, which is
recorded in Accrued expenses and other current liabilities, was $1.0 million and $1.7 million as of February 1, 2025 and
February 3, 2024, respectively.
The Company’s private label credit card is issued to customers for use exclusively at The Children’s Place and
Gymboree stores and online at www.childrensplace.com and www.gymboree.com, and credit is extended to such customers by a
third-party financial institution on a non-recourse basis to the Company. The private label credit card includes multiple
performance obligations for the Company, including marketing and promoting the program on behalf of the bank and the
operation of the loyalty rewards program. Included in the agreement with the third-party financial institution was an upfront
bonus paid to the Company and an additional bonus to extend the term of the agreement. These bonuses are recognized as
revenue and allocated between brand and reward obligations. As the license of the Company’s brand is the predominant item in
the performance obligation, the amount allocated to the brand obligation is recognized on a straight-line basis over the term of
the agreement. The amount allocated to the reward obligation is recognized on a point-in-time basis as redemptions under the
loyalty program occur.
In measuring revenue and determining the consideration the Company is entitled to as part of a contract with a customer,
the Company takes into account the related elements of variable consideration, such as additional bonuses, including profit-
sharing, over the life of the private label credit card program. Similar to the upfront bonus, the usage-based royalties and
bonuses are recognized as revenue and allocated between the brand and reward obligations. The amount allocated to the brand
obligation is recognized on a straight-line basis over the initial term. The amount allocated to the reward obligation is
recognized on a point-in-time basis as redemptions under the loyalty program occur. In addition, the annual profit-sharing
amount is recognized quarterly within an annual period when it can be estimated reliably. The additional bonuses are amortized
over the contract term based on anticipated progress against future targets and level of risk associated with achieving the
targets.
The Company has a points-based customer loyalty program in which customers earn points based on purchases and other
promotional activities. These points can be redeemed for coupons to discount future purchases. The redemption cycle for
coupons is 45 days. A contract liability is estimated based on the standalone selling price of benefits earned by customers
through the program and the related redemption experience under the program. The value of each point earned is recorded as
deferred revenue and is included within Accrued expenses and other current liabilities. The total contract liabilities related to
this program were $3.7 million, $1.7 million and $2.6 million and as of February 1, 2025, February 3, 2024, and January 28,
2023, respectively. During Fiscal 2024 and Fiscal 2023, the Company recognized Net sales of 1686435 and $2.6 million related
to the points-based customer loyalty program liability balance that existed at February 3, 2024 and January 28, 2023,
respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
65
The Company’s policy with respect to gift cards is to record revenue as and when the gift cards are redeemed for
merchandise. The Company recognizes gift card breakage income in proportion to the pattern of rights exercised by the
customer when the Company expects to be entitled to breakage and the Company determines that it does not have a legal
obligation to remit the value of the unredeemed gift card to the relevant jurisdiction as unclaimed or abandoned property. Gift
card breakage is recorded within Net sales. Prior to their redemption, gift cards are recorded as a liability within Accrued
expenses and other current liabilities. The liability is estimated based on expected breakage that considers historical patterns of
redemption. The gift card liability balance was $4.8 million, $6.8 million, and $11.1 million as of February 1, 2025, February 3,
2024, and January 28, 2023, respectively. During Fiscal 2024 and Fiscal 2023, the Company recognized Net sales of $5.4
million and $9.3 million related to the gift card liability balance that existed at February 3, 2024 and January 28, 2023,
respectively.
The Company has an international program of territorial agreements with franchisees. The Company generates revenues
from the franchisees from the sale of product and, in certain cases, sales royalties. The Company recognizes revenue on the sale
of product to franchisees when the franchisee takes ownership of the product. The Company records net sales for royalties when
the applicable franchisee sells the product to its customers. Under certain agreements, the Company receives a fee from each
franchisee for exclusive territorial rights and based on the opening of new stores. The Company records these territorial fees as
deferred revenue and amortizes the fee into Net sales over the life of the territorial agreement.
Cost of Sales (exclusive of depreciation and amortization)
In addition to the cost of inventory sold, the Company includes certain buying, design, and distribution expenses, and
shipping and handling costs on merchandise sold directly to customers. The Company records all occupancy costs in Cost of
sales, except for administrative office buildings, which are recorded in Selling, general, and administrative expenses. All
depreciation and amortization is reported on a separate line in the Company’s Consolidated Statements of Operations.
Stock-Based Compensation
The Company’s stock-based compensation plans are administered by the Human Capital & Compensation Committee of
the Board of Directors. The Human Capital & Compensation Committee is comprised of independent members of the Board of
Directors. Effective May 20, 2011, the stockholders approved the 2011 Equity Incentive Plan (the “Equity Plan”). The Equity
Plan allows the Human Capital & Compensation Committee to grant multiple forms of stock-based compensation, such as stock
options, stock appreciation rights, restricted stock awards, deferred stock awards, and performance stock awards.
The Company accounts for stock-based compensation in accordance with the provisions of FASB ASC 718—
Compensation—Stock Compensation. These provisions require, among other things: (i) the fair value at grant date of all stock
awards be expensed over their respective vesting periods; (ii) the amount of cumulative compensation cost recognized at any
date must at least be equal to the portion of the grant-date value of the award that is vested at that date; and (iii) that
compensation expense include a forfeiture estimate for those shares not expected to vest. The fair value of all stock awards is
based on the closing price of the Company’s common stock on the grant date.
We grant time-vesting and performance-based stock awards to employees at senior management levels. We also grant
time-vesting stock awards to our non-employee independent directors. Time-vesting awards are granted in the form of restricted
stock units that require each recipient to complete a service period (“Deferred Awards”). Typically, Performance-based stock
awards are granted in the form of restricted stock units, which have performance criteria that must be achieved for the awards to
be earned, in addition to a service period requirement (“Performance Awards”), and each Performance Award has a defined
number of shares that an employee can earn (the “Target Shares”).
In Fiscal 2024, there was a change of control of the Company, which triggered a conversion of all then-outstanding
Performance Awards into service-based Performance Awards in accordance with their terms. As a result, the Fiscal 2023, Fiscal
2022 and fiscal year 2021 Performance Awards will all vest or have vested, as applicable, at their Target Shares on their
respective vesting dates without regard to the achievement of any of the performance metrics associated with those awards,
provided that the recipient be employed at the Company on each such vesting date. In Fiscal 2024, the stock awards granted to
employees at senior management levels were a combination of both Deferred Awards and Performance Awards. The Deferred
Award portion has a one-year vesting schedule, while the Performance Award portion is subject to graded vesting over the
subsequent two years of the stock award, whereby employees may earn from 0% to 200% of their Target Shares in each of
those years, based on the terms of the award and our achievement of certain performance goals established for such
Performance Awards. The expense recognized for Performance Awards throughout the service period and the number of shares
that are projected to ultimately vest, are based on the estimated degree to which the related performance metrics are expected to
be achieved.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
66
Advertising and Marketing Costs
The Company defers costs associated with the production of advertising until the first time the advertising takes place.
Costs associated with communicating advertising that has been produced are expensed when the advertising event takes place.
Advertising and other marketing costs are recorded in Selling, general, and administrative expenses and amounted to $68.9
million, $99.9 million, and $55.5 million in Fiscal 2024, Fiscal 2023, and Fiscal 2022, respectively.
Earnings (Loss) per Common Share
The Company reports its earnings (loss) per share in accordance with FASB ASC 260—Earnings Per Share, which
requires the presentation of both basic and diluted earnings per share on the Consolidated Statements of Operations. The diluted
weighted average common shares include adjustments for the potential effects of outstanding Deferred Awards and
Performance Awards (as both terms are used in “Note 12. Stock-Based Compensation” of the Consolidated Financial
Statements, “Item 8. Financial Statements and Supplementary Data” of this Form 10-K), but only in the periods in which such
effect is dilutive under the treasury stock method. Included in basic and diluted weighted average common shares are those
shares, due to participants in the Deferred Compensation Plan, which are held in treasury stock. Anti-dilutive stock awards are
comprised of unvested deferred, restricted, and performance shares which would have been anti-dilutive in the application of
the treasury stock method in accordance with FASB ASC 260—Earnings Per Share.
Recent Accounting Standards Updates
Accounting Pronouncement Recently Adopted
In November 2023, the FASB issued Accounting Standards Update No. 2023-07 “Segment Reporting (Topic 280):
Improvements to Reportable Segment Disclosures,” (“ASU 2023-07”). The amendments in ASU 2023-07 are designed to
improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment
expenses during interim and annuals periods. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and
interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted
ASU 2023-07 on a retrospective basis, which expanded our disclosures but did not have a material impact on our consolidated
financial statements.
Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued Accounting Standards Update No. 2023-09 “Income Taxes (Topic 740):
Improvements to Income Tax Disclosures,” (“ASU 2023-09”). The amendments in ASU 2023-09 are designed to enhance the
transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate
reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after
December 15, 2024, with early adoption permitted. The adoption of ASU 2023-09 will expand our disclosures, but we do not
expect it to have a material impact on our consolidated financial statements.
In November 2024, the FASB issued Accounting Standards Update No. 2024-03 “Income Statement — Reporting
Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40),” (“ASU 2024-03”). The amendments in
ASU 2024-03 are designed to improve financial reporting by requiring that public business entities disclose additional
information about specific expense categories in the notes to financial statements at interim and annual reporting periods. ASU
2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods with fiscal years beginning after
December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this update on its
consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
67
2. REVENUES
The following table presents the Company’s net sales disaggregated by geography:
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
(in thousands)
South
$
502,042 $
586,370 $
633,430
Northeast
254,521
304,554
339,072
West
166,234
208,249
231,135
Midwest
147,308
185,126
196,075
International and other (1)
316,164
318,209
308,770
Total net sales
$
1,386,269 $
1,602,508 $
1,708,482
____________________________________________
(1)
Includes retail and e-commerce sales in Canada and Puerto Rico, wholesale and franchisee sales, and certain amounts earned under the Company’s private
label credit card program.
3. RESTRUCTURING
As a result of the strategic actions associated with the voluntary early termination and subsequent renewal of the
Company’s corporate office lease, the move of its distribution center operations from Toronto, Canada (“TODC”) to Alabama
in the United States, and workforce reductions, the Company incurred 2549000 and 11808000 in restructuring costs during
Fiscal 2024 and Fiscal 2023, respectively, on a pretax basis, summarized in the following table:
Fiscal Years Ended
February 1,
2025
February 3,
2024
(in thousands)
Employee-related costs
$
— $
7,382
Lease termination costs (1)
701
4,158
TODC costs (2)
1,848
—
Professional fees
—
268
Total restructuring costs (3)
$
2,549 $
11,808
___________________________________________
(1)
Includes non-cash charges related to accelerated depreciation on certain assets in the corporate office over the reduced term, amounting to $0.7 million
and 1800000 during Fiscal 2024 and Fiscal 2023, respectively.
(2)
Includes non-cash charges related to accelerated depreciation on TODC assets, amounting to 1100000 during Fiscal 2024.
(3)
Restructuring costs are recorded within Selling, general and administrative expenses, except accelerated depreciation charges noted above, which are
recorded within Depreciation and amortization. TODC costs are recorded within The Children’s Place International segment. The remaining restructuring
costs are primarily recorded within The Children’s Place U.S. segment.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
68
The following tables summarize the restructuring costs that have been settled with cash payments. There was no
remaining liability as of February 1, 2025.
Employee-Related
Costs
Lease Termination
Costs
TODC Costs
Professional Fees
Total
(in thousands)
Balance at January 28, 2023
$
— $
— $
— $
— $
—
Provision
7,382
4,040
—
268
11,690
Cash Payments
(5,716)
(4,040)
—
(268)
(10,024)
Balance at February 3, 2024
1,666
—
—
—
1,666
Provision
(248)
—
432
—
184
Cash Payments
(1,418)
—
(432)
—
(1,850)
Balance at February 1, 2025
$
— $
— $
— $
— $
—
4. INTANGIBLE ASSETS
On April 4, 2019, the Company acquired certain intellectual property and related assets of Gymboree Group, Inc. and
related entities, which included the worldwide rights to the names “Gymboree” and “Crazy 8” and other intellectual property,
including trademarks, domain names, copyrights, and customer databases. These intangible assets, inclusive of acquisition
costs, are recorded in the long-term assets section of the Consolidated Balance Sheets.
The Company identified an indicator of impairment in its qualitative assessment performed during Fiscal 2024 and Fiscal
2023, primarily due to reductions in Gymboree sales forecasts and performed a quantitative impairment assessment of the
Gymboree tradename. Some of the key assumptions used in the Fiscal 2024 quantitative impairment assessment included a
long-term revenue growth rate of 2.5% and a discount rate of 14.5%. Based on its quantitative assessment performed, the
Company recorded an impairment charge of $28.0 million in Fiscal 2024, which reduced the carrying value to its fair value of
$13.0 million. The Company recorded a 29000000 impairment charge in Fiscal 2023 and there was no impairment charge in
Fiscal 2022.
The Company’s intangible assets were as follows:
February 1, 2025
Useful Life
Gross Amount
Accumulated
Amortization
Net Amount
(in thousands)
Gymboree tradename
Indefinite
$
13,000 $
— $
13,000
Crazy 8 tradename
5 years
4,000
(4,000)
—
Total intangible assets
$
13,000 $
— $
13,000
February 3, 2024
Useful Life
Gross Amount
Accumulated
Amortization
Net Amount
(in thousands)
Gymboree tradename
Indefinite
$
41,000 $
— $
41,000
Crazy 8 tradename
5 years
4,000
(3,877)
123
Total intangible assets
$
45,000 $
(3,877) $
41,123
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
69
5. PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
February 1,
2025
February 3,
2024
(in thousands)
Land and land improvements
$
3,403 $
3,403
Building and improvements
36,527
36,187
Material handling equipment
88,092
90,637
Leasehold improvements
159,992
162,898
Store fixtures and equipment
151,810
173,667
Capitalized software
228,227
333,953
Construction in progress
1,647
3,386
669,698
804,131
Less accumulated depreciation and amortization
(572,211)
(679,381)
Total property and equipment, net
$
97,487 $
124,750
The Company reviewed its store related long-lived assets for indicators of impairment, and performed a recoverability
test if indicators were identified. Based on the results of the analyses performed, the Company did not record impairment
charges on its store related long-lived assets during Fiscal 2024. The Company recorded asset impairment charges during Fiscal
2023 and Fiscal 2022 of $5.6 million, and $3.3 million, respectively, inclusive of ROU assets.
6.
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
February 1,
2025
February 3,
2024
(in thousands)
Prepaid income taxes
$
4,834 $
26,493
Prepaid cloud computing
4,385
8,329
Prepaid maintenance contracts
3,215
1,843
Prepaid insurance
5,097
2,679
Other
2,823
3,825
Total prepaid expenses and other current assets
$
20,354 $
43,169
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
70
7.
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:
February 1,
2025
February 3,
2024
(in thousands)
Accrued salaries and benefits
$
19,760 $
19,140
Related party accrued interest
6,493
—
Accrued marketing
5,754
3,177
Customer liabilities
4,784
6,817
Accrued real estate expenses
4,780
6,366
Deferred revenue
4,183
4,832
Accrued legal costs
4,100
6,771
Sales taxes and other taxes payable
4,074
7,212
Loyalty points
3,692
1,686
Accrued outside services
2,460
4,044
Accrued store expenses
2,369
2,319
Accrued insurance
2,287
3,786
Accrued freight
2,124
10,324
Accrued professional fees
1,620
2,301
Accrued IT costs
1,225
2,995
Other
6,190
7,838
Total accrued expenses and other current liabilities
$
75,895 $
89,608
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
71
8. LEASES
The following components of lease expense were recognized in the Company’s Consolidated Statements of Operations:
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
(in thousands)
Fixed operating lease cost
$
90,129 $
91,066 $
99,988
Variable operating lease cost
24,425
44,195
51,905
Total operating lease cost
$
114,554 $
135,261 $
151,893
The following table provides the weighted-average remaining lease term of the Company’s operating leases, the
weighted-average discount rate used to calculate the Company’s operating liabilities, cash paid for amounts included in the
measurement of the Company’s operating lease liabilities, and ROU assets obtained in exchange for the Company’s new
operating lease liabilities:
Fiscal Years Ended
February 1,
2025
February 3,
2024
Weighted-average remaining lease term (years)
4.3
4.2
Weighted average discount rate (%)
8.1
7.1
Cash paid for amounts included in the measurement of operating lease liabilities ($, in millions)
79.1
93.4
ROU assets obtained in exchange for new operating lease liabilities ($, in millions)
71.8
120.5
As of February 1, 2025, the maturities of operating lease liabilities were as follows:
February 1, 2025
(in thousands)
2025
$
78,499
2026
49,253
2027
23,993
2028
16,325
2029
10,715
Thereafter
34,642
Total operating lease payments
213,427
Less: imputed interest
(38,733)
Present value of operating lease liabilities
$
174,694
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
72
9. DEBT
ABL Credit Facility and 2021 Term Loan
The Company and certain of its subsidiaries maintain a 433.0 million asset-based revolving credit facility (the “ABL
Credit Facility”) and, before it was fully repaid, maintained a 50000000 term loan (the “2021 Term Loan”) under its Credit
Agreement with Wells Fargo Bank, National Association (“Wells Fargo”), Truist Bank, Bank of America, N.A., HSBC
Business Credit (USA) Inc., JPMorgan Chase Bank, N.A., and PNC Bank, National Association, as the lenders party thereto
(collectively, the “Credit Agreement Lenders”) and Wells Fargo, as Administrative Agent, Collateral Agent, Swing Line Lender
and, before the 2021 Term Loan was fully repaid, Term Agent. The ABL Credit Facility will mature and, before it was fully
repaid, the 2021 Term Loan would have matured, in November 2026.
As of April 18, 2024, which is the effective date of the seventh amendment to the Credit Agreement (the “Seventh
Amendment”), the ABL Credit Facility includes a $25.0 million Canadian sublimit and a $25.0 million sublimit for standby and
documentary letters of credit.
Under the ABL Credit Facility, borrowings outstanding bear interest, at the Company’s option, at:
(i)
the prime rate per annum, plus a margin of 2.000; or
(ii) the Secured Overnight Financing Rate (“SOFR”) per annum, plus 0.100%, plus a margin of 3.000.
Prior to April 18, 2024, the Company was charged a fee of 0.200% on the unused portion of the commitments. As of
April 18, 2024, based on the size of the unused portion of the commitments, the Company is charged a fee ranging from
0.250% to 0.375%. Letter of credit fees are at 1.125% for commercial letters of credit and 1.750% for standby letters of credit.
The amount available for loans and letters of credit under the ABL Credit Facility is determined by a borrowing base consisting
of certain credit card receivables, certain trade receivables, certain inventory, and the fair market value of certain real estate,
subject to certain reserves and an availability block.
From and after February 4, 2025 and on the first day of each fiscal quarter thereafter, based on the amount of the
Company’s average daily excess availability under the facility, borrowings outstanding under the ABL Credit Facility will bear
interest, at the Company’s option, at:
(i)
the prime rate per annum, plus a margin of 1.750% or 2.000%; or
(ii) the SOFR per annum, plus 0.100%, plus a margin of 2.750% or 3.000%.
Letter of credit fees will range from 1.000% to 1.125% for commercial letters of credit and will range from 1.500% to
1.750% for standby letters of credit. Letter of credit fees will be determined based on the amount of the Company’s average
daily excess availability under the facility.
For Fiscal 2024, Fiscal 2023, and Fiscal 2022, the Company recognized $25.0 million, $24.2 million, and $10.2 million,
respectively, in interest expense related to the ABL Credit Facility.
Prior to April 18, 2024, when the 2021 Term Loan was fully repaid, credit extended under the ABL Credit Facility was
secured by a first priority security interest in substantially all of the Company’s U.S. and Canadian assets other than intellectual
property, certain furniture, fixtures, equipment, and pledges of subsidiary capital stock, and a second priority security interest in
the Company’s intellectual property, certain furniture, fixtures, equipment, and pledges of subsidiary capital stock. As of April
18, 2024, the ABL Credit Facility is secured on a first priority basis by all of the foregoing collateral.
The outstanding obligations under the ABL Credit Facility may be accelerated upon the occurrence of certain customary
events of default, as described below. The Company is not subject to any early termination fees.
The ABL Credit Facility contains covenants, which include conditions on stock buybacks and the payment of cash
dividends or similar payments. These covenants also limit the ability of the Company and its subsidiaries to incur certain liens,
to incur certain indebtedness, to make certain investments, acquisitions, or dispositions or to change the nature of its business.
Pursuant to the Seventh Amendment, the requisite payment condition thresholds for some of these covenants have been
heightened, resulting in certain actions such as the repurchase of shares and payment of cash dividends becoming more difficult
to perform. Additionally, if the Company is unable to maintain a certain amount of excess availability for borrowings (the
“excess availability threshold”), the Company may be subject to cash dominion.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
73
The ABL Credit Facility contains customary events of default, which include (subject in certain cases to customary grace
and cure periods) nonpayment of principal or interest, breach of covenants, failure to pay certain other indebtedness, and certain
events of bankruptcy, insolvency or reorganization, such as a change of control.
The tables below present the components of the Company’s ABL Credit Facility as of the end of Fiscal 2024 and Fiscal
2023:
February 1,
2025
February 3,
2024
(in millions)
Total borrowing base availability (1)
$
301.9
$
258.4
Credit facility availability (1)
433.0
400.5
Maximum borrowing availability (2)
301.9
258.4
Outstanding borrowings
245.7
226.7
Letters of credit outstanding—standby
16.0
7.4
Utilization of credit facility at end of period
261.7
234.1
Availability (3)
$
40.2 $
24.3
Interest rate at end of period
7.6%
8.1%
Average end-of-day loan balance during the period
$
284.5
$
315.5
Highest end-of-day loan balance during the period
$
366.9
$
379.4
Average interest rate
8.7%
7.5%
____________________________________________
(1)
In Fiscal 2023, the total borrowing base availability and credit facility availability were both calculated net of the excess availability threshold under the
Credit Agreement, as prior to the Seventh Amendment, crossing that threshold would have resulted in cash dominion, which would have triggered a fixed
charge coverage ratio covenant test and would likely have led to a default under the Credit Agreement. As of the Seventh Amendment, the fixed charge
coverage ratio covenant has been removed from the Credit Agreement, and entering into cash dominion by crossing the excess availability threshold no
longer poses the same risk of default under the Credit Agreement.
(2)
The lower of the credit facility availability and the total borrowing base availability.
(3)
The sub-limit availability for letters of credit was $9.0 million at February 1, 2025 and $42.6 million at February 3, 2024.
The 2021 Term Loan bore interest, payable monthly, at (i) the SOFR per annum plus 2.750% for any portion that was a
SOFR loan, or (ii) the base rate per annum plus 2.000% for any portion that was a base rate loan. The 2021 Term Loan was pre-
payable at any time without penalty, and did not require amortization. For Fiscal 2024, Fiscal 2023, and Fiscal 2022, the
Company recognized $1.1 million, $4.0 million, and $2.3 million respectively, in interest expense related to the 2021 Term
Loan.
As of April 18, 2024, the 2021 Term Loan was fully repaid.
As of February 1, 2025 and February 3, 2024, unamortized deferred financing costs amounted to 3.8 million and 2.2
million, respectively, related to the Company's ABL Credit Facility.
Mithaq Term Loans
Mithaq Capital SPC, a Cayman segregated portfolio company (“Mithaq”), is a controlling stockholder of the Company.
The Company and certain of its subsidiaries maintain an interest-free, unsecured and subordinated promissory note with Mithaq
for a 78.6 million term loan (the “Initial Mithaq Term Loan”), consisting of (i) a first tranche in an aggregate principal amount
of $30.0 million (the “First Tranche”) and (ii) a second tranche in an aggregate principal amount of $48.6 million (the “Second
Tranche”). The Company received the First Tranche on February 29, 2024 and the Second Tranche on March 8, 2024.
The Initial Mithaq Term Loan matures on February 15, 2027. The Initial Mithaq Term Loan is guaranteed by each of the
Company’s subsidiaries that guarantee the Company’s ABL Credit Facility.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
74
The Company and certain of its subsidiaries also maintain an unsecured and subordinated 90000000 term loan with
Mithaq (the “New Mithaq Term Loan”; and together with the Initial Mithaq Term Loan, collectively, the “Mithaq Term
Loans”).
The New Mithaq Term Loan matures on April 16, 2027, and requires monthly payments equivalent to interest charged at
the SOFR plus 4.000% per annum, with such monthly payments to Mithaq deferred until April 30, 2025. The New Mithaq
Term Loan is guaranteed by each of the Company’s subsidiaries that guarantee the Company’s ABL Credit Facility. For Fiscal
2024, the Company recognized 6492884 in deferred interest-equivalent expense related to the New Mithaq Term Loan.
The Mithaq Term Loans are subject to an amended and restated subordination agreement (as amended from time to time,
the “Subordination Agreement”), dated as of April 16, 2024, by and among the Company and certain of its subsidiaries, Wells
Fargo and Mithaq, pursuant to which the Mithaq Term Loans are subordinated in payment priority to the obligations of the
Company and its subsidiaries under the Credit Agreement. Subject to such subordination terms, the Mithaq Term Loans are
prepayable at any time and from time to time without penalty and do not require any mandatory prepayments.
The Mithaq Term Loans contain customary affirmative and negative covenants substantially similar to a subset of the
covenants set forth in the Credit Agreement, including limits on the ability of the Company and its subsidiaries to incur certain
liens, to incur certain indebtedness, to make certain investments, acquisitions, dispositions or restricted payments, or to change
the nature of its business. The Mithaq Term Loans, however, do not provide for any closing, prepayment or exit fees, or other
fees typical for transactions of this nature, do not impose additional reserves on borrowings under the Credit Agreement, and do
not contain certain other restrictive covenants.
The Mithaq Term Loans contain certain customary events of default, which include (subject in certain cases to
customary grace periods), nonpayment of principal, breach of other covenants of the Mithaq Term Loans, inaccuracy in
representations or warranties, acceleration of certain other indebtedness (including under the Credit Agreement), certain events
of bankruptcy, insolvency or reorganization, such as a change of control, and invalidity of any part of the Mithaq Term Loans.
As of February 1, 2025, unamortized deferred financing costs amounted to 2625911 related to the Mithaq Term Loans.
Maturities of the Company’s principal debt payments on the Mithaq Term Loans as of February 1, 2025 are as follows:
February 1, 2025
(in thousands)
2025
$
—
2026
—
2027
168,600
Thereafter
—
Total related party debt
$
168,600
As of February 6, 2025, $60.2 million under the Initial Mithaq Term Loan was repaid pursuant to the completion of the
Rights Offering, leaving an aggregate of $108.4 million outstanding under the Mithaq Term Loans, payable in fiscal year 2027.
Refer to “Note 18. Subsequent Events” for additional detail.
Mithaq Commitment Letter
On May 2, 2024, the Company entered into a commitment letter (the “Commitment Letter”) with Mithaq for a 40000000
credit facility (the “Mithaq Credit Facility”). Under the Mithaq Credit Facility, the Company had the ability to request for
advances at any time prior to July 1, 2025. On September 10, 2024, the Company and Mithaq entered into an Amendment No. 1
to the Commitment Letter, that extended the deadline for requesting advances until July 1, 2026.
If any debt is incurred under the Mithaq Credit Facility, it shall require monthly payments equivalent to interest charged
at the SOFR plus 5.000% per annum. Such debt shall be unsecured and shall be guaranteed by each of the Company’s
subsidiaries that guarantee the Company’s ABL Credit Facility. Similar to the Mithaq Term Loans, such debt shall also be
subject to the Subordination Agreement, contain customary affirmative and negative covenants substantially similar to a subset
of the covenants set forth in the Credit Agreement, and contain certain customary events of default. Additionally, such debt
shall require no mandatory prepayments and shall mature no earlier than July 1, 2026. As of February 1, 2025, no debt had been
incurred under the Mithaq Credit Facility.
10. COMMITMENTS AND CONTINGENCIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
75
Commitments
As of February 1, 2025, the Company entered into various purchase commitments for the next 12 months for
merchandise for re-sale of approximately $96.9 million and approximately $56.4 million for equipment, construction, and other
non-merchandise commitments. The Company also has operating lease and standby letters of credit commitments of
$213.4 million and $16.0 million, respectively.
Legal and Regulatory Matters
The Company is a defendant in Rael v. The Children’s Place, Inc., a purported class action, pending in the U.S. District
Court, Southern District of California. In the initial complaint filed in February 2016, the plaintiff alleged that the Company
falsely advertised discount prices in violation of California’s Unfair Competition Law, False Advertising Law, and Consumer
Legal Remedies Act. The plaintiff filed an amended complaint in April 2016, adding allegations of violations of other state
consumer protection laws. In August 2016, the plaintiff filed a second amended complaint, adding an additional plaintiff and
removing the other state law claims. The plaintiffs’ second amended complaint sought to represent a class of California
purchasers and sought, among other items, injunctive relief, damages, and attorneys’ fees and costs.
The Company engaged in mediation proceedings with the plaintiffs in December 2016 and April 2017. The parties
reached an agreement in principle in April 2017, and signed a definitive settlement agreement in November 2017, to settle the
matter on a class basis with all individuals in the U.S. who made a qualifying purchase at The Children’s Place from February
11, 2012 through January 28, 2020, the date of preliminary approval by the court of the settlement. The Company submitted its
memorandum in support of final approval of the class settlement on March 2, 2021. On March 29, 2021, the court granted final
approval of the class settlement and denied plaintiff’s motion for attorney’s fees, with the amount of attorney’s fees to be
decided after the class recovery amount has been determined. The settlement provides merchandise vouchers for qualified class
members who submit valid claims, as well as payment of legal fees and expenses and claims administration expenses. Vouchers
were distributed to class members on November 15, 2021 and they were eligible for redemption in multiple rounds through
November 2023. On February 23, 2024, a hearing on motion for preliminary injunction and permanent injunction and to
enforce judgement and settlement agreement was held. Pending receipt of the court’s ruling, upon the court’s order, the plaintiff
filed a renewed motion for attorneys’ fees, costs and incentive awards on March 4, 2024, to which the Company filed a
statement of non-opposition on April 1, 2024. Because the plaintiff was seeking less than the maximum amount agreed to in the
settlement, the Company requested that such difference in amount be distributed as vouchers to authorized class members,
pursuant to the settlement agreement. The hearing for the motion for attorneys’ fees, costs, and incentive awards resulted in the
court granting the plaintiff’s counsel approximately $0.3 million in fees, costs and incentive awards. The balance of funds
initially reserved for the plaintiff counsel’s fees and costs have now been issued as a single, final round of merchandise
vouchers for qualified class members, which expired in March 2025. In connection with the settlement, the Company recorded
a reserve for 5.0 million in its consolidated financial statements in the first quarter of 2017. Following the court’s recent
decision(s), the Company released $2.3 million from its previously established reserve during Fiscal 2024, which is recorded
within Selling, general and administrative expenses.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
76
Similar to the Rael case above, the Company is also a defendant in Gabriela Gonzalez v. The Children’s Place, Inc., a
purported class action, pending in the U.S. District Court, Central District of California. The plaintiff alleged that the Company
had falsely advertised discounts that do not exist, in violation of California’s Unfair Competition Laws, False Advertising Law
and the California Consumer Legal Remedies Act. The Company filed a motion to compel arbitration, which the plaintiff did
not oppose, and the court granted the motion on August 17, 2022—staying the case pending the outcome of the arbitration. The
demand for arbitration was filed on October 4, 2022, in connection with the individual claim of the plaintiff. A mass arbitration
firm associated with plaintiff’s counsel then conducted an advertising campaign for claimants to conduct a mass arbitration. In
part, to avoid the mass arbitration, the parties stipulated to return the original plaintiff’s claim to court to proceed as a class
action. Accordingly, the arbitration would not be proceeding and the Company’s response to the original plaintiff’s complaint
in court was filed on July 20, 2023. On August 16, 2023, however, the Company began to receive notices regarding an initial
tranche of approximately 1,300 individual demands that were filed with Judicial Arbitration and Mediation Services, Inc.
(“JAMS”) as part of a related mass arbitration claim. The parties participated in mediation proceedings on November 15, 2023
and February 9, 2024. The parties agreed to further discuss settlement options in May 2024, which occurred without resolution.
In late May, due to the judge’s retirement, the Gonzalez action was transferred and reassigned to a different judge. Deadlines
were therefore reset, including the Company’s motion to dismiss. On June 10, 2024, JAMS advised that it would be pausing its
administration of the claims until the parties resolve their dispute over which set of arbitration terms apply to the case. The
Company’s motion to dismiss was denied in November 2024. Any liability arising out of these proceedings is not expected to
have a material adverse effect on the Company's financial position, results of operations, or cash flows.
The Company is also involved in various legal proceedings arising in the normal course of business. In the opinion of
management, any ultimate liability arising out of these proceedings is not expected to have a material adverse effect on the
Company’s financial position, results of operations, or cash flows.
11. STOCKHOLDERS’ DEFICIT
Share Repurchase Program
In November 2021, the Board of Directors authorized a $250.0 million share repurchase program (the “Share Repurchase
Program”). Under this program, the Company may repurchase shares on the open market at current market prices at the time of
purchase or in privately negotiated transactions. The timing and actual number of shares repurchased under the program will
depend on a variety of factors, including price, corporate and regulatory requirements, and other market and business
conditions. The Company may suspend or discontinue the program at any time and may thereafter reinstitute purchases, all
without prior announcement. Currently, pursuant to the terms of the Company’s Credit Agreement as amended by its Seventh
Amendment described above, the repurchase of any shares would require fulfilling the heightened payment conditions under
the Credit Agreement, except that repurchases of shares as described below, pursuant to the Company’s practice as a result of
its insider trading policy, are expressly permitted. As of February 1, 2025, there was $156.5 million remaining availability
under the Share Repurchase Program.
Pursuant to the Company’s practice, including due to restrictions imposed by the Company’s insider trading policy
during black-out periods, the Company withholds and repurchases shares of vesting stock awards and makes payments to taxing
authorities as required by law to satisfy the withholding tax requirements of all equity award recipients. The Company’s
payment of the withholding taxes in exchange for the surrendered shares constitutes a repurchase of its common stock. The
Company also acquires shares of its common stock in conjunction with liabilities owed under the Company’s deferred
compensation plan, which are held in treasury.
The following table summarizes the Company’s share repurchases:
Fiscal Years Ended
February 1, 2025
February 3, 2024
January 28, 2023
Shares
Amount
Shares
Amount
Shares
Amount
(in thousands)
Share repurchases related to:
Share repurchase program
71 $
674
210 $ 7,131
1,953 $ 92,945
Shares acquired and held in treasury
5 $
66
8 $
245
6 $
293
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
77
In accordance with the FASB ASC 505—Equity, the par value of the shares retired is charged against Common stock
and the remaining purchase price is allocated between Additional paid-in capital and Accumulated deficit. The portion charged
against Additional paid-in capital is determined using a pro-rata allocation based on total shares outstanding.
Dividends
Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to
approval by the Board of Directors based on a number of factors, including business and market conditions, the Company’s
financial performance, and other investment priorities. Currently, pursuant to the terms of the Company’s Credit Agreement as
amended by its Seventh Amendment described above, the Company has no current plans to pay regular cash dividends in Fiscal
2025.
12. STOCK-BASED COMPENSATION
The Company generally grants time vesting stock awards (“Deferred Awards”) and performance-based stock awards
(“Performance Awards”) to employees at senior management levels. The Company also grants Deferred Awards to its non-
employee independent directors. Deferred Awards are granted in the form of restricted stock units that require each recipient to
complete a service period. Performance Awards are granted in the form of restricted stock units which have performance
criteria that must be achieved for the awards to vest in addition to a service period requirement, and each Performance Award
has a defined number of shares that an employee can earn (the “Target Shares”). With the approval of the Human Capital &
Compensation Committee, the Company may settle vested Deferred Awards and Performance Awards in shares, in a cash
amount equal to the market value of such shares at the time all requirements for delivery of the award have been met, or in part
shares and cash.
In Fiscal 2024, there was a change of control of the Company, which triggered a conversion of all then-outstanding
Performance Awards into service-based Performance Awards in accordance with their terms. As a result, the Fiscal 2023, Fiscal
2022, and fiscal year 2021 Performance Awards will all vest or have vested, as applicable, at their Target Shares on their
respective vesting dates without regard to the achievement of any of the performance metrics associated with those awards,
provided that the recipient be employed at the Company on each such vesting date. In Fiscal 2024, the stock awards granted to
employees at senior management levels were a combination of both Deferred Awards and Performance Awards. The Deferred
Award portion has a one-year vesting schedule, while the Performance Award portion is subject to graded vesting over the
subsequent two years of the stock award, whereby employees may earn from 0% to 200% of their Target Shares in each of
those years, based on the terms of the award and the Company’s achievement of certain performance goals established for such
Performance Awards.
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78
The following table summarizes the Company’s stock-based compensation expense (benefit):
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
(in thousands)
Deferred Awards
$
2,956 $
6,619 $
9,937
Performance Awards (1)
9,830
(12,195)
19,213
Total stock-based compensation expense (benefit) (2)
$
12,786 $
(5,576) $
29,150
____________________________________________
(1)
Included within the Performance Awards expense for Fiscal 2024 was a combination of ongoing expense associated with existing grants and $9.9 million
associated with increasing the attainment level of certain Performance Awards due to the change of control of the Company, partially offset by the
reversal of unvested expense related to forfeited awards for employees no longer at the Company. Included within the Performance Awards benefit for
Fiscal 2023 was a combination of ongoing expense associated with existing grants and $13.5 million of credits resulting from (i) a change in estimate
based on revised expectations of the attainment levels for performance metrics of certain awards, and (ii) the reversal of unvested expense related to
forfeited awards for employees no longer with the Company.
(2)
Stock-based compensation expense (benefit) recorded within Cost of sales (exclusive of depreciation and amortization) amounted to $1.1 million, $0.4
million, and $2.2 million in Fiscal 2024, Fiscal 2023, and Fiscal 2022, respectively. All other stock-based compensation expense is included in Selling,
general, and administrative expenses.
The Company recognized a tax benefit related to stock-based compensation expense (benefit) before consideration of the
valuation allowance of $1.6 million, $0.3 million, and $2.5 million in Fiscal 2024, Fiscal 2023, and Fiscal 2022, respectively.
At February 1, 2025, the Company had 278,400 shares available for grant under the Equity Plan.
Changes in the Company’s Unvested Stock Awards
Deferred Awards
Fiscal Years Ended
February 1, 2025
February 3, 2024
January 28, 2023
Number of
Shares
Weighted
Average
Grant Date
Fair Value
Number of
Shares
Weighted
Average
Grant Date
Fair Value
Number of
Shares
Weighted
Average
Grant Date
Fair Value
(in thousands)
(in thousands)
(in thousands)
Unvested Deferred Awards at beginning
of year
238 $
31.99
282 $
49.78
467 $
57.60
Granted
183
16.27
170
25.35
159
46.56
Vested
(158)
28.86
(203)
50.08
(222)
62.13
Forfeited
(110)
33.78
(11)
52.27
(122)
53.09
Unvested Deferred Awards at end of year
153 $
15.23
238 $
31.99
282 $
49.78
Total unrecognized stock-based compensation expense related to unvested Deferred Awards was 1.7 million as of
February 1, 2025, which will be recognized over a weighted average period of approximately 2.3 years.
The fair value of Deferred Awards that vested during Fiscal 2024, Fiscal 2023, and Fiscal 2022 was $4.6 million, $4.7
million, and $11.4 million, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
79
Performance Awards
Fiscal Years Ended
February 1, 2025
February 3, 2024
January 28, 2023
Number of
Shares(1)
Weighted
Average
Grant Date
Fair Value
Number of
Shares(1)
Weighted
Average
Grant Date
Fair Value
Number of
Shares(1)
Weighted
Average
Grant Date
Fair Value
(in thousands)
(in thousands)
(in thousands)
Unvested Performance Awards at
beginning of year
296 $
51.98
483 $
55.85
366 $
70.01
Granted
182
14.17
131
21.55
90
48.84
Shares earned in excess of (below)
Target Shares
—
—
—
—
192
48.17
Vested shares, including shares earned
in excess of Target Shares
(114)
75.97
(300)
44.71
(58)
101.62
Forfeited
(112)
27.18
(18)
55.01
(107)
59.86
Unvested Performance Awards at end
of year
252 $
24.92
296 $
51.98
483 $
55.85
____________________________________________
(1)
For awards for which the performance period is complete, the number of unvested shares is based on actual shares that will vest upon completion of the
service period. For awards for which the performance period is not yet complete, the number of unvested shares is based on the participants earning their
Target Shares at 100%.
The cumulative expense (benefit) recognized for Performance Awards are based on the changes in the estimated degree
to which the related performance metrics are expected to be achieved. Based on the current number of Performance Awards
expected to be earned, total unrecognized stock-based compensation expense related to unvested Performance Awards was 2.2
million as of February 1, 2025, which will be recognized over a weighted average period of approximately 2.4 years.
The fair value of Performance Awards that vested during Fiscal 2024, Fiscal 2023 and Fiscal 2022 was 8633524, $11.8
million, and $3.0 million, respectively.
13. LOSS PER COMMON SHARE
On February 6, 2025, the Company completed a rights offering (“Rights Offering”) pursuant to which it distributed to
the holders of record of the Company’s Common stock non-transferable subscription rights to purchase, in the aggregate, up to
9.2 million shares of Common stock. As the exercise price of the subscription right was less than the fair value of the Common
stock, the subscription right contained a bonus element. In connection with this transaction, and in accordance with FASB ASC
260—Earnings Per Share, the Company’s weighted average common shares outstanding and basic and diluted loss per share
were retroactively adjusted for all periods presented by a factor of 1.002. Refer to “Note 18. Subsequent Events” for more
information.
The following table reconciles net loss and share amounts utilized to calculate basic and diluted loss per common share:
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
(in thousands)
Net loss
$
(57,819) $
(154,541) $
(1,138)
Basic weighted average common shares outstanding
12,766
12,522
13,063
Dilutive effect of stock awards
—
—
—
Diluted weighted average common shares outstanding
12,766
12,522
13,063
Anti-dilutive shares excluded from diluted loss per common share
calculation
53
114
184
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
80
14. FAIR VALUE MEASUREMENT
FASB ASC 820—Fair Value Measurement provides a single definition of fair value, together with a framework for
measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities.
This topic defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date and establishes a three-level hierarchy, which encourages an
entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The
three levels of the hierarchy are defined as follows:
•
Level 1 - inputs to the valuation techniques that are quoted prices in active markets for identical assets or
liabilities
•
Level 2 - inputs to the valuation techniques that are other than quoted prices, but are observable for the assets or
liabilities, either directly or indirectly
•
Level 3 - inputs to the valuation techniques that are unobservable for the assets or liabilities
The Company’s cash and cash equivalents and investments in the rabbi trust are short-term in nature. As such, their
carrying amounts approximate fair value. These assets and liabilities fall within Level 1 of the fair value hierarchy. The
Company stock included in the Deferred Compensation Plan is not subject to fair value measurement.
The fair value of the Initial Mithaq Term Loan with a carrying value (gross of debt issuance costs) of 78.6 million at
February 1, 2025, was approximately 60.2 million. The fair value of the New Mithaq Term Loan with a carrying value (gross of
debt issuance costs) of 90.0 million at February 1, 2025, was approximately 80.8 million. The fair value of debt was estimated
using a market approach, which considers the Company’s credit risk and market related conditions, and is therefore within
Level 2 of the fair value hierarchy.
The Company’s non-financial assets measured at fair value on a nonrecurring basis include long-lived assets, such as
intangible assets, fixed assets, and ROU assets. The Company reviews the carrying amounts of such assets when events indicate
that their carrying amounts may not be recoverable. Any resulting asset impairment would require that the asset be recorded at
its fair value. The resulting fair value measurements of the assets are considered to fall within Level 3 of the fair value
hierarchy.
Impairment of Long-Lived Assets
The fair value of the Company’s long-lived assets is primarily calculated using a discounted cash-flow model directly
associated with those assets, which consist principally of property and equipment and ROU assets. These assets are tested for
impairment when events indicate that their carrying value may not be recoverable.
The Company performed periodic quantitative impairment assessments of its long-lived assets and did not record an
impairment charge in Fiscal 2024. The Company recorded impairment charges of $5.6 million and $3.3 million during Fiscal
2023 and Fiscal 2022, respectively, inclusive of ROU assets.
Impairment of Indefinite-Lived Intangible Assets
The Company estimates the fair value of its indefinite-lived Gymboree tradename based on an income approach using
the relief-from-royalty method. Estimating fair value using this method requires management to estimate future revenues,
royalty rates, discount rates, long-term growth rates, and other factors in order to project future cash flows.
The Company identified an indicator of impairment in its qualitative assessment performed during Fiscal 2024, primarily
due to reductions in Gymboree sales forecasts. Based on its quantitative assessment performed, the Company recorded an
impairment charge of $28.0 million in Fiscal 2024, which reduced the carrying value to its fair value of $13.0 million. The
Company recorded a 29000000 impairment charge recorded in Fiscal 2023 and there was no impairment charge in Fiscal 2022.
The impairment charge was recorded in The Children’s Place U.S. segment.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
81
15. INCOME TAXES
The components of Loss before provision (benefit) for income taxes were as follows:
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
(in thousands)
Domestic
$
(58,830) $
(156,703) $
(61,065)
Foreign
9,382
42,905
46,303
Total loss before provision (benefit) for income taxes
$
(49,448) $
(113,798) $
(14,762)
The components of the Company’s Provision (benefit) for income taxes consisted of the following:
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
(in thousands)
Current:
Federal
$
4,812
$
(1,239)
$
4,172
State and local
1,120
249
(1,193)
Foreign
2,439
4,758
(2,842)
8,371
3,768
137
Deferred:
Federal
—
21,125
(12,030)
State and local
—
13,019
(2,712)
Foreign
—
2,831
981
—
36,975
(13,761)
Total provision (benefit) for income taxes
$
8,371
$
40,743
$
(13,624)
Effective tax rate
(16.9) %
(35.8) %
92.3 %
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in
response to the COVID-19 pandemic. The CARES Act allows net operating losses (“NOLs”) incurred in taxable years 2018,
2019, and 2020 to be carried back to each of the five preceding taxable years to offset 100% of taxable income and to generate a
refund of previously paid income taxes. Pursuant to the CARES Act, the Company carried back the taxable year 2020 tax loss
of $150.0 million to prior years. As of February 1, 2025, the remaining income tax receivable of $19.1 million is included
within Prepaid expenses and other current assets on the Consolidated Balance Sheets.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
82
A reconciliation between the calculated tax provision (benefit) based on the U.S. federal statutory rate of 21.0% and the
effective tax rate for Fiscal 2024, Fiscal 2023, and Fiscal 2022 follows:
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
(in thousands)
Calculated income tax benefit at U.S. federal statutory rate
$
(10,384) $
(23,898) $
(3,100)
State and local income taxes, net of federal benefit
(2,145)
(6,901)
(3,812)
Foreign tax rate differential (1)
(3,082)
(4,937)
(5,498)
Non-deductible expenses
2,654
(1,488)
3,696
Excess tax detriment related to stock compensation
889
558
816
Unrecognized tax benefits
104
3,127
(5,324)
Change in valuation allowance
18,251
68,625
163
Global intangible low-taxed income
251
9,505
1,760
Federal tax credits
(291)
(3,242)
(2,934)
Other
2,124
(606)
609
Total provision (benefit) for income taxes
$
8,371 $
40,743 $
(13,624)
____________________________________________
(1)
The Company has substantial operations in Hong Kong, which has a lower statutory income tax rate as compared to the U.S. The Company’s foreign
effective tax rate for Fiscal 2024, Fiscal 2023, and Fiscal 2022 was 17.5%, 11.6%, and 9.8%, respectively. This rate will fluctuate from year to year in
response to changes in the mix of income by country, as well as changes in tax laws in foreign jurisdictions.
The assessment of the amount of value assigned to the Company’s deferred tax assets under the applicable accounting
rules is judgmental. The Company is required to consider all available positive and negative evidence in evaluating the
likelihood that it will be able to realize the benefit of the Company’s deferred tax assets in the future. Such evidence includes
scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and the results of recent
operations. Since this evaluation requires consideration of events that may occur some years into the future, there is an element
of judgment involved. Realization of the Company’s deferred tax assets is dependent on generating sufficient taxable income in
future periods. The Company believes that it is not more likely than not that future taxable income will be sufficient to allow it
to recover substantially all of the value assigned to the Company’s deferred tax assets. Thus, in Fiscal 2024, the Company
increased its valuation allowance accordingly.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
83
The tax effects of temporary differences which give rise to deferred tax assets and liabilities were as follows:
February 1,
2025
February 3,
2024
(in thousands)
Deferred tax assets:
Operating lease liabilities
$
45,209 $
48,122
Capitalized research and development, net
22,193
23,653
Net operating loss carryforward
13,578
13,704
Reserves
10,295
10,167
Interest expense carryforward
16,853
9,980
Tax credits
5,616
6,630
Inventory
10,299
3,333
Tradenames and customer databases, net
9,407
3,304
Charitable contributions
815
1,084
Stock-based compensation
843
924
Subtotal
135,108
120,901
Less: valuation allowance
(88,148)
(69,898)
Total deferred tax assets
46,960
51,003
Deferred tax liabilities:
Right-of-use assets
(41,460)
(44,844)
Property and equipment, net
(3,530)
(3,149)
Prepaid expenses
(998)
(2,038)
Foreign and state tax on unremitted earnings
(1,554)
(1,554)
Total deferred tax liabilities
(47,542)
(51,585)
Total deferred tax liabilities, net
$
(582) $
(582)
The Company has gross federal NOL carryforwards of approximately $19.3 million which do not expire, state NOL
carryforwards of approximately $126.7 million which either expire between one and nineteen years, or carryforward
indefinitely, and foreign NOL carryforwards of approximately $9.3 million which expire between five and twenty years. The
Company also has an Alternative Minimum Tax credit (“AMT”) in Puerto Rico of approximately $0.6 million.
The Company has concluded that it is not more likely than not that its deferred tax assets, including NOLs, can be
utilized in the foreseeable future. Thus, the Company’s valuation allowance continues to be maintained against its net deferred
tax assets and increased $18.3 million to 88148000 in Fiscal 2024. However, to the extent that tax benefits related to these
deferred tax assets are realized in the future, the reduction of the valuation allowance will reduce income tax expense
accordingly.
During Fiscal 2024, there was a change of control of the Company. This change of control constituted an “ownership
change” under Internal Revenue Code Section 382, subjecting the Company to an annual limitation on its ability to utilize its
existing NOLs and tax credits as of the ownership change date to offset future taxable income. The application of such
limitation may cause U.S. federal income taxes to be paid by the Company earlier than they otherwise would be paid if such
limitation was not in effect, which would adversely affect the Company’s operating results and cash flows if it has taxable
income in the future. In addition to the aforementioned federal income tax implications pursuant to Section 382 of the Code,
most U.S. states follow the general provision of Section 382 of the Code, either explicitly or implicitly resulting in separate
state NOL limitations. This may cause state income taxes to be paid earlier than otherwise would be paid if such limitation was
not in effect and could cause such NOLs to expire unused.
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On December 22, 2017, the U.S. government passed the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act is a
comprehensive tax legislation that implemented complex changes to the U.S. tax code including, but not limited to, the
reduction of the corporate tax rate from 35% to 21% and a move from a global tax regime to a modified territorial regime which
required U.S. companies to pay a mandatory one-time transition tax on historical offshore earnings that have not been
repatriated to the U.S. The remaining unpaid transition tax of $9.5 million is shown net in Prepaid expenses and other current
assets on the Consolidated Balance Sheet as of February 1, 2025.
While the Company is no longer permanently reinvested to the extent earnings were subject to the transition tax under
the Tax Act, no additional income taxes have been provided on any earnings subsequent to the transition tax or for any
additional outside basis differences inherent in the Company’s foreign subsidiaries, as these amounts continue to be
permanently reinvested in foreign operations. Determining the amount of the unrecognized deferred tax liability related to any
additional outside basis differences in the Company’s foreign subsidiaries (i.e., basis differences in excess of that subject to the
one-time transition tax) is not practicable. The unremitted foreign earnings earned subsequent to the transition tax, which are
permanently reinvested, were $262.4 million at February 1, 2025.
Unrecognized Tax Benefits
Tax positions are evaluated in a two-step process. First, the Company determines whether it is more-likely-than-not that
a tax position will be sustained upon examination. Second, if a tax position meets the more-likely-than-not recognition
threshold, it is measured to determine the amount of benefit to recognize in the financial statements. The tax position is
measured as the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement.
A reconciliation of the gross amounts of unrecognized tax benefits, excluding accrued interest and penalties, is as
follows:
Fiscal Years Ended
February 1,
2025
February 3,
2024
(in thousands)
Beginning Balance
$
6,990 $
3,626
Additions for current year tax positions
636
1,756
Additions for prior year tax positions
35
1,608
Reductions for prior year tax positions
(661)
—
Reductions related to settlements with taxing authorities
(70)
—
Reductions due to a lapse of the applicable statute of limitations
(56)
—
Ending Balance
$
6,874 $
6,990
Unrecognized tax benefits of $6.5 million, excluding accrued interest and penalties, at February 1, 2025 would affect the
Company’s effective tax rate in future periods, if recognized. The Company believes that it is reasonably possible that the total
amount of unrecognized tax benefits as of February 1, 2025 could decrease by up to $1.8 million in the next 12 months as a
result of settlements with taxing authorities or the expiration of statutes of limitations.
The Company accrues interest and penalties related to unrecognized tax benefits as part of the provision for income
taxes. At February 1, 2025 and February 3, 2024, accrued interest and penalties of $0.8 million and $0.6 million, respectively,
were included in unrecognized tax benefits. Interest, penalties, and reversals thereof, net of taxes, amounted to an expense of
$0.2 million and $0.3 million in Fiscal 2024 and Fiscal 2023, respectively.
The Company is subject to tax in the U.S. and foreign jurisdictions, including Canada and Hong Kong. The Company
files a consolidated U.S. income tax return for federal income tax purposes. The Company is no longer subject to income tax
examinations by U.S. federal, state and local or foreign tax authorities for tax years 2015 and prior.
The Internal Revenue Service is currently conducting an examination of the Company’s tax return for fiscal year 2020 in
conjunction with its review of the CARES Act NOL carryback to earlier fiscal years. The Company believes that its reserves for
uncertain tax positions are adequate to cover existing risks or exposures. Management believes that an adequate provision has
been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted
with certainty. If any issues arise as a result of a tax audit, and are resolved in a manner not consistent with management’s
expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
85
16. RETIREMENT AND SAVINGS PLANS
401(k) Plan
The Company has adopted The Children’s Place 401(k) Savings Plan (the “401(k) Plan”), which qualifies under
Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”). The 401(k) Plan is a defined contribution plan
established to provide retirement benefits for employees. The 401(k) Plan is employee funded up to an elective annual deferral
amount and also provides for Company matching contributions up to a certain percentage of the employee’s salary.
The 401(k) Plan is available for all U.S. employees of the Company. The Company matches the first 3% of the
participant’s contributions and 50% of the next 2% of the participant’s contributions, and the Company’s matching contribution
vests immediately. The Company’s matching contributions were $3.4 million in Fiscal 2024, $4.0 million in Fiscal 2023, and
$4.5 million in Fiscal 2022.
Deferred Compensation Plan
The Deferred Compensation Plan liability, excluding Company stock, was $1.1 million and $1.2 million at February 1,
2025 and February 3, 2024, respectively. The value of the assets held in the rabbi trust was $1.1 million and $1.2 million at
February 1, 2025 and February 3, 2024, respectively. The cost of the Company’s stock repurchased was $0.1 million and $2.9
million at February 1, 2025 and February 3, 2024, respectively.
Other Plans
Under statutory requirements, the Company contributes to retirement plans for its operations in Canada, Puerto Rico, and
Asia. Contributions under these plans were $0.5 million, $0.6 million, and $0.6 million in Fiscal 2024, Fiscal 2023, and Fiscal
2022, respectively.
17. SEGMENT INFORMATION
The Company’s reportable segments are based on the financial information the chief operating decision maker
(“CODM”) uses to allocate resources and assess performance of its business. The Company’s President and Interim Chief
Executive Officer is the CODM. The Company’s CODM evaluates the performance of each segment and measures its segment
profitability based on operating income (loss), defined as income (loss) before interest and taxes. Operating income (loss) is
used as a key metric during the annual budget process, and on a quarterly basis to monitor actual performance against the
annual budget and forecasts.
The Company reports segment data based on geography: The Children’s Place U.S. and The Children’s Place
International. Each segment includes an e-commerce business located at www.childrensplace.com and www.gymboree.com.
Included in The Children’s Place U.S. segment are the Company’s U.S. and Puerto Rico-based stores and revenue from the
Company’s U.S.-based wholesale business. Included in The Children’s Place International segment are the Company’s
Canadian-based stores and revenue from international franchisees. Net sales and direct costs are recorded by each
segment. Certain inventory procurement functions, such as production and design, as well as corporate overhead, including
executive management, finance, real estate, human resources, legal, and information technology services, are managed by The
Children’s Place U.S. segment. Expenses related to these functions, including depreciation and amortization, are allocated to
The Children’s Place International segment based primarily on net sales. The assets related to these functions are not allocated.
The Company periodically reviews these allocations and adjusts them based upon changes in business circumstances.
Major Customers
Net sales to external customers are derived from merchandise sales, and the Company has one U.S. wholesale customer
that individually accounted for more than 10% of its net sales, amounting to 170693448 during Fiscal 2024, and accounts for a
majority of the Company’s accounts receivable, amounting to 31648000 as of February 1, 2025.
Store Count by Segment
As of February 1, 2025, The Children’s Place U.S. had 437 stores and The Children’s Place International had 58 stores.
As of February 3, 2024, The Children’s Place U.S. had 460 stores and The Children’s Place International had 63 stores.
Table of Contents
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
86
The tables below present certain segment information for our reportable segments for the periods indicated:
Fiscal Year Ended February 1, 2025
The Children’s Place
U.S.
The Children’s Place
International (1)
Total
(in thousands)
Net sales
$
1,266,500
$
119,769
$
1,386,269
Cost of sales (2)
836,351
90,457
926,808
Selling, general, and administrative expenses (3)
405,895
39,267
445,162
Other segment expenses (4)
28,000
—
28,000
Segment operating loss
$
(3,746)
$
(9,955)
$
(13,701)
Segment operating loss as a percentage of net sales
(0.3) %
(8.3) %
(1.0) %
Fiscal Year Ended February 3, 2024
The Children’s Place
U.S.
The Children’s Place
International (1)
Total
(in thousands)
Net sales
$
1,457,352
$
145,156
$
1,602,508
Cost of sales (2)
1,058,423
98,811
1,157,234
Selling, general, and administrative expenses (3)
450,868
43,661
494,529
Other segment expenses (4)
34,543
—
34,543
Segment operating income (loss)
$
(86,482)
$
2,684
$
(83,798)
Segment operating income (loss) as a percentage of net sales
(5.9) %
1.8 %
(5.2) %
Fiscal Year Ended January 28, 2023
The Children’s Place
U.S.
The Children’s Place
International (1)
Total
(in thousands)
Net sales
$
1,533,934
$
174,548
$
1,708,482
Cost of sales (2)
1,079,241
115,079
1,194,320
Selling, general, and administrative expenses (3)
460,218
52,218
512,436
Other segment expenses (4)
3,256
—
3,256
Segment operating income (loss)
$
(8,781)
$
7,251
$
(1,530)
Segment operating income (loss) as a percentage of net sales
(0.6) %
4.2 %
(0.1) %
___________________________________________
(1)
The Company’s foreign subsidiaries, primarily in Canada, have operating results based in foreign currencies and are thus subject to the fluctuations of the
corresponding translation rates into U.S dollars.
(2)
Refer to Note 1. Basis of Presentation for additional information on the components of Cost of sales.
(3)
Selling, general, and administrative expenses include store expenses, marketing, corporate payroll, including long-term incentive compensation,
information technology, other administrative expenses, and depreciation and amortization.
(4)
Other segment expenses include asset impairment charges.
Table of Contents
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
87
The table below presents a reconciliation of reportable segment operating loss to Loss before provision (benefit) for
income taxes:
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
(in thousands)
Total segment operating loss
$
(13,701) $
(83,798) $
(1,530)
Related party interest expense
(6,493)
—
—
Other interest expense
(29,301)
(30,087)
(13,324)
Interest income
47
87
92
Loss before provision (benefit) for income taxes
$
(49,448)
$ (113,798)
$
(14,762)
Additional Segment Data
Fiscal Years Ended
February 1,
2025
February 3,
2024
January 28,
2023
(in thousands)
Depreciation and amortization:
The Children’s Place U.S.
$
35,644 $
43,428 $
47,612
The Children’s Place International
3,968
3,758
3,852
Total depreciation and amortization
$
39,612
$
47,186
$
51,464
Capital expenditures:
The Children’s Place U.S.
$
15,245 $
27,462 $
44,970
The Children’s Place International
585
97
607
Total capital expenditures
$
15,830
$
27,559
$
45,577
February 1,
2025
February 3,
2024
(in thousands)
Total assets:
The Children’s Place U.S.
$
711,564 $
758,003
The Children’s Place International
35,988
42,305
Total assets
$
747,552 $
800,308
Geographic Information
The Company’s long-lived assets were located in the following countries:
February 1,
2025
February 3,
2024
(in thousands)
Long-lived assets (1):
United States
$
267,751 $
334,425
Canada
9,801
13,382
Asia
1,996
375
Total long-lived assets
$
279,548 $
348,182
___________________________________________
(1)
The Company long-lived assets are comprised of net Property and equipment, ROU assets, Tradenames, and Other assets.
Table of Contents
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
88
18. SUBSEQUENT EVENTS
On February 6, 2025, the Company completed a rights offering pursuant to which the Company distributed to the holders
of record of the Company’s Common stock as of the close of business on December 13, 2024, the record date for the Rights
Offering, non-transferable subscription rights to purchase, in the aggregate, up to 9.2 million shares of Common stock. Each
subscription right entitled its holder to purchase 0.7220 shares of Common stock at a subscription price of $9.75 per whole
share of Common stock. Additionally, rights holders who fully exercised their basic subscription rights were entitled to
subscribe for additional shares of Common stock that remained unsubscribed as a result of any unexercised basic subscription
rights. The subscription price was payable by rights holders (i) in cash, (ii) by delivery in lieu of cash of an equivalent amount
of any indebtedness for borrowed money (principal and/or accrued and unpaid interest) owed by the Company to such rights
holder, or (iii) by delivery of a combination of cash and such indebtedness. Upon the completion of the Rights Offering, the
Company issued 9.2 million shares of Common stock for a total purchase price of $90 million.
Mithaq purchased 6.7 million shares of Common stock pursuant to the Rights Offering and as of February 6, 2025, it
owns and controls the voting power of 62.2% of our outstanding shares of Common stock. It paid (i) $5.1 million of the
subscription price for such shares in cash and (ii) the remaining $60.2 million of the subscription price for such shares by
delivery of indebtedness for borrowed money owed by the Company to Mithaq pursuant to the Initial Mithaq Term Loan.
Accordingly, the aggregate outstanding indebtedness owed by the Company to Mithaq pursuant to the Mithaq Term Loans has
been reduced to $108.4 million as of February 6, 2025, the date of issuance of shares. The Company received approximately
$29.8 million in gross cash proceeds from the Rights Offering on February 6, 2025. Substantially all of the gross cash proceeds
from the Rights Offering were used towards prepaying the Company’s ABL Credit Facility.
The following table reflects a pro forma condensed consolidated balance sheet of the Company to reflect the impact of
the Rights Offering had the shares of Common stock been issued as of February 1, 2025:
February 1, 2025
Pre-Rights
Offering
Adjustments
Post Rights
Offering
(in thousands)
Cash and cash equivalents
$
5,347 $
29,813 $
35,160
Total assets
747,552
29,813
777,365
Related party long-term debt
165,974
(59,148)
106,826
Total liabilities
806,963
(59,148)
747,815
Stockholder's equity (deficit)
(59,411)
88,961
29,550
Total liabilities and stockholder’s equity (deficit)
$
747,552 $
29,813 $
777,365
Number of shares of Common stock outstanding
12,782
9,231
22,013
Table of Contents
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
89
(a)(3) Exhibits.
3.1
Amended and Restated Certificate of Incorporation of the Company dated May 31, 2016 filed as Exhibit
3.1 to the registrant’s Current Report on Form 8-K filed on June 7, 2016 is incorporated by reference
herein.
3.2
Eighth Amended and Restated Bylaws of The Children’s Place, Inc. filed as Exhibit 3.2 to the registrant’s
Current Report on Form 8-K filed on December 12, 2024, is incorporated by reference herein.
4.1(1)
Form of Certificate for Common Stock of the Company filed as an exhibit to the registrant’s Registration
Statement No. 333-31535 on Form S-1, is incorporated by reference herein.
4.2(1)
Amended Form of Certificate for Common Stock of the Company filed as Exhibit 4.2 to the registrant’s
Annual Report on Form 10-K for the period ended January 28, 2017, is incorporated by reference herein.
4.3
Description of capital stock of the Company filed as Exhibit 4.3 to the registrant’s Annual Report on
Form 10-K for the period ended February 1, 2020, is incorporated by reference herein.
10.1
Lease Agreement as of August 12, 2003 between Orlando Corporation and The Children’s Place
(Canada), LP, together with Indemnity Agreement as of August 12, 2003 between the Company and
Orlando Corporation, together with Surrender of Lease as of August 12, 2003 between the Company and
Orlando Corporation and Orion Properties Ltd. (Canadian Distribution Center) filed as Exhibit 10.2 to the
registrant’s Quarterly Report on Form 10-Q for the period ended November 1, 2003, is incorporated by
reference herein.
10.2
Form of Indemnity Agreement between the Company and certain members of management and the Board
of Directors filed as Exhibit 10.7 to registrant’s Quarterly Report on Form 10-Q for the period ended
August 2, 2008, is incorporated by reference herein.
10.3
Lease Agreement between The Children’s Place Services Company, LLC and 500 Plaza Drive Corp.
effective as of March 12, 2009 (500 Plaza Drive), Secaucus, New Jersey filed as Exhibit 10.67 to the
registrant’s Annual Report on Form 10-K for the period ended January 31, 2009, is incorporated by
reference herein.
10.4
Guaranty between the Company and 500 Plaza Drive Corp. effective as of March 12, 2009 filed as
Exhibit 10.68 to the registrant’s Annual Report on Form 10-K for the period ended January 31, 2009, is
incorporated by reference herein.
10.5
The First Lease Modification Agreement, dated as of August 27, 2009, between The Children’s Place
Services Company, LLC and 500 Plaza Drive Corp. filed as Exhibit 10.3 to the registrant’s Quarterly
Report on Form 10-Q for the period ended August 1, 2009, is incorporated by reference herein.
10.6
Sixth Modification Agreement, dated as of January 23, 2024, by and between Hancock S-REIT SECA
LLC and The Children’s Place Services Company, LLC filed as Exhibit 10.6 to the registrant’s Annual
Report on Form 10-K for the period ended February 3, 2024, is incorporated by reference herein.
10.7
The Company Nonqualified Deferred Compensation Plan effective January 1, 2010 filed as Exhibit 10.82
to the registrant’s Annual Report on Form 10-K for the period ended January 30, 2010, is incorporated by
reference herein.
10.8
Form of Amended and Restated Change in Control Agreement filed as Exhibit 10.41 to the registrant’s
Annual Report on Form 10-K for the period ended January 29, 2011, is incorporated by reference herein.
10.9
Agreement dated May 22, 2015, by and among The Children’s Place, Inc., Macellum SPV II, LP,
Barington Companies Equity Partners, L.P., Jonathan Duskin, James A. Mitarotonda, certain of their
affiliates listed on Schedule A to the Agreement, and Robert L. Mettler filed as Exhibit 10.1 to the
registrant’s Current Report on Form 8-K filed on May 29, 2015, is incorporated by reference herein.
10.10(*)
The Company Profit Sharing/401(k) Plan Adoption Agreement No.#001 for use with Fidelity Basic Plan
Document No. 17 entered into by the Company and Fidelity Management Trust Company on September
11, 2015 as filed as Exhibit 10.28 to the registrant’s Annual Report on Form 10-K for the period ended
January 30, 2016, is incorporated by reference herein.
10.11
The Children’s Place, Inc. Fourth Amended and Restated 2011 Equity Incentive Plan filed as Annex B to
the registrant’s Definitive Proxy Statement on Schedule 14A filed on April 2, 2021, is incorporated by
reference herein.
10.12
Amended and Restated Credit Agreement, dated as of May 9, 2019, by and among the Company and The
Children’s Place Services Company, LLC, as borrowers, The Children’s Place (International), LLC, The
Children’s Place Canada Holdings, Inc., the childrensplace.com, inc., TCP IH II, LLC, TCP International
IP Holdings, LLC and TCP International Product Holdings, LLC, as guarantors, Wells Fargo Bank,
National Association (successor by merger to Wells Fargo Retail Finance, LLC), as Administrative Agent
and Collateral Agent, L/C Issuer, Swing Line Lender and as a lender and Bank of America, N.A., HSBC
Bank USA, N.A. and JPMorgan Chase Bank, N.A., as lenders, filed as Exhibit 10.5 to the registrant’s
Quarterly Report on Form 10-Q for the period ended May 4, 2019, is incorporated by reference herein.
Exhibit
Description
Table of Contents
90
10.13
First Amendment to Amended and Restated Credit Agreement, dated April 24, 2020, by and among the
Company and The Children's Place Services Company, LLC, as borrowers, The Children's Place
(International), LLC, The Children's Place Canada Holdings, Inc., the childrensplace.com, inc., TCP IH
II, LLC, TCP International IP Holdings, LLC and TCP International Product Holdings, LLC, as
guarantors, Wells Fargo Bank, National Association (successor by merger to Wells Fargo Retail Finance,
LLC), as Administrative Agent and Collateral Agent, L/C Issuer, Swing Line Lender and as a lender and
HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A., as lenders, filed as Exhibit 10.1 to the
registrant’s Quarterly Report on Form 10-Q for the period ended May 2, 2020, is incorporated by
reference herein.
10.14
Joinder and Second Amendment to Amended and Restated Credit Agreement and Other Loan
Documents, dated as of October 5, 2020, among the Company, the Borrowers identified on Schedule I
thereto, TCP Brands, LLC, TCP Investment Canada I Corp., collectively, the New Guarantors, the
Guarantors identified on Schedule II thereto, the Credit Agreement Lenders and Wells Fargo Bank,
National Association (successor by merger to Wells Fargo Retail Finance, LLC), as Administrative Agent
and Collateral Agent, L/C Issuer, Swing Line Lender and as a lender, filed as Exhibit 4.2 to the
registrant’s Current Report on Form 8-K filed on October 6, 2020, is incorporated by reference herein.
10.15
Third Amendment to Amended and Restated Credit Agreement, dated as of April 23, 2021, by and
among the Company, the Borrowers identified on Schedule I thereto, the Guarantors identified on
Schedule II thereto, the Credit Agreement Lenders and Wells Fargo Bank, National Association
(successor by merger to Wells Fargo Retail Finance, LLC), as Administrative Agent, Collateral Agent, L/
C Issuer, and Swing Line Lender filed as Exhibit 10.23 to the registrant’s Annual Report on Form 10-K
for the period ended January 29, 2022, is incorporated by reference herein.
10.16
Joinder and Fourth Amendment to Amended and Restated Credit Agreement and Other Loan Documents,
dated as of November 15, 2021, among the Company, the Borrowers identified on Schedule I thereto,
TCP Brands, LLC, The Children’s Place International, LLC, collectively the New Borrowers, the
Guarantors identified on Schedule II thereto, the Credit Agreement Lenders and Wells Fargo Bank,
National Association, as Administrative Agent, Collateral Agent, L/C Issuer, Swing Line Lender and
Term Agent, filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q for the period ended
October 30, 2021, is incorporated by reference herein.
10.17
Joinder and Fifth Amendment to the Amended and Restated Credit Agreement and Other Loan
Documents, dated as of June 5, 2023, among the Company, the Borrowers identified on Schedule I
thereto, the Guarantors identified on Schedule II thereto, the Credit Agreement Lenders and Wells Fargo
Bank, National Association, as Administrative Agent, Collateral Agent, L/C Issuer, Swing Line Lender
and Term Agent filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly
period ended April 29, 2023, is incorporated by reference herein.
10.18
Waiver and Amendment Agreement to the Credit Agreement, dated as of October 24, 2023, among the
Company, the Borrowers identified on Schedule I thereto, the Guarantors identified on Schedule II
thereto, the Credit Agreement Lenders and Wells Fargo Bank, National Association, as Administrative
Agent, Collateral Agent, L/C Issuer, Swing Line Lender and Term Agent, filed as Exhibit 10.4 to the
registrant’s Quarterly Report on Form 10-Q for the period ended October 28, 2023, is incorporated by
reference herein.
10.19
Seventh Amendment to Amended and Restated Credit Agreement, dated April 16, 2024, among the
Company, certain subsidiaries of the Company, the Credit Agreement Lenders and Wells Fargo Bank,
National Association, as Administrative Agent, Collateral Agent, L/C Issuer and Swing Line Lender filed
as Exhibit 10.24 to the registrant’s Annual Report on Form 10-K for the period ended February 3, 2024,
is incorporated by reference herein.
10.20
Unsecured Promissory Note, dated February 29, 2024, among the Company, certain subsidiaries of the
Company, and Mithaq Capital SPC filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K
filed on March 4, 2024, is incorporated by reference herein.
10.21
Unsecured Promissory Note, dated April 16, 2024, among the Company, certain subsidiaries of the
Company, and Mithaq Capital SPC filed as Exhibit 10.26 to the registrant’s Annual Report on Form 10-K
for the period ended February 3, 2024, is incorporated by reference herein.
10.22
Commitment Letter for $40 Million Senior Unsecured Credit Facility (Third), dated as of May 2, 2024,
among the Company, certain subsidiaries of the Company, and Mithaq Capital SPC filed as Exhibit 10.27
to the registrant’s Annual Report on Form 10-K for the period ended February 3, 2024, is incorporated by
reference herein.
10.23
Asset Purchase Agreement, dated March 1, 2019, by and among TCP Brands, LLC, as buyer, and
Gymboree Group, Inc. and its subsidiaries, as sellers, filed as Exhibit 10.6 to the registrant’s Quarterly
Report on Form 10-Q for the period ended May 4, 2019, is incorporated by reference herein.
10.24
The Fifth Lease Modification Agreement, dated as of January 29, 2021, by and between The Children’s
Place Services Company, LLC and Hancock S-REIT SECA LLC filed as Exhibit 10.24 to the registrant’s
Annual Report on Form 10-K for the period ended January 30, 2021, is incorporated by reference herein.
Exhibit
Description
Table of Contents
91
10.25(*)
Letter Agreement dated July 21, 2021 between The Children’s Place Services Company, LLC and Jared
Shure filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the period ended July
31, 2021, is incorporated by reference herein.
10.26(*)
Letter Agreement dated May 29, 2024 between The Children’s Place, Inc. and Muhammad Umair filed as
Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the period ended May 4, 2024, is
incorporated by reference herein.
10.27(*)
Letter Agreement dated August 9, 2024 between The Children’s Place, Inc. and Claudia Lima-Guinehut
filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q for the period ended August 3,
2024, is incorporated by reference herein.
10.28(+)(*)
Letter Agreement dated February 25, 2025 between The Children’s Place, Inc. and John Szczepanksi.
10.29(+)(*)
Form of Deferred Cash Award Agreement under the 2011 Equity Incentive Plan (Group Vice President &
below).
10.30(+)(*)
Form of Restricted Stock Unit Award Agreement under the 2011 Equity Incentive Plan (Senior Vice
President & above).
19.1(+)
The Children’s Place Inc. Insider Trading Policy
21.1(+)
Subsidiaries of the Company.
23.1(+)
Consent of Independent Registered Public Accounting Firm BDO USA, P.C.
23.2(+)
Consent of Independent Registered Public Accounting Firm Ernst & Young, LLP.
31.1(+)
Certificate of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2(+)
Certificate of Principal Financial Officer and Principal Accounting Officer pursuant to Section 302 of the
Sarbanes Oxley Act of 2002.
32(+)
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
101.SCH*
XBRL Taxonomy Extension Schema.
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase.
101.DEF*
XBRL Taxonomy Extension Definition Linkbase.
101.LAB*
XBRL Taxonomy Extension Label Linkbase.
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase.
Exhibit
Description
________________________________________
(1) Exhibit numbers are identical to the exhibit numbers incorporated by reference to such registration statement.
(*) Compensation Arrangement.
(+) Filed herewith.
* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration
statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange
Act of 1934 and otherwise are not subject to liability.
(b) Exhibits. The exhibits required by Item 601 of Regulation S-K are filed herewith or incorporated by reference.
(c) Financial Statement Schedules and Other Financial Statements.
All other financial statement schedules are omitted from this Annual Report on Form 10-K, as they are not required or
applicable or the required information is included in the financial statements or notes thereto.
ITEM 16.
FORM 10-K SUMMARY.
Omitted at registrant’s option.
Table of Contents
92
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE CHILDREN’S PLACE, INC.
By: /S/ Muhammad Umair
Muhammad Umair
President and Interim Chief Executive Officer
(Principal Executive Officer)
April 17, 2025
Table of Contents
93
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ Turki Saleh A. AlRajhi
Chairman of the Board
April 17, 2025
Turki Saleh A. AlRajhi
/S/ Muhammad Umair
Director, President and Interim Chief Executive Officer
(Principal Executive Officer)
April 17, 2025
Muhammad Umair
/S/ John Szczepanski
Chief Financial Officer
(Principal Financial Officer)
April 17, 2025
John Szczepanski
/S/ Laura Lentini
Chief Accounting Officer
(Principal Accounting Officer)
April 17, 2025
Laura Lentini
/S/ Douglas Edwards
Director
April 17, 2025
Douglas Edwards
/S/ Hussan Arshad
Director
April 17, 2025
Hussan Arshad
/S/ Muhammad Asif Seemab
Director
April 17, 2025
Muhammad Asif Seemab
/S/ Rhys Summerton
Director
April 17, 2025
Rhys Summerton
Table of Contents
94
* This document, together with the Annual Report on Form 10-K for the fiscal year ended February 1, 2025,
constitutes our 2024 Annual Report to Stockholders.
† As of April 17, 2025
Supplement*
The Children’s Place, Inc.
Board of Directors and Executive Officers †
Board of Directors
Executive Officers
Turki Saleh A. AlRajhi
(Chairman of the Board)
Muhammad Asif Seemab
(Vice Chairman of the Board)
Hussan Arshad
Douglas Edwards
Rhys Summerton
Muhammad Umair
Muhammad Umair
President and Interim Chief Executive Officer
Claudia Lima-Guinehut
Brand President
John Szczepanski
Chief Financial Officer
Jared Shure
Chief Administrative Officer, General Counsel and
Corporate Secretary