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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM 8-K
CURRENT
REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported):
September 11, 2024
| THE CHILDREN’S PLACE, INC. |
| (Exact Name of Registrant as Specified in Charter) |
| |
| Delaware |
| (State or Other Jurisdiction of Incorporation) |
| 0-23071 |
31-1241495 |
| (Commission File Number) |
(IRS Employer 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) |
| |
| Not Applicable |
| (Former Name or Former Address, if Changed Since Last Report) |
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions
(see General Instruction A.2. below):
| |
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2
of the Securities Exchange Act of 1934 (§240.12-b-2 of this chapter).
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 pursuant to Section 13(a) of the Exchange Act. ¨
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 |
| Item 2.02 | Results of Operations and Financial Condition. |
On September 11, 2024, the
Company issued a press release containing the Company’s financial results for the second quarter of the fiscal year ending February
1, 2025 (“Fiscal 2024”). A copy of the press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The preliminary unaudited
information in this Current Report is being furnished pursuant to Item 2.02 of Form 8-K, insofar as it discloses historical information
regarding the Company’s results of operations and financial condition as of and for the second quarter of Fiscal 2024. In accordance
with General Instruction B.2 of Form 8-K, such information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed
“filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities
Act of 1933, as amended, or the Exchange Act except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statement and Exhibits. |
(d) Exhibits
Forward-Looking Statements
This Current Report on
Form 8-K, including Exhibit 99.1, 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” 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 the “Risk Factors” section of its
annual report on Form 10-K for the fiscal year ended February 3, 2024. 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 litigations 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 shareholder, and the uncertainty of weather
patterns. 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.
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: September 11, 2024
| THE CHILDREN’S PLACE, INC. |
| |
|
|
| |
By: |
/s/ Jared Shure |
| |
Name: |
Jared Shure |
| |
Title: |
Chief Administrative Officer, General Counsel & Corporate Secretary |
Exhibit 99.1
THE CHILDREN’S PLACE REPORTS SECOND QUARTER
2024 RESULTS
Significant Improvement in Gross
Profit Margin to 35%
Lowest Level of SG&A spending
in more than 15 Years during Q2
Incurred a Non-Cash Impairment Charge
of $28 Million for Gymboree Tradename
Adjusted Operating Income of $14.2
Million after Two Years of Losses during Q2
Positive Adjusted EBITDA, Improving
$37.4 Million versus the Prior Year Loss
Secaucus, New Jersey – September 11, 2024 – The Children’s
Place, Inc. (Nasdaq: PLCE), an omni-channel children’s specialty portfolio of brands, today announced financial results for
the second quarter ended August 3, 2024.
Muhammad Umair, President and Interim Chief Executive Officer said,
“During the second quarter we proactively made certain strategic and operational changes to improve the profitability of the business
and provide a foundation for future growth and we were pleased with the results. While we anticipated that these efforts would provide
pressure to topline sales, we drove significant improvements in gross profit margin versus the prior year’s second quarter and sequential
improvement in margin for two quarters, which is particularly important moving from the first quarter to the second quarter. In addition,
we were also able to significantly decrease Adjusted SG&A expenses as we reduced payroll costs and eliminated unprofitable marketing
spend, all of which has combined to show more than a $39 million improvement in Adjusted operating income despite the lower top line sales.
While these first steps to improve operating results have been promising, we still believe that we have significant work ahead of us in
future quarters as we rationalize profitability.”
Second Quarter 2024 Results
Net sales decreased $25.9 million,
or 7.5%, to $319.7 million in the three months ended August 3, 2024, compared to $345.6 million in the three months ended July 29,
2023. The decrease in net sales was primarily driven by an anticipated decrease in ecommerce revenue, as the Company proactively rationalized
its unprofitable promotional strategies, inflated marketing spend and “free shipping” offers to significantly improve profitability,
which was successful during the second quarter. These efforts not only improved the profitability of the Company’s ecommerce business,
despite the lower revenue, but also benefited the brick-and-mortar channel, as the stores business experienced positive comparable store
sales for the first time in ten quarters. The wholesale business also rebounded with double-digit growth after a decline in the first
quarter.
Comparable retail sales decreased 7.2%
for the quarter, largely driven by the planned decrease in ecommerce as this business decreased by a double-digit percentage as the Company
proactively sacrificed unprofitable sales to improve profitability. Stores experienced a positive comparable store sales result for the
first time since the post COVID-19 period of 2021, driven by stronger units per transaction and conversion metrics, and improving traffic
trends.
Gross profit increased $24.0
million to $111.8 million in the three months ended August 3, 2024, compared to $87.8 million in the three months ended July 29,
2023. The gross margin rate increased by 960 basis points to 35.0% during the three months ended August 3, 2024, compared to 25.4%
in the prior year period. The increase was caused by a combination of factors, including reductions in product input costs,
including cotton and supply chain costs, which negatively impacted margins in the prior year. These improvements were combined with
the success of the Company’s rationalization of profit-draining promotional strategies and shipping offers, which resulted in
a significant improvement in the leverage of ecommerce freight costs due to the Company’s new shipping threshold for free
shipping.
Selling, general, and administrative
expenses were well controlled at $96.1 million in the three months ended August 3, 2024, compared to $112.0 million in the three months
ended July 29, 2023. Adjusted selling, general & administrative expenses were $88.3 million in the three months ended August 3, 2024,
compared to $101.7 million in the comparable period last year, and leveraged 180 basis points to 27.6% of net sales, primarily as a result
of significant reductions in store payroll and home office payroll, and the elimination of inflated and unprofitable marketing costs.
This represents the lowest level of Adjusted selling, general, and administrative expenses in over 15 years for the second quarter.
Operating loss was $(21.8) million
in the three months ended August 3, 2024, compared to $(36.9) million in the three months ended July 29, 2023. Operating loss was impacted
by incremental expenses of $36.0 million, which included an impairment charge of $28.0 million on the Gymboree tradename,
primarily due to reductions in Gymboree sales forecasts and a reduction in the royalty rate used to value the tradename, and restructuring
costs of $6.1 million due to recent changes in the senior leadership team. These charges have been classified as non-GAAP adjustments,
leading to a shift back to profitability with an adjusted operating income of $14.2 million in the three months ended August 3, 2024,
or an improvement of $39.2 million compared to an adjusted operating loss of $(25.0) million in the comparable period last year, and leveraged
1,170 basis points to 4.5% of net sales.
Net interest expense was $9.2 million in the three months ended August
3, 2024, compared to $7.6 million in the three months ended July 29, 2023. The increase in interest expense was primarily driven by higher
average interest rates associated with the Company’s revolving credit facility due to the impact of refinancings and continued market-based
rate increases, partially offset by continued benefits associated with certain non-interest bearing loans from the Company’s majority
shareholder, Mithaq Capital SPC (“Mithaq”).
As previously announced, in the three months ended February 3, 2024,
the Company established a valuation allowance against its net deferred tax assets and, as such, continues to adjust the allowance based
upon the ongoing operating results. The provision for income taxes, which is reflected net of these adjustments, was $1.1 million in the
three months ended August 3, 2024, compared to a benefit for income taxes of $(9.2) million during the three months ended July 29, 2023.
The change in the provision (benefit) for income taxes was primarily driven by the establishment of the valuation allowance against the
Company’s net deferred tax assets.
Net loss, which included certain non-cash impairment charges and non-operating
restructuring charges, was $(32.1) million, or $(2.51) per diluted share, in the three months ended August 3, 2024, compared to $(35.4)
million, or $(2.82) per diluted share, in the three months ended July 29, 2023. Adjusted net income shifted back to profitability after
two years of losses during the second quarter, improving by $30.4 million versus the prior year to $3.9 million, or $0.30 per diluted
share, compared to an adjusted net loss of $(26.5) million, or $(2.12) per diluted share, in the comparable period last year.
Fiscal Year-To-Date 2024 Results
Net sales decreased $79.7 million, or 11.9%, to $587.5 million in
the six months ended August 3, 2024, compared to $667.2 million in the six months ended July 29, 2023. The decrease in net sales was
primarily due to reductions in retail sales due to lower store count, and anticipated declines in ecommerce demand due to the
rationalization of promotions, reductions in inflated and unprofitable marketing spend and the strategic decision to change
“free shipping” offers, as the Company proactively sacrificed unprofitable sales in an effort to improve profitability.
Comparable retail sales decreased 9.4% for the six months ended August 3, 2024.
Gross profit increased $20.3 million to $204.5 million in the six months
ended August 3, 2024, compared to $184.2 million in the six months ended July 29, 2023. The gross margin rate increased by 720 basis points
to 34.8% during the six months ended August 3, 2024 compared to 27.6% in the prior year period. The increase 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
were combined with the success of the Company’s rationalization of profit-draining promotional strategies and shipping offers, which
resulted in a significant improvement in the leverage of ecommerce freight costs due to the Company’s new shipping threshold for
free shipping.
Selling, general, and administrative
expenses were $205.2 million in the six months ended August 3, 2024, compared to $224.9 million in the six months ended July 29, 2023.
Adjusted selling, general & administrative expenses were $177.0 million in the six months ended August 3, 2024, compared to $210.8
million in the comparable period last year, and leveraged 150 basis points to 30.1% of net sales, primarily as a result of significant
reductions in store payroll and home office payroll, and the elimination of inflated and unprofitable marketing costs. This represents
the lowest level of Adjusted selling, general and administrative expenses in over 15 years for the first two quarters of a fiscal year.
Operating loss was $(49.8) million
in the six months ended August 3, 2024, compared to $(67.0) million in the six months ended July 29, 2023. Operating loss was impacted
by incremental expenses of $58.9 million, which included an impairment charge of $28.0 million on the Gymboree tradename,
primarily due to reductions in Gymboree sales forecasts and a reduction in the royalty rate used to value the tradename, restructuring
costs of $6.4 million primarily due to recent changes in the senior leadership team, and several charges due to the Company’s recent
change of control, due to the investment in the Company by Mithaq, and several new financing initiatives, which include $10.8 million of
non-cash equity compensation charges and $3.8 million in other fees associated with the change of control, and $6.7 million of
financing-related charges. These charges have been classified as non-GAAP adjustments leading to a shift back to profitability with an
adjusted operating income of $9.2 million for year-to-date 2024, or an improvement of $58.7 million compared to an adjusted operating
loss of $(49.5) million in the comparable period last year, and leveraged 900 basis points to 1.6% of net sales.
Net interest expense was $17.0 million in the six months ended August
3, 2024, compared to $13.5 million in the six months ended July 29, 2023. The increase in interest expense was primarily driven by higher
average interest rates associated with the Company’s revolving credit facility due to the impact of refinancings and continued market-based
rate increases, partially offset by continued benefits associated with certain non-interest bearing loans from Mithaq.
The provision for income taxes was $3.2 million in the six months ended
August 3, 2024, compared to a benefit for income taxes of $(16.4) million during the six months ended July 29, 2023. The change in the
provision (benefit) for income taxes was primarily driven by the establishment of a valuation allowance against the Company’s net
deferred tax assets in the Company’s fiscal year for 2023.
Net loss, which included certain non-cash impairment charges and non-operating
restructuring charges, was $(69.9) million, or $(5.50) per diluted share, in the six months ended August 3, 2024, compared to $(64.2)
million, or $(5.16) per diluted share, in the six months ended July 29, 2023. Adjusted net loss, which was driven by losses in the first
quarter and partially offset by profits in the second quarter, was $(11.0) million, or $(0.87) per diluted share, compared to $(51.2)
million, or $(4.12) per diluted share, in the comparable period last year.
Store Update
The Company closed 3 stores in the three months ended August
3, 2024 and ended the quarter with 515 stores and square footage of 2.5 million.
Balance Sheet and Cash Flow
As of August
3, 2024, the Company had $9.6 million of cash and cash equivalents and $316.7 million outstanding on its revolving credit facility.
Additionally, the Company used $194.7 million in operating cash flows in the six months ended August 3, 2024.
Inventories were $520.6 million as of August
3, 2024, compared to $537.0 million as of July 29, 2023.
Non-GAAP Reconciliation
The Company’s results are reported in this press release
on a GAAP and as adjusted, non-GAAP basis. Adjusted net income (loss), adjusted net income (loss) per diluted share, adjusted gross profit,
adjusted selling, general, and administrative expenses, adjusted operating income (loss) and adjusted EBITDA are non-GAAP measures, and
are not intended to replace GAAP financial information, and may be different from non-GAAP measures reported by other companies. The Company
believes the income and expense items excluded as non-GAAP adjustments are not reflective of the performance of its core business, and
that providing this supplemental disclosure to investors will facilitate comparisons of the past and present performance of its core business.
Please refer to the “Reconciliation of Non-GAAP Financial
Information to GAAP” later in this press release, which sets forth the non-GAAP operating adjustments
for the 13-week periods and 26-week periods ended August 3, 2024, and July 29, 2023.
About The Children’s Place
The Children’s Place is an omni-channel children’s specialty
portfolio of brands. Its global retail and wholesale network includes two digital storefronts, more than 500 stores in North America,
wholesale marketplaces and distribution in 15 countries through five international franchise partners. The Children’s Place designs,
contracts to manufacture, and sells fashionable, high-quality apparel, accessories and footwear predominantly at value prices, primarily
under its proprietary brands: “The Children’s Place”, “Gymboree”, “Sugar & Jade”, and “PJ
Place”. For more information, visit: www.childrensplace.com and www.gymboree.com, as well as the Company’s
social media channels on Instagram, Facebook, X, formerly known as Twitter, YouTube and Pinterest.
“Forward-Looking Statements”
This press release 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” 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 the “Risk Factors”
section of its annual report on Form 10-K for the fiscal year ended February 3, 2024. 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 litigations 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
shareholder, and the uncertainty of weather patterns. 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.
Contact: Investor Relations (201) 558-2400
ext. 14500
THE CHILDREN’S PLACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| | |
Second Quarter Ended | | |
Year-to-Date Ended | |
| | |
August 3,
2024 | | |
July 29,
2023 | | |
August 3,
2024 | | |
July 29,
2023 | |
| Net sales | |
$ | 319,655 | | |
$ | 345,599 | | |
$ | 587,533 | | |
$ | 667,239 | |
| Cost of sales | |
| 207,861 | | |
| 257,840 | | |
| 382,998 | | |
| 483,019 | |
| Gross profit | |
| 111,794 | | |
| 87,759 | | |
| 204,535 | | |
| 184,220 | |
| Selling, general and administrative expenses | |
| 96,065 | | |
| 111,965 | | |
| 205,159 | | |
| 224,895 | |
| Depreciation and amortization | |
| 9,505 | | |
| 11,953 | | |
| 21,140 | | |
| 23,801 | |
| Asset impairment charges | |
| 28,000 | | |
| 782 | | |
| 28,000 | | |
| 2,532 | |
| Operating loss | |
| (21,776 | ) | |
| (36,941 | ) | |
| (49,764 | ) | |
| (67,008 | ) |
| Interest expense, net | |
| (9,231 | ) | |
| (7,641 | ) | |
| (16,952 | ) | |
| (13,543 | ) |
| Loss before provision (benefit) for income taxes | |
| (31,007 | ) | |
| (44,582 | ) | |
| (66,716 | ) | |
| (80,551 | ) |
| Provision (benefit) for income taxes | |
| 1,107 | | |
| (9,227 | ) | |
| 3,193 | | |
| (16,363 | ) |
| Net loss | |
$ | (32,114 | ) | |
$ | (35,355 | ) | |
$ | (69,909 | ) | |
$ | (64,188 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Loss per common share | |
| | | |
| | | |
| | | |
| | |
| Basic | |
$ | (2.51 | ) | |
$ | (2.82 | ) | |
$ | (5.50 | ) | |
$ | (5.16 | ) |
| Diluted | |
$ | (2.51 | ) | |
$ | (2.82 | ) | |
$ | (5.50 | ) | |
$ | (5.16 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average common shares outstanding | |
| | | |
| | | |
| | | |
| | |
| Basic | |
| 12,772 | | |
| 12,522 | | |
| 12,707 | | |
| 12,448 | |
| Diluted | |
| 12,772 | | |
| 12,522 | | |
| 12,707 | | |
| 12,448 | |
THE CHILDREN’S PLACE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
TO GAAP
(In thousands, except per share amounts)
(Unaudited)
| | |
Second Quarter Ended | | |
Year-to-Date Ended | |
| | |
August 3,
2024 | | |
July 29,
2023 | | |
August 3,
2024 | | |
July 29,
2023 | |
| Net loss | |
$ | (32,114 | ) | |
$ | (35,355 | ) | |
$ | (69,909 | ) | |
$ | (64,188 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Non-GAAP adjustments: | |
| | | |
| | | |
| | | |
| | |
| Asset impairment charges | |
| 28,000 | | |
| 782 | | |
| 28,000 | | |
| 2,532 | |
| Restructuring costs | |
| 6,104 | | |
| 9,659 | | |
| 6,367 | | |
| 9,928 | |
| Credit agreement/lender-required consulting | |
| 1,102 | | |
| — | | |
| 1,852 | | |
| — | |
| Professional and consulting fees | |
| 422 | | |
| — | | |
| 422 | | |
| — | |
| Accelerated depreciation | |
| 256 | | |
| 907 | | |
| 1,813 | | |
| 907 | |
| Fleet optimization | |
| 123 | | |
| 81 | | |
| 708 | | |
| 1,168 | |
| Change of control | |
| — | | |
| — | | |
| 14,589 | | |
| — | |
| Broken financing and restructuring fees | |
| — | | |
| — | | |
| 6,661 | | |
| — | |
| Canada distribution center closure | |
| — | | |
| — | | |
| 781 | | |
| — | |
| Reversal of legal settlement accrual | |
| — | | |
| — | | |
| (2,279 | ) | |
| — | |
| Contract termination costs | |
| — | | |
| 546 | | |
| — | | |
| 2,962 | |
| Aggregate impact of non-GAAP adjustments | |
| 36,007 | | |
| 11,975 | | |
| 58,914 | | |
| 17,497 | |
| Income tax effect (1) | |
| — | | |
| (3,113 | ) | |
| — | | |
| (4,549 | ) |
| Net impact of non-GAAP adjustments | |
| 36,007 | | |
| 8,862 | | |
| 58,914 | | |
| 12,948 | |
| | |
| | | |
| | | |
| | | |
| | |
| Adjusted net income (loss) | |
$ | 3,893 | | |
$ | (26,493 | ) | |
$ | (10,995 | ) | |
$ | (51,240 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| GAAP net loss per common share | |
$ | (2.51 | ) | |
$ | (2.82 | ) | |
$ | (5.50 | ) | |
$ | (5.16 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Adjusted net income (loss) per common share | |
$ | 0.30 | | |
$ | (2.12 | ) | |
$ | (0.87 | ) | |
$ | (4.12 | ) |
(1) The tax effects of the non-GAAP items are calculated
based on the statutory rate of the jurisdiction in which the discrete item resides, adjusted for the impact of any valuation allowance.
THE CHILDREN’S PLACE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
TO GAAP
(In thousands, except per share amounts)
(Unaudited)
| | |
Second Quarter Ended | | |
Year-to-Date Ended | |
| | |
August 3,
2024 | | |
July 29,
2023 | | |
August 3,
2024 | | |
July 29,
2023 | |
| Operating loss | |
$ | (21,776 | ) | |
$ | (36,941 | ) | |
$ | (49,764 | ) | |
$ | (67,008 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Non-GAAP adjustments: | |
| | | |
| | | |
| | | |
| | |
| Asset impairment charges | |
| 28,000 | | |
| 782 | | |
| 28,000 | | |
| 2,532 | |
| Restructuring costs | |
| 6,104 | | |
| 9,659 | | |
| 6,367 | | |
| 9,928 | |
| Credit agreement/lender-required consulting | |
| 1,102 | | |
| — | | |
| 1,852 | | |
| — | |
| Professional and consulting fees | |
| 422 | | |
| — | | |
| 422 | | |
| — | |
| Accelerated depreciation | |
| 256 | | |
| 907 | | |
| 1,813 | | |
| 907 | |
| Fleet optimization | |
| 123 | | |
| 81 | | |
| 708 | | |
| 1,168 | |
| Change of control | |
| — | | |
| — | | |
| 14,589 | | |
| — | |
| Broken financing and restructuring fees | |
| — | | |
| — | | |
| 6,661 | | |
| — | |
| Canada distribution center closure | |
| — | | |
| — | | |
| 781 | | |
| — | |
| Reversal of legal settlement accrual | |
| — | | |
| — | | |
| (2,279 | ) | |
| — | |
| Contract termination costs | |
| — | | |
| 546 | | |
| — | | |
| 2,962 | |
| Aggregate impact of non-GAAP adjustments | |
| 36,007 | | |
| 11,975 | | |
| 58,914 | | |
| 17,497 | |
| | |
| | | |
| | | |
| | | |
| | |
| Adjusted operating income (loss) | |
$ | 14,231 | | |
$ | (24,966 | ) | |
$ | 9,150 | | |
$ | (49,511 | ) |
THE CHILDREN’S PLACE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
TO GAAP
(In thousands, except per share amounts)
(Unaudited)
| | |
Second Quarter Ended | | |
Year-to-Date Ended | |
| | |
August 3,
2024 | | |
July 29,
2023 | | |
August 3,
2024 | | |
July 29,
2023 | |
| Gross profit | |
$ | 111,794 | | |
$ | 87,759 | | |
$ | 204,535 | | |
$ | 184,220 | |
| | |
| | | |
| | | |
| | | |
| | |
| Non-GAAP adjustments: | |
| | | |
| | | |
| | | |
| | |
| Change of control | |
| — | | |
| — | | |
| 905 | | |
| — | |
| Aggregate impact of non-GAAP adjustments | |
| — | | |
| — | | |
| 905 | | |
| — | |
| | |
| | | |
| | | |
| | | |
| | |
| Adjusted gross profit | |
$ | 111,794 | | |
$ | 87,759 | | |
$ | 205,440 | | |
$ | 184,220 | |
| | |
Second Quarter Ended | | |
Year-to-Date Ended | |
| | |
August 3,
2024 | | |
July 29,
2023 | | |
August 3,
2024 | | |
July 29,
2023 | |
| Selling, general and administrative expenses | |
$ | 96,065 | | |
$ | 111,965 | | |
$ | 205,159 | | |
$ | 224,895 | |
| | |
| | | |
| | | |
| | | |
| | |
| Non-GAAP adjustments: | |
| | | |
| | | |
| | | |
| | |
| Restructuring costs | |
| (6,104 | ) | |
| (9,659 | ) | |
| (6,367 | ) | |
| (9,928 | ) |
| Credit agreement/lender-required consulting | |
| (1,102 | ) | |
| — | | |
| (1,852 | ) | |
| — | |
| Professional and consulting fees | |
| (422 | ) | |
| — | | |
| (422 | ) | |
| — | |
| Fleet optimization | |
| (123 | ) | |
| (81 | ) | |
| (708 | ) | |
| (1,168 | ) |
| Change of control | |
| — | | |
| — | | |
| (13,684 | ) | |
| — | |
| Broken financing deal | |
| — | | |
| — | | |
| (6,661 | ) | |
| — | |
| Canada distribution center closure | |
| — | | |
| — | | |
| (781 | ) | |
| — | |
| Reversal of legal settlement accrual | |
| — | | |
| — | | |
| 2,279 | | |
| — | |
| Contract termination costs | |
| — | | |
| (546 | ) | |
| | | |
| (2,962 | ) |
| Aggregate impact of non-GAAP adjustments | |
| (7,751 | ) | |
| (10,286 | ) | |
| (28,196 | ) | |
| (14,058 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Adjusted selling, general and administrative expenses | |
$ | 88,314 | | |
$ | 101,679 | | |
$ | 176,963 | | |
$ | 210,837 | |
THE CHILDREN’S PLACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| | |
August 3,
2024 | | |
February 3,
2024* | | |
July 29,
2023 | |
| Assets: | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 9,573 | | |
$ | 13,639 | | |
$ | 18,846 | |
| Accounts receivable | |
| 61,926 | | |
| 33,219 | | |
| 33,073 | |
| Inventories | |
| 520,593 | | |
| 362,099 | | |
| 536,980 | |
| Prepaid expenses and other current assets | |
| 35,251 | | |
| 43,169 | | |
| 65,108 | |
| Total current assets | |
| 627,343 | | |
| 452,126 | | |
| 654,007 | |
| | |
| | | |
| | | |
| | |
| Property and equipment, net | |
| 111,296 | | |
| 124,750 | | |
| 141,244 | |
| Right-of-use assets | |
| 163,539 | | |
| 175,351 | | |
| 112,325 | |
| Tradenames, net | |
| 13,000 | | |
| 41,123 | | |
| 70,491 | |
| Other assets, net | |
| 6,236 | | |
| 6,958 | | |
| 45,018 | |
| Total assets | |
$ | 921,414 | | |
$ | 800,308 | | |
$ | 1,023,085 | |
| | |
| | | |
| | | |
| | |
| Liabilities and Stockholders' (Deficit) Equity: | |
| | | |
| | | |
| | |
| Revolving loan | |
$ | 316,655 | | |
$ | 226,715 | | |
$ | 347,546 | |
| Accounts payable | |
| 215,793 | | |
| 225,549 | | |
| 262,369 | |
| Current portion of operating lease liabilities | |
| 67,610 | | |
| 69,235 | | |
| 65,266 | |
| Accrued expenses and other current liabilities | |
| 98,458 | | |
| 94,905 | | |
| 124,970 | |
| Total current liabilities | |
| 698,516 | | |
| 616,404 | | |
| 800,151 | |
| | |
| | | |
| | | |
| | |
| Long-term debt | |
| — | | |
| 49,818 | | |
| 49,785 | |
| Related party long-term debt | |
| 165,354 | | |
| — | | |
| — | |
| Long-term portion of operating lease liabilities | |
| 110,596 | | |
| 118,073 | | |
| 63,714 | |
| Other long-term liabilities | |
| 15,820 | | |
| 25,032 | | |
| 23,505 | |
| Total liabilities | |
| 990,286 | | |
| 809,327 | | |
| 937,155 | |
| | |
| | | |
| | | |
| | |
| Stockholders' (deficit) equity | |
| (68,872 | ) | |
| (9,019 | ) | |
| 85,930 | |
| Total liabilities and stockholders' (deficit) equity | |
$ | 921,414 | | |
$ | 800,308 | | |
$ | 1,023,085 | |
* Derived from the audited consolidated
financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2024.
THE CHILDREN’S PLACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | |
Second Quarter Ended | |
| | |
August 3,
2024 | | |
July 29,
2023 | |
| Net loss | |
$ | (69,909 | ) | |
$ | (64,188 | ) |
| Non-cash adjustments | |
| 100,757 | | |
| 63,570 | |
| Working capital | |
| (225,535 | ) | |
| (32,087 | ) |
| Net cash used in operating activities | |
| (194,687 | ) | |
| (32,705 | ) |
| | |
| | | |
| | |
| Net cash used in investing activities | |
| (12,478 | ) | |
| (18,261 | ) |
| | |
| | | |
| | |
| Net cash provided by financing activities | |
| 203,652 | | |
| 52,969 | |
| | |
| | | |
| | |
| Effect of exchange rate changes on cash and cash equivalents | |
| (553 | ) | |
| 154 | |
| | |
| | | |
| | |
| Net (decrease) increase in cash and cash equivalents | |
| (4,066 | ) | |
| 2,157 | |
| | |
| | | |
| | |
| Cash and cash equivalents, beginning of period | |
| 13,639 | | |
| 16,689 | |
| | |
| | | |
| | |
| Cash and cash equivalents, end of period | |
$ | 9,573 | | |
$ | 18,846 | |
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