Children's Place Q1 2024 10-Q Filed

Ticker: PLCE · Form: 10-Q · Filed: Jun 13, 2024 · CIK: 1041859

Sentiment: neutral

Topics: 10-Q, earnings, retail

TL;DR

Children's Place filed its Q1 2024 10-Q. Financials are in.

AI Summary

Children's Place, Inc. filed a 10-Q for the period ending May 4, 2024. The company reported its financial results for the first quarter of fiscal year 2024. Key financial data and operational details for the period are disclosed in this filing.

Why It Matters

This filing provides investors with the latest financial performance and operational updates for Children's Place, Inc., crucial for assessing the company's current health and future prospects.

Risk Assessment

Risk Level: medium — The filing is a routine 10-Q, but the retail sector can be volatile, and specific financial details within the report could indicate underlying risks.

Key Numbers

Key Players & Entities

FAQ

What were the total assets of Children's Place, Inc. as of May 4, 2024?

The filing indicates financial data for the period ending May 4, 2024, but specific total asset figures are not provided in this header information.

What is the company's primary industry classification?

The company's Standard Industrial Classification is RETAIL-FAMILY CLOTHING STORES [5651].

When did the company last change its name?

The company's name was last changed on July 2, 1997, from CHILDRENS PLACE RETAIL STORES INC.

What is the SEC file number for Children's Place, Inc.?

The SEC file number is 000-23071.

What is the fiscal year end for Children's Place, Inc.?

The fiscal year end for the company is February 1st (0201).

Filing Stats: 4,594 words · 18 min read · ~15 pages · Grade level 13.6 · Accepted 2024-06-12 18:01:14

Key Financial Figures

Filing Documents

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION PAGE Item 1. F inancial S tatements . Consolidated Balance Sheets as of May 4, 2024, February 3, 2024 and April 29, 2023 1 Consolidated Statements of Operations for the thirteen weeks ended May 4, 2024 and April 29, 2023 2 Consolidated Statements of Comprehensive Loss for the thirteen weeks ended May 4, 2024 and April 29, 2023 3 Consolidated Statements of Changes in Stockholders ' (Deficit) Equity for the thirteen weeks ended May 4, 2024 and April 29, 2023 4 Consolidated Statements of Cash Flows for the thirteen weeks ended May 4, 2024 and April 29, 2023 5 Notes to C onsolidated F inancial S tatements 6 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations . 23 Item 3.

Quantitative and Qualitative Disclosures A bout Market Risk

Quantitative and Qualitative Disclosures A bout Market Risk . 33 Item 4.

Controls and Procedures

Controls and Procedures . 34

— OTHER INFORMATION

PART II — OTHER INFORMATION Item 1. Legal Proceedings . 35 Item 1A. Risk Factors . 35 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds . 35 Item 5. Other Information . 36 Item 6. Exhibits . 37 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS. THE CHILDREN'S PLACE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) May 4, 2024 February 3, 2024 April 29, 2023 (in thousands, except par value) ASSETS Current assets: Cash and cash equivalents $ 12,960 $ 13,639 $ 18,242 Accounts receivable 28,286 33,219 25,659 Inventories 425,156 362,099 504,194 Prepaid expenses and other current assets 43,210 43,169 58,504 Total current assets 509,612 452,126 606,599 Long-term assets: Property and equipment, net 116,779 124,750 146,315 Right-of-use assets 173,987 175,351 144,781 Tradenames, net 41,000 41,123 70,691 Deferred income taxes — — 36,432 Other assets 6,957 6,958 10,052 Total assets $ 848,335 $ 800,308 $ 1,014,870 LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities: Revolving loan $ 226,100 $ 226,715 $ 300,835 Accounts payable 193,100 225,549 223,244 Current portion of operating lease liabilities 70,668 69,235 74,741 Income taxes payable 3,476 5,297 3,534 Accrued expenses and other current liabilities 79,872 89,608 116,933 Total current liabilities 573,216 616,404 719,287 Long-term liabilities: Long-term debt 166,635 49,818 49,768 Long-term portion of operating lease liabilities 118,363 118,073 87,905 Income taxes payable 9,486 9,486 17,199 Other tax liabilities 4,928 4,664 2,885 Other long-term liabilities 10,557 10,882 12,005 Total liabilities 883,185 809,327 889,049 Commitments and contingencies (see Note 8) Stockholders' (deficit) equity: 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; 12,739 , 12,585 , and 12,473 issued; 12,679 , 12,529 , and 12,405 outstanding 1,274 1,259 1,247 Additional paid-in capital 153,358 141,083 150,846 Treasury stock, at cost ( 60 , 56 , and 68 shares) ( 2,957 ) ( 2,909 ) ( 3,810 ) Deferred compensation 2,957 2,909 3,810 Accumulated other comprehensive loss ( 16,822 ) ( 1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION Description of Business The Children's Place, Inc. and its subsidiaries (collectively, the "Company") operate an omni-channel children's specialty portfolio of brands with an industry-leading digital-first operating model. Its global retail and wholesale network includes two digital storefronts, more than 500 stores in North America, wholesale marketplaces and distribution in 16 countries through six international franchise partners. 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". 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, revenue from the Company's Canadian-based wholesale business, as well as revenue from international franchisees. Each segment includes an e-commerce business located at www.childrensplace.com and www.gymboree.com. The Company also has social media channels on Instagram, Facebook, X, formerly known as Twitter, YouTube and Pinterest. Terms that are commonly used in the notes to the Company's consolidated financial statements are defined as follows: First Quarter 2024 — The thirteen weeks ended May 4, 2024 First Quarter 2023 — The thirteen weeks ended April 29, 2023 Fiscal 2024 — The fifty-two weeks ending 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Liquidity The Company incurred net losses in the First Quarter 2024, Fiscal 2023 and Fiscal 2022. As of May 4, 2024, the Company had an Accumulated deficit of $ 172.7 million and a working capital deficit of $ 63.6 million, which included borrowings of $ 226.1 million under its asset-based revolving credit facility (the "ABL Credit Facility") that do not mature until November 2026, pursuant to its credit agreement, dated as of May 9, 2019, (as amended from time to time, the "Credit Agreement"), by and among the Company, certain of its subsidiaries and the lenders party thereto. The Company had availability under its ABL Credit Facility of $ 47.7 million. These conditions resulted in the Company seeking additional liquidity to fund its ongoing operations. On May 2, 2024, the Company and its majority shareholder, Mithaq Capital SPC, a Cayman segregated portfolio company ("Mithaq"), entered into a commitment letter pursuant to which Mithaq agreed to provide the Company with a Shariah-compliant senior unsecured credit facility of up to $ 40.0 million (the "Mithaq Credit Facility") in accordance with the terms described in "Note 7. Debt" of the consolidated financial statements. The Mithaq Credit Facility will be available to draw on at any time prior to July 1, 2025 to augment the Company's liquidity position, if needed. The Company plans to address its ongoing liquidity needs with additional financing as necessary. The Company has determined that its existing cash on hand, expected cash generated from operations, and availability under its ABL Credit Facility and the Mithaq Credit Facility, will be sufficient to fund its capital and other cash requirements for at least the next twelve months from the date that the Company's consolidated financial statements for the First Quarter 2024 were issued. Fiscal Year The Company's fiscal year is a fifty-two week or fifty-three week period ending on the Sat

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 2. 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 following table presents the Company's revenues disaggregated by geography: Thirteen Weeks Ended May 4, 2024 April 29, 2023 (in thousands) Net sales: South $ 103,257 $ 119,918 Northeast 54,228 64,532 West 33,917 42,603 Midwest 32,538 38,809 International and other (1) 43,938 55,778 Total net sales $ 267,878 $ 321,640 ____________________________________________ (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. The Company recognizes revenue, including shipping and handling fees billed to customers, 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 $ 5.3 million, $ 3.1 million, and $ 5.9 million within Accrued expenses and other current liabilities as of May 4, 2024, February 3, 2024, and April 29, 2023, 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, including shipping and handling fees billed to customers, 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 $ 7.0 million, $ 9.0 million, and $ 5.5 million as of May 4, 2024, February 3, 2024, and April 29, 2023, respectively. For the sale of goods to retail customers wit

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 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. 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 $ 2.3 million, $ 1.7 million, and $ 3.8 million as of May 4, 2024, February 3, 2024, and April 29, 2023, respectively. 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) As a result of these strategic actions associated with the voluntary early termination of its corporate office lease, the move from the TODC, and workforce reductions, the Company incurred non-operating charges of $ 2.3 million in restructuring costs during the First Quarter 2024 on a pretax basis, summarized in the following table: Thirteen Weeks Ended May 4, 2024 April 29, 2023 (in thousands) Lease termination costs (1) $ 460

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