The Children’s Place Seeks Funding, Explores ‘Strategic Alternatives’ After Reporting Losses

Retailer The Children’s Place is searching for new financing and weighing what it described as “strategic alternatives” after missing financial targets and posting a loss in preliminary results for the fiscal fourth quarter. 

The children’s apparel retailer with nearly 600 stores across North America is expected to post an operating loss between 8% and 9% of net sales in Q4. That is far from prior guidance of net income in the range of 2% to 3% of net sales, the company said in a release.

Net sales for the New Jersey-based retailer are expected to be between $454M and $456M for Q4, below the company's guidance of $460M to $465M. 

The Children’s Place said in the release that the operating loss was due to “the impact of lower than expected merchandise margin resulting from more aggressive promotions in an effort to maximize sales, higher than anticipated split shipments to meet customer e-commerce demand, and increased inventory valuation adjustments.”

The company’s total liquidity as of Feb. 3 was around $45M, including $13M in cash and cash equivalents and $32M in excess debt availability. The Children’s Place estimated its total debt to be around $277M, down from $408M at the end of its third fiscal quarter in 2023. 

The disclosure follows The Children’s Place bringing in the investment bank and advisory firm Centerview Partners to look for ways to strengthen its cash reserves, Bloomberg Law reported last week. The retailer is also working with Washington D.C.-based FTI Consulting for operational assistance. 

“The Company is working with its advisors (including Centerview Partners), lenders and potential lenders to obtain new financing necessary to support ongoing operations, and is considering strategic alternatives in the event that the Company is unable to consummate new financing,” the release stated. 

The Children’s Place has spent the last several years shedding stores, going from more than 1,100 retail locations to 591 stores at retail plazas and traditional malls in the U.S. and Canada as of November, CoStar reported. It’s closed 608 locations since 2013, cutting its footprint by roughly 46% to 2.8M SF. 

The retailer has also looked for cost savings on its operations side. It announced in a securities filing last summer a plan to terminate its lease in May for its headquarters at 500 Plaza Drive in Secaucus, New Jersey, five years before the lease was scheduled to expire, according to CoStar. In July, the retailer said it would lay off 17% of its workforce, amounting to 181 jobs. 

The lease termination and job cuts would allow the retailer to decrease its office footprint and “capitalize on lower prevailing market rates than would have been applicable under the company’s existing lease, which included escalations in occupancy costs,” it said in the filing, according to CoStar.  

Wall Street responded positively to the The Children's Place announcement that it was searching to raise more debt. The stock, which was down around 45% from the start of the year on Friday, jumped more than 25% to nearly $16 in early trading Monday but is more than 30% off its share price from the start of the year. 

The Children’s Place’s disclosure marks one of the first retailers to report financial distress in 2024, following a year where several big-box retailers folded or filed for bankruptcy protection. 

Bed Bath & Beyond was perhaps the most high-profile retailer to collapse when it filed for Chapter 11 restructuring in April and announced plans to close all of its 360 stores as well as 120 Buy Buy Baby locations. 

The chain was far from alone, with Party City among the first to fall in 2023 with a January bankruptcy filing. Tuesday Morning auctioned off the leases at more than 250 locations as part of a February 2023 bankruptcy, its second in three years. David’s Bridal followed in April when it filed for bankruptcy protection, and home goods retailer Christmas Tree Shops filed for bankruptcy in May.