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Children’s Place issues profit warning; faces financing challenge

Children's Place storefront
The Children's Place has more than 500 stores across North America.

The Children’s Place is looking for new funding.

The children’s apparel retailer issued a profit warning for its fourth quarter and said it is working with its advisors, lenders and potential lenders to obtain new financing. The company noted that it considering strategic alternatives if it cannot secure funds to support ongoing operations. 

Children’s Place, which operates more than 500 stores in North America, now expects a fourth-quarter adjusted operating loss equal to 9% to 8% of sales. Its prior guidance called for adjusted operating income of about 2% to 3% of sales. 

“The adjusted operating loss reflects 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 adjustment,” Children’s Place said in a release.

The company expects net sales to range from approximately $454 million to $456 million, compared to its prior guidance of $460 million to $465 million.

For its third quarter, ended Oct. 28, Children’s Place reported that its net sales decreased 5.7% to $28.9 million. comparable retail sales decreased 7.3%.  Adjusted net income was $40.6 million, or $3.22 per share, compared to $43.8 million, or $3.33 per share, in the comparable period last year.

Children’s Place's total liquidity as of Feb. 3, 2024 is expected to be approximately $45 million. As previously anticipated, total indebtedness is expected to decrease by more than $100 million versus the third quarter of fiscal 2023 and, as of Feb. 3, 2024, is expected to be approximately $277 million as compared to $408 million as of the end of the third quarter of fiscal 2023.

The company's global retail and wholesale network includes four 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 apparel, accessories and footwear predominantly at value prices, primarily under its proprietary brands: The Children’s Place, Gymboree, Sugar & Jade and PJ Place.

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