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Children’s Place expanding into China

Starbucks isn’t the only U.S. retailer that sees big opportunity in China.

The Children’s Place on Tuesday announced it has signed an exclusive licensing agreement with Zhejiang Semir Garment Co. Ltd. (Semir), parent of Balabala, the largest specialty kids’ apparel retailer in China. During the first five years of the agreement, Semir will open at least 300 Children’s Place stores in Greater China, and also operate the brand’s e-commerce business.

The partnership is projected to generate between $125 million and $150 million in sales by 2022. The agreement is projected to generate $125 million to $150 million in retail sales in year five.

“Today’s announcement unites two of the world’s largest children’s apparel retailers, both with long and outstanding track records of success,” said Jane Elfers, president and CEO, The Children’s Place, which operates 1,014 stores in the United States, Canada and Puerto Rico. “Entering China through this strategic partnership is a game-changer for our international business. It takes us one step closer to our goal of becoming the leading global omnichannel kids’ apparel brand.”

The young children’s apparel market is already one of the fastest-growing categories in China. It is currently estimated at $24 billion, Elfers noted, and, with China’s two child policy firmly in place, is forecasted to double by 2025.

Commenting on the agreement with Semir, Neil Saunders, managing director of GlobalData Retail, said it gives Children's Place “accelerated, low-risk access to a very lucrative market.”

Also on Thursday, Children’s Place reported that it swung to a loss of $9.9 million in the quarter ended Feb. 3, or 57 cents a share, from a profit of $34.2 million, or $1.86 a share, in the year-ago period. Excluding non-recurring items, such as a $51.8 million charge resulting from recent tax legislation, adjusted earnings per share came to $2.52, above estimates of $2.49.

Revenue increased to $570.0 million from $520.8 million, but was below analysts’ estimates of $572.0 million. Same-store sales rose 8.2%, below expectations. It was the chain’s 9th consecutive quarter of positive comps and 12th consecutive quarter of merchandise margin expansion.

For the full year, net sales increased 4.8% to $1.87 billion. Comparable sales increased 5.8%, the fourth consecutive year of positive comps.

Net income was $84.7 million, or $4.67 per diluted share, in fiscal 2017, compared to net income of $102.3 million, or $5.40 per diluted share, the previous year.
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