Investor group takes majority stake in The Children’s Place
An investor group has taken an unsolicited stake in The Children’s Place.
The struggling children’s apparel retailer said it has received notice from Snowball Compounding Ltd. and parties related to Saudi investment firm Mithaq Capital that they own approximately 54% of the company and plan to nominate 11 persons for election to its board at the 2024 annual shareholders meetings.
The news comes less than a week after Children’s Place issued a profit warning for its fourth quarter and said it would consider strategic alternatives if it could not secure funds to support ongoing operations.
The unsolicited stock acquisition has triggered a “change of control” clause causing Children’s Place to be in default on its amended and restated credit agreement. The retailer said it is discussions with its lenders to seek a waiver of the event of default.
“The company intends to accept Mithaq’s request to enter into discussions regarding the provision of financing to assist with the company’s liquidity needs,” Children’s Place stated. “Any such financing would be subject to, among other things, lender approval and compliance with applicable law.”
The retailer noted that its shareholders are not required to take any action at this time.
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. The company’s total liquidity as of Feb. 3, 2024 is expected to be approximately $45 million.
The Children’s Place global retail and wholesale network includes more than 500 stores in North America, four e-commerce sites, 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.