What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-09-05 compared with 2025-06-11 · 187 added, 100 removed, 202 unchanged (59% of the section changed)

13 unchanged sentences

Terms that are commonly used in our Management’s Discussion and Analysis of Financial Condition and Results of Operations are defined as follows:

• First Quarter 2025 — The thirteen weeks ended May 3, 2025

• First Quarter 2024 — The thirteen weeks ended May 4, 2024

• Second Quarter 2025 — The thirteen weeks ended August 2, 2025

• Second Quarter 2024 — The thirteen weeks ended August 3, 2024

• Year-To-Date 2025 — The twenty-six weeks ended August 2, 2025

• Year-To-Date 2024 — The twenty-six weeks ended August 3, 2024

• Fiscal 2025 — The fifty-two weeks ending January 31, 2026

17 unchanged sentences

“The Children’s Place”, “Gymboree”, “Sugar & Jade”, and “PJ Place”.

Our global retail and wholesale network includes two digital storefronts, 495 stores in North America, wholesale marketplaces, 228 international points of distribution in 12 countries through our seven franchise partners, and social media channels on Instagram, Facebook, X, formerly known as Twitter, YouTube and Pinterest.

Our global retail and wholesale network includes two digital storefronts, 494 stores in North America, wholesale marketplaces, 229 international points of distribution in 12 countries through our seven international franchise and wholesale partners, and social media channels on Instagram, Facebook, X, formerly known as Twitter, YouTube and Pinterest.

Our digital storefronts are at www.childrensplace.com and www.gymboree.com , where our customers are able to shop online for the same merchandise available in our physical stores, but also certain exclusive merchandise only available at our e-commerce sites.

15 unchanged sentences

Net sales to external customers are derived from merchandise sales, and we have one U.S.

wholesale customer that individually accounted for more than 10% of our net sales for the First Quarter 2025.

wholesale customer that individually accounted for more than 10% of our net sales for the Second Quarter 2025 and Year-To-Date 2025.

Recent Developments

Macroeconomic conditions, including inflationary pressures, higher interest rates, and other domestic and geopolitical factors, continued to adversely affect our core customer.

While some of these inflationary pressures, including freight input costs and product input costs, improved in Fiscal 2024, we may continue to experience inflationary pressures on our product input costs and distribution costs in Fiscal 2025.

During the First Quarter 2025, these pressures contributed to a decrease in consumer discretionary apparel purchases.

Macroeconomic conditions, including inflationary pressures, higher interest rates, tariffs, and other domestic and geopolitical factors, continued to adversely affect our core customer.

During the Second Quarter 2025, these pressures contributed to a decrease in consumer discretionary apparel purchases.

We expect these macroeconomic conditions, including but not limited to increased product input costs, transportation costs, distribution costs, and geopolitical conditions like changes in foreign policies of the United States, and other inflationary pressures, to continue to have an adverse impact during the remainder of Fiscal 2025.

During the First Quarter 2025, the U.S.

government announced the intention to impose tariffs on certain goods imported from Canada, Mexico and China.

It was further announced that tariffs would be applied to all countries importing goods to the United States.

Since then, subsequent developments have put the certainty and the extent of these tariffs into question.

We will continue to monitor the impact of any of these tariffs that become effective, as well as potential retaliatory tariffs imposed by other countries.

During Fiscal 2025, the U.S.

government announced the intention to impose tariffs on certain goods imported from all countries importing goods to the United States.

We have assessed the potential impact of tariffs that have become effective and are implementing plans to reduce their financial impact on us.

We will continue to monitor the impact of any further tariffs that may become effective in the future, as well as potential retaliatory tariffs imposed by other countries.

These tariffs could have a material adverse impact on the global retail industry, supply chains worldwide, and other political and macroeconomic conditions, which could also affect customer sentiment in deciding whether to purchase U.S.

goods as opposed to other alternatives.

In the meantime, we are benefiting from our diversified sourcing strategies, with no single country representing more than 20% of our total sourcing capacity, including limited exposure to China in the mid-single digit range.

In the meantime, we are benefiting from our diversified sourcing strategies, which includes our efforts to ensure no single country represents more than 20% of our total sourcing capacity, with limited exposure to China in the mid-single digit range.

We will be implementing an in-depth long-range plan that will better streamline our operations to yield over $40 million of benefits over the next three years.

We will be focused on reducing unnecessary corporate office costs, optimizing our distribution network, and right-sizing non-merchandise and third-party spend.

These expense savings will further support our changing business model, including our strategic shift from closing stores to opening stores instead, as we revitalize the overall experience for our customers both in-store and online.

Our transformation efforts also include a review of our corporate cost structure, to seek further opportunities to augment our staffing and optimize our corporate payroll.

These transformation efforts are expected to incur certain one-time costs amounting to approximately $5 million to $10 million.

Pillar Two Model Rules

The Organization for Economic Cooperation and Development (“OECD”) has introduced a global minimum corporate tax rate of 15% under its Pillar Two initiative (“Pillar Two”), effective for tax years beginning in January 2024.

The Organization for Economic Cooperation and Development (“OECD”) introduced a global minimum corporate tax rate of 15% under its Pillar Two initiative (“Pillar Two”), which became effective for tax years beginning in January 2024.

Although the U.S.

4 unchanged sentences

We believe that our e-commerce and brick-and-mortar retail store operations are highly interdependent, with both sharing common customers purchasing from a common pool of product inventory.

Accordingly, we believe that consolidated omni-channel reporting presents the most meaningful and appropriate measure of our performance, including Net sales.

The following table sets forth, for the periods indicated, selected data from our Consolidated Statements of Operations expressed as a percentage of Net sales.

Accordingly, we believe that consolidated omni-channel reporting presents the most meaningful and appropriate measure of our performance.

We primarily evaluate the results of our operations as a percentage of Net sales rather than in terms of absolute dollar increases or decreases by analyzing the year over year change in our business expressed as a percentage of Net sales (i.e., “basis points”).

Non-GAAP Reconciliation

We have presented certain measures on a non-GAAP basis.

Adjusted net income (loss), adjusted net income (loss) per diluted share, adjusted selling, general, and administrative expenses, and adjusted operating income (loss) are non-GAAP measures.

These measures are not intended to replace GAAP financial information, and may be different from non-GAAP measures reported by other companies.

The most comparable GAAP measures are net income (loss), net income (loss) per diluted share, selling, general, and administrative expenses, and operating income (loss), respectively.

We believe the income and expense items excluded as non-GAAP adjustments are not reflective of the performance of our core business, and that providing this supplemental disclosure to investors will facilitate comparisons of the past and present performance of our core business.

Second Quarter 2025 Compared to Second Quarter 2024

Thirteen Weeks Ended Thirteen Weeks Ended Variance

2025 % of Net Sales May 4,

2025 % of Net Sales August 3,

2024 % of Net Sales $ % % of Net Sales

5 unchanged sentences

Depreciation and amortization 7,570 2.5 % 9,505 3.0 % 1,935 20.4 % 0.5 %

Operating loss (24,117) (10.0) % (27,988) (10.4) % 3,871 13.8 % 0.4 %

Asset impairment charges — — % 28,000 8.8 % 28,000 100.0 % 8.8 %

Operating income (loss) 4,106 1.4 % (21,776) (6.8) % 25,882 118.9 % 8.2 %

Related party interest expense (1,868) (0.6) % (2,087) (0.7) % 219 10.5 % 0.1 %

3 unchanged sentences

Net loss $ (5,365) (1.8) % $ (32,114) (10.0) % $ 26,749 83.3 % 8.2 %

Non-GAAP Reconciliation

We have presented certain measures on a non-GAAP basis.

Adjusted net loss, adjusted net loss per diluted share, adjusted selling, general, and administrative expenses, and adjusted operating loss are non-GAAP measures.

These measures are not intended to replace GAAP financial information, and may be different from non-GAAP measures reported by other companies.

The most comparable GAAP measures are net loss, net loss per diluted share, selling, general, and administrative expenses, and operating loss, respectively.

First Quarter 2025 Compared to First Quarter 2024

Net sales decreased $25.8 million, or 9.6%, to $242.1 million during the First Quarter 2025 from $267.9 million during the First Quarter 2024, driven by a decrease in e-commerce sales due to an increase in shipping minimum thresholds to $40 from $20 in the prior year period as we continue to focus on profitable top-line sales, combined with lower traffic and conversion.

We also experienced a decrease in brick-and-mortar revenue due to a lower store count and lower sales volume due to lower traffic.

Our stores and e-commerce sales were both negatively impacted by the current macroeconomic environment, including uncertainty around potential tariffs, which has decreased consumer sentiment.

The decrease in net sales was partially offset by an increase in wholesale revenue.

Comparable retail sales decreased 13.6% for the First Quarter 2025, largely driven by the decrease in e-commerce revenue.

Gross profit decreased $21.9 million to $70.8 million during the First Quarter 2025, compared to $92.7 million during the First Quarter 2024.

Gross margin decreased 540 basis points to 29.2% of Net sales in the First Quarter 2025, compared to 34.6% of Net sales in the First Quarter 2024.

The decrease in gross margin was caused by a combination of factors, including channel mix from the higher penetration of wholesale sales and a higher mix of markdown versus full price product sales, partially offset by favorability from higher shipping minimum thresholds compared to the First Quarter 2024.

Net sales decreased $21.7 million, or 6.8%, to $298.0 million during the Second Quarter 2025 from $319.7 million during the Second Quarter 2024, driven by a decrease in brick-and-mortar revenue due to a lower store count and lower sales volume due to lower traffic.

We also experienced a decrease in e-commerce sales due to lower traffic and conversion compared to the Second Quarter 2024, however, these trends have improved since the first quarter of Fiscal 2025, due to shifts in our marketing strategies combined with the impact of our new product strategies.

Our stores and e-commerce sales were both negatively impacted by the current macroeconomic environment, including uncertainty around potential tariffs, which has negatively affected consumer sentiment.

Comparable retail sales decreased 4.7% for the Second Quarter 2025.

Gross profit decreased $10.5 million to $101.3 million during the Second Quarter 2025, compared to $111.8 million during the Second Quarter 2024.

Gross margin decreased 100 basis points to 34.0% of Net sales in the Second Quarter 2025, compared to 35.0% of Net sales in the Second Quarter 2024.

The decrease in gross margin was caused by adjustments associated with our decrease in inventory balance compared to the Second Quarter 2024 and shifts in channel mix, partially offset by favorable product margins and improvements in product mix, pricing and promotions.

Gross profit is calculated as consolidated net sales less cost of goods sold.

2 unchanged sentences

These factors, among others, may cause gross profit as a percentage of net sales to fluctuate from period to period.

Selling, general, and administrative expenses were $86.7 million during the First Quarter 2025, compared to $109.1 million during the First Quarter 2024 .

The decrease was due to a reduction in one-time costs incurred during the First Quarter 2024, primarily associated with the change of control and broken financing deal costs.

The First Quarter 2025 results included incremental operating expenses of $0.1 million, including restructuring costs of $0.9 million, partially offset by the reversal of a legal settlement accrual of $0.8 million.

The First Quarter 2024 results included incremental operating expenses of $20.4 million, including non-cash equity compensation charges of $9.9 million and other fees of $3.8 million associated with the change of control, broken financing and restructuring fees of $6.7 million, costs to close our Canada distribution center of $0.8 million, fees associated with our credit agreement of $0.8 million, fleet optimization costs of $0.6 million, and restructuring costs of $0.3 million, partially offset by the reversal of a legal settlement accrual of $2.3 million.

Excluding the impact of these incremental charges, Adjusted SG&A expenses were $86.5 million during the First Quarter 2025, compared to $88.6 million during the First Quarter 2024, and deleveraged 260 basis points to 35.7% of Net sales, due to lower sales combined with incremental marketing spend as a percentage of net sales.

As we reinvest in marketing and focus on content, we are beginning to see initial promising indicators, as Google search interest has grown, along with an acceleration of TikTok followers.

We have continued to control our costs well, as this represents the lowest level of Adjusted selling, general, and administrative expenses in more than 15 years for the first quarter of a fiscal year and we continue to evaluate opportunities to further optimize our operating model.

Depreciation and amortization was $8.2 million during the First Quarter 2025, compared to $11.6 million during the First Quarter 2024.

The decrease was primarily driven by reduced depreciation of capitalized software and the permanent closure of 24 stores during the past twelve months.

Operating loss was $(24.1) million during the First Quarter 2025, compared to $(28.0) million during the First Quarter 2024.

The First Quarter 2025 results were impacted by incremental operating expenses of $0.1 million, as described within SG&A expenses above.

The First Quarter 2024 results were impacted by incremental operating expenses of $22.9 million, including SG&A expenses of $20.4 million, as described above, accelerated depreciation of $1.6 million, and additional change in control charges impacting gross margin of $0.9 million.

Excluding the impact of these incremental charges, Adjusted operating loss was $(24.0) million in the First Quarter 2025, compared to $(5.1) million in the First Quarter 2024, and deleveraged 800 basis points to (9.9)% of Net sales.

Related party interest expense was $1.9 million during the First Quarter 2025, compared to $0.4 million during the First Quarter 2024.

The increase was driven by a full quarter of interest-equivalent charges from loans entered into with Mithaq Capital SPC, a Cayman segregated portfolio company (“Mithaq”), which is a controlling stockholder of the Company, during the First Quarter 2024, compared to a partial period in the prior year.

Other interest expense, net was $6.7 million during the First Quarter 2025, compared to $7.3 million during the First Quarter 2024.

The decrease in interest expense was primarily driven by lower average interest rates associated with our asset-based revolving credit facility (the “ABL Credit Facility”) and the paydown of a prior $50.0 million term loan under our credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”) and other lenders, partially offset by higher borrowings on our ABL Credit Facility, and the write-off of deferred financing costs associated with the partial paydown of our first term loan entered into with Mithaq as a result of the completion of our rights offering in the First Quarter 2025 (the “Rights Offering”).

For more information about our ABL Credit Facility and our term loans with Mithaq, see “Liquidity and Capital Resources — ABL Credit Facility” and “— Mithaq Term Loans” below.

Provision for income taxes was $1.3 million during the First Quarter 2025, compared to $2.1 million during the First Quarter 2024.

Our effective tax rate was a provision of (4.1)% and (5.8)% in the First Quarter 2025 and First Quarter 2024, respectively.

Selling, general, and administrative expenses were $89.6 million during the Second Quarter 2025, compared to $96.1 million during the Second Quarter 2024 .

The decrease was primarily due to a reduction in one-time restructuring costs incurred in the Second Quarter 2024 due to the departure of certain members of the senior leadership team, partially offset by an increase in marketing expense as we continue to invest in top of funnel and brand building initiatives.

The Second Quarter 2025 results included incremental operating expenses of $2.0 million, including restructuring costs of $1.2 million and an $0.8 million accrual for legal settlement.

The Second Quarter 2024 results included incremental operating expenses, including restructuring costs of $6.1 million, credit agreement lender-required consulting costs of $1.1 million, professional and consulting fees of $0.4 million, and fleet optimization costs of $0.1 million.

Excluding the impact of these incremental charges, Adjusted SG&A expenses were $87.6 million during the Second Quarter 2025, compared to $88.3 million during the Second Quarter 2024, and deleveraged 180 basis points to 29.4% of Net sales, due to lower sales.

Depreciation and amortization was $7.6 million during the Second Quarter 2025, compared to $9.5 million during the Second Quarter 2024.

The decrease was primarily driven by reduced depreciation of capitalized software and the permanent closure of 23 stores during the past twelve months, partially offset by two store openings.

There were no Asset impairment charges during the Second Quarter 2025, compared to $28.0 million during the Second Quarter 2024 due to the reduction in fair value of the Gymboree tradename.

Operating income (loss) was an income of $4.1 million during the Second Quarter 2025, compared to a loss of $(21.8) million during the Second Quarter 2024.

The Second Quarter 2025 results were impacted by incremental operating expenses of $2.0 million, as described within SG&A expenses above.

The Second Quarter 2024 results were impacted by incremental operating expenses, including SG&A expenses of $7.7 million, as described above, an impairment charge of $28.0 million on the Gymboree tradename, and accelerated depreciation of $0.3 million.

Excluding the impact of these incremental charges, Adjusted operating income was $6.1 million in the Second Quarter 2025, compared to $14.2 million in the Second Quarter 2024, and deleveraged 250 basis points to 2.0% of Net sales.

Related party interest expense was $1.9 million during the Second Quarter 2025, compared to $2.1 million during the Second Quarter 2024.

The decrease was driven by a lower average interest rate on the New Mithaq Term Loan, as described below.

Other interest expense, net was $6.2 million during the Second Quarter 2025, compared to $7.1 million during the Second Quarter 2024.

The decrease in interest expense was primarily driven by lower average borrowings on our asset-based revolving credit facility (the “ABL Credit Facility”) and lower average interest rates.

Provision for income taxes was $1.5 million during the Second Quarter 2025, compared to $1.1 million during the Second Quarter 2024.

Our effective tax rate was a provision of (37.1)% and (3.6)% in the Second Quarter 2025 and Second Quarter 2024, respectively.

We continue to adjust our valuation allowance based on ongoing operating results.

Net loss was $(34.0) million, or $(1.57) per diluted share, during the First Quarter 2025, compared to $(37.8) million, or $(2.98) per diluted share, during the First Quarter 2024, due to the factors discussed above.

Adjusted net loss was $(32.8) million, or $(1.52) per diluted share during the First Quarter 2025, compared to $(14.9) million, or $(1.18) per diluted share, during the First Quarter 2024, due to the factors described above, in addition to the loss on extinguishment of debt of $1.0 million during the First Quarter 2025, due to the partial prepayment of our first term loan entered into with Mithaq.

The following table sets forth Net sales and Operating loss, respectively, by segment, for the periods indicated:

Net loss was $(5.4) million, or $(0.24) per diluted share, during the Second Quarter 2025, compared to $(32.1) million, or $(2.51) per diluted share, during the Second Quarter 2024, due to the factors discussed above.

Adjusted net loss was $(3.4) million, or $(0.15) per diluted share during the Second Quarter 2025, compared to adjusted net income of $3.9 million, or $0.30 per diluted share, during the Second Quarter 2024, due to the factors described above.

The following table sets forth Net sales and Operating income (loss), respectively, by segment, for the periods indicated:

Thirteen Weeks Ended

2025 August 3,

(in thousands)

7 unchanged sentences

The Children’s Place International (1)

(2,178) (2,103)

Total segment operating income (loss) $ 4,106 $ (21,776)

The Children’s Place U.S.

2.3 % (6.7) %

The Children’s Place International (1)

(8.8) % (7.7) %

Total segment operating income (loss) as a percentage of net sales 1.4 % (6.8) %

___________________________________________

(1) The Company’s foreign subsidiaries, primarily in Canada, have operating results based in foreign currencies and are thus subject to the fluctuations of the corresponding translation rates into U.S dollars.

The Children’s Place U.S.

Net sales decreased $19.2 million, or 6.6%, to $273.2 million during the Second Quarter 2025, compared to $292.4 million during the Second Quarter 2024 , driven by a decrease in brick-and-mortar revenue due to a lower store count and lower sales volume due to lower traffic.

We also experienced a decrease in e-commerce sales due to lower traffic and conversion compared to the Second Quarter 2024.

The Children’s Place International Net sales decreased $2.5 million, or 9.0%, to $24.8 million during the Second Quarter 2025, compared to $27.3 million during the Second Quarter 2024 , driven by a decrease in brick-and-mortar revenue due to a lower store count and lower sales volume due to lower traffic.

We also experienced a decrease in e-commerce sales due to lower traffic and conversion compared to the Second Quarter 2024.

The Children’s Place U.S.

Operating income was $6.3 million during the Second Quarter 2025, compared to a loss of $(19.7) million during the Second Quarter 2024.

The Children’s Place U.S.

operating margin improved during the Second Quarter 2025, primarily due to the impairment charge on the Gymboree tradename during the Second Quarter 2024.

The Children’s Place International Operating loss was $(2.2) million during the Second Quarter 2025, compared to $(2.1) million during the Second Quarter 2024.

Year-To-Date 2025 Compared to Year-To-Date 2024

Twenty-six Weeks Ended Twenty-six Weeks Ended Variance

2025 % of Net Sales August 3,

2024 % of Net Sales $ % % of Net Sales

(amounts in thousands)

Net sales $ 540,131 100.0 % $ 587,533 100.0 % $ (47,402) (8.1) % — %

Cost of sales (exclusive of depreciation and amortization) 368,076 68.1 % 382,998 65.2 % 14,922 3.9 % (2.9) %

Gross profit 172,055 31.9 % 204,535 34.8 % (32,480) (15.9) % (2.9) %

Selling, general, and administrative expenses 176,266 32.6 % 205,159 34.9 % 28,893 14.1 % 2.3 %

Depreciation and amortization 15,800 2.9 % 21,140 3.6 % 5,340 25.3 % 0.7 %

Asset impairment charges — — % 28,000 4.8 % 28,000 100.0 % 4.8 %

Operating loss (20,011) (3.7) % (49,764) (8.5) % 29,753 59.8 % 4.8 %

Related party interest expense (3,740) (0.7) % (2,476) (0.4) % (1,264) (51.1) % (0.3) %

Other interest expense, net (12,840) (2.4) % (14,476) (2.5) % 1,636 11.3 % 0.1 %

Loss before provision for income taxes (36,591) (6.8) % (66,716) (11.4) % 30,125 45.2 % 4.6 %

Provision for income taxes 2,797 0.5 % 3,193 0.5 % 396 12.4 % — %

Net loss $ (39,388) (7.3) % $ (69,909) (11.9) % $ 30,521 43.7 % 4.6 %

Net sales decreased $47.4 million, or 8.1%, to $540.1 million during Year-To-Date 2025 from $587.5 million during Year-To-Date 2024, driven by a decrease in e-commerce sales due to lower traffic and conversion.

We also experienced a decrease in brick-and-mortar revenue due to a lower store count and lower sales volume due to lower traffic.

This was partially offset by an increase in wholesale revenue.

Comparable retail sales decreased 8.9% during Year-To-Date 2025.

Gross profit decreased $32.5 million to $172.1 million during Year-To-Date 2025, compared to $204.5 million during Year-To-Date 2024.

Gross margin decreased 290 basis points to 31.9% of Net sales during Year-To-Date 2025, compared to 34.8% of Net sales in Year-To-Date 2024.

The decrease in gross margin was caused by adjustments associated with our decrease in inventory balance compared to the prior year and shifts in channel mix from the higher penetration of wholesale sales, partially offset by favorable product margins and improvements in pricing and promotions.

Selling, general, and administrative expenses were $176.3 million during Year-To-Date 2025 , compared to $205.2 million during Year-To-Date 2024.

The decrease was due to a reduction in one-time costs incurred during Year-To-Date 2025 , as described below.

The Year-To-Date 2025 results included incremental operating expenses of $2.1 million for restructuring costs.

The Year-To-Date 2024 results included incremental operating expenses, including costs associated with our change of control of $13.7 million, financing related charges of $6.7 million, restructuring costs of $6.4 million, credit agreement lender-required consulting costs of $1.9 million, costs associated with the closure of our Canada distribution center of $0.8 million, fleet optimization costs of $0.7 million, and professional and consulting fees of $0.4 million, partially offset by the reversal of a legal settlement accrual of $2.3 million.

Excluding the impact of these incremental charges, Adjusted SG&A expenses were $174.2 million during Year-To-Date 2025, compared to $177.0 million during Year-To-Date 2024, and deleveraged 210 basis points to 32.2% of Net sales.

Depreciation and amortization was $15.8 million during Year-To-Date 2025, compared to $21.1 million during Year-To-Date 2024.

The decrease was primarily driven by reduced depreciation of capitalized software and the permanent closure of 23 stores during the past twelve months, partially offset by two store openings.

There were no Asset impairment charges during Year-To-Date 2025, compared to $28.0 million during Year-To-Date 2024 due to the reduction in fair value of the Gymboree tradename.

Operating loss was $(20.0) million during Year-To-Date 2025, compared to $(49.8) million during Year-To-Date 2024.

The Year-To-Date 2025 results were impacted by incremental operating expenses of $2.1 million, as described within SG&A expenses above.

The Year-To-Date 2024 results were impacted by incremental operating expenses, including SG&A expenses of $28.2 million, as described above, an impairment charge of $28.0 million on the Gymboree tradename, accelerated depreciation of $1.8 million, and additional change in control charges impacting gross margin of $0.9 million.

Excluding the impact of these incremental charges, Adjusted operating loss was $(17.9) million during Year-To-Date 2025, compared to Adjusted operating income of $9.2 million during Year-To-Date 2024, and deleveraged 490 basis points to (3.3)% of Net sales.

Related party interest expense was $3.7 million during Year-To-Date 2025, compared to $2.5 million during Year-To-Date 2024.

The increase was due to interest-equivalent charges for the full period compared to a partial period in the prior year.

Other interest expense, net was $12.8 million during Year-To-Date 2025, compared to $14.5 million during Year-To-Date 2024.

The decrease in interest expense was primarily driven by lower average interest rates on our ABL Credit Facility, partially offset by the write-off of deferred financing costs associated with the partial paydown of our first term loan entered into with our majority shareholder, Mithaq Capital SPC (“Mithaq”).

Provision for income taxes was $2.8 million during Year-To-Date 2025, compared to $3.2 million during Year-To-Date 2024.

Our effective tax rate was a provision of (7.6)% and (4.8)% during Year-To-Date 2025 and Year-To-Date 2024, respectively.

We continue to adjust our valuation allowance based on ongoing operating results.

Net loss was $(39.4) million, or $(1.80) per diluted share, during Year-To-Date 2025, compared to $(69.9) million, or $(5.49) per diluted share, during Year-To-Date 2024, due to the factors discussed above.

Adjusted net loss was $(36.3) million, or $(1.66) per diluted share during Year-To-Date 2025, compared to $(11.0) million, or $(0.86) per diluted share, during Year-To-Date 2024, due to the factors described above.

The following table sets forth Net sales and Operating loss, respectively, by segment, for the periods indicated:

Twenty-six Weeks Ended

2025 August 3,

(in thousands)

The Children’s Place U.S.

$ 494,954 $ 538,581

The Children’s Place International (1)

45,177 48,952

Total net sales $ 540,131 $ 587,533

The Children’s Place U.S.

$ (13,431) $ (43,652)

The Children’s Place International (1)

(6,580) (6,112)

Total segment operating loss $ (20,011) $ (49,764)

2 unchanged sentences

The Children’s Place International (1)

(14.6) % (12.5) %

Total segment operating loss as a percentage of net sales (3.7) % (8.5) %

2 unchanged sentences

The Children’s Place U.S.

Net sales decreased $24.4 million, or 9.9%, to $221.8 million during the First Quarter 2025, compared to $246.2 million during the First Quarter 2024 , driven by a decrease in e-commerce sales due to a higher shipping threshold, combined with lower traffic and conversion.

Net sales decreased $43.6 million, or 8.1%, to $495.0 million during Year-To-Date 2025, compared to $538.6 million during Year-To-Date 2024, driven by a decrease in e-commerce sales due to lower traffic and conversion.

We also experienced a decrease in brick-and-mortar revenue due to a lower store count and lower sales volume due to lower traffic.

Our stores and e-commerce sales were both negatively impacted by the current macroeconomic environment, including uncertainty around potential tariffs, which has decreased consumer sentiment.

The decrease in net sales was partially offset by an increase in wholesale revenue.

The Children’s Place International Net sales decreased $1.3 million, or 6.1%, to $20.4 million during the First Quarter 2025, compared to $21.7 million during the First Quarter 2024 , driven by a decrease in e-commerce sales due to a higher shipping threshold, combined with lower conversion.

This was partially offset by an increase in wholesale revenue.

The Children’s Place International Net sales decreased $3.8 million, or 7.8%, to $45.2 million during Year-To-Date 2025, compared to $49.0 million during Year-To-Date 2024, driven by a decrease in e-commerce sales due to lower traffic and conversion.

We also experienced a decrease in brick-and-mortar revenue due to a lower store count and lower sales volume due to lower traffic.

The Children’s Place U.S.

Operating loss was $(19.7) million during the First Quarter 2025, compared to $(24.0) million during the First Quarter 2024 .

Operating loss was $(13.4) million during Year-To-Date 2025, compared to $(43.7) million during Year-To-Date 2024.

The Children’s Place U.S.

operating margin improved during the First Quarter 2025, primarily due to a reduction in one-time costs incurred in the prior year associated with the Company’s change of control and broken financing deal costs.

The Children’s Place International Operating loss was $(4.4) million during the First Quarter 2025, compared to $(4.0) million during the First Quarter 2024 .

The Children’s Place International operating margin decreased during the First Quarter 2025 due to shifts in our supply chain, which resulted in increased freight, duty and commission costs to transfer inventory from the U.S.

into Canada, partially offset by occupancy cost savings achieved due to the closure of our distribution center in Toronto, Canada.

operating margin improved during Year-To-Date 2025, primarily due to the impairment charge on the Gymboree tradename during Year-To-Date 2024.

The Children’s Place International Operating loss was $(6.6) million during Year-To-Date 2025, compared to $(6.1) million during Year-To-Date 2024.

LIQUIDITY AND CAPITAL RESOURCES

4 unchanged sentences

and together with the Initial Mithaq Term Loan, collectively, the “Mithaq Term Loans”).

As of February 6, 2025, $60.2 million under the Initial Mithaq Term Loan was repaid pursuant to the completion of the Rights Offering, leaving an aggregate of $108.4 million outstanding under the Mithaq Term Loans as of May 3, 2025.

As of May 3, 2025, we had $258.6 million of outstanding borrowings under our $433.0 million ABL Credit Facility and no borrowings under our $40.0 million senior unsecured credit facility with Mithaq (the “Mithaq Credit Facility”).

Our working capital deficit decreased $20.6 million to $43.0 million as of May 3, 2025, compared to $63.6 million as of May 4, 2024, primarily reflecting a decrease in our accounts payable balances as we paid down past due vendors, partially offset by an increase in outstanding borrowings under our ABL Credit Facility.

As of May 3, 2025, we had total liquidity of $84.4 million, including $38.7 million of availability under our ABL Credit Facility, $40.0 million of availability under our Mithaq Credit Facility, and $5.7 million of cash on hand.

As of May 3, 2025, we had $18.2 million of outstanding letters of credit, with an additional $6.8 million available for issuing letters of credit under our ABL Credit Facility.

We expect to be able to meet our working capital and capital expenditure requirements for at least the next twelve months from the date that our consolidated financial statements for the First Quarter 2025 were issued, by using our cash on hand, cash flows from operations, and availability under our ABL Credit Facility and Mithaq Credit Facility.

As of August 2, 2025, we had $294.4 million of outstanding borrowings under our $433.0 million ABL Credit Facility and no borrowings under our $40.0 million senior unsecured credit facility with Mithaq (the “Mithaq Credit Facility”).

Our working capital deficit decreased $31.1 million to $40.0 million as of August 2, 2025, compared to $71.2 million as of August 3, 2024, primarily reflecting a decrease in our accounts payable balances as we paid down past due vendors and reduced inventory purchases, and a decrease in outstanding borrowings under our ABL Credit Facility, partially offset by a decrease in inventory due to improved inventory management as we continue to align our inventory levels with our growth and product strategy, and better balance the mix of fashion and basic product.

As of August 2, 2025, we had total liquidity of $91.6 million, including $43.8 million of availability under our ABL Credit Facility, $40.0 million of availability under our Mithaq Credit Facility, and $7.8 million of cash on hand.

As of August 2, 2025, we had $18.2 million of outstanding letters of credit, with an additional $6.8 million available for issuing letters of credit under our ABL Credit Facility.

We expect to be able to meet our working capital and capital expenditure requirements for at least the next twelve months from the date that our consolidated financial statements for the Second Quarter 2025 were issued, by using our cash on hand, cash flows from operations, and availability under our ABL Credit Facility and Mithaq Credit Facility.

Share Repurchase Program

1 unchanged sentence

Currently, given the terms of our credit agreement with Wells Fargo and other lenders, as amended by its seventh amendment, the repurchase of any shares would require fulfilling the heightened payment conditions under that credit agreement, except that repurchases of shares as described in “Note 8.

Stockholders’ Equity (Deficit)” of the consolidated financial statements, pursuant to our practice as a result of our insider trading policy, are expressly permitted.

As of May 3, 2025, there was $156.5 million remaining availability under the Share Repurchase Program.

Stockholders’ Deficit” of the consolidated financial statements, pursuant to our practice as a result of our insider trading policy, are expressly permitted.

As of August 2, 2025, there was $156.1 million remaining availability under the Share Repurchase Program.

Cash Flows and Capital Expenditures

Cash used in operating activities was $43.0 million during the First Quarter 2025, compared to $110.8 million during the First Quarter 2024.

The decrease in cash used in operating activities during the First Quarter 2025 was primarily the result of a smaller increase in our inventory balance compared to the First Quarter 2024, as we continue to scale our inventory levels, in addition to the paydown of past due accounts payable balances in the prior year that existed at the end of fiscal year 2023.

Cash used in investing activities was $3.4 million during the First Quarter 2025, compared to $4.7 million during the First Quarter 2024, driven by lower capital expenditures.

Cash provided by financing activities was $42.3 million during the First Quarter 2025, compared to $114.9 million during the First Quarter 2024.

The decrease primarily resulted from proceeds received from the Mithaq Term Loans during the First Quarter 2024, partially offset by the net cash proceeds received from the Rights Offering completed during the First Quarter 2025.

Cash used in operating activities was $73.4 million during Year-To-Date 2025, compared to $194.7 million during Year-To-Date 2024.

The decrease in cash used in operating activities during Year-To-Date 2025 was primarily the result of a smaller increase in our inventory balance compared to Year-To-Date 2024, as we continue to scale our inventory levels.

Cash used in investing activities was $4.8 million during Year-To-Date 2025, compared to $12.5 million during Year-To-Date 2024, driven by lower capital expenditures.

Cash provided by financing activities was $77.8 million during Year-To-Date 2025, compared to $203.7 million during Year-To-Date 2024.

The decrease primarily resulted from proceeds received from the Mithaq Term Loans during Fiscal 2024 and lower net borrowings on our ABL Credit Facility, partially offset by the net cash proceeds received from the Rights Offering completed during Fiscal 2025.

Our ability to continue to meet our capital requirements in Fiscal 2025 depends on our cash on hand, our ability to generate cash flows from operations, and available borrowings under our ABL Credit Facility and Mithaq Credit Facility.

2 unchanged sentences

Selected Consolidated Balance Sheets Data

Certain components of our Consolidated Balance Sheets as of May 3, 2025, February 1, 2025, and May 4, 2024 were as follows:

Certain components of our Consolidated Balance Sheets as of August 2, 2025, February 1, 2025, and August 3, 2024 were as follows:

2025 February 1,

2025 August 3,

(in thousands)

2 unchanged sentences

Accounts payable 132,436 126,716 215,793

Accounts receivable were $41.3 million as of May 3, 2025, compared to $28.3 million as of May 4, 2024 and $42.7 million as of February 1, 2025.

The increase of $13.1 million, or 46.1%, compared to May 4, 2024 was primarily driven by an increase in wholesale revenue during the First Quarter 2025.

There was no significant change in balance compared to February 1, 2025.

Inventories were $422.2 million as of May 3, 2025, compared to $425.2 million as of May 4, 2024 and $399.6 million as of February 1, 2025, representing a decrease of $3.0 million, or 0.7% compared to May 4, 2024 and an increase of $22.6 million, or 5.7%, compared to February 1, 2025, as a result of a shift in our product strategy, as we better balance the mix of fashion and basic product, combined with the impacts of lower conversion.

Accounts payable were $131.4 million as of May 3, 2025, compared to $193.1 million as of May 4, 2024 and $126.7 million as of February 1, 2025.

The decrease of $61.7 million, or 32.0%, compared to May 4, 2024 was primarily the result of paying down past due vendors that existed at the end of the First Quarter 2024.

Accounts receivable were $54.4 million as of August 2, 2025, compared to $61.9 million as of August 3, 2024 and $42.7 million as of February 1, 2025.

The decrease of $7.6 million, or 12.2%, compared to August 3, 2024 was primarily driven by a decrease in wholesale receivables.

The increase of $11.7 million, or 27.3%, compared to February 1, 2025 was primarily driven by an increase in credit card receivables, in line with the seasonality of our business.

Inventories were $442.7 million as of August 2, 2025, compared to $520.6 million as of August 3, 2024 and $399.6 million as of February 1, 2025.

The decrease of $77.9 million, or 15.0% compared to August 3, 2024 was primarily driven by improved inventory management as we continue to align our inventory levels with our growth and product strategy, and better balance the mix of fashion and basic product.

The increase of $43.1 million, or 10.8%, compared to February 1, 2025 was primarily driven by a higher number of units on hand, as we build inventory levels for back-to-school and holiday season.

Accounts payable were $132.4 million as of August 2, 2025, compared to $215.8 million as of August 3, 2024 and $126.7 million as of February 1, 2025.

The decrease of $83.4 million, or 38.6%, compared to August 3, 2024 was primarily the result of lower inventory purchases and paying down past due vendors that existed at the end of the Second Quarter 2024.

There was no significant change in balance compared to February 1, 2025.

3 unchanged sentences

As of April 18, 2024, which is the effective date of the seventh amendment to the Credit Agreement (the “Seventh Amendment”), the ABL Credit Facility includes a $25.0 million Canadian sublimit and a $25.0 million sublimit for standby and documentary letters of credit.

Under the ABL Credit Facility, prior to February 4, 2025, borrowings outstanding bore interest, at our option, at:

(i) the prime rate per annum, plus a margin of 2.000%;

(ii) the Secured Overnight Financing Rate (“SOFR”) per annum, plus 0.100%, plus a margin of 3.000%.

From and after February 4, 2025 and on the first day of each fiscal quarter thereafter, based on the amount of our average daily excess availability under the facility, borrowings outstanding under the ABL Credit Facility bear interest, at our option, at:

(i) the prime rate per annum, plus a margin of 1.750% or 2.000%;

(ii) the SOFR per annum, plus 0.100%, plus a margin of 2.750% or 3.000%.

(ii) the Secured Overnight Financing Rate (“SOFR”) per annum, plus 0.100%, plus a margin of 2.750% or 3.000%.

As of April 18, 2024, based on the size of the unused portion of the commitments, we are charged a fee ranging from 0.250% to 0.375%.

Prior to February 4, 2025, letter of credit fees were at 1.125% for commercial letters of credit and 1.750% for standby letters of credit.

As of February 4, 2025, letter of credit fees range from 1.000% to 1.125% for commercial letters of credit and range from 1.500% to 1.750% for standby letters of credit.

1 unchanged sentence

The amount available for loans and letters of credit under the ABL Credit Facility is determined by a borrowing base consisting of certain credit card receivables, certain trade receivables, certain inventory, and the fair market value of certain real estate, subject to certain reserves and an availability block.

For the First Quarter 2025 and First Quarter 2024, we recognized $4.8 million and $5.7 million, respectively, in interest expense related to the ABL Credit Facility.

For the Second Quarter 2025 and Year-To-Date 2025, the Company recognized $5.4 million and $10.2 million, respectively, in interest expense related to the ABL Credit Facility.

For the Second Quarter 2024 and Year-To-Date 2024, the Company recognized $6.3 million and $12.0 million, respectively, in interest expense related to the ABL Credit Facility.

As of April 18, 2024, credit extended under the ABL Credit Facility is secured by a first priority security interest in substantially all of our U.S.

7 unchanged sentences

The ABL Credit Facility contains customary events of default, which include (subject in certain cases to customary grace and cure periods) nonpayment of principal or interest, breach of covenants, failure to pay certain other indebtedness, and certain events of bankruptcy, insolvency or reorganization, such as a change of control.

As of May 3, 2025, February 1, 2025, and May 4, 2024, unamortized deferred financing costs amounted to $3.3 million, $3.8 million, and $2.9 million, related to our ABL Credit Facility.

As of August 2, 2025, February 1, 2025, and August 3, 2024, unamortized deferred financing costs amounted to $2.7 million, $3.8 million, and $2.4 million, related to the Company’s ABL Credit Facility.

The tables below present the components of our ABL Credit Facility:

2025 February 1,

2025 August 3,

(in millions)

16 unchanged sentences

(1) The lower of the credit facility availability and the total borrowing base availability.

(2) The sub-limit availability for letters of credit was $6.8 million as of May 3, 2025, $9.0 million at February 1, 2025, and $12.8 million as of May 4, 2024.

(2) The sub-limit availability for letters of credit was $6.8 million as of August 2, 2025, $9.0 million at February 1, 2025, and $12.8 million as of August 3, 2024.

Mithaq Term Loans

1 unchanged sentence

The Company and certain subsidiaries maintain the interest-free, unsecured and subordinated promissory note for a $78.6 million Initial Mithaq Term Loan, dated February 29, 2024, by and among us, certain of our subsidiaries, and Mithaq.

During the First Quarter 2025, $60.2 million under the Initial Mithaq Term Loan was repaid pursuant to the completion of our rights offering on February 6, 2025 (“Rights Offering”), leaving $18.4 million outstanding under the Initial Mithaq Term Loan as of May 3, 2025.

We recorded a loss on extinguishment of debt of $1.0 million during the First Quarter 2025, due to this partial prepayment of the Initial Mithaq Term Loan, which is recorded within Other interest expense.

During the first quarter of Fiscal 2025, $60.2 million under the Initial Mithaq Term Loan was repaid pursuant to the completion of our rights offering on February 6, 2025 (“Rights Offering”), leaving $18.4 million outstanding under the Initial Mithaq Term Loan as of August 2, 2025.

The Initial Mithaq Term Loan matures on February 15, 2027 and is guaranteed by each of our subsidiaries that guarantee our ABL Credit Facility.

3 unchanged sentences

1 to the New Mithaq Term Loan promissory note, which subjected these deferred monthly payments due as of April 30, 2025 to a payment plan, payable in installments prior to the end of Fiscal 2025.

The amendment was evaluated under FASB ASC 470 — Debt , and accounted for as a debt modification.

The New Mithaq Term Loan is guaranteed by each of our subsidiaries that guarantee our ABL Credit Facility.

For the First Quarter 2025 and First Quarter 2024, we recognized $1.9 million and $0.4 million, respectively, in interest-equivalent expense related to the New Mithaq Term Loan.

As of May 3, 2025 and May 4, 2024, interest-equivalent expense payable to Mithaq was $8.4 million and $0.4 million, respectively, which is recorded within Accrued expenses and other current liabilities.

For the Second Quarter 2025 and Year-To-Date 2025, the Company recognized $1.9 million and $3.7 million, respectively, in interest-equivalent expense related to the New Mithaq Term Loan.

For the Second Quarter 2024 and Year-To-Date 2024, the Company recognized $2.1 million and $2.5 million, respectively, in interest-equivalent expense related to the New Mithaq Term Loan.

During the Second Quarter 2025, the Company paid $3.3 million in interest-equivalent charges to Mithaq.

These payments were made in the form of Murabaha transactions to be compliant with Shariah law.

The purchase and sale of commodities as a result of these transactions have been accounted for in accordance with FASB ASC 610 — Other income , and presented on a net basis within Related party interest expense.

As of August 2, 2025, February 1, 2025, and August 3, 2024, interest-equivalent expense payable to Mithaq was $7.0 million, $6.5 million, and $2.5 million, respectively, which is recorded within Accrued expenses and other current liabilities.

The Mithaq Term Loans are subject to an amended and restated subordination agreement (as amended from time to time, the “Subordination Agreement”), dated as of April 16, 2024, by and among the Company and certain subsidiaries, Wells Fargo and Mithaq, pursuant to which the Mithaq Term Loans are subordinated in payment priority to our obligations and our subsidiaries’ obligations under the Credit Agreement.

3 unchanged sentences

The Mithaq Term Loans contain certain customary events of default, which include (subject in certain cases to customary grace periods), nonpayment of principal, breach of other covenants of the Mithaq Term Loans, inaccuracy in representations or warranties, acceleration of certain other indebtedness (including under the Credit Agreement), certain events of bankruptcy, insolvency or reorganization, such as a change of control, and invalidity of any part of the Mithaq Term Loans.

As of May 3, 2025, February 1, 2025, and May 4, 2024, unamortized deferred financing costs amounted to $1.4 million, $2.6 million, and $2.0 million, respectively, related to the Mithaq Term Loans.

Maturities of our principal debt payments on the Mithaq Term Loans as of May 3, 2025 are as follows:

As of August 2, 2025, February 1, 2025, and August 3, 2024, unamortized deferred financing costs amounted to $1.2 million, $2.6 million, and $3.2 million, respectively, related to the Mithaq Term Loans.

Maturities of our principal debt payments on the Mithaq Term Loans as of August 2, 2025 are as follows:

August 2, 2025

(in thousands)

6 unchanged sentences

1 to the Commitment Letter with Mithaq, that extended the deadline for requesting advances until July 1, 2026.

On September 4, 2025, the Company and Mithaq entered into an Amendment No.

2 to the Commitment Letter, that further extended the deadline for requesting advances until July 1, 2027.

If any debt is incurred under the Mithaq Credit Facility, it shall require monthly payments equivalent to interest charged at the SOFR plus 5.000% per annum.

2 unchanged sentences

Additionally, such debt shall require no mandatory prepayments and shall mature no earlier than July 1, 2027.

As of May 3, 2025, no debt had been incurred under the Mithaq Credit Facility.

As of August 2, 2025, no debt had been incurred under the Mithaq Credit Facility.

SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES

14 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis