What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-12-16 compared with 2025-09-05 · 138 added, 121 removed, 268 unchanged (49% 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:

• 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

• Third Quarter 2025 — The thirteen weeks ended November 1, 2025

• Third Quarter 2024 — The thirteen weeks ended November 2, 2024

• Year-To-Date 2025 — The thirty-nine weeks ended November 1, 2025

• Year-To-Date 2024 — The thirty-nine weeks ended November 2, 2024

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

6 unchanged sentences

GAAP for SEC registrants

• AUR — Average unit retail price

• Comparable Retail Sales — Net sales from stores that have been open for at least 14 consecutive months and from our e-commerce store, excluding postage and handling fees.

5 unchanged sentences

• SG&A — Selling, general, and administrative expenses

We are the largest pure-play children’s specialty retailer in North America with an omni-channel portfolio of brands and an industry-leading digital-first model.

We are one of the only pure-play children’s specialty retailer in North America with an omni-channel portfolio of brands and an industry-leading digital-first model.

We design, contract to manufacture, and sell fashionable, high quality apparel, accessories and footwear predominantly at value prices, primarily under our proprietary brands:

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

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.

Our global retail and wholesale network includes two digital storefronts, 499 stores in North America, wholesale marketplaces, 227 international points of distribution in 12 countries through our nine 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, as well as certain exclusive merchandise offered only on our e-commerce sites.

Segment Reporting

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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 Second Quarter 2025 and Year-To-Date 2025.

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

Recent Developments

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.

During the Third 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 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.

government imposed tariffs on certain goods imported from other countries into the United States.

Based on the current environment, we are projecting the impact of tariffs to result in incremental expenses of approximately $15 million to $20 million for Fiscal 2025, and an additional impact of $25 million to $30 million in the first half of fiscal year 2026.

We have developed plans to mitigate a majority of the effects of these tariffs through a range of strategic initiatives, including pricing strategies, the establishment of stronger vendor partnerships, and improvements in inbound ocean rates.

Additionally, our diversified sourcing strategies include efforts to ensure that 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 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, 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.

We have commenced the implementation of our transformation efforts, and we are increasing the estimate of our expected gross benefits from $40 million to $50 million over the next three years.

These efforts are focused on reducing unnecessary corporate office costs, optimizing our distribution network, and rightsizing non-merchandise and third-party spending.

In addition, these expense savings will further support our changing business model, including our strategic shift from closing stores to opening stores instead.

We have already implemented actions which are expected to realize gross benefits of over $25 million on an annualized basis.

We expect to incur certain one-time costs for these transformation efforts, amounting to approximately $5 million to $10 million.

During the Third Quarter 2025, we revamped our My Place Rewards loyalty program to deliver more personalized connections, rewards, and elevated experiences to our customers.

Some of the key elements of the program include (i) tiered memberships, which offer members more ways to earn, unlock, and level-up benefits, (ii) earning points, bonuses, and exclusive incentives with every purchase, (iii) members-only perks, including VIP events, early collection access, and faster order processing, (iv) family-centered benefits such as birthday discounts, and (v) enhanced convenience, such as free gift-wrapping kits and the ability to redeem points at the member’s own discretion over a 12 month period.

The launch of our new loyalty program is expected to drive customer acquisition and retention.

On December 16, 2025, we completed the refinancing of our asset-based revolving credit facility (the “ABL Credit Facility”) with Wells Fargo by entering into an eighth amendment (the “Eighth Amendment”) to our credit agreement.

Among other things, the Eighth Amendment (i) reduced the ABL Credit Facility to $350.0 million and Wells Fargo became the sole lender party thereto, (ii) increased the sublimit for standby and documentary letters of credit to $30.0 million, (iii) lowered the interest rates, (iv) reconfigured the collateral package for the ABL Credit Facility, and (v) implemented a new minimum excess availability covenant that limits the maximum amount of borrowings that we may make under the ABL Credit Facility.

Also on December 16, 2025, we entered into a term loan agreement (the “SLR Loan Agreement”) with SLR Credit Solutions for a $100.0 million (the “SLR Term Loan”).

The SLR Term Loan (i) matures on the earlier of December 16, 2030, or the maturity date under the ABL Credit Facility, (ii) bears interest, payable monthly, (a) until June 16, 2026, at the SOFR per annum plus 5.250% for any portion that is a SOFR loan, or at the base rate per annum plus 4.250% for any portion that is a base rate loan;

or (b) from and after June 17, 2026, at the SOFR per annum plus 5.250% or 6.250% for any portion that is a SOFR loan, or at the base rate per annum plus 4.250% or 5.250% for any portion that is a base rate loan, based on our consolidated fixed charge coverage ratio for the trailing twelve-month period as of the most recent fiscal quarter just ended.

The SLR Term Loan is, in whole or in part, pre-payable any time and from time to time, subject to certain prepayment premiums specified in the SLR Loan Agreement, plus accrued and unpaid interest.

We used the net proceeds from the SLR Term Loan to partially pay down our borrowings under the ABL Credit Facility.

Pursuant to our refinancing transactions described above, both term loans issued by our majority shareholder, Mithaq Capital SPC (“Mithaq”), were amended to extend their maturity dates to April 16, 2031, and our credit facility under Mithaq was also amended to extend our deadline for requesting advances until December 16, 2030.

Our second term loan with Mithaq was also amended to allow us to defer our monthly payments upon written notice to Mithaq, and as an amendment consent fee, its principal amount was increased by $2.7 million to $92.7 million.

Pillar Two Model Rules

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Although the U.S.

has not yet implemented the Pillar Two rules, other regions where we conduct business, primarily Hong Kong and Canada, have enacted such legislation.

has not implemented the Pillar Two rules, other regions where we conduct business, primarily Hong Kong and Canada, have enacted such legislation.

The implementation of the Pillar Two rules in each jurisdiction in which it operates is not expected to have a material impact on our effective tax rate.

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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

Third Quarter 2025 Compared to Third Quarter 2024

Thirteen Weeks Ended Thirteen Weeks Ended Variance

2025 % of Net Sales August 3,

2025 % of Net Sales November 2,

2024 % of Net Sales $ % % of Net Sales

5 unchanged sentences

Depreciation and amortization 7,334 2.2 % 9,266 2.4 % 1,932 20.9 % 0.2 %

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 %

Operating income 3,669 1.1 % 29,258 7.5 % (25,589) (87.5) % (6.4) %

Related party interest expense (1,869) (0.6) % (2,078) (0.5) % 209 10.1 % (0.1) %

Other interest expense, net (6,252) (1.8) % (8,000) (2.1) % 1,748 21.9 % 0.3 %

Loss before provision for income taxes (3,912) (1.3) % (31,007) (9.7) % 27,095 87.4 % 8.4 %

Provision for income taxes 1,453 0.5 % 1,107 0.3 % (346) (31.3) % (0.2) %

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

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.

Income (loss) before benefit for income taxes (4,452) (1.3) % 19,180 4.9 % (23,632) (123.2) % (6.2) %

Benefit for income taxes (132) — % (900) (0.2) % (768) (85.3) % (0.2) %

Net income (loss) $ (4,320) (1.3) % $ 20,080 5.1 % $ (24,400) (121.5) % (6.4) %

Net sales decreased $50.7 million, or 13.0%, to $339.5 million during the Third Quarter 2025 from $390.2 million during the Third Quarter 2024, driven by a decrease in wholesale revenue due to lower order commitments as a result of higher purchases earlier in the fiscal year, and a decrease in e-commerce sales due to lower traffic and conversion compared to the Third Quarter 2024, in addition to challenges we experienced with transitioning to a new marketing agency during the Third Quarter 2025.

Comparable retail sales decreased 5.4% for the Third Quarter 2025.

Gross profit decreased $26.0 million to $112.3 million during the Third Quarter 2025, compared to $138.3 million during the Third Quarter 2024.

Gross margin decreased 240 basis points to 33.1% of Net sales in the Third Quarter 2025, compared to 35.5% of Net sales in the Third Quarter 2024.

The decrease in gross margin was caused by a higher penetration of markdown sales (200 basis points), the impact of higher tariffs on our product (55 basis points), and an increase in inventory reserves (50 basis points), partially offset by favorable channel and product mix.

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 $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.

Selling, general, and administrative expenses were $101.3 million during the Third Quarter 2025, compared to $99.8 million during the Third Quarter 2024 .

The increase was primarily due to an increase in marketing expenses as we ramped up our spend towards the end of Third Quarter 2025 to drive incremental e-commerce demand, expenses incurred to revamp our My Place Rewards loyalty program, costs to support our new stores strategy, and an increase in donations as we further develop our inventory lifecycle process, partially offset by one-time costs incurred in the prior year.

The Third Quarter 2025 results included incremental operating expenses of $0.3 million in restructuring costs.

The Third Quarter 2024 results included incremental operating expenses of $6.0 million, including restructuring costs of $4.8 million, primarily due to changes in our senior leadership team, lender-required consulting fees of $0.5 million, broken financing deal fees of $0.3 million, other professional and consulting fees of $0.2 million, and fleet optimization costs of $0.1 million.

Excluding the impact of these incremental charges, Adjusted SG&A expenses were $101.0 million during the Third Quarter 2025, compared to $93.8 million during the Third Quarter 2024, and deleveraged 570 basis points to 29.7% of Net sales.

Depreciation and amortization was $7.3 million during the Third Quarter 2025, compared to $9.3 million during the Third Quarter 2024.

The decrease was primarily driven by reduced depreciation of capitalized software and the permanent closure of 18 stores during the past twelve months, partially offset by seven store openings.

There were no Asset impairment charges during the Third Quarter 2025 and Third Quarter 2024.

Operating income was $3.7 million during the Third Quarter 2025, compared to $29.3 million during the Third Quarter 2024.

The Third Quarter 2025 results were impacted by incremental operating expenses of $0.3 million, as described within SG&A expenses above.

The Third Quarter 2024 results were impacted by incremental operating expenses, including SG&A expenses of $6.0 million, as described above.

Excluding the impact of these incremental charges, Adjusted operating income was $4.0 million in the Third Quarter 2025, compared to $35.3 million in the Third Quarter 2024, and deleveraged 780 basis points to 1.2% of Net sales.

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

Other interest expense, net was $6.3 million during the Third Quarter 2025, compared to $8.0 million during the Third Quarter 2024.

The decrease in interest expense was primarily driven by lower average borrowings and interest rates on our ABL Credit Facility.

Benefit for income taxes was $(0.1) million during the Third Quarter 2025, compared to $(0.9) million during the Third Quarter 2024.

Our effective tax rate was 3.0% and (4.7)% in the Third Quarter 2025 and Third Quarter 2024, respectively.

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

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.

Net income (loss) was a loss of $(4.3) million, or $(0.19) per diluted share, during the Third Quarter 2025, compared to income of $20.1 million, or $1.57 per diluted share, during the Third Quarter 2024, due to the factors discussed above.

Adjusted net loss was $(4.0) million, or $(0.18) per diluted share during the Third Quarter 2025, compared to Adjusted net income of $26.1 million, or $2.04 per diluted share, during the Third 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,

2025 November 2,

(in thousands)

10 unchanged sentences

The Children’s Place U.S.

2.3 % (6.7) %

The Children’s Place International (1)

2 unchanged sentences

___________________________________________

(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.

(1) Our 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.

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

Net sales decreased $48.8 million, or 13.7%, to $307.4 million during the Third Quarter 2025, compared to $356.2 million during the Third Quarter 2024 , driven by a decrease in wholesale revenue due to lower order commitments as a result of higher purchases earlier in the fiscal year, and a decrease in e-commerce sales due to lower traffic and conversion compared to the Third Quarter 2024, in addition to challenges we experienced with transitioning to a new marketing agency during the Third Quarter 2025.

The Children’s Place International Net sales decreased $1.9 million, or 5.6%, to $32.1 million during the Third Quarter 2025, compared to $34.0 million during the Third Quarter 2024 , driven by a decrease in e-commerce sales due to lower traffic.

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.

Operating income was $9.0 million during the Third Quarter 2025, compared to $28.1 million during the Third Quarter 2024, primarily due to lower net sales, as described above.

The Children’s Place International Operating loss was $(5.3) million during the Third Quarter 2025, compared to operating income of $1.1 million during the Third Quarter 2024, primarily due to liquidation sales on certain inventory which negatively impacted our margins.

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,

Thirty-nine Weeks Ended Thirty-nine Weeks Ended Variance

2025 % of Net Sales November 2,

2024 % of Net Sales $ % % of Net Sales

13 unchanged sentences

Net sales decreased $98.1 million, or 10.0%, to $879.6 million during Year-To-Date 2025 from $977.7 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.

We also experienced a decrease in brick-and-mortar revenue due to a lower store count and lower sales volume, particularly in the first half of the fiscal year.

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

We also experienced a decrease in wholesale revenue as we shifted our strategy towards selling higher margin product to improve profitability.

Comparable retail sales decreased 7.5% during Year-To-Date 2025.

1 unchanged sentence

Gross margin decreased 280 basis points to 32.3% of Net sales during Year-To-Date 2025, compared to 35.1% 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.

The decrease in gross margin was caused primarily by a higher penetration of markdown sales (140 basis points), an increase in inventory reserves (110 basis points), and the impact of higher tariffs on our product (50 basis points).

Selling, general, and administrative expenses were $277.6 million during Year-To-Date 2025 , compared to $305.0 million during Year-To-Date 2024.

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The Year-To-Date 2025 results included incremental operating expenses of $2.4 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.

The Year-To-Date 2024 results included incremental operating expenses, including restructuring costs of $11.2 million, primarily due to changes in our senior leadership team, non-cash equity compensation charges of $9.9 million and other fees of $3.8 million associated with the change of control, financing-related charges of $7.0 million, lender-required consulting fees of $2.4 million, fleet optimization costs of $0.9 million, costs associated with the closure of our Canada distribution center of $0.8 million, and other professional and consulting fees of $0.6 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 $275.1 million during Year-To-Date 2025, compared to $270.8 million during Year-To-Date 2024, and deleveraged 360 basis points to 31.3% of Net sales.

Depreciation and amortization was $23.1 million during Year-To-Date 2025, compared to $30.4 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.

The decrease was primarily driven by reduced depreciation of capitalized software and the permanent closure of 18 stores during the past twelve months, partially offset by seven 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.

6 unchanged sentences

Other interest expense, net was $19.1 million during Year-To-Date 2025, compared to $22.5 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”).

The decrease in interest expense was primarily driven by lower average borrowings and 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 $2.7 million during Year-To-Date 2025, compared to $2.3 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.

Our effective tax rate was (6.5)% 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 $(43.7) million, or $(1.99) per diluted share, during Year-To-Date 2025, compared to $(49.8) million, or $(3.91) 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.

Adjusted net loss was $(40.2) million, or $(1.83) per diluted share during Year-To-Date 2025, compared to Adjusted net income of $15.1 million, or $1.18 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,

Thirty-nine Weeks Ended

2025 November 2,

(in thousands)

15 unchanged sentences

___________________________________________

(1) Our 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 $92.3 million, or 10.3%, to $802.4 million during Year-To-Date 2025, compared to $894.7 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.

We also experienced a decrease in brick-and-mortar revenue due to a lower store count and lower sales volume, particularly in the first half of the fiscal year.

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

We also experienced a decrease in wholesale revenue as we shifted our strategy towards selling higher margin product to improve profitability.

The Children’s Place International Net sales decreased $5.8 million, or 7.0%, to $77.2 million during Year-To-Date 2025, compared to $83.0 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.

We also experienced a decrease in brick-and-mortar revenue due to a lower store count and lower sales volume, particularly in the first half of the fiscal year.

The Children’s Place U.S.

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The Children’s Place U.S.

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.

operating margin improved during Year-To-Date 2025, primarily due to the impairment charge on the Gymboree tradename during Year-To-Date 2024, partially offset by lower net sales, as described above.

The Children’s Place International Operating loss was $(11.9) million during Year-To-Date 2025, compared to $(5.0) million during Year-To-Date 2024, primarily due to liquidation sales on certain inventory which negatively impacted our margins.

LIQUIDITY AND CAPITAL RESOURCES

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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 August 2, 2025.

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.

As of November 1, 2025, we had $297.2 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”).

On December 16, 2025, we completed our refinancing of the ABL Credit Facility which, among other things, reduced the ABL Credit Facility to $350.0 million.

At the same time, the Company and certain subsidiaries entered into the SLR Loan Agreement with SLR for a $100.0 million SLR Term Loan, and we used the net proceeds to partially pay down our borrowings under the ABL Credit Facility.

Our working capital deficit decreased $3.8 million to $42.5 million as of November 1, 2025, compared to $46.3 million as of November 2, 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 November 1, 2025, we had total liquidity of $93.4 million, including $46.1 million of availability under our ABL Credit Facility, $40.0 million of availability under our Mithaq Credit Facility, and $7.3 million of cash on hand.

As of November 1, 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.

As of November 1, 2025, we would have increased our liquidity by $35 million to $40 million, bringing our total liquidity to $128 million to $133 million on a proforma basis had the refinancing of the ABL Credit Facility and SLR Term Loan issuance been completed as of that date.

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 Third 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

In November 2021, our Board of Directors (the “Board”) authorized a $250.0 million share repurchase program (the “Share Repurchase Program”).

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.

Currently, given the terms of our credit agreement with Wells Fargo as its administrative agent, 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’ 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.

As of November 1, 2025, there was $156.1 million remaining availability under the Share Repurchase Program.

Cash Flows and Capital Expenditures

Cash used in operating activities was $67.2 million during Year-To-Date 2025, compared to $238.9 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.

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

Cash used in investing activities was $14.5 million during Year-To-Date 2025, compared to $15.9 million during Year-To-Date 2024, driven by lower capital expenditures.

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Selected Consolidated Balance Sheets Data

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

Certain components of our Consolidated Balance Sheets were as follows:

2025 February 1,

2025 August 3,

2025 November 2,

(in thousands)

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Accounts payable 86,151 126,716 125,912

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.

Accounts receivable were $43.4 million as of November 1, 2025, compared to $62.2 million as of November 2, 2024 and $42.7 million as of February 1, 2025.

The decrease of $18.8 million, or 30.2%, compared to November 2, 2024 was primarily driven by a decrease in wholesale receivables due to lower order commitments as a result of higher purchases earlier in the year.

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

Inventories were $390.3 million as of November 1, 2025, compared to $491.6 million as of November 2, 2024 and $399.6 million as of February 1, 2025.

The decrease of $101.3 million, or 20.6% compared to November 2, 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.

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

Accounts payable were $86.2 million as of November 1, 2025, compared to $125.9 million as of November 2, 2024 and $126.7 million as of February 1, 2025.

The decrease of $39.7 million, or 31.5%, compared to November 2, 2024, and the decrease of $40.5 million, or 32.0%, compared to February 1, 2025, was primarily the result of lower inventory purchases during Fiscal 2025 and better cash management.

ABL Credit Facility

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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 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.

For the Third Quarter 2025 and Year-To-Date 2025, we recognized $5.5 million and $15.7 million, respectively, in interest expense related to the ABL Credit Facility.

For the Third Quarter 2024 and Year-To-Date 2024, we recognized $7.1 million and $19.1 million, respectively, in interest expense related to the ABL Credit Facility.

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

and Canadian assets, including our intellectual property, certain furniture, fixtures, equipment, and pledges of subsidiary capital stock.

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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 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.

As of November 1, 2025, February 1, 2025, and November 2, 2024, unamortized deferred financing costs amounted to $2.2 million, $3.8 million, and $4.3 million, related to the ABL Credit Facility.

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

2025 February 1,

2025 August 3,

2025 November 2,

(in millions)

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____________________________________________

(1) Pursuant to our recent refinancing transactions, as of December 16, 2025, our credit facility availability will be subject to a new excess availability requirement.

(2) 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 August 2, 2025, $9.0 million at February 1, 2025, and $12.8 million as of August 3, 2024.

Pursuant to our recent refinancing transactions, as of December 16, 2025, our maximum borrowing availability is the lower of the credit facility availability, net of the new excess availability requirement, and the total borrowing base availability.

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

On December 16, 2025, we completed the refinancing of the ABL Credit Facility with Wells Fargo by entering into the Eighth Amendment.

At the same time, the Company and certain subsidiaries entered into the SLR Loan Agreement with SLR Credit Solutions for a $100.0 million SLR Term Loan and used the net proceeds to partially pay down our borrowings under the ABL Credit Facility.

Refer to “Recent Developments” above for further information.

Mithaq Term Loans

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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 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.

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

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.

For the Third Quarter 2025 and Year-To-Date 2025, we recognized $1.9 million and $5.6 million, respectively, in interest-equivalent expense related to the New Mithaq Term Loan.

For the Third Quarter 2024 and Year-To-Date 2024, we recognized $2.1 million and $4.6 million, respectively, in interest-equivalent expense related to the New Mithaq Term Loan.

Pursuant to our recent refinancing transactions, the Mithaq Term Loans were amended to extend both of their maturity dates to April 16, 2031.

The New Mithaq Term Loan was also amended to allow us to defer our monthly payments upon written notice to Mithaq, and as an amendment consent fee, its principal amount was increased by $2.7 million to $92.7 million.

During the Third Quarter 2025 and Year-To-Date 2025, we paid $3.3 million and $6.6 million, respectively, 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.

As of November 1, 2025, February 1, 2025, and November 2, 2024, interest-equivalent expense payable to Mithaq was $5.5 million, $6.5 million, and $4.6 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 “Mithaq 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.

Pursuant to our recent refinancing transactions, the Mithaq Term Loans are also subordinated in payment priority to our obligations and our subsidiaries’ obligations under the SLR Term Loan.

Subject to such subordination terms, the Mithaq Term Loans are prepayable at any time and from time to time without penalty and do not require any mandatory prepayments.

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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 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

As of November 1, 2025, February 1, 2025, and November 2, 2024, unamortized deferred financing costs amounted to $1.0 million, $2.6 million, and $2.9 million, respectively, related to the Mithaq Term Loans.

Maturities of our principal debt payments on the Mithaq Term Loans as of November 1, 2025 are as follows:

November 1, 2025

(in thousands)

Remainder of 2025

Thereafter (1)

Total related party debt

____________________________________________

(1) Pursuant to our recent refinancing transactions, the Mithaq Term Loans were amended to extend both of their maturity dates to April 16, 2031.

Mithaq Commitment Letter

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Such debt shall be unsecured and shall be guaranteed by each of our subsidiaries that guarantee our ABL Credit Facility.

Similar to the Mithaq Term Loans, such debt shall also be subject to the Subordination Agreement, contain customary affirmative and negative covenants substantially similar to a subset of the covenants set forth in the Credit Agreement, and contain certain customary events of default.

Similar to the Mithaq Term Loans, such debt shall also be subject to the Mithaq Subordination Agreement, contain customary affirmative and negative covenants substantially similar to a subset of the covenants set forth in the Credit Agreement, and contain certain customary events of default.

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

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

As of November 1, 2025, no debt had been incurred under the Mithaq Credit Facility.

Pursuant to our recent refinancing transactions, the Mithaq Credit Facility was further amended to extend the deadline for requesting advances until December 16, 2030, and the rate for any monthly payments for borrowings equivalent to interest charged was increased to the SOFR plus 9.000% per annum.

SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES

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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