Item 1. Business
ITEM 1. BUSINESS.
As used in this Annual Report on Form 10-K, references to the “Company”, “The Children’s Place”, “we”, “us”, “our”, and similar terms refer to The Children's Place, Inc. and its subsidiaries. Our fiscal year ends on the Saturday on or nearest to January 31. Other terms that are commonly used in this Annual Report on Form 10-K are defined as follows:
• Fiscal 2025 — The fifty-two weeks ending January 31, 2026
• Fiscal 2024 — The fifty-two weeks ended February 1, 2025
• Fiscal 2023 — The fifty-three weeks ended February 3, 2024
• Fiscal 2022 — The fifty-two weeks ended January 28, 2023
• SEC — U.S. Securities and Exchange Commission
• U.S. GAAP — Generally Accepted Accounting Principles in the United States
• FASB — Financial Accounting Standards Board
• FASB ASC — FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP, except that rules and interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC registrants
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• Comparable Retail Sales — Net sales, in constant currency, from stores that have been open for at least 14 consecutive months and from our e-commerce store, excluding postage and handling fees. Store closures in the current fiscal year will be excluded from Comparable Retail Sales beginning in the fiscal quarter in which the store closes. A store that is closed for a substantial remodel, relocation, or material change in size will be excluded from Comparable Retail Sales for at least 14 months beginning in the fiscal quarter in which the closure occurred. However, stores that temporarily close will be excluded from Comparable Retail Sales until the store is re-opened for a full fiscal month
General
The Children’s Place, Inc. and its subsidiaries (collectively, the “Company”) is the largest pure-play children’s specialty retailer in North America with an omni-channel portfolio of brands. 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, 495 stores in North America, wholesale marketplaces, 190 international points of distribution in 13 countries through six international franchise partners, and social media channels on Instagram, Facebook, X, formerly known as Twitter, YouTube and Pinterest. Our physical stores offer a friendly and convenient shopping environment, segmented into departments that serve the wardrobe needs of girls and boys (sizes 4-18), toddler girls and boys (sizes 6 months-5T), and baby (sizes 0-24 months). 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.
The Children’s Place was founded in 1969. The Company became publicly traded on the Nasdaq Global Select Market in 1997. During Fiscal 2024, Mithaq Capital SPC, a Cayman segregated portfolio company (“Mithaq”), acquired more than 50% of The Children’s Place, Inc.’s outstanding shares of common stock and became a controlling shareholder of the Company.
As part of the Company’s business strategy in this ever-evolving retail environment, our senior management team has established several key priorities:
1. Superior Product - Product remains our number one priority. We are focused on providing the right product, in the right channels of distribution, at the right time. We offer a full line of apparel, footwear and accessories so busy moms can quickly and easily put together head-to-toe outfits. Our design, merchandising, sourcing, and planning teams strive to ensure that our product is trend-right, while at the same time balancing fashion and fashion basics with more frequent, wear-now deliveries. We reintroduced the Gymboree brand in February 2020 on an enhanced Gymboree website and in November 2024, we opened our first Gymboree stand-alone store at Garden State Plaza in Paramus, New Jersey. We also launched the Sugar & Jade brand in November 2021 which is targeted at the girls’ “tween” market and is offered exclusively online, and launched the PJ Place brand in October 2022, which is a sleepwear lifestyle brand targeted towards millennial and Gen Z customers, and is offered exclusively online. We are focused on optimizing our assortment and purchasing inventory at levels which will drive margin growth.
2. Digital Expansion - Our digital capabilities continue to expand with the development of completely redesigned responsive sites and mobile applications, providing an online shopping experience geared toward the needs of our “on-the-go” customers with expanded customer personalization, which delivers unique, relevant content designed to drive sales, loyalty and retention, and the ability to have our entire store fleet equipped with ship-from-store capabilities.
3. Omni-Channel Customer Experience - We continue to transform our omni-channel experience by making shopping even more effortless, accessible and exciting to our customers through our brick-and-mortar retail channel, our digital presence, and our wholesale channels. We have a renewed focus on our store portfolio and are exploring opportunities for expanding and refurbishing our current fleet and strengthening our landlord relationships. Our wholesale business includes our relationship with Amazon, which is an important customer acquisition vehicle. We are exploring opportunities to expand our wholesale relationships and identify opportunities with licensing partners and new revenue streams that can drive further revenue growth and profitability. We have 190 international points of distribution (stores, shop-in-shops, e-commerce sites) with six international franchise partners operating in 13 countries. We generate revenues from our franchisees from the sale of products and sales royalties.
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In addition to the above discussed key priorities, we will continue to transform our marketing strategies to better position us to maximize our interactions with our younger, digitally savvy core millennial and Gen Z customers, and to support top-line opportunity by increasing new customer acquisition, increasing customer retention and loyalty, and significantly increasing customer lifetime value. We have refined our approach so as to eliminate previously inflated and unprofitable marketing costs. Our marketing transformation includes strategic investments across key areas of the marketing organization: our teams – both internal and external, our research and processes, and implementation of new, state-of-the-art, marketing tools and systems. We are confident in our ability to conceptualize, build, deploy and optimize fully integrated creative marketing strategies paired with a robust media mix, aimed to reach, inspire and convert our shoppers at every stage of their purchase journey with The Children’s Place family of brands, comprised of “The Children’s Place”, “Gymboree”, “Sugar & Jade”, and “PJ Place” ( “ Family of Brands”), and continue to position marketing as a key growth lever in Fiscal 2025 and beyond.
Overlaying these strategic initiatives is talent. Talent ultimately defines our success, and we have built a best-in-class management team. We believe that our talented team is a significant competitive advantage for our Company.
Underlying these growth initiatives is a commitment to operational excellence. The Company’s commitment to operational excellence includes disciplined expense management and a focus on ongoing improvement in store and e-commerce operations, and combined with our finance, human resources, compliance and legal areas, form the strong base necessary to support our long-term growth initiatives.
Segment Reporting
We report segment data based on geography: The Children’s Place U.S. and The Children’s Place International. Each segment includes an e-commerce business located at www.childrensplace.com and www.gymboree.com. Included in The Children’s Place U.S. segment are our U.S. and Puerto Rico-based stores and revenue from our U.S.-based wholesale business. Included in The Children’s Place International segment are our Canadian-based stores and revenue from international franchisees. We measure our segment profitability based on operating income (loss), defined as income (loss) before interest and taxes. Net sales and direct costs are recorded by each segment. Certain inventory procurement functions such as production and design, as well as corporate overhead, including executive management, finance, real estate, human resources, legal, and information technology services, are managed by The Children’s Place U.S. segment. Expenses related to these functions, including depreciation and amortization, are allocated to The Children’s Place International segment based primarily on net sales. The assets related to these functions are not allocated. We periodically review these allocations and adjust them based upon changes in business circumstances. 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.
See “Note 17. Segment Information” of the Consolidated Financial Statements, “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations,” and “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for further segment financial data.
Key Capabilities
Our objective is to sell fashionable, high-quality apparel, accessories and footwear predominately at value prices across our Family of Brands. Our merchandise assortment offers one stop shopping across apparel, footwear, and accessories.
Merchandising Strategy
Our merchandising strategy delivers a compelling and coordinated assortment of apparel, footwear, and accessories that encourage the purchase of head-to-toe outfits. We merchandise our deliveries by season and flow new product monthly.
High Quality and Value
We believe that offering high-quality apparel, accessories and footwear predominantly at value prices across our Family of Brands is a competitive advantage.
Brand Image
We focus on our brand image and strengthening our customer loyalty by:
• Consistently offering high quality and age-appropriate products and trend-right fashion predominantly at value prices online and in our stores;
• Providing coordinated outfits and accessories for our customers’ lifestyle needs;
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• Providing exclusive products on our e-commerce sites to expand the breadth of our offerings;
• Creating strong merchandising and visual presentations to create compelling online and in-store experiences;
• Emphasizing our great value fashion in marketing visuals to convey a consistent message across our brands;
• Leveraging our customer database to communicate with our customers and personalize communications to maximize customer satisfaction, engagement and retention;
• Utilizing our MyPLACE Loyalty Rewards program and private label credit card to drive customer engagement and retention; and
• Optimizing our fully integrated creative marketing strategies paired with a robust media mix, aimed to reach, inspire and convert our shoppers at every stage of their purchase journey with our Family of Brands .
Low-Cost Global Sourcing
We design, source, and contract to manufacture the substantial majority of the Company’s branded products. We believe that this is essential to assuring the consistency and quality of our merchandise, as well as our ability to deliver value to our customers. We have strong multi-year relationships with the substantial majority of our vendors. Through these relationships and our extensive knowledge of low cost sourcing on a global scale, we are able to offer our customers high-quality products at predominantly value prices. We maintain a network of sourcing offices globally in order to manage our vendors efficiently and respond to changing business needs effectively. Our sourcing offices in Hong Kong, India, Kenya, Ethiopia, China, and Indonesia give us access to a wide range of vendors and allow us to work to maintain or reduce our merchandise costs by capitalizing on new sourcing opportunities while maintaining our high standard for product quality.
Merchandising Process
The strong collaboration between our cross-functional teams in design, merchandising, sourcing, and planning have enabled us to build our brands.
Design
The design team gathers information from trends, color services, research, and trade shows.
Merchandising
Each quarter, we develop seasonal merchandising strategies.
Planning and Allocation
The planning and allocation organization works collaboratively with the merchandising, finance, and global sourcing teams to develop seasonal sales and margin plans to support our financial objectives and merchandising strategies. Further, this team plans the flow of inventory to ensure that we are adequately supporting store floor sets, online demand, and key selling periods.
Production, Quality Assurance, and Responsible Sourcing
During Fiscal 2024, we engaged independent contract vendors located primarily in Asia and Africa. We continue to pursue global sourcing opportunities to support our inventory needs and seek to reduce merchandise costs. We contract for the manufacture of the substantial majority of the products we sell. We do not own or operate any manufacturing facilities.
During Fiscal 2024, we sourced all of our merchandise directly without the use of third-party commissioned buying agents for our branded product. We source from a diversified network of vendors, purchasing primarily from Bangladesh, Vietnam, India, Kenya, Ethiopia, China, and Indonesia. Bangladesh and Vietnam accounted for more than 15% of our production.
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In addition to our quality assurance procedures, we conduct a responsible sourcing program that seeks to protect our Company, enhance our brands and address the well-being of the people who make our products by providing guidance in line with industry standards to our vendors in their efforts to provide safe and appropriate working conditions for their employees. These efforts are part of an ongoing process to encourage our vendors to continually assess, and where appropriate, improve factory working conditions, and well-being of their employees who make our product. Additionally, under our responsible sourcing program, we monitor changes in local laws and other conditions (e.g., worker safety, workers’ rights of association, and political and social instability) in the countries from which we source in order to identify and assess potential risks to our sourcing capabilities.
Environmental, Social & Governance
We published our latest Environment, Social & Governance (“ESG”) Report, now called our Sustainability and Social Impact Update, in October 2024, which is available at http://corporate.childrensplace.com under the Corporate Sustainability tab.
In terms of environmental initiatives, we believe that purpose-led companies such as ours have the opportunity and responsibility to work to ensure that our business contributes to a healthy planet. We focus on topics that are important to our long-term success and where we believe we can have the most positive impact.
In terms of social initiatives, our commitment to positive social practices includes our responsible sourcing activities in our global supply chain, where we partner with our third-party vendors and factories, non-governmental organizations and others in supporting workers’ health, safety and well-being. We monitor compliance by our third-party vendors and factories with our Vendor Code of Conduct, local laws and ethical business practices to help ensure fair and safe work conditions for the people who make our products. We also recognize the importance of eliminating forced labor within the supply chain and its increasing significance in light of reports of human rights abuses in various regions of the world. In addition, we support and sponsor a number of worker well-being programs designed to improve the daily lives of the workers who make our products. Our commitment to having a positive social influence also extends to our charitable mission of supporting children and families in need.
Human Capital Management
As of February 1, 2025, we had approximately 7,900 employees, approximately 1,460 of whom were based at our corporate offices and distribution centers. Approximately 1,070 were full-time store employees and approximately 5,370 were part-time and seasonal store employees. None of our employees are covered by a collective bargaining agreement.
The Human Capital & Compensation Committee is actively engaged in overseeing our human capital management strategies, including our talent and succession planning initiatives designed to attract, develop, engage, reward and retain top retail, digital and business leaders, who can drive our financial performance and strategic growth initiatives and contribute to building long-term stockholder value. The Human Capital & Compensation Committee’s involvement in leadership development and succession planning is systematic and ongoing, culminating in an annual review by our board of directors (“Board of Directors”) of succession plans for all of our senior leaders, inclusive of development strategies for top talent within the Company.
Company Stores
The following section highlights various store information for The Children’s Place operated stores as of February 1, 2025.
Existing Stores
As of February 1, 2025, we had a total of 495 stores in the United States, Canada, and Puerto Rico, including our first Gymboree stand-alone store at Garden State Plaza in Paramus, New Jersey, which was opened in November 2024, and our online stores at www.childrensplace.com and www.gymboree.com. In addition, our six international partners operated 190 international points of distribution in 13 countries.
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The following table sets forth the number of stores in the U.S., Canada, and Puerto Rico as of the current and prior fiscal year end:
Number of Stores
Location February 1, 2025 February 3, 2024
United States 431 454
Canada 58 63
Puerto Rico 6 6
Total Stores 495 523
At The Children’s Place, our store concepts consist of multiple formats with an average of approximately 4,900 square feet, which have evolved over time in response to market trends, and are strategically placed within each market. We try to create an open and brightly lit environment for customers. Our stores typically feature white fixtures to ensure the merchandise is the focal point, using color to brand and create shop identifiers.
E-commerce Sales
Each of our U.S. and International segments includes an e-commerce business located at www.childrensplace.com and www.gymboree.com and digital growth remains one of our top strategic priorities. We are committed to delivering a best-in-class, end-to-end user experience, from product assortment and website operation, to order fulfillment and customer service. We are further committed to delivering these experiences to our customers when, where, and how they are looking to access our brands, accounting for cross-channel behavior, growth of mobile devices, and the growing interest in our brands from international consumers. We believe that the critical investments made in areas such as e-commerce infrastructure and mobile optimization, as well as additional front-end website features, have improved our customer experience.
We continue to explore opportunities to enhance our online presence by partnering with well-established online marketplaces. For instance, on October 30, 2024, we announced our partnership with global fashion and lifestyle online retailer, SHEIN. This collaboration brings our apparel to SHEIN’s platform, opening up opportunities for us to reach customers outside our typical customer file.
Wholesale and International Franchisees
Our wholesale business includes our relationship with Amazon, which is an important customer acquisition vehicle. We are exploring opportunities to expand our wholesale relationships and identify opportunities with licensing partners and new revenue streams that can drive further revenue growth and profitability. We generate revenues from our franchisees from the sale of products and sales royalties.
Store Operations
The Children’s Place store operations are organized by geographic region. Our U.S. Vice Presidents and Canada Regional Director oversee a number of district managers residing within each region. We have a centralized corporate store operations function which supports the operations of our stores. Our stores are staffed by store managers and full-time and part-time sales associates, with additional temporary associates hired to support seasonal needs. Our store managers spend a high percentage of their time on the store’s selling floor providing direction, motivation, and development to store associates. To maximize selling productivity, our teams emphasize greeting, replenishment, presentation standards, procedures, and controls. In order to motivate our store management, we offer a monthly incentive compensation plan that awards bonuses for achieving certain financial goals.
Seasonality
Our business is subject to seasonal influences, with historically heavier concentrations of sales during the back-to-school and holiday seasons. Our first fiscal quarter results are dependent upon sales during the period leading up to the Easter holiday, our second and third fiscal quarter results are dependent upon back-to-school sales, and our fourth fiscal quarter results are dependent upon sales during the holiday season. The business is also subject to shifts due to unseasonable weather conditions.
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The following table shows the quarterly distribution, as a percentage of the full year, of net sales, and the quarterly distribution of operating income (loss):
First Quarter Second Quarter Third Quarter Fourth Quarter
Net sales as a percentage of full year
Fiscal 2024 19.3 % 23.1 % 28.1 % 29.5 %
Fiscal 2023 20.0 % 21.6 % 30.0 % 28.4 %
First Quarter Second Quarter Third Quarter Fourth Quarter
(in thousands)
Operating income (loss)
Fiscal 2024 $ (27,988) $ (21,776) $ 29,258 $ 6,805
Fiscal 2023 (30,067) (36,941) 44,967 (61,757)
For more information regarding the seasonality of our business, refer to “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Quarterly Results and Seasonality.”
Marketing
The Children’s Place and Gymboree are well-recognized brands, with a trend-right offering and a compelling value proposition. Our direct marketing program utilizes both on-line and off-line channels. We relaunched the Gymboree brand in February 2020 with a meaningfully improved digital experience on www.gymboree.com , complemented by shop-in-shop locations in certain co-branded stores in the U.S. and Canada, by successfully executing on the specific design, sourcing, and merchandising characteristics that create Gymboree’s elevated, playful collections, and in November 2024, we opened our first Gymboree stand-alone store. We also launched the Sugar & Jade brand in November 2021 which is targeted at the girls’ “tween” market and is offered exclusively online, and launched the PJ Place brand in October 2022, which is a sleepwear lifestyle brand targeted towards millennial and Gen Z customers, and is offered exclusively online. We are focused on optimizing our assortment and purchasing inventory at levels which will drive margin growth.
We have a customer loyalty program and a private label credit card program. At the end of Fiscal 2024, members of our MyPLACE Rewards loyalty program and/or private label credit card program accounted for approximately 85% of sales. Our private label credit card is issued to our customers for use exclusively at The Children’s Place stores and online at www.childrensplace.com and www.gymboree.com , and credit is extended to such customers through a third-party financial institution on a non-recourse basis to us. Additionally, in our effort to reach an even wider customer base who are digitally savvy and to utilize other forms of spending arrangements available, we have partnered with Afterpay to allow our customers to purchase our merchandise on a “buy-now-pay-later” program. We promote affinity and loyalty through our marketing programs by utilizing specialized incentive programs. We continue to focus on enhancing our loyalty programs to meet our customers’ needs.
Distribution
In the United States, we own and operate a 700,000 square foot distribution center in Alabama, which supports our retail store operations, e-commerce, and wholesale operations both in the U.S. and in Canada. We use a third-party provider operating a 315,000 square foot distribution center in Indiana and a 184,000 square foot distribution center in Ontario, Canada to support our U.S. and Canadian e-commerce fulfillment operations, respectively. We utilize additional facilities in Alabama to support further warehousing needs, including offsite storage. We also use a third-party provider of warehousing and logistics services in both Malaysia and China to support our international franchise business.
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Competition
The children’s apparel, footwear, and accessories retail markets are highly competitive. Our primary competitors are specialty stores, mass merchants, and off-price stores, including Carter’s, Inc., Target Corporation, Old Navy, GapKids, and babyGap (each of which is a division of The Gap, Inc.), T.J. Maxx and Marshall’s (each of which is a division of TJX Companies, Inc.), Burlington Coat Factory, Inc., Kohl’s Corporation, Walmart Stores, Inc., and other department stores. We also compete with regional retail chains, catalog companies, and e-commerce retailers. One or more of our competitors are present in substantially all of the areas in which we have stores.
Trademarks and Service Marks
“The Children’s Place”, “Gymboree”, “Sugar & Jade”, “PJ Place” “Crazy 8”, “Place”, “Baby Place”, and certain other marks have been registered as trademarks and/or service marks with the United States Patent and Trademark Office and in Canada and other foreign countries. During the first quarter of fiscal year 2019, the Company acquired certain intellectual property and related assets of Gymboree Group, Inc. and related entities, which included the worldwide rights to the names “Gymboree” and “Crazy 8” and other intellectual property, including trademarks, domain names, copyrights, and customer databases. In November 2021, we launched the Sugar & Jade brand , and in October 2022, we launched the PJ Place brand . Registration of our trademarks and the service marks may be renewed to extend the original registration period indefinitely, provided the marks are still in use. We intend to continue to use and protect our trademarks and service marks and maintain their registrations. We have also registered our trademarks in other countries where we source our products and where we have established and possibly may establish franchising operations.
Government Regulation
We are subject to extensive federal, state, local, provincial, and other foreign laws and regulations affecting our business, including product testing and safety, consumer protection, privacy, truth-in-advertising, accessibility, customs, wage and hour laws and regulations, and zoning and occupancy ordinances that regulate retailers generally and/or govern the promotion and sale of merchandise and the operation of retail stores and e-commerce sites. We also are subject to similar international laws and regulations affecting our business. We believe that we are in material compliance with these laws and regulations.
We are committed to product quality and safety. We focus our efforts to adhere to all applicable laws and regulations affecting our business, including the provisions of the U.S. Consumer Product Safety Improvement Act of 2008 (“CPSIA”), the Federal Hazardous Substances Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the Canada Consumer Product Safety Act (“CCPSA”), the Canadian Textile Labelling Act, the Canadian Care Labelling Program, and various environmental laws and regulations. Each of our product styles currently covered by the CPSIA and the CCPSA is appropriately tested to meet current standards.
Virtually all of our merchandise is manufactured by third-party factories located outside of the United States. These products are imported and are subject to U.S. and Canadian customs laws and regulations, which restrict the importation of and impose tariffs, anti-dumping and countervailing duties on, certain imported products, including textiles, apparel, footwear, and accessories. We currently are not restricted by any such anti-dumping and countervailing duties in the operation of our business.
Internet Access to Reports
We are a public company and are subject to the disclosure requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, we file periodic reports, proxy statements, and other information with the SEC. Such reports, proxy statements, and other information may be obtained by visiting the SEC website (http://www.sec.gov) that contains reports, proxy, and information statements and other information regarding us and other issuers that file electronically.
Our corporate website address is http://corporate.childrensplace.com. We make available, without charge, through our website, copies of our Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such reports are filed with or furnished to the SEC. Our ESG Report is also available on our corporate website under the Corporate Sustainability tab. References in this document to our websites are not and should not be considered part of this Annual Report on Form 10-K, and the information on our websites is not incorporated by reference into this Annual Report on Form 10-K.
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We also make available our corporate governance materials, including our corporate governance guidelines and our code of business conduct, on our website. If we make any substantive amendments to our code of business conduct or grant any waiver, including any implicit waiver, from a provision of the code for the benefit of our President and Interim Chief Executive Officer, we will disclose the nature of such amendment or waiver on our corporate website or in a Current Report on Form 8-K.
Controlled Company Status
In light of Mithaq’s ownership of more than 50% of the Company’s outstanding shares of common stock, The Children’s Place, Inc. is a “controlled company” within the meaning of Rule 5615(c)(1) of the Nasdaq Listing Rules, and our Board of Directors has chosen to rely on the “controlled company” exemption under the Nasdaq Listing Rules that would otherwise require the Company to have a majority independent board and fully independent Human Capital and Compensation Committee and Corporate Responsibility, Sustainability and Governance Committee. See “ Risk Factors – Risks Related to Legal and Regulatory Matters – We have exercised our option for the “controlled company” exemption under Nasdaq rules”.
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