What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-06-12 compared with 2025-12-16 · 245 added, 263 removed, 143 unchanged (78% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Quarterly Report on Form 10-Q contains or may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements relating to the Company’s strategic initiatives and results of operations, including adjusted net income (loss) per diluted share.

Forward-looking statements typically are identified by use of terms such as “may,” “will,” “should,” “plan,” “project,” “expect,” “anticipate,” “estimate,” “believe,” and similar words, although some forward-looking statements are expressed differently.

These forward-looking statements are based upon the Company’s current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results and performance to differ materially.

Some of these risks and uncertainties are described in the Company’s filings with the Securities and Exchange Commission, including in the "Risk Factors" section of its annual report on Form 10-K for the fiscal year ended February 1, 2025.

Included among the risks and uncertainties that could cause actual results and performance to differ materially are the risk that the Company will be unable to achieve operating results at levels sufficient to fund and/or finance the Company’s current level of operations and repayment of indebtedness, the risk that changes in trade policy and tariff regimes, including newly imposed U.S.

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and its subsidiaries.

The following discussion should be read in conjunction with the Company ’ s unaudited financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the annual audited financial statements and notes thereto included in the Company ’ s Annual Report on Form 10-K for the year ended February 1, 2025.

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

• 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

• First Quarter 2026 — The thirteen weeks ended May 2, 2026

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

• Fiscal 2026 — The fifty-two weeks ending January 30, 2027

• Fiscal 2024 — The fifty-two weeks ended February 1, 2025

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

Securities and Exchange Commission

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

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 are one of the only pure-play children’s specialty retailers in North America with an omni-channel presence.

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, 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.

“The Children’s Place” and “Gymboree”.

Our global retail and wholesale network includes two digital storefronts, 497 stores in North America, wholesale marketplaces, 329 international points of distribution in 13 countries through our nine international franchise and wholesale partners, and social media channels on Instagram, Facebook, and X, formerly known as Twitter.

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.

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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 for Year-To-Date 2025.

Net sales to external customers are derived from merchandise sales, and we have no customer that individually accounted for more than 10% of our Net sales for the First Quarter 2026.

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 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 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.

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

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.

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.

We are closely monitoring legislative developments globally to evaluate potential impacts on our financial statements, as more regions implement Pillar Two rules.

As part of the Company’s transformation, we are introducing the following strategic priorities this quarter to drive long-term growth and profitability:

1) Improve Customer Experience Across All Channels by focusing on the target consumer;

providing a strong price/value proposition;

delivering compelling and convenient omni-channel experiences;

and enhancing store and brand site environments.

2) Strengthen and Elevate the Brand by delivering appealing product that resonates with our customer;

building a compelling, consistent brand narrative that drives awareness, consideration and desire;

establishing a distinctive, ownable visual and creative identity across every customer touchpoint;

and deepening relationships with existing customers by expanding and activating our current customer file.

3) Deliver on Financial Targets through strengthening financial performance by driving topline growth and profitability and improving liquidity;

ensuring financial and operating plans are aligned with the business strategy and are executed with operational discipline, optimizing our product assortment and inventory management;

and executing transformation initiatives effectively.

4) Organizational Leadership through building leadership capability and bench strength;

strengthening decision-making and execution accountability;

driving clear, consistent communication;

and driving cultural engagement and performance alignment.

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

During the First Quarter 2026, 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, gas prices, 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 2026.

During the First Quarter 2026, we continued to focus on cost reduction and driving operational efficiencies and have actioned on $45 million of gross annualized benefits toward our goal of $60 million by fiscal year 2027, partially offset by approximately $10 million to $15 million in recurring operating costs.

As part of our transformation strategy, we accomplished a significant milestone this quarter by exiting our third-party distribution facility.

This logistical shift will simplify our distribution execution, reduce costs in our supply chain, and is expected to yield approximately $10 million in annualized savings towards our target.

During the First Quarter 2026, the U.S.

Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unlawful and thus deemed invalid.

During Fiscal 2025 and Fiscal 2026, we paid approximately $40 million in IEEPA tariffs, for which we have submitted refund claims from the U.S.

Customs and Border Protection (“CBP”).

These refunds will reduce Cost of goods sold for amounts incurred for goods previously sold and will continue to improve gross margin as we sell through the remaining inventory on hand that was impacted by IEEPA tariffs.

As a result, we expect the recovery of these refunds to partially offset some of our margin dilution in Fiscal 2026, which has been impacted by the current macroeconomic environment.

We have received $5.5 million of these refunds from the CBP subsequent to the end of the First Quarter 2026 to date.

As previously disclosed, we have monetized most of these tariff refund claims at a discounted rate by selling the future receipt of these funds to a purchaser.

For more information about the monetization of these IEEPA tariff refund claims, see “Note 6.

Debt” of the accompanying consolidated financial statements.

RESULTS OF OPERATIONS

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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.

Third Quarter 2025 Compared to Third Quarter 2024

To the extent that our sales have increased at a faster rate than our costs (i.e., “leverage”), the more efficiently we have utilized the investments we have made in our business.

Conversely, if our sales have decreased or if our costs have grown at a faster pace than our sales (i.e., “deleverage”), we have utilized the investments we have made in our business less efficiently.

First Quarter 2026 Compared to First Quarter 2025

Thirteen Weeks Ended Thirteen Weeks Ended Variance

2025 % of Net Sales November 2,

2026 % of Net Sales May 3,

2025 % of Net Sales $ % % of Net Sales

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Depreciation and amortization 6,666 3.1 % 8,230 3.4 % 1,564 19.0 % 0.3 %

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

Operating loss (42,179) (19.6) % (24,117) (10.0) % (18,062) (74.9) % (9.6) %

Related party interest expense (1,942) (0.9) % (1,871) (0.8) % (71) (3.8) % (0.1) %

Other interest expense, net (7,748) (3.6) % (6,691) (2.8) % (1,057) (15.8) % (0.8) %

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.

Loss before provision for income taxes (51,869) (24.1) % (32,679) (13.5) % (19,190) (58.7) % (10.6) %

Provision for income taxes 1,322 0.6 % 1,344 0.6 % 22 1.6 % — %

Net loss $ (53,191) (24.7) % $ (34,023) (14.1) % $ (19,168) (56.3) % (10.6) %

Net sales decreased $26.9 million, or 11.1%, to $215.2 million during the First Quarter 2026 from $242.1 million during the First Quarter 2025, driven by a decrease in direct-to-consumer (“DTC”) sales of 10.2% due to lower traffic compared to the First Quarter 2025, as we work to stabilize our customer file.

Despite this, our DTC business experienced a sequential improvement in sales trends versus the fourth quarter of Fiscal 2025 of 40 basis points (“bps”) and an improvement in trend versus the prior year of 460 bps.

Comparable retail sales in our owned and operated DTC business decreased 8.3% for the First Quarter 2026.

Our consolidated results were also impacted by the planned reduction in shipments in our wholesale channel as we continue to work with our customers to ensure inventories are aligned with demand.

While our shipments to this channel were down in the First Quarter 2026, retail sales to the end consumer were flat to the First Quarter 2025.

Gross profit decreased $17.4 million to $53.4 million during the First Quarter 2026, compared to $70.8 million during the First Quarter 2025.

Gross margin decreased 440 bps to 24.8% of Net sales in the First Quarter 2026, compared to 29.2% of Net sales in the First Quarter 2025.

The decrease in gross margin was caused primarily by the impact of higher tariff costs on our product (360 bps), higher distribution costs due to a one-time charge to exit our third party distribution facility (170 bps) and a higher penetration of markdown sales and dilutions (140 bps), partially offset by favorable product mix (150 bps) and a reduction in inventory reserves (80 bps).

Adjusted gross profit decreased $13.1 million to $57.6 million during the First Quarter 2026, compared to $70.8 million during the First Quarter 2025.

Adjusted gross margin decreased 240 bps to 26.8% of Net sales during the First Quarter 2026, compared to 29.2% during the First Quarter 2025.

Gross profit is calculated as consolidated Net sales less Cost of goods sold (exclusive of depreciation and amortization).

Gross margin is calculated as gross profit divided by consolidated net sales.

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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 $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 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:

Selling, general, and administrative expenses were $88.9 million during the First Quarter 2026, compared to $86.7 million during the First Quarter 2025, and deleveraged 550 bps to 41.3% of Net sales.

The increase was primarily due to an increase in store expenses as we grow our fleet.

Adjusted SG&A expenses were $87.4 million during the First Quarter 2026, compared to $86.5 million during the First Quarter 2025, and deleveraged 490 bps to 40.6% of Net sales.

Depreciation and amortization was $6.7 million during the First Quarter 2026, compared to $8.2 million during the First Quarter 2025.

The decrease was primarily driven by reduced depreciation of capitalized software.

Operating loss was $(42.2) million during the First Quarter 2026, compared to $(24.1) million during the First Quarter 2025 due to the factors described above, and deleveraged 960 bps to (19.6)% of Net sales.

Adjusted operating loss was $(36.1) million in the First Quarter 2026, compared to $(24.0) million in the First Quarter 2025, and deleveraged 690 bps to (16.8)% of Net sales.

Related party interest expense was $1.9 million during the First Quarter 2026 and the First Quarter 2025.

Other interest expense, net was $7.7 million during the First Quarter 2026, compared to $6.7 million during the First Quarter 2025.

The increase was due to the amortization of financing costs associated with the monetization of our tariff refund claims and income tax receivable claim, partially offset by lower average borrowings and interest rates on our debt facilities.

Provision for income taxes was $1.3 million during the First Quarter 2026 and the First Quarter 2025.

Our effective tax rate was (2.5)% and (4.1)% in the First Quarter 2026 and First Quarter 2025, respectively.

Net loss was $(53.2) million, or $(2.40) per diluted share, during the First Quarter 2026, compared to $(34.0) million, or $(1.57) per diluted share, during the First Quarter 2025, due to the factors described above.

Adjusted net loss was $(44.3) million, or $(2.00) per diluted share, during the First Quarter 2026, compared to $(32.8) million, or $(1.52) per diluted share, during the First Quarter 2025.

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

Thirteen Weeks Ended

2025 November 2,

(in thousands)

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(8,137) (4,402)

Total segment operating income (loss) $ 3,669 $ 29,258

Total segment operating loss $ (42,179) $ (24,117)

The Children’s Place U.S.

(17.4) % (8.9) %

The Children’s Place International (1)

(40.8) % (21.6) %

Total segment operating income (loss) as a percentage of net sales 1.1 % 7.5 %

Total segment operating loss as a percentage of net sales (19.6) % (10.0) %

___________________________________________

(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 $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.

(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.

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

Thirty-nine Weeks Ended Thirty-nine Weeks Ended Variance

2025 % of Net Sales November 2,

2024 % of Net Sales $ % % of Net Sales

(amounts in thousands)

Net sales $ 879,597 100.0 % $ 977,706 100.0 % $ (98,109) (10.0) % — %

Cost of sales (exclusive of depreciation and amortization) 595,238 67.7 % 634,830 64.9 % 39,592 6.2 % (2.8) %

Gross profit 284,359 32.3 % 342,876 35.1 % (58,517) (17.1) % (2.8) %

Selling, general, and administrative expenses 277,567 31.6 % 304,976 31.2 % 27,409 9.0 % (0.4) %

Depreciation and amortization 23,134 2.6 % 30,406 3.1 % 7,272 23.9 % 0.5 %

Asset impairment charges — — % 28,000 2.9 % 28,000 100.0 % 2.9 %

Operating loss (16,342) (1.9) % (20,506) (2.1) % 4,164 20.3 % 0.2 %

Related party interest expense (5,609) (0.6) % (4,554) (0.5) % (1,055) (23.2) % (0.1) %

Other interest expense, net (19,092) (2.2) % (22,476) (2.3) % 3,384 15.1 % 0.1 %

Loss before provision for income taxes (41,043) (4.7) % (47,536) (4.9) % 6,493 13.7 % 0.2 %

Provision for income taxes 2,665 0.3 % 2,293 0.2 % (372) (16.2) % (0.1) %

Net loss $ (43,708) (5.0) % $ (49,829) (5.1) % $ 6,121 12.3 % 0.1 %

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, 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.

Gross profit decreased $58.5 million to $284.4 million during Year-To-Date 2025, compared to $342.9 million during Year-To-Date 2024.

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 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.

The decrease was due to a reduction in one-time costs incurred during Year-To-Date 2024 , as described below.

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 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 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.

Operating loss was $(16.3) million during Year-To-Date 2025, compared to $(20.5) million during Year-To-Date 2024.

The Year-To-Date 2025 results were impacted by incremental operating expenses of $2.4 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 $34.2 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 $(13.9) million during Year-To-Date 2025, compared to Adjusted operating income of $44.4 million during Year-To-Date 2024, and deleveraged 610 basis points to (1.6)% of Net sales.

Related party interest expense was $5.6 million during Year-To-Date 2025, compared to $4.6 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 $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 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 (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 $(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:

Thirty-nine Weeks Ended

2025 November 2,

(in thousands)

Net sales decreased $26.5 million, or 11.9%, to $195.3 million during the First Quarter 2026, compared to $221.8 million during the First Quarter 2025 , driven by a decrease in DTC sales due to lower traffic compared to the First Quarter 2025, as we work to stabilize our customer file.

Our results were also impacted by the planned reduction in shipments in our wholesale channel as we continue to work with our customers to ensure inventories are aligned with demand.

While our shipments to this channel were down in the First Quarter 2026, retail sales to the end consumer were flat to the First Quarter 2025.

The Children’s Place International Net sales decreased $0.5 million, or 2.5%, to $19.9 million during the First Quarter 2026, compared to $20.4 million during the First Quarter 2025.

The Children’s Place U.S.

$ 802,353 $ 894,744

The Children’s Place International (1)

Operating loss was $(34.0) million during the First Quarter 2026, compared to $(19.7) million during the First Quarter 2025, primarily due to lower net sales, as described above.

The Children’s Place International Operating loss was $(8.1) million during the First Quarter 2026, compared to $(4.4) million during the First Quarter 2025, primarily due to higher merchandise costs which negatively impacted our margins.

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 gross profit, 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, gross profit, selling, general, and administrative expenses, and operating income (loss), respectively.

Thirteen Weeks Ended

(amounts in thousands, except per share amounts)

Gross profit Selling, general and

administrative expenses Operating loss Net loss Diluted loss per common share

As reported (GAAP) $ 53,351 $ 88,864 $ (42,179) $ (53,191) $ (2.40)

Exit from third-party distribution facility (1)

4,291 — 4,620 4,620

Total net sales $ 879,597 $ 977,706

The Children’s Place U.S.

Financing charges on monetization of tariff refund claims (2)

Restructuring (3)

— (1,438) 1,438 1,438

The Children’s Place International (1)

Financing charges on monetization of income tax receivable claim (4)

Aggregate impact of non-GAAP adjustments 4,291 (1,438) 6,058 8,850

Income tax effect — — — —

As adjusted $ 57,642 $ 87,426 $ (36,121) $ (44,341) $ (2.00)

% of Net Sales (GAAP) 24.8 % 41.3 % (19.6) % (24.7) %

% of Net Sales (As adjusted) 26.8 % 40.6 % (16.8) % (20.6) %

____________________________________________

Total segment operating loss $ (16,342) $ (20,506)

The Children’s Place U.S.

(1) Related to the termination fee and other costs incurred due to the early exit from our third-party distribution facility.

(2) Related to amortization of financing costs associated with the monetization of our tariff refund claims.

(3) Related to one-time severance costs incurred for the senior leadership team and other positions eliminated.

(4) Related to amortization of financing costs associated with the monetization of our income tax receivable claim.

Thirteen Weeks Ended

(amounts in thousands, except per share amounts)

Gross profit Selling, general and

administrative expenses Operating loss Net loss Diluted loss per common share

As reported (GAAP) $ 70,783 $ 86,670 $ (24,117) $ (34,023) $ (1.57)

Restructuring costs (1)

— (934) 934 934

The Children’s Place International (1)

Reversal of legal settlement accrual (2)

— 796 (796) (796)

Total segment operating loss as a percentage of net sales (1.9) % (2.1) %

Loss on extinguishment of debt (3)

Aggregate impact of non-GAAP adjustments — (138) 138 1,177

Income tax effect — — — —

As adjusted $ 70,783 $ 86,532 $ (23,979) $ (32,846) $ (1.52)

% of Net Sales (GAAP) 29.2 % 35.8 % (10.0) % (14.1) %

% of Net Sales (As adjusted) 29.2 % 35.7 % (9.9) % (13.6) %

____________________________________________

(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, 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, particularly in the first half of the fiscal year.

The Children’s Place U.S.

Operating loss was $(4.4) million during Year-To-Date 2025, compared to $(15.5) million during Year-To-Date 2024.

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, 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.

(1) Related to one-time severance costs incurred for positions eliminated.

(2) Related to the over accrual of costs that were expected for legal settlements.

(3) Related to write-off of debt issuance costs associated with the partial prepayment of the Initial Mithaq Term Loan pursuant to the completion of our rights offering in the First Quarter 2025.

LIQUIDITY AND CAPITAL RESOURCES

Our working capital needs typically follow a seasonal pattern, peaking during the third fiscal quarter based on seasonal inventory purchases.

Our primary uses of cash are for working capital requirements, which consist primarily of inventory purchases, rent and marketing expenses;

the payment of interest expense on our ABL Credit Facility and interest-equivalent expense on our New Mithaq Term Loan as described below, and the financing of capital projects.

Our primary uses of cash are for working capital requirements, which consist primarily of inventory purchases, rent and marketing expenses, the payment of interest expense on our ABL Credit Facility and term loans, and the financing of capital projects.

During Fiscal 2024, we entered into an interest-free, unsecured and subordinated promissory note with Mithaq for a $78.6 million term loan (the “Initial Mithaq Term Loan”), and a separate unsecured and subordinated promissory note for a $90.0 million term loan (the “New Mithaq Term Loan”;

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 November 1, 2025.

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.

As of February 6, 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.

Pursuant to our refinancing transactions on December 16, 2025, the New Mithaq Term Loan was 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, leaving an aggregate of $111.1 million outstanding under the Mithaq Term Loans as of May 2, 2026.

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

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

The principal amount outstanding as of May 2, 2026 was $100.0 million.

As of May 2, 2026, we had $150.0 million of outstanding borrowings under our $350.0 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 increased $6.2 million to $49.2 million as of May 2, 2026, compared to $43.0 million as of May 3, 2025, primarily due to a decrease in inventory due to improved inventory management and an increase in short-term debt, partially offset by a decrease in outstanding borrowings under our ABL Credit Facility due to proceeds received from the SLR Term Loan, and a decrease in our accounts payable balances due to lower inventory purchases.

As of May 2, 2026, we had total liquidity of $82.8 million, including $38.0 million of availability under our ABL Credit Facility, $40.0 million of availability under our Mithaq Credit Facility, and $4.8 million of cash on hand.

As of May 2, 2026, we had $23.7 million of outstanding letters of credit with an additional $6.3 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 2026 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 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 November 1, 2025, there was $156.1 million remaining availability under the Share Repurchase Program.

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

Currently, given the terms of our credit agreement with Wells Fargo as its administrative agent and our term loan agreement with SLR, the repurchase of any shares would require fulfilling stringent payment conditions under those agreements, 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 2, 2026, 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 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.

Cash provided by financing activities was $80.6 million during Year-To-Date 2025, compared to $248.0 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.

Cash used in operating activities was $53.8 million during the First Quarter 2026, compared to $43.0 million during the First Quarter 2025.

Cash used in operating activities during the First Quarter 2026 and First Quarter 2025 was primarily due to the net loss incurred.

Cash used in investing activities was $8.0 million during the First Quarter 2026, compared to $3.4 million during the First Quarter 2025, driven by higher capital expenditures.

Cash provided by financing activities was $60.4 million during the First Quarter 2026, compared to $42.3 million during the First Quarter 2025.

The increase primarily resulted from proceeds received from the monetization of our tariff refund claims and income tax receivable claim, partially offset by net cash proceeds received from the Rights Offering in the prior year.

Our ability to continue to meet our capital requirements in Fiscal 2026 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.

Cash flows generated from operations depends on our ability to achieve our financial plans.

Cash flows generated from operations depend on our ability to achieve our financial plans.

We believe that our cash on hand, cash generated from operations, and funds available to us through our ABL Credit Facility and Mithaq Credit Facility will be sufficient to fund our capital and other cash requirements for the foreseeable future.

1 unchanged sentence

Certain components of our Consolidated Balance Sheets were as follows:

2025 February 1,

2025 November 2,

2026 January 31,

(in thousands)

2 unchanged sentences

Accounts payable 102,035 108,481 131,392

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.

Accounts receivable were $30.4 million as of May 2, 2026, compared to $41.3 million as of May 3, 2025 and $26.0 million as of January 31, 2026.

The decrease of $10.9 million, or 26.5%, compared to May 3, 2025 was primarily driven by a decrease in wholesale receivables due to lower net sales.

There was no significant change in balance compared to January 31, 2026.

Inventories were $326.4 million as of May 2, 2026, compared to $422.2 million as of May 3, 2025 and $325.1 million as of January 31, 2026.

The decrease of $95.8 million, or 22.7% compared to May 3, 2025 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 January 31, 2026.

Accounts payable were $102.0 million as of May 2, 2026, compared to $131.4 million as of May 3, 2025 and $108.5 million as of January 31, 2026.

The decrease of $29.3 million, or 22.3%, compared to May 3, 2025, and the decrease of $6.4 million, or 5.9%, compared to January 31, 2026, was primarily the result of lower inventory purchases.

ABL Credit Facility

The Company and certain subsidiaries maintain the $433.0 million ABL Credit Facility under our Amended and Restated Credit Agreement dated May 9, 2019 (as amended from time to time, the “Credit Agreement”), with Wells Fargo Bank, National Association (“Wells Fargo”), Bank of America, N.A., JPMorgan Chase Bank, N.A., Truist Bank, HSBC Bank (USA), N.A., and PNC Bank, National Association, as the lenders party thereto and Wells Fargo, as Administrative Agent, Collateral Agent, and Swing Line Lender.

The ABL Credit Facility will mature in November 2026.

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.

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:

We maintain the $350.0 million asset-based revolving credit facility (the “ABL Credit Facility”) under our Amended and Restated Credit Agreement dated May 9, 2019 (as amended from time to time, the “Credit Agreement”), with Wells Fargo Bank, National Association (“Wells Fargo”), as the sole lender party thereto, and as Administrative Agent, Collateral Agent, and Swing Line Lender.

The ABL Credit Facility will mature on the earlier of December 16, 2030, or the maturity date under our term loan agreement with SLR as further described below.

As of December 16, 2025, which is the effective date of the eighth amendment to the Credit Agreement (the “Eighth Amendment”), the ABL Credit Facility includes a $25.0 million Canadian sublimit and a $30.0 million sublimit for standby and documentary letters of credit.

As of February 1, 2026, 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 1.000%, 1.250% or 1.500%;

(ii) the Secured Overnight Financing Rate (“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 a margin of 2.000%, 2.250% or 2.500%.

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%.

1 unchanged sentence

These fees are determined based on the amount of our average daily excess availability under the facility.

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 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.

As of December 16, 2025, 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, and certain inventory, subject to certain reserves.

For the First Quarter 2026 and First Quarter 2025, we recognized $2.2 million and $4.8 million, respectively, in interest expense related to the ABL Credit Facility.

As of December 16, 2025, credit extended under the ABL Credit Facility is secured by a first priority security interest in substantially all of our U.S.

and Canadian assets, other than intellectual property, real estate, certain furniture, fixtures and equipment, and pledges of subsidiary capital stock, and a second priority security interest in our intellectual property, real estate, certain furniture, fixtures and equipment, and pledges of subsidiary capital stock.

The outstanding obligations under the ABL Credit Facility may be accelerated upon the occurrence of certain customary events of default, as described below.

1 unchanged sentence

The ABL Credit Facility contains covenants, which include conditions on stock buybacks and the payment of cash dividends or similar payments.

These covenants also limit our ability and our subsidiaries’ ability to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, or dispositions or to change the nature of our business.

Pursuant to the Seventh Amendment, the requisite payment condition thresholds for some of these covenants have been heightened, resulting in certain actions such as the repurchase of shares and payment of cash dividends becoming more difficult to perform.

Additionally, if we are unable to maintain a certain amount of excess availability for borrowings (the “excess availability threshold”), we may be subject to cash dominion.

These covenants also limit our ability to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, or dispositions or to change the nature of our business.

Pursuant to a prior amendment, the requisite payment condition thresholds for some of these covenants were heightened, resulting in certain actions such as the repurchase of shares and payment of cash dividends becoming more difficult to perform.

Additionally, if we are unable to maintain a certain amount of excess availability for borrowings, we may be subject to cash dominion, and pursuant to the Eighth Amendment, we are required to maintain excess availability of at least $35.0 million, subject to increase based on our borrowing base (the “excess availability requirement”).

We were in compliance with this excess availability requirement as of May 2, 2026.

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 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.

As of May 2, 2026, January 31, 2026, and May 3, 2025, unamortized deferred financing costs amounted to $5.3 million, $5.6 million, and $3.3 million, related to our ABL Credit Facility.

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

2025 February 1,

2025 November 2,

2026 January 31,

(in millions)

Total borrowing base availability

Borrowing base

$ 246.7 $ 234.2 $ 315.5

Credit facility availability (1)

Credit facility size

350.0 350.0 433.0

7 unchanged sentences

Interest rate at end of period 6.5% 6.5% 7.7%

Average interest rate 6.6% 7.6% 7.7%

Average end-of-day loan balance during the period $ 124.1 $ 248.7 $ 247.2

Highest end-of-day loan balance during the period $ 150.0 $ 302.7 $ 262.3

Average interest rate 7.7% 8.7% 9.0%

____________________________________________

(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.

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.

(1) Prior to the Eighth Amendment, the lower of the credit facility size and the borrowing base, without factoring in any excess availability requirement.

Pursuant to the Eighth Amendment, as of December 16, 2025, our maximum borrowing availability is the lower of the credit facility size and the borrowing base, net of the new excess availability requirement.

(2) The sublimit availability for letters of credit was $6.3 million as of May 2, 2026, $6.3 million as of January 31, 2026, and $6.8 million as of May 3, 2025.

SLR Term Loan

On December 16, 2025, we entered into a term loan agreement (the “SLR Loan Agreement”) with SLR and other affiliated SLR entities as the lenders party thereto, and SLR as Administrative Agent, and Collateral Agent, providing for a $100.0 million term loan (the “SLR Term Loan”).

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

The SLR Term Loan is secured by a first priority security interest in our intellectual property, real estate, certain furniture, fixtures and equipment, and pledges of subsidiary capital stock, and a second priority security interest in the collateral secured by a first priority security interest under the ABL Credit Facility.

The SLR Term Loan is guaranteed by each of our subsidiaries that guarantees our ABL Credit Facility.

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.

The SLR Term Loan contains customary affirmative and negative covenants substantially similar to a subset of the covenants set forth in the Credit Agreement, including limits on our ability to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, dispositions or restricted payments, or to change the nature of our business.

The SLR Term Loan contains certain customary events of default, which include (subject in certain cases to customary grace periods), nonpayment of principal, breach of other covenants of the SLR Term Loan, 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 SLR Term Loan.

Additionally, the SLR Term Loan contains the same excess availability requirement as the ABL Credit Facility.

We were in compliance with this excess availability requirement as of May 2, 2026.

For the First Quarter 2026, we recognized $2.3 million in interest expense related to the SLR Term Loan.

As of May 2, 2026, the interest rate was 8.9%.

As of May 2, 2026, unamortized deferred financing costs amounted to $2.3 million related to the SLR Term Loan.

Mithaq Term Loans

Mithaq is a controlling stockholder of the Company.

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 November 1, 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.

The Company and certain subsidiaries also maintain the unsecured and subordinated promissory note for a $90.0 million New Mithaq Term Loan, dated April 16, 2024, by and among us, certain of our subsidiaries, and Mithaq.

The New Mithaq Term Loan matures on April 16, 2027, and requires monthly payments equivalent to interest charged at the SOFR plus 4.000% per annum, with the first year’s monthly payments to Mithaq deferred until April 30, 2025.

Mithaq Capital SPC, a Cayman segregated portfolio company (“Mithaq”), is a controlling stockholder of the Company.

We maintain an interest-free, unsecured and subordinated promissory note with Mithaq (the “Initial Mithaq Term Loan”), dated February 29, 2024, by and among the Company, certain of its subsidiaries, and Mithaq.

During 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 May 2, 2026.

The Initial Mithaq Term Loan matures on April 16, 2031 and is guaranteed by each of our subsidiaries that guarantees our ABL Credit Facility.

We also maintain an unsecured and subordinated promissory note with Mithaq for a $90.0 million term loan (the “New Mithaq Term Loan”;

and together with the Initial Mithaq Term Loan, collectively, the “Mithaq Term Loans”), dated April 16, 2024, by and among the Company, certain of its subsidiaries, and Mithaq.

The New Mithaq Term Loan also matures on April 16, 2031, and requires monthly payments equivalent to interest charged at the SOFR per annum plus 4.000%, with the first year’s monthly payments to Mithaq deferred until April 30, 2025.

On April 28, 2025, the Company and Mithaq entered into Amendment No.

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 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 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.

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

Pursuant to our refinancing transactions on December 16, 2025, the New Mithaq Term Loan was further amended to allow us to defer its 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, leaving an aggregate of $111.1 million outstanding under the Mithaq Term Loans.

These amendments were evaluated under FASB ASC 470 — Debt , and accounted for as debt modifications.

For the First Quarter 2026 and First Quarter 2025, we recognized $1.9 million in interest-equivalent expense related to the New Mithaq Term Loan.

As of May 2, 2026, the interest-equivalent rate was 7.8%.

During the First Quarter 2026, we deferred all interest-equivalent payments to Mithaq, which is expected to be settled upon maturity of the New Mithaq Term Loan.

There were no interest-equivalent payments to Mithaq during the First Quarter 2025.

As of May 2, 2026, January 31, 2026, and May 3, 2025, interest-equivalent expense payable to Mithaq was $7.4 million, $5.6 million and $8.4 million, respectively, which is recorded within Accrued expenses and other current liabilities.

Pursuant to our refinancing transactions in December 2025, the Mithaq Term Loans are also subordinated in payment priority to our payment 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.

The Mithaq Term Loans contain customary affirmative and negative covenants substantially similar to a subset of the covenants set forth in the Credit Agreement, including limits on our ability and our subsidiaries’ ability to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, dispositions or restricted payments, or to change the nature of our business.

The Mithaq Term Loans contain customary affirmative and negative covenants substantially similar to a subset of the covenants set forth in the Credit Agreement, including limits on our ability to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, dispositions or restricted payments, or to change the nature of our business.

The Mithaq Term Loans, however, do not provide for any closing, prepayment or exit fees, or other fees typical for transactions of this nature, do not impose additional reserves on borrowings under the Credit Agreement, and do not contain certain other restrictive covenants.

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 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

As of May 2, 2026, January 31, 2026, and May 3, 2025, unamortized deferred financing costs amounted to $3.4 million, $3.6 million, and $1.4 million, respectively, related to the Mithaq Term Loans.

Maturities of our principal debt payments on the SLR Term Loan and Mithaq Term Loans are as follows:

(in thousands)

Remainder of 2026

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.

Total principal debt payments

Mithaq Commitment Letter

On May 2, 2024, we entered into a commitment letter (the “Commitment Letter”) with Mithaq for a $40.0 million Mithaq Credit Facility.

Under the Mithaq Credit Facility, we had the ability to request for advances at any time prior to July 1, 2025.

On September 10, 2024, we entered into an Amendment No.

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.

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

On May 2, 2024, we entered into a commitment letter (the “Commitment Letter”) with Mithaq for a $40.0 million credit facility (the “Mithaq Credit Facility”).

Initially, under the Mithaq Credit Facility, we had the ability to request for advances at any time prior to July 1, 2025.

On December 16, 2025, the Company and Mithaq entered into an Amendment No.

3 to the Commitment Letter, that extended the deadline for requesting advances until December 16, 2030.

If any debt is incurred under the Mithaq Credit Facility, it shall require monthly payments equivalent to interest charged at the SOFR per annum plus 9.000%.

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

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 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.

Additionally, such debt shall require no mandatory prepayments and shall mature no earlier than December 16, 2030.

As of May 2, 2026, no debt had been incurred under the Mithaq Credit Facility.

Monetization of Income Tax Receivable Claim

On February 5, 2026, we entered into a Receivables Purchase Agreement (the “RPA”) with TRMEF Basis II LLC (“TRMEF”) to monetize our CARES Act income tax receivable claim of $19.1 million plus accrued interest of $3.7 million at a purchase rate of 88.5%, for a total purchase price of $20.1 million.

We received net cash proceeds of $15.9 million, after insurance and legal fees amounting to $0.7 million.

The remaining proceeds of $3.5 million are expected to be received in two tranches as follows:

(i) upon confirmation by the IRS of submission by the IRS of the Revenue Agent Report to the Joint Committee on Taxation, TRMEF shall pay $2.5 million to us, less the amount of any downward adjustments in respect of the tax refund claim set forth in such Revenue Agent Report, and (ii) on the date on which TRMEF receives payment in full in cash of the refund claim, TRMEF shall pay us $1.0 million, less 10% of accrued interest as of the effective date of the RPA.

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

The monetization of our income tax receivable claim was accounted for in accordance with FASB ASC 470 — Debt , and presented as Short-term debt.

As of May 2, 2026, the unamortized financing costs amounted to $3.0 million.

These costs are being amortized through the expected settlement date of the claim and recorded in Interest expense based on an effective interest rate of 18.0%.

Monetization of IEEPA Tariff Refund Claims

On March 31, 2026, we entered into a Claim Sale and Purchase Agreement with Alnus Investors, LLC (“Alnus”) to monetize our claims for refunds of tariffs previously paid to the U.S.

Customs and Border Protection (“CBP”) , related to those tariffs originally invoked under the International Emergency Economics Powers Act, for which such tariffs were ruled unlawful by the United States Supreme Court on February 20, 2026.

Alnus purchased an aggregate amount of $38.2 million of the approximately $40 million refund claims submitted to the CBP at a purchase rate of 67.2%, for a total purchase price of $25.7 million.

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

We have received $5.5 million of these refunds from the CBP subsequent to the end of the First Quarter 2026 to date.

The monetization of our tariff refund claims was accounted for in accordance with FASB ASC 470 — Debt , and presented as Short-term debt.

As of May 2, 2026, the unamortized financing costs amounted to $10.5 million.

These costs are being amortized through the expected settlement date of the claim and recorded in Interest expense based on an effective interest rate of 153.1%.

Refer to “Note 1.

Basis of Preparation” of the accompanying consolidated financial statements for the related accounting policy update on tariff refund claims.

SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES

We describe our significant accounting policies in “Note 1.

Basis of Preparation and Summary of Significant Accounting Policies” of the consolidated financial statements included in our most recent Annual Report on Form 10-K for the fiscal year ended February 1, 2025.

There have been no significant changes in our accounting policies from those described in our most recent Annual Report on Form 10-K.

Except as described in “Note 1.

Basis of Presentation” of the accompanying consolidated financial statements, there have been no significant changes in our accounting policies from those described in our most recent Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S.

3 unchanged sentences

Consequently, actual results could differ materially from our estimates.

Our critical accounting estimates are described under the heading “Critical Accounting Estimates” in Item 7 of our most recent Annual Report on Form 10-K for the fiscal year ended February 1, 2025.

Our critical accounting estimates include impairment of long-lived assets, impairment of indefinite-lived intangible assets, income taxes, stock-based compensation, and inventory valuation.

4 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