What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-09-14 compared with 2026-06-12 · 287 added, 146 removed, 242 unchanged (64% 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 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.

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

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

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

• Second Quarter 2026 — The thirteen weeks ended August 1, 2026

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

• Year-To-Date 2026 — The twenty-six weeks ended August 1, 2026

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

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

16 unchanged sentences

“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 global retail and wholesale network includes two digital storefronts, 514 stores in North America, wholesale marketplaces, 323 international points of distribution in 13 countries through our ten 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 no customer that individually accounted for more than 10% of our Net sales for the First Quarter 2026.

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

wholesale customer that individually accounted for more than 10% of our Net sales for the Second Quarter 2026.

Recent Developments

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.

During the Second Quarter 2026, these pressures contributed to a decrease in consumer discretionary apparel purchases.

We expect these macroeconomic conditions, including but not limited to increased 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 of 2026, the U.S.

Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act of 1977 (“IEEPA”) were unlawful and thus deemed invalid.

During Fiscal 2025 and Fiscal 2026, we paid approximately $40 million in IEEPA tariffs.

During the Second Quarter 2026, we submitted tariff refund claims to the U.S.

Customs and Border Protection (“CBP”) and received refunds amounting to approximately $39 million (excluding interest) which was recorded as a reduction of Cost of sales for inventory previously sold.

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

The refunds received were used primarily to pay down our short-term debt.

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

Debt” of the accompanying consolidated financial statements.

As previously disclosed, on July 6, 2026, Muhammad Umair resigned as President and Chief Executive Officer of the Company, but not as an employee, and the board of directors of the Company (the “Board”) appointed Muhammad Asif Seemab as President and Interim Chief Executive Officer.

The Company indicated at that time that there were ongoing negotiations regarding Mr.

Umair taking on a new role with the Company and potential adjustments to his compensation in connection with such change in role.

On September 11, 2026, the Company entered into an employment adjustment letter (the “Adjustment Letter”) with Mr.

Umair, effective as of July 1, 2026, pursuant to which Mr.

Umair transitioned from the position of President and Chief Executive Officer to the position of Chief Strategy Officer of the Company.

Umair will continue to serve as a member of the Board.

Under the Adjustment Letter, Mr.

Umair’s annual base salary was revised to $497,500, his existing equity awards granted in connection with his prior position were forfeited, and he would no longer be eligible to participate in the Company’s annual management incentive plan.

All other terms and conditions of Mr.

Umair’s employment, from his employment letter dated May 29, 2024 remain the same.

In connection with Mr.

Umair’s transition, the Company granted Mr.

Umair the following one-time awards pursuant to the Adjustment Letter:

(i) a grant of 125,000 shares of the Company’s common stock, subject to certain restrictions on transfer and risks of forfeiture (the “Umair Restricted Shares”);

(ii) a grant of 125,000 performance-based restricted stock units, each representing the right to receive one share of the Company’s common stock, subject to certain restrictions on transfer and risks of forfeiture (the “Umair PSUs”);

and (iii) a one-time cash award of $350,000, payable within 30 days of the date of the Adjustment Letter.

Each of the Umair Restricted Shares and Umair PSUs vest in two equal tranches upon the Company’s market capitalization (measured using a 90-day volume-weighted average price) equaling or exceeding $265 million and $400 million, respectively, subject to Mr.

Umair’s continued employment with the Company.

Any Umair Restricted Shares or Umair PSUs that have not vested by the third anniversary of the grant date will be forfeited and returned to the Company, subject to extensions up to the seventh anniversary of the grant date, at the Company’s discretion.

RESULTS OF OPERATIONS

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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

Second Quarter 2026 Compared to Second Quarter 2025

Thirteen Weeks Ended Thirteen Weeks Ended Variance

2026 % of Net Sales May 3,

2026 % of Net Sales August 2,

2025 % of Net Sales $ % % of Net Sales

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Depreciation and amortization 6,254 2.6 % 7,570 2.5 % 1,316 17.4 % (0.1) %

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

Operating income (loss) (13,037) (5.4) % 4,106 1.4 % (17,143) (417.5) % (6.8) %

Related party interest expense (2,099) (0.9) % (1,868) (0.6) % (231) (12.4) % (0.3) %

Other interest expense, net (16,153) (6.7) % (6,150) (2.1) % (10,003) (162.7) % (4.6) %

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 % — %

Loss before provision (benefit) for income taxes (31,289) (12.9) % (3,912) (1.3) % (27,377) (699.8) % (11.6) %

Provision (benefit) for income taxes (338) (0.1) % 1,453 0.5 % 1,791 123.3 % 0.6 %

Net loss $ (30,951) (12.8) % $ (5,365) (1.8) % $ (25,586) (476.9) % (11.0) %

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).

Net sales decreased $56.2 million, or 18.9%, to $241.8 million during the Second Quarter 2026 from $298.0 million during the Second Quarter 2025.

The decrease in net sales was driven by a decrease in direct-to-consumer (“DTC”) sales of 15.0% due to lower traffic compared to the Second Quarter 2025.

Comparable retail sales in our owned and operated DTC business decreased 16.7% for the Second Quarter 2026.

Our consolidated results were also impacted by the planned reduction in shipments for our wholesale channel to align inventory positions with our customers, and to liquidate aged fashion inventories.

Gross profit decreased $18.0 million to $83.3 million during the Second Quarter 2026, compared to $101.3 million during the Second Quarter 2025.

Gross margin increased 40 basis points (“bps”) to 34.4% of Net sales in the Second Quarter 2026, compared to 34.0% of Net sales in the Second Quarter 2025.

The increase in gross margin was caused primarily by the impact of tariff refunds recognized during the Second Quarter 2026 amounting to approximately $39 million, which was accounted for as a reduction of Cost of sales.

Excluding the impact of these refunds, our gross margin decreased 1,550 bps, primarily due to a higher penetration of markdown sales (590 bps), higher tariffs on our product (330 bps), increased store occupancy costs due to new store openings (260 bps), and an increase in inventory reserves (250 bps), partially offset by favorable product mix and costs (100 bps).

Adjusted gross profit decreased $17.6 million to $83.7 million during the Second Quarter 2026, compared to $101.3 million during the Second Quarter 2025.

Adjusted gross margin increased 60 bps to 34.6% of Net sales during the Second Quarter 2026, compared to 34.0% during the Second Quarter 2025, inclusive of the impact of tariff refunds.

Gross profit is calculated as consolidated Net sales less Cost of sales (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 $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.

Selling, general, and administrative expenses increased $0.5 million to $90.1 million during the Second Quarter 2026, compared to $89.6 million during the Second Quarter 2025, and deleveraged 710 bps to 37.2% of Net sales.

The increase was primarily due to an increase in store expenses as we opened 19 new stores, combined with the impact of unfavorable foreign currency exchange movements, partially offset by lower marketing expense as we continue to focus on rationalizing our spend, and lower payroll costs from our transformation efforts.

Adjusted SG&A expenses were $88.3 million during the Second Quarter 2026, compared to $87.6 million during the Second Quarter 2025, and deleveraged 710 bps to 36.5% of Net sales.

Depreciation and amortization was $6.3 million during the Second Quarter 2026, compared to $7.6 million during the Second 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:

Operating income (loss) was a loss of $(13.0) million during the Second Quarter 2026, compared to income of $4.1 million during the Second Quarter 2025 due to the factors described above, and deleveraged 680 bps to (5.4)% of Net sales.

Adjusted operating loss was $(10.9) million in the Second Quarter 2026, compared to Adjusted operating income of $6.1 million in the Second Quarter 2025, and deleveraged 650 bps to (4.5)% of Net sales.

Related party interest expense was $2.1 million during the Second Quarter 2026 compared to $1.9 million during the Second Quarter 2025.

Net interest expense was $18.3 million during the Second Quarter 2026, compared to $8.0 million during the Second 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.

Excluding the impact of these financing costs, net interest expense decreased $0.4 million due to lower average borrowings and interest rates on our debt facilities.

Provision (benefit) for income taxes was a benefit of $(0.3) million during the Second Quarter 2026, compared to a provision of $1.5 million during the Second Quarter 2025.

Our effective tax rate was a benefit of 1.1% and a provision of (37.1)% in the Second Quarter 2026 and Second Quarter 2025, respectively.

The change in the effective tax rate was primarily due to a higher pretax loss and changes in forecasted earnings mix.

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

Net loss was $(31.0) million, or $(1.39) per diluted share, during the Second Quarter 2026, compared to $(5.4) million, or $(0.24) per diluted share, during the Second Quarter 2025, due to the factors described above.

Adjusted net loss was $(18.2) million, or $(0.82) per diluted share, during the Second Quarter 2026, compared to $(3.4) million, or $(0.15) per diluted share, during the Second Quarter 2025.

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

Thirteen Weeks Ended

2026 August 2,

(in thousands)

8 unchanged sentences

(5,415) (2,178)

Total segment operating income (loss) $ (13,037) $ 4,106

The Children’s Place U.S.

(3.5) % 2.3 %

The Children’s Place International (1)

(25.0) % (8.8) %

Total segment operating income (loss) as a percentage of net sales (5.4) % 1.4 %

___________________________________________

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

The Children’s Place U.S.

Net sales decreased $53.1 million, or 19.4%, to $220.1 million during the Second Quarter 2026, compared to $273.2 million during the Second Quarter 2025 , driven by a decrease in DTC sales due to lower traffic compared to the Second Quarter 2025.

Our results were also impacted by the planned reduction in shipments for our wholesale channel to align inventory positions with our customers, and to liquidate aged fashion inventories.

The Children’s Place International Net sales decreased $3.1 million, or 12.5%, to $21.7 million during the Second Quarter 2026, compared to $24.8 million during the Second Quarter 2025, driven by a decrease in DTC sales due to lower traffic compared to the Second Quarter 2025.

The Children’s Place U.S.

Operating loss was $(7.6) million during the Second Quarter 2026, compared to Operating income of $6.3 million during the Second Quarter 2025, primarily due to lower net sales, as described above.

The Children’s Place International Operating loss was $(5.4) million during the Second Quarter 2026, compared to $(2.2) million during the Second Quarter 2025, primarily due to higher merchandise costs which negatively impacted our margins.

Year-To-Date 2026 Compared to Year-To-Date 2025

Twenty-six Weeks Ended Twenty-six Weeks Ended Variance

2026 % of Net Sales August 2,

2025 % of Net Sales $ % % of Net Sales

(amounts in thousands)

Net sales $ 457,025 100.0 % $ 540,131 100.0 % $ (83,106) (15.4) % — %

Cost of sales (exclusive of depreciation and amortization) 320,397 70.1 % 368,076 68.1 % 47,679 13.0 % (2.0) %

Gross profit 136,628 29.9 % 172,055 31.9 % (35,427) (20.6) % (2.0) %

Selling, general, and administrative expenses 178,925 39.1 % 176,266 32.6 % (2,659) (1.5) % (6.5) %

Depreciation and amortization 12,920 2.8 % 15,800 2.9 % 2,880 18.2 % 0.1 %

Operating loss (55,217) (12.1) % (20,011) (3.7) % (35,206) (175.9) % (8.4) %

Related party interest expense (4,041) (0.9) % (3,740) (0.7) % (301) (8.0) % (0.2) %

Other interest expense, net (23,900) (5.2) % (12,840) (2.4) % (11,060) (86.1) % (2.8) %

Loss before provision for income taxes (83,158) (18.2) % (36,591) (6.8) % (46,567) (127.3) % (11.4) %

Provision for income taxes 984 0.2 % 2,797 0.5 % 1,813 64.8 % 0.3 %

Net loss $ (84,142) (18.4) % $ (39,388) (7.3) % $ (44,754) (113.6) % (11.1) %

Net sales decreased $83.1 million, or 15.4%, to $457.0 million during Year-To-Date 2026 from $540.1 million during Year-To-Date 2025.

The decrease in net sales was driven by a decrease in DTC sales due to lower traffic.

Comparable retail sales in our owned and operated DTC business decreased 12.9% during Year-To-Date 2026.

Our consolidated results were also impacted by the planned reduction in shipments for our wholesale channel to align inventory positions with our customers, and to liquidate aged fashion inventories.

Gross profit decreased $35.4 million to $136.6 million during Year-To-Date 2026, compared to $172.1 million during Year-To-Date 2025.

Gross margin decreased 200 bps to 29.9% of Net sales during Year-To-Date 2026, compared to 31.9% of Net sales in Year-To-Date 2025.

Excluding the impact of tariff refunds recognized during Year-To-Date 2026 amounting to approximately $39 million, which was accounted for as a reduction of Cost of sales, our gross margin decreased 1,040 bps primarily due to a higher penetration of markdown sales (420 bps), higher tariffs on our product (350 bps), increased store occupancy costs due to new store openings (190 bps), and an increase in inventory reserves (170 bps), partially offset by favorable product mix and costs (190 bps).

Adjusted gross profit decreased $30.8 million to $141.3 million during Year-To-Date 2026, compared to $172.1 million during Year-To-Date 2025.

Adjusted gross margin decreased 100 bps to 30.9% of Net sales during Year-To-Date 2026, compared to 31.9% of Net sales in Year-To-Date 2025, inclusive of the impact of tariff refunds.

Selling, general, and administrative expenses increased $2.7 million to $178.9 million during Year-To-Date 2026, compared to $176.3 million during Year-To-Date 2025, and deleveraged 650 bps to 39.1% of Net sales during Year-To-Date 2026.

The increase was primarily due to an increase in store expenses as we opened 20 new stores, combined with the impact of unfavorable foreign currency exchange movements, partially offset by a reduction in marketing expense as we continue to focus on rationalizing our spend, and a decrease in long-term incentive compensation.

Adjusted SG&A expenses were $175.8 million during Year-To-Date 2026, compared to $174.2 million during Year-To-Date 2025, and deleveraged 630 bps to 38.5% of Net sales.

Depreciation and amortization was $12.9 million during Year-To-Date 2026, compared to $15.8 million during Year-To-Date 2025.

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

Operating loss was $(55.2) million during Year-To-Date 2026, compared to $(20.0) million during Year-To-Date 2025 due to the factors described above, and deleveraged 840 bps to (12.1)% of Net sales.

Adjusted operating loss was $(47.1) million during Year-To-Date 2026, compared to $(17.9) million during Year-To-Date 2025.

Related party interest expense was $4.0 million during Year-To-Date 2026, compared to $3.7 million during Year-To-Date 2025.

Net interest expense, was $27.9 million during Year-To-Date 2026, compared to $16.6 million during Year-To-Date 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.

Excluding the impact of these financing costs, net interest expense decreased $1.0 million due to lower average borrowings and interest rates on our debt facilities.

Provision for income taxes was $1.0 million during Year-To-Date 2026, compared to $2.8 million during Year-To-Date 2025.

Our effective tax rate was a provision of (1.2)% and (7.6)% during Year-To-Date 2026 and Year-To-Date 2025, respectively.

The change in the effective tax rate was primarily due to a higher pretax loss and changes in forecasted earnings mix.

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

Net loss was $(84.1) million, or $(3.79) per diluted share, during Year-To-Date 2026, compared to $(39.4) million, or $(1.80) per diluted share, during Year-To-Date 2025.

Adjusted net loss was $(62.6) million, or $(2.82) per diluted share during Year-To-Date 2026, compared to $(36.3) million, or $(1.66) per diluted share, during Year-To-Date 2025.

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

Twenty-six Weeks Ended

2026 August 2,

(in thousands)

The Children’s Place U.S.

$ 415,407 $ 494,954

The Children’s Place International (1)

41,618 45,177

Total net sales $ 457,025 $ 540,131

The Children’s Place U.S.

$ (41,665) $ (13,431)

The Children’s Place International (1)

(13,552) (6,580)

Total segment operating loss $ (55,217) $ (20,011)

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The Children’s Place U.S.

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.

Net sales decreased $79.6 million, or 16.1%, to $415.4 million during Year-To-Date 2026, compared to $495.0 million during Year-To-Date 2025, driven by a decrease in DTC sales due to lower traffic.

Our results were also impacted by the planned reduction in shipments for our wholesale channel to align inventory positions with our customers, and to liquidate aged fashion inventories.

The Children’s Place International Net sales decreased $3.7 million, or 8.1%, to $41.6 million during Year-To-Date 2026, compared to $45.2 million during Year-To-Date 2025, driven by a decrease in DTC sales due to lower traffic.

The Children’s Place U.S.

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.

Operating loss was $(41.7) million during Year-To-Date 2026, compared to $(13.4) million during Year-To-Date 2025, primarily due to lower net sales, as described above.

The Children’s Place International Operating loss was $(13.6) million during Year-To-Date 2026, compared to $(6.6) million during Year-To-Date 2025, primarily due to higher merchandise costs which negatively impacted our margins.

Non-GAAP Reconciliation

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Thirteen Weeks Ended

August 1, 2026

(amounts in thousands, except per share amounts)

5 unchanged sentences

Financing charges on monetization of tariff refund claims (2)

Restructuring (3)

Restructuring costs (3)

— (1,713) 1,713 1,713

6 unchanged sentences

____________________________________________

(1) Related to 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.

Twenty-six Weeks Ended

August 1, 2026

(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) $ 136,628 $ 178,925 $ (55,217) $ (84,142) $ (3.79)

Exit from third-party distribution facility (1)

4,681 — 5,010 5,010

Financing charges on monetization of tariff refund claims (2)

Restructuring costs (3)

— (3,151) 3,151 3,151

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

Aggregate impact of non-GAAP adjustments 4,681 (3,151) 8,161 21,580

Income tax effect — — — —

As adjusted $ 141,309 $ 175,774 $ (47,056) $ (62,562) $ (2.82)

% of Net Sales (GAAP) 29.9 % 39.1 % (12.1) % (18.4) %

% of Net Sales (As adjusted) 30.9 % 38.5 % (10.3) % (13.7) %

____________________________________________

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

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Thirteen Weeks Ended

August 2, 2025

(amounts in thousands, except per share amounts)

Gross profit Selling, general and

administrative expenses Operating income Net loss Diluted loss per common share

As reported (GAAP) $ 101,272 $ 89,596 $ 4,106 $ (5,365) $ (0.24)

Restructuring costs (1)

— (1,211) 1,211 1,211

Legal settlement accrual (2)

— (750) 750 750

Aggregate impact of non-GAAP adjustments — (1,961) 1,961 1,961

Income tax effect — — — —

As adjusted $ 101,272 $ 87,635 $ 6,067 $ (3,404) $ (0.15)

% of Net Sales (GAAP) 34.0 % 30.1 % 1.4 % (1.8) %

% of Net Sales (As adjusted) 34.0 % 29.4 % 2.0 % (1.1) %

____________________________________________

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

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

Twenty-six Weeks Ended

August 2, 2025

(amounts in thousands, except per share amounts)

Gross profit Selling, general and

administrative expenses Operating loss Net loss Diluted loss per common share

12 unchanged sentences

(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.

(2) Related to the reversal of costs accrued for legal settlements.

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

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 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”).

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 $350.0 million asset-based revolving credit facility (the “ABL Credit Facility”) with Wells Fargo Bank, National Association and our term loan with SLR Credit Solutions (“SLR”), and the financing of capital projects.

During Fiscal 2024, we entered into an interest-free, unsecured and subordinated promissory note with Mithaq Capital SPC, a Cayman segregated portfolio company (“Mithaq”) for a $78.6 million term loan (the “First Mithaq Term Loan”), and a separate unsecured and subordinated promissory note for a $90.0 million term loan (the “Second Mithaq Term Loan”;

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

As of February 6, 2025, $60.2 million under the First 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 First Mithaq Term Loan.

Pursuant to our refinancing transactions on December 16, 2025, the Second 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 Initial Mithaq Term Loans as of August 1, 2026.

On December 16, 2025, we entered into a term loan agreement with 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.

The principal amount outstanding as of August 1, 2026 was $100.0 million.

On July 1, 2026, we entered into a Shariah compliant, unsecured and subordinated promissory note with Mithaq for a $15.0 million term loan (the “Third Mithaq Term Loan”;

and collectively with the Initial Mithaq Term Loans, the “Mithaq Term Loans”), as the first advance under our $40.0 million senior unsecured credit facility (the “Mithaq Credit Facility”) pursuant to our commitment letter with Mithaq.

We received the funds on July 1, 2026, and effective upon the receipt of such funds, our remaining availability under the Mithaq Credit Facility was permanently reduced to $25.0 million.

As of August 1, 2026, we had $160.1 million of outstanding borrowings under our ABL Credit Facility.

Our working capital deficit increased $13.7 million to $53.7 million at August 1, 2026, compared to $40.0 million at August 2, 2025, primarily due to a decrease in inventory due to improved inventory management and an increase in short-term debt and accounts payable balances, partially offset by a decrease in outstanding borrowings under our ABL Credit Facility due to proceeds received from the SLR Term Loan.

As of August 1, 2026, we had total liquidity of $79.7 million, including $47.5 million of availability under our ABL Credit Facility, $25.0 million of availability under our Mithaq Credit Facility, and $7.2 million of cash on hand.

At August 1, 2026, we had $21.5 million of outstanding letters of credit with an additional $8.5 million available for issuing letters of credit under our ABL Credit Facility.

We expect to be able to meet our working capital and capital expenditure requirements for at least the next twelve months from the date that our consolidated financial statements for the Second Quarter 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 authorized a $250.0 million share repurchase program (the “Share Repurchase Program”).

In November 2021, 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 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.

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

As of August 1, 2026, there was $156.1 million remaining availability under the Share Repurchase Program.

Cash Flows and Capital Expenditures

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.

Cash used in operating activities was $32.3 million during Year-To-Date 2026, compared to $73.4 million during Year-To-Date 2025, primarily due to better working capital management with a reduction in inventory levels and an increase in accounts payable balances, partially offset by higher net losses incurred during the year.

Cash used in investing activities was $13.7 million during Year-To-Date 2026, compared to $4.8 million during Year-To-Date 2025, driven by higher capital expenditures due to store openings.

Cash provided by financing activities was $48.4 million during Year-To-Date 2026, compared to $77.8 million during Year-To-Date 2025.

The decrease primarily resulted from lower net borrowings under our ABL Credit Facility, in addition to lower capital raised from the Third Mithaq Term Loan proceeds compared to the net proceeds 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.

4 unchanged sentences

2026 January 31,

2026 August 2,

(in thousands)

2 unchanged sentences

Accounts payable 146,201 108,481 132,436

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.

Accounts receivable were $44.6 million as of August 1, 2026, compared to $54.4 million as of August 2, 2025 and $26.0 million as of January 31, 2026.

The decrease of $9.7 million, or 17.9%, compared to August 2, 2025 was primarily driven by a decrease in wholesale receivables due to lower net sales.

The increase of $18.6 million or 71.8%, compared to January 31, 2026 was primarily driven by an increase in sales due to seasonality.

Inventories were $340.2 million as of August 1, 2026, compared to $442.7 million as of August 2, 2025 and $325.1 million as of January 31, 2026.

The decrease of $102.5 million, or 23.2% compared to August 2, 2025 was primarily driven by improved inventory management as we continue to align our inventory levels with anticipated demand and sell through excess inventory on hand.

The increase of $15.1 million, or 4.6%, compared to January 31, 2026 was primarily driven by a buildup of inventory based on seasonal needs.

Accounts payable were $146.2 million as of August 1, 2026, compared to $132.4 million as of August 2, 2025 and $108.5 million as of January 31, 2026.

The increase of $13.9 million, or 10.5%, compared to August 2, 2025, was due to the timing of receipts and payments.

The increase of $37.8 million, or 34.8%, compared to January 31, 2026, was primarily the result of higher inventory purchases based on seasonal needs.

ABL Credit Facility

9 unchanged sentences

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.

For the Second Quarter 2026 and Second Quarter 2025, we recognized $2.6 million and $5.4 million, respectively, in interest expense related to the ABL Credit Facility.

During the Year-To-Date 2026 and the Year-To-Date 2025, we recognized $4.8 million and $10.2 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.

6 unchanged sentences

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.

We were in compliance with this excess availability requirement as of August 1, 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 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:

As of August 1, 2026, January 31, 2026, and August 2, 2025, unamortized deferred financing costs amounted to $5.0 million, $5.6 million, and $2.7 million, related to our ABL Credit Facility.

The table below presents the components of our ABL Credit Facility:

2026 January 31,

2026 August 2,

(in millions)

17 unchanged sentences

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.

(2) The sublimit availability for letters of credit was $8.5 million as of August 1, 2026, $6.3 million as of January 31, 2026, and $6.8 million as of August 2, 2025.

SLR Term Loan

9 unchanged sentences

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

We were in compliance with this excess availability requirement as of August 1, 2026.

For the Second Quarter 2026 and Year-To-Date 2026, we recognized $2.4 million and $4.6 million in interest expense related to the SLR Term Loan.

As of August 1, 2026, the interest rate was 10.1%.

As of August 1, 2026 and January 31, 2026, unamortized deferred financing costs amounted to $2.3 million and $2.4 million, respectively, related to the SLR Term Loan.

Initial Mithaq Term Loans

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.

We maintain an interest-free, unsecured and subordinated promissory note with Mithaq (the “First 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 First 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 First Mithaq Term Loan as of August 1, 2026.

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

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

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

The Second 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 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.

1 to the Second 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 Second Mithaq Term Loan is guaranteed by each of our subsidiaries that guarantees our ABL Credit Facility and the SLR Term Loan.

Pursuant to our refinancing transactions on December 16, 2025, the Second 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 Initial 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.

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 payment obligations under the Credit Agreement.

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 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 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

Total principal debt payments

For the Second Quarter 2026 and Second Quarter 2025, we recognized $1.8 million and $1.9 million, respectively, in interest-equivalent expense related to the Second Mithaq Term Loan.

During the Year-To-Date 2026 and the Year-To-Date 2025, we recognized $3.5 million and $3.7 million, respectively, in interest expense related to the Second Mithaq Term Loan.

As of August 1, 2026, the interest-equivalent rate was 7.6%.

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

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

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

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

As of August 1, 2026, January 31, 2026, and August 2, 2025, interest-equivalent expense payable to Mithaq was $9.1 million, $5.6 million, and $7.0 million, respectively.

As the payments due as of August 1, 2026 are not expected to be settled within 12 months due to payment condition restrictions within the Credit Agreement, the amounts payable are recorded within Other long-term liabilities.

The Initial 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 Initial Mithaq Term Loans are subordinated in payment priority to our payment obligations under the Credit Agreement.

Pursuant to our refinancing transactions in December 2025, the Initial Mithaq Term Loans are also subordinated in payment priority to our payment obligations under the SLR Term Loan.

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

The Initial 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 Initial 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 Initial 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 Initial 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 Initial Mithaq Term Loans.

As of August 1, 2026, January 31, 2026, and August 2, 2025, unamortized deferred financing costs amounted to $3.2 million, $3.6 million, and $1.2 million, respectively, related to the Initial Mithaq Term Loans.

Mithaq Commitment Letter

4 unchanged sentences

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.

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

Similar to the Initial 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 December 16, 2030.

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

On July 1, 2026, the Company and certain subsidiaries entered into a Shariah compliant, unsecured and subordinated promissory note with Mithaq for a $15.0 million term loan (the “Third Mithaq Term Loan”;

and collectively with the Initial Mithaq Term Loans, the “Mithaq Term Loans”), as the first advance under our $40.0 million Mithaq Credit Facility.

The net proceeds from the Third Mithaq Term Loan were received by the Company on July 1, 2026 and used to partially pay down our borrowings under the ABL Credit Facility, to reduce a portion of our accounts payable balances with vendors, and for other working capital purposes.

As of August 1, 2026, our remaining availability under the Mithaq Credit Facility was $25.0 million.

Similar to the Initial Mithaq Term Loans, the Third Mithaq Term Loan matures on April 16, 2031, and is guaranteed by each of the Company’s subsidiaries that guarantees the ABL Credit Facility and the SLR Term Loan.

Similar to the Second Mithaq Term Loan, the Third Mithaq Term Loan requires monthly payments equivalent to interest charged at the SOFR per annum plus 9.000%, with such payments subject to deferral by the Company upon written notice to Mithaq.

For the Second Quarter 2026 and Year-To-Date 2026, we recognized $0.2 million in interest expense related to the Third Mithaq Term Loan.

As of August 1, 2026, the interest-equivalent rate was 12.6%.

In addition, similar to the Initial Mithaq Term Loans, the Third Mithaq Term Loan is subject to the Mithaq Subordination Agreement, pursuant to which the Third Mithaq Term Loan is also subordinated in payment priority to the obligations of the Company and our subsidiaries under the Credit Agreement and the SLR Loan Agreement.

Subject to such subordination terms, the Third Mithaq Term Loan is also prepayable at any time and from time to time without penalty and does not require any mandatory prepayments.

Similar to the Initial Mithaq Term Loans, the Third Mithaq Term Loan also contains customary affirmative and negative covenants substantially similar to a subset of the covenants set forth in the Credit Agreement, including limits on the ability of the Company and our subsidiaries to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, dispositions or restricted payments, or to change the nature of its business.

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

Similar to the Initial Mithaq Term Loans, the Third Mithaq Term Loan also 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 Third Mithaq 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 Third Mithaq Term Loan.

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

August 1, 2026

(in thousands)

Remainder of 2026

Total principal debt payments

Monetization of Income Tax Receivable Claim

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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.

As of August 1, 2026, the unamortized financing costs amounted to $2.2 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%.

1 unchanged sentence

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.

Customs and Border Protection (“CBP”) , related to those tariffs originally invoked under the International Emergency Economics Powers Act of 1977, 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%.

During the Second Quarter 2026, we received tariff refunds amounting to approximately $39 million (excluding interest), the majority of which was remitted to Alnus which reduced the Short-term debt outstanding.

As of August 1, 2026, the unamortized financing costs amounted to $0.6 million.

These costs are being amortized through the expected settlement date of the claim and recorded in Interest expense.

Refer to “Note 1.

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

Basis of Presentation” 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 January 31, 2026.

Basis of Presentation 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 January 31, 2026.

Except as described in “Note 1.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis