PLCE 10-Q
Childrens Place, Inc. (PLCE)
10-Q
2025-12-16
For: 2025-11-01
View Original
Added on
April 10, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the quarterly period ended November 1, 2025
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the transition period from ____________ to ____________
Commission file number 0-23071
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |||||||
| incorporation or organization) | Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
(201 ) 558-2400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
___________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||||||||
| x | Smaller reporting company | |||||||||||||||||||
Emerging growth company | ||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, par value $0.10 per share, outstanding at December 12, 2025: 22,167,889 .
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED NOVEMBER 1, 2025
TABLE OF CONTENTS
| PAGE | ||||||||
Consolidated Balance Sheets as of November 1, 2025, February 1, 2025 and November 2, 2024 | ||||||||
Consolidated Statements of Operations for the thirteen and thirty-nine weeks ended November 1, 2025 and November 2, 2024 | ||||||||
Consolidated Statements of Comprehensive Income (Loss) for the thirteen and thirty-nine weeks ended November 1, 2025 and November 2, 2024 | ||||||||
Consolidated Statements of Changes in Stockholders’ Deficit for the thirteen and thirty-nine weeks ended November 1, 2025 and November 2, 2024 | ||||||||
Consolidated Statements of Cash Flows for the thirty-nine weeks ended November 1, 2025 and November 2, 2024 | ||||||||
PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS.
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| November 1, 2025 | February 1, 2025 | November 2, 2024 | |||||||||||||||
| (in thousands, except par value) | |||||||||||||||||
| ASSETS | |||||||||||||||||
| Current assets: | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Accounts receivable | |||||||||||||||||
| Inventories | |||||||||||||||||
| Prepaid expenses and other current assets | |||||||||||||||||
| Total current assets | |||||||||||||||||
| Long-term assets: | |||||||||||||||||
| Property and equipment, net | |||||||||||||||||
| Right-of-use assets | |||||||||||||||||
| Tradenames, net | |||||||||||||||||
| Other assets | |||||||||||||||||
| Total assets | $ | $ | $ | ||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||||||||||||
| Current liabilities: | |||||||||||||||||
| Revolving loan | $ | $ | $ | ||||||||||||||
| Accounts payable | |||||||||||||||||
| Current portion of operating lease liabilities | |||||||||||||||||
| Income taxes payable | |||||||||||||||||
| Accrued expenses and other current liabilities | |||||||||||||||||
| Total current liabilities | |||||||||||||||||
| Long-term liabilities: | |||||||||||||||||
| Related party long-term debt | |||||||||||||||||
| Long-term portion of operating lease liabilities | |||||||||||||||||
| Other tax liabilities | |||||||||||||||||
| Other long-term liabilities | |||||||||||||||||
| Total liabilities | |||||||||||||||||
| Commitments and contingencies (see Note 7) | |||||||||||||||||
| Stockholders’ deficit: | |||||||||||||||||
Preferred stock, $ | |||||||||||||||||
Common stock, $ | |||||||||||||||||
| Additional paid-in capital | |||||||||||||||||
Treasury stock, at cost ( | ( | ( | ( | ||||||||||||||
| Deferred compensation | |||||||||||||||||
| Accumulated other comprehensive loss | ( | ( | ( | ||||||||||||||
| Accumulated deficit | ( | ( | ( | ||||||||||||||
| Total stockholders’ deficit | ( | ( | ( | ||||||||||||||
| Total liabilities and stockholders’ deficit | $ | $ | $ | ||||||||||||||
See accompanying notes to these consolidated financial statements.
1
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||||
| November 1, 2025 | November 2, 2024 | November 1, 2025 | November 2, 2024 | ||||||||||||||||||||
| (in thousands, except loss per common share) | |||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of sales (exclusive of depreciation and amortization) | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general, and administrative expenses | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Asset impairment charges | |||||||||||||||||||||||
| Operating income (loss) | ( | ( | |||||||||||||||||||||
| Related party interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Other interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Income (loss) before provision (benefit) for income taxes | ( | ( | ( | ||||||||||||||||||||
| Provision (benefit) for income taxes | ( | ( | |||||||||||||||||||||
| Net income (loss) | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Earnings (loss) per common share | |||||||||||||||||||||||
| Basic | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Diluted | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying notes to these consolidated financial statements.
2
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||||
| November 1, 2025 | November 2, 2024 | November 1, 2025 | November 2, 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net income (loss) | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||||||||||||||
| Total comprehensive income (loss) | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
See accompanying notes to these consolidated financial statements.
3
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
Thirteen Weeks Ended November 1, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In | Deferred | Accumulated | Comprehensive | Treasury Stock | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Shares | Amount | Capital | Compensation | Deficit | Loss | Shares | Amount | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, August 2, 2025 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, November 1, 2025 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
Thirty-nine Weeks Ended November 1, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In | Deferred | Accumulated | Comprehensive | Treasury Stock | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Shares | Amount | Capital | Compensation | Deficit | Loss | Shares | Amount | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, February 1, 2025 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Vesting of stock awards | ( | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase and retirement of common stock | ( | ( | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Rights offering stock issuance | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issuance costs | — | — | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, November 1, 2025 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to these consolidated financial statements.
4
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
Thirteen Weeks Ended November 2, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In | Deferred | Accumulated | Comprehensive | Treasury Stock | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Shares | Amount | Capital | Compensation | Deficit | Loss | Shares | Amount | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, August 3, 2024 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Vesting of stock awards | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issuance costs | — | — | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Deferral of common stock into deferred compensation plan | — | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, November 2, 2024 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
Thirty-nine Weeks Ended November 2, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In | Deferred | Accumulated | Comprehensive | Treasury Stock | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Shares | Amount | Capital | Compensation | Deficit | Loss | Shares | Amount | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, February 3, 2024 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Vesting of stock awards | ( | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase and retirement of common stock | ( | ( | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock issuance costs | — | — | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Distribution of common stock from deferred compensation plan, net of deferrals | — | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, November 2, 2024 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to these consolidated financial statements.
5
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
See accompanying notes to these consolidated financial statements.
| Thirty-nine Weeks Ended | |||||||||||
| November 1, 2025 | November 2, 2024 | ||||||||||
| (in thousands) | |||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Reconciliation of net loss to net cash used in operating activities: | |||||||||||
| Non-cash portion of operating lease expense | |||||||||||
| Depreciation and amortization | |||||||||||
| Non-cash stock-based compensation expense | |||||||||||
| Asset impairment charges | |||||||||||
| Other non-cash charges, net | |||||||||||
| Loss on extinguishment of debt | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Inventories | ( | ||||||||||
| Accounts receivable and other assets | ( | ( | |||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||
| Income taxes payable, net of prepayments | ( | ||||||||||
| Accounts payable and other current liabilities | ( | ( | |||||||||
| Lease liabilities | ( | ( | |||||||||
| Other long-term liabilities | ( | ( | |||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Borrowings under revolving credit facility | |||||||||||
| Repayments under revolving credit facility | ( | ( | |||||||||
| Proceeds from rights offering | |||||||||||
| Purchase and retirement of common stock, including shares surrendered for tax withholdings and transaction costs | ( | ( | |||||||||
| Proceeds from issuance of related party term loans | |||||||||||
| Repayment of related party term loan | ( | ||||||||||
| Repayment of term loan | ( | ||||||||||
| Payment of debt issuance costs | ( | ||||||||||
| Payment of stock issuance costs | ( | ( | |||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||||
| Net cash paid (received) for income taxes | $ | $ | ( | ||||||||
| Cash paid for interest | |||||||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: | |||||||||||
| Purchases of property and equipment not yet paid | |||||||||||
6
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.BASIS OF PRESENTATION
Description of Business
The Children’s Place, Inc. and its subsidiaries (collectively, the “Company”) is 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. The Company designs, contracts to manufacture, and sells fashionable, high-quality apparel, accessories and footwear predominantly at value prices, primarily under the Company’s proprietary brands “The Children’s Place”, “Gymboree”, “Sugar & Jade”, and “PJ Place”. Its 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 nine international franchise and wholesale partners and social media channels on Instagram, Facebook, X, formerly known as Twitter, YouTube and Pinterest. The Company’s digital storefronts are at www.childrensplace.com and www.gymboree.com, where its customers are able to shop online for the same merchandise available in its physical stores, as well as certain exclusive merchandise offered only on its e-commerce sites.
The Company classifies its business into two segments: The Children’s Place U.S. and The Children’s Place International. Included in The Children’s Place U.S. segment are the Company’s U.S. and Puerto Rico-based stores and net sales from its U.S.-based wholesale business. Included in The Children’s Place International segment are its Canadian-based stores and net sales from international franchisees. Each segment includes an e-commerce business located at www.childrensplace.com and www.gymboree.com.
Terms that are commonly used in the notes to the Company’s consolidated financial statements 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
•Fiscal 2025 — The fifty-two weeks ending January 31, 2026
•Fiscal 2024 — The fifty-two weeks ended February 1, 2025
•SEC — U.S. Securities and Exchange Commission
•U.S. GAAP — Generally Accepted Accounting Principles in the United States
•FASB — Financial Accounting Standards Board
•FASB ASC — FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP, except that rules and interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC registrants
Basis of Presentation
The unaudited consolidated financial statements and accompanying notes to the consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated. As of November 1, 2025, February 1, 2025 and November 2, 2024, the Company did not have any investments in unconsolidated affiliates. FASB ASC 810 — Consolidation is considered when determining whether an entity is subject to consolidation.
7
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In the opinion of management, the accompanying unaudited consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of the consolidated balance sheets of the Company as of November 1, 2025 and November 2, 2024, the results of its consolidated operations, consolidated comprehensive income (loss), and consolidated changes in stockholders’ deficit for the thirteen and thirty-nine weeks ended November 1, 2025 and November 2, 2024, and consolidated cash flows for the thirty-nine weeks ended November 1, 2025 and November 2, 2024. The consolidated balance sheet as of February 1, 2025 was derived from audited financial statements. Due to the seasonal nature of the Company’s business, the results of operations for the thirteen and thirty-nine weeks ended November 1, 2025 and November 2, 2024 are not necessarily indicative of operating results for a full fiscal year. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2025.
Fiscal Year
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and amounts of revenues and expenses reported during the period. Actual results could differ from the assumptions used and estimates made by management, which could have a material impact on the Company’s financial position or results of operations. Critical accounting estimates inherent in the preparation of the consolidated financial statements include impairment of long-lived assets, impairment of indefinite-lived intangible assets, income taxes, stock-based compensation, and inventory valuation.
Recent Accounting Standards Updates
Accounting Pronouncement Recently Adopted
In November 2023, the FASB issued Accounting Standards Update No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” (“ASU 2023-07”). The amendments in ASU 2023-07 are designed to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses during interim and annual periods. The Company adopted ASU 2023-07 on a retrospective basis and is effective for the Company’s Annual Report on Form 10-K for Fiscal 2024, and subsequent interim periods. The adoption of ASU 2023-07 expanded our disclosures but did not have a material impact on our consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued Accounting Standards Update No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” (“ASU 2023-09”). The amendments in ASU 2023-09 are designed to enhance the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The adoption of ASU 2023-09 will expand the Company’s disclosures, but is not expected to have a material impact on its consolidated financial statements.
In November 2024, the FASB issued Accounting Standards Update No. 2024-03 “Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40),” (“ASU 2024-03”). The amendments in ASU 2024-03 are designed to improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods with fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements.
8
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In September 2025, the FASB issued Accounting Standards Update No. 2025-06, “Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40),” (“ASU 2025-06”). The amendments in ASU 2025-06 remove all references to prescriptive and sequential software development stages, and require entities to start capitalizing software costs when management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years, and may be adopted on a prospective, modified, or retrospective transition approach. Early adoption is permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements.
2. REVENUES
The following table presents the Company’s net sales disaggregated by geography:
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||||
| November 1, 2025 | November 2, 2024 | November 1, 2025 | November 2, 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| South | $ | $ | $ | $ | |||||||||||||||||||
| Northeast | |||||||||||||||||||||||
| West | |||||||||||||||||||||||
| Midwest | |||||||||||||||||||||||
International and other (1) | |||||||||||||||||||||||
| Total net sales | $ | $ | $ | $ | |||||||||||||||||||
(1)Includes retail and e-commerce sales in Canada and Puerto Rico, wholesale and franchisee sales, and certain amounts earned under the Company’s private label credit card program.
Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
The Company recognizes revenue, including shipping and handling fees billed to customers, as applicable, upon purchase at the Company’s retail stores or when received by the customer if the product was purchased via e-commerce, net of coupon redemptions and anticipated sales returns. The Company deferred sales of $11.0 million, $3.2 million, and $9.3 million within Accrued expenses and other current liabilities as of November 1, 2025, February 1, 2025, and November 2, 2024, respectively, based upon estimated time of delivery, at which point control passes to the customer. Sales tax collected from customers is excluded from revenue.
For its wholesale business, the Company recognizes revenue, when title of the goods passes to the customer, net of commissions, discounts, operational chargebacks, and cooperative advertising. The allowance for wholesale revenue included within Accounts receivable was $7.4 million, $8.7 million, and $14.1 million as of November 1, 2025, February 1, 2025, and November 2, 2024, respectively.
For the sale of goods to retail customers with a right of return, the Company recognizes revenue for the consideration it expects to be entitled to and calculates an allowance for estimated sales returns based upon the Company’s sales return experience. Adjustments to the allowance for estimated sales returns in subsequent periods have not been material based on historical data, thereby reducing the uncertainty inherent in such estimates. The allowance for estimated sales returns, which is recorded in Accrued expenses and other current liabilities, was $1.7 million, $1.0 million, and $1.9 million as of November 1, 2025, February 1, 2025, and November 2, 2024, respectively.
9
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company’s private label credit card is issued to customers for use exclusively at The Children’s Place and Gymboree stores in the U.S. and online at www.childrensplace.com and www.gymboree.com, and credit is extended to such customers by a third-party financial institution on a non-recourse basis to the Company. The private label credit card includes multiple performance obligations for the Company, including marketing and promoting the program on behalf of the bank and the operation of the loyalty rewards program. Included in the agreement with the third-party financial institution was an upfront bonus paid to the Company and an additional bonus to extend the term of the agreement. These bonuses are recognized as revenue and allocated between brand and reward obligations. As the license of the Company’s brand is the predominant item in the performance obligation, the amount allocated to the brand obligation is recognized on a straight-line basis over the term of the agreement. The amount allocated to the reward obligation is recognized on a point-in-time basis as redemptions under the loyalty program occur.
In measuring revenue and determining the consideration the Company is entitled to as part of a contract with a customer, the Company takes into account the related elements of variable consideration, such as additional bonuses, including profit-sharing, over the life of the private label credit card program. Similar to the upfront bonus, the usage-based royalties and bonuses are recognized as revenue and allocated between the brand and reward obligations. The amount allocated to the brand obligation is recognized on a straight-line basis over the remaining term. The amount allocated to the reward obligation is recognized on a point-in-time basis as redemptions under the loyalty program occur. In addition, the annual profit-sharing amount is recognized quarterly within an annual period when it can be estimated reliably. The additional bonuses are amortized over the contract term based on anticipated progress against future targets and level of risk associated with achieving the targets.
The Company has a points-based customer loyalty program in which customers earn points based on purchases and other promotional activities. These points can be redeemed for coupons to discount future purchases. The redemption cycle for coupons is 45 days. On September 23, 2025, the Company launched a new loyalty program in which customers can now redeem their coupons over a 12 month period. A contract liability is estimated based on the standalone selling price of benefits earned by customers through the program and the related redemption experience under the program. The value of each point earned is recorded as deferred revenue and is included within Accrued expenses and other current liabilities. The total contract liabilities related to this program were $8.1 million, $3.7 million, and $3.8 million as of November 1, 2025, February 1, 2025, and November 2, 2024, respectively. During Year-To-Date 2025 and Year-To-Date 2024, the Company recognized Net sales of $3.7 million and $1.7 million related to the points-based customer loyalty program balance that existed at February 1, 2025 and February 3, 2024, respectively.
The Company’s policy with respect to gift cards is to record revenue as and when the gift cards are redeemed for merchandise. The Company recognizes gift card breakage income in proportion to the pattern of rights exercised by the customer when the Company expects to be entitled to breakage and the Company determines that it does not have a legal obligation to remit the value of the unredeemed gift card to the relevant jurisdiction as unclaimed or abandoned property. Gift card breakage is recorded within Net sales. Prior to their redemption, gift cards are recorded as a liability within Accrued expenses and other current liabilities. The liability is estimated based on expected breakage that considers historical patterns of redemption. The gift card liability balance as of November 1, 2025, February 1, 2025, and November 2, 2024 was $2.7 million, $4.8 million, and $4.5 million, respectively. During the Third Quarter 2025 and the Third Quarter 2024, the Company recognized Net sales of $1.7 million and $1.9 million related to the gift card liability balance that existed at February 1, 2025 and February 3, 2024, respectively. During Year-To-Date 2025 and Year-To-Date 2024, the Company recognized Net sales of $4.1 million and $4.7 million related to the gift card liability balance that existed at February 1, 2025 and February 3, 2024, respectively.
The Company has an international program of territorial agreements with franchisees. The Company generates revenues from the franchisees from the sale of product and, in certain cases, sales royalties. The Company recognizes revenue on the sale of product to franchisees when the franchisee takes ownership of the product. The Company records net sales for royalties when the applicable franchisee sells the product to its customers. Under certain agreements, the Company receives a fee from each franchisee for exclusive territorial rights and based on the opening of new stores. The Company records these territorial fees as deferred revenue and amortizes the fee into Net sales over the life of the territorial agreement.
10
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. INTANGIBLE ASSETS
On April 4, 2019, the Company acquired certain intellectual property and related assets of Gymboree Group, Inc. and related entities, which included the worldwide rights to the Gymboree tradename. The Gymboree tradename is recorded in the long-term assets section of the consolidated balance sheets.
The Company’s intangible assets were as follows:
| November 1, 2025 | ||||||||||||||||||||||||||
| Useful Life | Gross Amount | Accumulated Amortization | Net Amount | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
Gymboree tradename | Indefinite | $ | $ | — | $ | |||||||||||||||||||||
| Total intangible assets | $ | $ | $ | |||||||||||||||||||||||
| February 1, 2025 | ||||||||||||||||||||||||||
| Useful Life | Gross Amount | Accumulated Amortization | Net Amount | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
Gymboree tradename | Indefinite | $ | $ | — | $ | |||||||||||||||||||||
Crazy 8 tradename | ( | |||||||||||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | ||||||||||||||||||||||
| November 2, 2024 | ||||||||||||||||||||||||||
| Useful Life | Gross Amount | Accumulated Amortization | Net Amount | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
Gymboree tradename | Indefinite | $ | $ | — | $ | |||||||||||||||||||||
| Total intangible assets | $ | $ | $ | |||||||||||||||||||||||
The Company did not 28.0 million during the Company’s second fiscal quarter of 2024, which reduced the carrying value to its fair value of $13.0 million.
4. PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
| November 1, 2025 | February 1, 2025 | November 2, 2024 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Land and land improvements | $ | $ | $ | ||||||||||||||
| Building and improvements | |||||||||||||||||
| Material handling equipment | |||||||||||||||||
| Leasehold improvements | |||||||||||||||||
| Store fixtures and equipment | |||||||||||||||||
| Capitalized software | |||||||||||||||||
| Construction in progress | |||||||||||||||||
| Less: accumulated depreciation and amortization | ( | ( | ( | ||||||||||||||
| Property and equipment, net | $ | $ | $ | ||||||||||||||
11
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company reviewed its store related long-lived assets for indicators of impairment, and performed a recoverability test if indicators were identified. Based on the results of the analyses performed, the Company did not record asset impairment charges in the Third Quarter 2025 and Year-To-Date 2025, and in the Third Quarter 2024 and Year-To-Date 2024.
5. LEASES
The Company has operating leases for retail stores, corporate offices, distribution facilities, and certain equipment. The Company’s leases have remaining lease terms ranging from less than one year up to twelve years , some of which include options to extend the leases for up to five years , and some of which include options to terminate the lease early. The Company records all occupancy costs in Cost of sales, except costs for administrative office buildings, which are recorded in Selling, general, and administrative expenses. As of the periods presented, the Company’s finance leases were not material to the Consolidated Balance Sheets, Consolidated Statements of Operations, or Consolidated Statements of Cash Flows.
The following components of operating lease expense were recognized in the Company’s Consolidated Statements of Operations:
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||||
| November 1, 2025 | November 2, 2024 | November 1, 2025 | November 2, 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Fixed operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
Variable operating lease cost | |||||||||||||||||||||||
| Total operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
The following table provides the weighted-average remaining lease term of the Company’s operating leases, the weighted-average discount rate used to calculate the Company’s operating liabilities, cash paid for amounts included in the measurement of the Company’s operating lease liabilities, and right-of-use (“ROU”) assets obtained in exchange for the Company’s new operating lease liabilities:
| Thirty-nine Weeks Ended | |||||||||||
| November 1, 2025 | November 2, 2024 | ||||||||||
| Weighted-average remaining lease term (years) | |||||||||||
| Weighted average discount rate (%) | |||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities ($, in millions) | |||||||||||
| ROU assets obtained in exchange for new operating lease liabilities ($, in millions) | |||||||||||
The maturities of operating lease liabilities were as follows:
| November 1, 2025 | |||||
| (in thousands) | |||||
Remainder of 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
Total operating lease payments | |||||
| Less: imputed interest | ( | ||||
| Present value of operating lease liabilities | $ | ||||
12
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. DEBT
ABL Credit Facility
The Company and certain subsidiaries maintain the $433.0 million asset-based revolving credit facility (the “ABL Credit Facility”) under its 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 the Company’s average daily excess availability under the facility, borrowings outstanding under the ABL Credit Facility bear interest, at the Company’s option, at:
(i)the prime rate per annum, plus a margin of 1.750 % or 2.000 %; or
(ii)the Secured Overnight Financing Rate (“SOFR”) per annum, plus 0.100 %, plus a margin of 2.750 % or 3.000 %.
As of April 18, 2024, based on the size of the unused portion of the commitments, the Company is charged a fee ranging from 0.250 % to 0.375 %.
As of February 4, 2025, letter of credit fees range from 1.000 % to 1.125 % for commercial letters of credit and range from 1.500 % to 1.750 % for standby letters of credit. These fees are determined based on the amount of the Company’s 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, the Company 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, the Company 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 the Company’s U.S. and Canadian assets, including the Company’s intellectual property, certain furniture, fixtures, 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. The Company is not subject to any early termination fees.
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 the ability of the Company and its subsidiaries to incur certain liens, to incur certain indebtedness, to make certain investments, acquisitions, or dispositions or to change the nature of its 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 the Company is unable to maintain a certain amount of excess availability for borrowings (the “excess availability threshold”), the Company may be subject to cash dominion.
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 Company’s ABL Credit Facility.
13
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The tables below present the components of the Company’s ABL Credit Facility:
| November 1, 2025 | February 1, 2025 | November 2, 2024 | |||||||||||||||
| (in millions) | |||||||||||||||||
Total borrowing base availability | $ | $ | $ | ||||||||||||||
Credit facility availability (1) | |||||||||||||||||
Maximum borrowing availability (2) | |||||||||||||||||
| Outstanding borrowings | |||||||||||||||||
| Letters of credit outstanding—standby | |||||||||||||||||
| Utilization of credit facility at end of period | |||||||||||||||||
Availability (3) | $ | $ | $ | ||||||||||||||
| Interest rate at end of period | |||||||||||||||||
| Average end-of-day loan balance during the period | $ | $ | $ | ||||||||||||||
| Highest end-of-day loan balance during the period | $ | $ | $ | ||||||||||||||
| Average interest rate | |||||||||||||||||
(1)Pursuant to the Company’s recent refinancing transactions, as of December 16, 2025, the 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 the Company’s recent refinancing transactions, as of December 16, 2025, the maximum borrowing availability of the Company 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, the Company completed the refinancing of its ABL Credit Facility with Wells Fargo by entering into an eighth amendment to its Credit Agreement (the “Eighth Amendment”). 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 the Company may make under the ABL Credit Facility. At the same time, the Company and certain of its subsidiaries entered into a term loan agreement (the “SLR Loan Agreement”) with SLR Credit Solutions (“SLR”) for $100.0 million (the “SLR Term Loan”) and used the net proceeds to partially pay down its borrowings under the ABL Credit Facility. Refer to “Note 14. Subsequent Events” for further information.
Mithaq Term Loans
Mithaq Capital SPC, a Cayman segregated portfolio company (“Mithaq”), is a controlling stockholder of the Company. The Company and certain subsidiaries maintain an interest-free, unsecured and subordinated promissory note with Mithaq for a $78.6 million term loan (the “Initial Mithaq Term Loan”), dated February 29, 2024, by and among the Company, certain of its 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 the Company’s rights offering on February 6, 2025 (“Rights Offering”), leaving $18.4 million outstanding under the Initial Mithaq Term Loan as of November 1, 2025. For more information about the Rights Offering, refer to “Note 8. Stockholders’ Deficit” below.
The Initial Mithaq Term Loan matures on February 15, 2027 and is guaranteed by each of the Company’s subsidiaries that guarantee the Company’s ABL Credit Facility.
14
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company and certain subsidiaries 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 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. 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 the Company’s subsidiaries that guarantee the Company’s ABL Credit Facility. For the Third Quarter 2025 and Year-To-Date 2025, the Company 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, the Company recognized $2.1 million and $4.6 million, respectively, in interest-equivalent expense related to the New Mithaq Term Loan.
Pursuant to the Company’s 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 the Company 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.
During the Third Quarter 2025 and Year-To-Date 2025, the Company 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 the obligations of the Company and its subsidiaries under the Credit Agreement. Pursuant to the Company’s recent refinancing transactions, the Mithaq Term Loans are also subordinated in payment priority to the obligations of the Company and its subsidiaries 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 the ability of the Company and its 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 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.
15
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Maturities of the Company’s principal debt payments on the Mithaq Term Loans as of November 1, 2025 are as follows:
| November 1, 2025 | |||||
| (in thousands) | |||||
| Remainder of 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
Thereafter (1) | |||||
Total related party debt | $ | ||||
____________________________________________
(1)Pursuant to the Company’s recent refinancing transactions, the Mithaq Term Loans were amended to extend both of their maturity dates to April 16, 2031.
Mithaq Commitment Letter
On May 2, 2024, the Company entered into a commitment letter (the “Commitment Letter”) with Mithaq for a senior unsecured $40.0 million credit facility (the “Mithaq Credit Facility”). Under the Mithaq Credit Facility, the Company had the ability to request for advances at any time prior to July 1, 2025. On September 10, 2024, the Company and Mithaq entered into an Amendment No. 1 to the Commitment Letter, 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 the Company’s subsidiaries that guarantee the Company’s 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 the Company’s 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.
7. COMMITMENTS AND CONTINGENCIES
The Company is a defendant in Gabriela Gonzalez v. The Children’s Place, Inc., a purported class action, pending in the U.S. District Court, Central District of California. The plaintiff alleged that the Company had falsely advertised discounts that do not exist, in violation of California’s Unfair Competition Laws, False Advertising Law and the California Consumer Legal Remedies Act. The Company filed a motion to compel arbitration, which the plaintiff did not oppose, and the court granted the motion on August 17, 2022—staying the case pending the outcome of the arbitration. The demand for arbitration was filed on October 4, 2022, in connection with the individual claim of the plaintiff. A mass arbitration firm associated with plaintiff’s counsel then conducted an advertising campaign for claimants to conduct a mass arbitration. In part, to avoid the mass arbitration, the parties stipulated to return the original plaintiff’s claim to court to proceed as a class action. Accordingly, the arbitration would not be proceeding and the Company’s response to the original plaintiff’s complaint in court was filed on July 20, 2023. On August 16, 2023, however, the Company began to receive notices regarding an initial tranche of approximately 1,300 individual demands that were filed with Judicial Arbitration and Mediation Services, Inc. (“JAMS”) as part of a related mass arbitration claim. The parties participated in mediation proceedings on November 15, 2023 and February 9, 2024. The parties agreed to further discuss settlement options in May 2024, which occurred without resolution. In late May 2024, due to the judge’s retirement, the Gonzalez action was transferred and reassigned to a different judge. Deadlines were therefore reset, including the Company’s motion to dismiss. On June 10, 2024, JAMS advised that it would be pausing its administration of the claims until the parties resolve their dispute over which set of arbitration terms apply to the case. The Company’s motion to dismiss was denied in November 2024. The Company subsequently filed a Motion for Reconsideration in December 2024, which was denied by the court in October 2025. Class certification discovery is ongoing, with class certification proceedings expected to take place in fiscal 2026. Any liability arising out of these proceedings is not expected to have a material adverse effect on the Company's financial position, results of operations, or cash flows.
16
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company is also involved in various legal proceedings arising in the normal course of business. In the opinion of management, any ultimate liability arising out of these proceedings is not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.
8. STOCKHOLDERS’ DEFICIT
Rights Offering
On February 6, 2025, the Company completed a Rights Offering pursuant to which the Company distributed to the holders of record of the Company’s Common stock as of the close of business on December 13, 2024, the record date for the Rights Offering, non-transferable subscription rights to purchase, in the aggregate, up to 9.2 million shares of Common stock. Each subscription right entitled its holder to purchase 0.7220 shares of Common stock at a subscription price of $9.75 per whole share of Common stock. Additionally, rights holders who fully exercised their basic subscription rights were entitled to subscribe for additional shares of Common stock that remained unsubscribed as a result of any unexercised basic subscription rights. The subscription price was payable by rights holders (i) in cash, (ii) by delivery in lieu of cash of an equivalent amount of any indebtedness for borrowed money (principal and/or accrued and unpaid interest) owed by the Company to such rights holder, or (iii) by delivery of a combination of cash and such indebtedness. Upon the completion of the Rights Offering, the Company issued 9.2 million shares of Common stock for a total purchase price of $90.0 million.
Mithaq purchased 6.7 million shares of Common stock pursuant to the Rights Offering and currently owns and controls the voting power of 62 % of the Company’s outstanding shares of Common stock. It paid (i) $5.1 million of the subscription price for such shares in cash and (ii) the remaining $60.2 million of the subscription price for such shares by delivery of indebtedness for borrowed money owed by the Company to Mithaq pursuant to the Initial Mithaq Term Loan. The Company received approximately $29.8 million in gross cash proceeds from the Rights Offering on February 6, 2025. Substantially all of the gross cash proceeds from the Rights Offering were used towards prepaying the Company’s ABL Credit Facility.
Share Repurchase Program
In November 2021, the Company’s Board of Directors authorized a $250.0 million share repurchase program (the “Share Repurchase Program”). Under this program, the Company may repurchase shares on the open market at current market prices at the time of purchase or in privately negotiated transactions. The timing and actual number of shares repurchased under the program will depend on a variety of factors, including price, corporate and regulatory requirements, and other market and business conditions. The Company may suspend or discontinue the program at any time and may thereafter reinstitute purchases, all without prior announcement. Currently, pursuant to the terms of the Company’s Credit Agreement, the repurchase of any shares would require fulfilling the heightened payment conditions under the Credit Agreement, except that repurchases of shares as described below, pursuant to the Company’s practice as a result of its insider trading policy, are expressly permitted. As of November 1, 2025, there was $156.1 million remaining availability under the Share Repurchase Program.
Pursuant to the Company’s practice, including due to restrictions imposed by the Company’s insider trading policy during black-out periods, the Company withholds and repurchases shares of vesting stock awards and makes payments to taxing authorities as required by law to satisfy the withholding tax requirements of all equity award recipients. The Company’s payment of the withholding taxes in exchange for the surrendered shares constitutes a repurchase of its common stock. The Company also acquires shares of its common stock in conjunction with liabilities owed under the Company’s deferred compensation plan, which are held in treasury.
The following table summarizes the Company’s share repurchases:
| Thirty-nine Weeks Ended | ||||||||||||||||||||||||||
| November 1, 2025 | November 2, 2024 | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Share repurchases related to: | ||||||||||||||||||||||||||
Share repurchase program | $ | $ | ||||||||||||||||||||||||
| Shares acquired and held in treasury | $ | $ | ||||||||||||||||||||||||
17
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In accordance with the FASB ASC 505 — Equity, the par value of the shares retired is charged against Common stock and the remaining purchase price is allocated between Additional paid-in capital and Accumulated deficit. The portion charged against Additional paid-in capital is determined using a pro-rata allocation based on total shares outstanding.
Dividends
Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by the Company’s Board of Directors based on a number of factors, including business and market conditions, the Company’s financial performance, and other investment priorities. Currently, pursuant to the terms of the Company’s Credit Agreement, the Company has no current plans to pay regular cash dividends in Fiscal 2025.
9. STOCK-BASED COMPENSATION
The Company generally grants time-vesting stock awards (“Deferred Awards”) and performance-based stock awards (“Performance Awards”) to employees at senior management levels. The Company also grants Deferred Awards to its non-employee independent directors.
The following table summarizes the Company’s stock-based compensation expense:
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||||
| November 1, 2025 | November 2, 2024 | November 1, 2025 | November 2, 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Deferred Awards | $ | $ | $ | $ | |||||||||||||||||||
Performance Awards | ( | ( | |||||||||||||||||||||
Total stock-based compensation expense (1) | $ | $ | $ | $ | |||||||||||||||||||
(1)Stock-based compensation expense recorded within Cost of sales (exclusive of depreciation and amortization) was immaterial in all periods presented. All other stock-based compensation expense is included in Selling, general, and administrative expenses.
During Fiscal 2024, there was a change of control of the Company, which triggered a conversion of all then-outstanding Performance Awards into service-based Performance Awards in accordance with their terms. As a result, the fiscal year 2023, fiscal year 2022, and fiscal year 2021 Performance Awards will all vest or have vested, as applicable, at their target shares on their respective vesting dates without regard to the achievement of any of the performance metrics associated with those awards, provided that the recipient be employed at the Company on each such vesting date. The incremental expense recorded for Performance Awards during Year-To-Date 2024 due to the change of control was $9.9 million.
10. EARNINGS (LOSS) PER COMMON SHARE
On February 6, 2025, the Company completed its Rights Offering. As the exercise price of the subscription right was less than the fair value of the Common stock, the subscription right contained a bonus element. In connection with this transaction, and in accordance with FASB ASC 260 — Earnings Per Share, the Company’s weighted average common shares outstanding and basic and diluted loss per share were retroactively adjusted for all prior periods presented by a factor of 1.002
18
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table reconciles net income (loss) and common share amounts utilized to calculate basic and diluted earnings (loss) per common share:
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||||
| November 1, 2025 | November 2, 2024 | November 1, 2025 | November 2, 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net income (loss) | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Basic weighted average common shares outstanding | |||||||||||||||||||||||
| Dilutive effect of stock awards | |||||||||||||||||||||||
| Diluted weighted average common shares outstanding | |||||||||||||||||||||||
| Anti-dilutive shares excluded from diluted earnings (loss) per common share calculation | |||||||||||||||||||||||
11. FAIR VALUE MEASUREMENT
The Company’s cash and cash equivalents and investments in the rabbi trust are short-term in nature. As such, their carrying amounts approximate fair value. These assets and liabilities fall within Level 1 of the fair value hierarchy. The Company stock included in the deferred compensation plan is not subject to fair value measurement.
The fair value of the Initial Mithaq Term Loan with a carrying value (gross of debt issuance costs) of $18.4 million as of November 1, 2025, was approximately $15.6 million. The fair value of the New Mithaq Term Loan with a carrying value (gross of debt issuance costs) of $90.0 million as of November 1, 2025, was approximately $83.9 million. The fair value of debt was estimated using a market approach, which considers the Company’s credit risk and market related conditions, and is therefore within Level 2 of the fair value hierarchy.
The Company’s non-financial assets measured at fair value on a nonrecurring basis include long-lived assets, such as intangible assets, fixed assets, and ROU assets. The Company reviews the carrying amounts of such assets when events indicate that their carrying amounts may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to fall within Level 3 of the fair value hierarchy.
Impairment of Long-Lived Assets
The fair value of the Company’s long-lived assets is primarily calculated using a discounted cash-flow model directly associated with those assets, which consist principally of property and equipment and ROU assets. These assets are tested for impairment when events indicate that their carrying value may not be recoverable.
The Company performed periodic quantitative impairment assessments of its long-lived assets and did no
Impairment of Indefinite-Lived Intangible Assets
The Company estimates the fair value of its indefinite-lived Gymboree tradename based on an income approach using the relief-from-royalty method. Estimating fair value using this method requires management to estimate future revenues, royalty rates, discount rates, long-term growth rates, and other factors in order to project future cash flows.
The Company performs a periodic impairment assessment of the Gymboree tradename, in accordance with FASB ASC 350 — Intangibles — Goodwill and Other. Based on this assessment, the Company did not 28.0 million, primarily due to reductions in Gymboree sales forecasts, which reduced the carrying value of its fair value to $13.0 million.
19
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
12. INCOME TAXES
The Company utilizes the asset and liability method of accounting for income taxes as set forth in FASB ASC 740 — Income Taxes. This method requires recognition of deferred tax assets and liabilities, measured by currently enacted rates, attributable to temporary differences between the financial statement and income tax basis of assets and liabilities. The Company’s deferred tax assets and liabilities are comprised largely of differences relating to depreciation and amortization, rent expense, inventory, stock-based compensation, net operating loss carryforwards, tax credits, and various accruals and reserves.
The Company’s benefit for income taxes was $(0.1 ) million during the Third Quarter 2025, compared to $(0.9 ) million during the Third Quarter 2024. The Company’s effective tax rate was 3.0 % in the Third Quarter 2025, compared to (4.7 )% in the Third Quarter 2024. The change in the effective tax rate is primarily due to shifts in earnings mix and pretax loss during the Third Quarter 2025 compared to pretax income during the Third Quarter 2024. The Company continues to adjust its valuation allowance based upon its ongoing operating results.
The Company’s provision for income taxes was $2.7 million during Year-To-Date 2025, compared to $2.3 million during Year-To-Date 2024. The Company’s effective tax rate was (6.5 )% in Year-To-Date 2025, compared to (4.8 )% in Year-To-Date 2024. The change in the effective tax rate is primarily due to the absence of the impairment charge related to the Gymboree tradename and a higher Year-To-Date 2024 pretax loss. The Company continues to adjust its valuation allowance based upon its ongoing operating results.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act allows net operating losses (“NOLs”) incurred in taxable years 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to offset 100 % of taxable income and to generate a refund of previously paid income taxes. Pursuant to the CARES Act, the Company carried back the taxable year 2020 tax loss of $150.0 million to prior years. As of November 1, 2025, the remaining income tax receivable of $19.1 million is included within Prepaid expenses and other current assets on the Consolidated Balance Sheets.
The Company accrues interest and penalties related to unrecognized tax benefits as part of its provision for income taxes. The total amount of unrecognized tax benefits was $6.8 million, $6.5 million, and $6.9 million as of November 1, 2025, February 1, 2025, and November 2, 2024, respectively, and is included within long-term liabilities. Additional interest expense recognized in the Third Quarter 2025 and Third Quarter 2024, and during Year-To-Date 2025 and Year-To-Date 2024, related to unrecognized tax benefits was not significant.
The Company is subject to tax in the United States and foreign jurisdictions, including Canada and Hong Kong. The Company files a consolidated U.S. income tax return for federal income tax purposes. The Company is no longer subject to income tax examinations by U.S. federal, state and local or foreign tax authorities for tax years 2015 and prior.
The Internal Revenue Service is currently conducting an examination of the Company’s tax return for fiscal year 2020 in conjunction with its review of the CARES Act NOL carryback to earlier fiscal years. The Company believes that its reserves for uncertain tax positions are adequate to cover existing risks or exposures. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues arise as a result of a tax audit, and are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.
On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the United States. The legislation contains certain provisions related to the full expensing of U.S. research and development costs and other depreciable property. The legislation also includes changes to the determination of the amount of U.S. interest expense that is deductible for U.S. tax purposes. While these changes are generally favorable to the Company’s cash tax position, the legislation does not have a material impact on its estimated annual effective tax rate and financial statements as of the Third Quarter 2025. The Company is evaluating the effects of the legislation that will begin to apply in fiscal year 2026.
20
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
13. SEGMENT INFORMATION
The Company’s reportable segments are based on the financial information the chief operating decision maker (“CODM”) uses to allocate resources and assess performance of its business. The Company’s President and Chief Executive Officer is the CODM. The Company’s CODM evaluates the performance of each segment and measures its segment profitability based on operating income (loss), defined as income (loss) before interest and taxes. Operating income (loss) is used as a key metric during the annual budget process, and on a quarterly basis to monitor actual performance against the annual budget and forecasts.
The Company reports segment data based on geography: The Children’s Place U.S. and The Children’s Place International. Each segment includes an e-commerce business located at www.childrensplace.com and www.gymboree.com. Included in The Children’s Place U.S. segment are the Company’s U.S. and Puerto Rico-based stores and net sales from the Company’s U.S.-based wholesale business. Included in The Children’s Place International segment are the Company’s Canadian-based stores and net sales from international franchisees. Net sales and direct costs are recorded by each segment. Certain inventory procurement functions, such as production and design, as well as corporate overhead, including executive management, finance, real estate, human resources, legal, and information technology services, are managed by The Children’s Place U.S. segment. Expenses related to these functions, including depreciation and amortization, are allocated to The Children’s Place International segment based primarily on net sales. The assets related to these functions are not allocated. The Company periodically reviews these allocations and adjusts them based upon changes in business circumstances.
Major Customers
Net sales to external customers are derived from merchandise sales, and the Company has one U.S. wholesale customer that individually accounted for more than 10% of its net sales during Year-To-Date 2025, with net sales amounting to $30.7 million for the Third Quarter 2025 and $105.3 million for Year-To-Date 2025, and $57.3 million and $118.3 million for the Third Quarter 2024 and Year-To-Date 2024, respectively. The customer also accounts for a majority of the Company’s accounts receivable, amounting to $26.0 million, $31.6 million, and $45.1 million as of November 1, 2025, February 1, 2025, and November 2, 2024.
Store Count by Segment
As of November 1, 2025, The Children’s Place U.S. had 442 stores and The Children’s Place International had 57 stores. As of November 2, 2024, The Children’s Place U.S. had 449 stores and The Children’s Place International had 61 stores.
The tables below present certain segment information for our reportable segments for the periods indicated:
| Thirteen Weeks Ended November 1, 2025 | |||||||||||||||||
| The Children’s Place U.S. | The Children’s Place International (1) | Total | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Net sales | $ | $ | $ | ||||||||||||||
Cost of sales (2) | |||||||||||||||||
Selling, general, and administrative expenses (3) | |||||||||||||||||
| Segment operating income (loss) | $ | $ | ( | $ | |||||||||||||
| Segment operating income (loss) as a percentage of net sales | ( | ||||||||||||||||
| Thirty-nine Weeks Ended November 1, 2025 | |||||||||||||||||
| The Children’s Place U.S. | The Children’s Place International (1) | Total | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Net sales | $ | $ | $ | ||||||||||||||
Cost of sales (2) | |||||||||||||||||
Selling, general, and administrative expenses (3) | |||||||||||||||||
| Segment operating loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Segment operating loss as a percentage of net sales | ( | ( | ( | ||||||||||||||
21
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| Thirteen Weeks Ended November 2, 2024 | |||||||||||||||||
| The Children’s Place U.S. | The Children’s Place International (1) | Total | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Net sales | $ | $ | $ | ||||||||||||||
Cost of sales (2) | |||||||||||||||||
Selling, general, and administrative expenses (3) | |||||||||||||||||
| Segment operating income | $ | $ | $ | ||||||||||||||
| Segment operating income as a percentage of net sales | |||||||||||||||||
| Thirty-nine Weeks Ended November 2, 2024 | |||||||||||||||||
| The Children’s Place U.S. | The Children’s Place International (1) | Total | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Net sales | $ | $ | $ | ||||||||||||||
Cost of sales (2) | |||||||||||||||||
Selling, general, and administrative expenses (3) | |||||||||||||||||
Other segment expenses (4) | |||||||||||||||||
| Segment operating loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Segment operating income loss as a percentage of net sales | ( | ( | ( | ||||||||||||||
___________________________________________
(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.
(2)Cost of sales includes the cost of inventory sold, certain buying, design, and distribution expenses, shipping and handling costs on merchandise sold directly to customers, and all occupancy costs, except for administrative office buildings.
(3)Selling, general, and administrative expenses include store expenses, marketing, corporate payroll, including long-term incentive compensation, information technology, other administrative expenses, and depreciation and amortization.
(4)Other segment expenses include asset impairment charges.
The table below presents a reconciliation of reportable segment operating income (loss) to Income (loss) before provision (benefit) for income taxes:
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||||
| November 1, 2025 | November 2, 2024 | November 1, 2025 | November 2, 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Total segment operating income (loss) | $ | $ | $ | ( | $ | ( | |||||||||||||||||
| Related party interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Other interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Income (loss) before provision (benefit) for income taxes | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
22
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Additional Segment Data
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||||
| November 1, 2025 | November 2, 2024 | November 1, 2025 | November 2, 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Depreciation and amortization: | |||||||||||||||||||||||
| The Children’s Place U.S. | $ | $ | $ | $ | |||||||||||||||||||
| The Children’s Place International | |||||||||||||||||||||||
| Total depreciation and amortization | $ | $ | $ | $ | |||||||||||||||||||
| Capital expenditures: | |||||||||||||||||||||||
| The Children’s Place U.S. | $ | $ | $ | $ | |||||||||||||||||||
| The Children’s Place International | |||||||||||||||||||||||
| Total capital expenditures | $ | $ | $ | $ | |||||||||||||||||||
| November 1, 2025 | February 1, 2025 | November 2, 2024 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Total assets: | |||||||||||||||||
| The Children’s Place U.S. | $ | $ | $ | ||||||||||||||
| The Children’s Place International | |||||||||||||||||
| Total assets | $ | $ | $ | ||||||||||||||
| Long-lived assets: | |||||||||||||||||
| United States | $ | $ | $ | ||||||||||||||
| Canada | |||||||||||||||||
| Asia | |||||||||||||||||
Total long-lived assets (1) | $ | $ | $ | ||||||||||||||
(1)The Company’s long-lived assets are comprised of net Property and equipment, ROU assets, Tradenames, and Other assets, and are recorded in the long-term assets section of the consolidated balance sheets.
14. SUBSEQUENT EVENTS
On December 16, 2025, the Company completed the refinancing of its ABL Credit Facility with Wells Fargo by entering into an Eighth Amendment to its 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 the Company may make under the ABL Credit Facility.
Also on December 16, 2025, the Company and certain of its subsidiaries entered into the SLR Loan Agreement with SLR for a $100.0 million 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 the Company’s 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 secured by a first priority security interest in the Company’s intellectual property, real estate, certain furniture, fixtures and equipment, and pledges of subsidiary capital stock, and a second priority security interest in the collateral securing the ABL Credit Facility. The SLR Term Loan is guaranteed by each of the Company’s subsidiaries that guarantee the Company’s ABL Credit Facility.
23
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 the ability of the Company and its 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 SLR Term Loan also imposes a more restrictive excess availability requirement that further limits the Company’s maximum borrowing availability under the ABL Credit Facility.
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.
The Company used the net proceeds from the SLR Term Loan to partially pay down its borrowings under the ABL Credit Facility.
Pursuant to the refinancing transactions described above, 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 the Company 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. Separately, the Mithaq Credit Facility was further amended to (i) extend the Company’s deadline for requesting advances until December 16, 2030, and (ii) increase the rate for any monthly payments for borrowings equivalent to interest charged to the SOFR plus 9.000 % per annum.
24
ITEM 2. 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. tariffs and any responsive non-U.S. tariffs, may impact the Company’s international manufacturing and operations or customers’ discretionary spending habits, the risk that the Company will be unsuccessful in gauging fashion trends and changing consumer preferences, the risks resulting from the highly competitive nature of the Company’s business and its dependence on consumer spending patterns, which may be affected by changes in economic conditions (including inflation), the risk that changes in the Company’s plans and strategies with respect to pricing, capital allocation, capital structure, investor communications and/or operations may have a negative effect on the Company’s business, the risk that the Company’s strategic initiatives to increase sales and margin, improve operational efficiencies, enhance operating controls, decentralize operational authority and reshape the Company’s culture are delayed or do not result in anticipated improvements, the risk of delays, interruptions, disruptions and higher costs in the Company’s global supply chain, including resulting from disease outbreaks, foreign sources of supply in less developed countries, more politically unstable countries, or countries where vendors fail to comply with industry standards or ethical business practices, including the use of forced, indentured or child labor, the risk that the cost of raw materials or energy prices will increase beyond current expectations or that the Company is unable to offset cost increases through value engineering or price increases, various types of litigation, including class action litigation brought under securities, consumer protection, employment, and privacy and information security laws and regulations, risks related to the existence of a controlling stockholder, and the uncertainty of weather patterns, as well as other risks discussed in the Company’s filings with the SEC from time to time. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
As used in this Quarterly Report on Form 10-Q, references to the “Company”, “The Children’s Place”, “we”, “us”, “our”, and similar terms refer to The Children’s Place, Inc. 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
•Fiscal 2025 — The fifty-two weeks ending January 31, 2026
•Fiscal 2024 — The fifty-two weeks ended February 1, 2025
•SEC — U.S. Securities and Exchange Commission
•U.S. GAAP — Generally Accepted Accounting Principles in the United States
•FASB — Financial Accounting Standards Board
•FASB ASC — FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP, except that rules and interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC registrants
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•Comparable Retail Sales — Net sales from stores that have been open for at least 14 consecutive months and from our e-commerce store, excluding postage and handling fees. Store closures in the current fiscal year will be excluded from Comparable Retail Sales beginning in the fiscal quarter in which the store closes. A store that is closed for a substantial remodel, relocation, or material change in size will be excluded from Comparable Retail Sales for at least 14 months beginning in the fiscal quarter in which the closure occurred. However, stores that temporarily close will be excluded from Comparable Retail Sales until the store is reopened for a full fiscal month.
•Cost of Sales — Cost of inventory sold, including certain buying, design, and distribution expenses, and shipping and handling costs on merchandise sold, and all occupancy costs, except for administrative office buildings
•Gross Margin — Gross profit expressed as a percentage of Net sales
•SG&A — Selling, general, and administrative expenses
OVERVIEW
Our Business
We are one of the only pure-play children’s specialty retailer in North America with an omni-channel portfolio of brands and an industry-leading digital-first model. We design, contract to manufacture, and sell fashionable, high quality apparel, accessories and footwear predominantly at value prices, primarily under our proprietary brands: “The Children’s Place”, “Gymboree”, “Sugar & Jade”, and “PJ Place”. Our global retail and wholesale network includes two digital storefronts, 499 stores in North America, wholesale marketplaces, 227 international points of distribution in 12 countries through our nine international franchise and wholesale partners, and social media channels on Instagram, Facebook, X, formerly known as Twitter, YouTube and Pinterest. Our digital storefronts are at www.childrensplace.com and www.gymboree.com, where our customers are able to shop online for the same merchandise available in our physical stores, as well as certain exclusive merchandise offered only on our e-commerce sites.
Segment Reporting
In accordance with FASB ASC 280 — Segment Reporting, we report segment data based on geography: The Children’s Place U.S. and The Children’s Place International. Each segment includes an e-commerce business located at www.childrensplace.com and www.gymboree.com. Included in The Children’s Place U.S. segment are our U.S. and Puerto Rico-based stores and net sales from our U.S.-based wholesale business. Included in The Children’s Place International segment are our Canadian-based stores and net sales from international franchisees. We measure our segment profitability based on operating income (loss), defined as income (loss) before interest and taxes. Net sales and direct costs are recorded by each segment. Certain inventory procurement functions such as production and design, as well as corporate overhead, including executive management, finance, real estate, human resources, legal, and information technology services, are managed by The Children’s Place U.S. segment. Expenses related to these functions, including depreciation and amortization, are allocated to The Children’s Place International segment based primarily on net sales. The assets related to these functions are not allocated. We periodically review these allocations and adjust them based upon changes in business circumstances. Net sales to external customers are derived from merchandise sales, and we have one U.S. wholesale customer that individually accounted for more than 10% of our net sales for Year-To-Date 2025.
Recent Developments
Macroeconomic conditions, including inflationary pressures, higher interest rates, tariffs, and other domestic and geopolitical factors, continued to adversely affect our core customer. During the 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.
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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.
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RESULTS OF OPERATIONS
We believe that our e-commerce and brick-and-mortar retail store operations are highly interdependent, with both sharing common customers purchasing from a common pool of product inventory. Accordingly, we believe that consolidated omni-channel reporting presents the most meaningful and appropriate measure of our performance. 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
| Thirteen Weeks Ended | Thirteen Weeks Ended | Variance | |||||||||||||||||||||
| November 1, 2025 | % of Net Sales | November 2, 2024 | % of Net Sales | $ | % | % of Net Sales | |||||||||||||||||
| (amounts in thousands) | |||||||||||||||||||||||
| Net sales | $ | 339,466 | 100.0 | % | $ | 390,173 | 100.0 | % | $ | (50,707) | (13.0) | % | — | % | |||||||||
| Cost of sales (exclusive of depreciation and amortization) | 227,162 | 66.9 | % | 251,832 | 64.5 | % | 24,670 | 9.8 | % | (2.4) | % | ||||||||||||
| Gross profit | 112,304 | 33.1 | % | 138,341 | 35.5 | % | (26,037) | (18.8) | % | (2.4) | % | ||||||||||||
| Selling, general, and administrative expenses | 101,301 | 29.8 | % | 99,817 | 25.6 | % | (1,484) | (1.5) | % | (4.2) | % | ||||||||||||
| Depreciation and amortization | 7,334 | 2.2 | % | 9,266 | 2.4 | % | 1,932 | 20.9 | % | 0.2 | % | ||||||||||||
| Operating income | 3,669 | 1.1 | % | 29,258 | 7.5 | % | (25,589) | (87.5) | % | (6.4) | % | ||||||||||||
| Related party interest expense | (1,869) | (0.6) | % | (2,078) | (0.5) | % | 209 | 10.1 | % | (0.1) | % | ||||||||||||
| Other interest expense, net | (6,252) | (1.8) | % | (8,000) | (2.1) | % | 1,748 | 21.9 | % | 0.3 | % | ||||||||||||
| 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. Gross margin is calculated as gross profit divided by consolidated net sales. Gross profit as a percentage of net sales is dependent upon a variety of factors, including changes in the relative sales mix among distribution channels, changes in the mix of products sold, the timing and level of promotional activities, changes in foreign currency exchange rates, and fluctuations in input costs. These factors, among others, may cause gross profit as a percentage of net sales to fluctuate from period to period.
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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:
___________________________________________
| Thirteen Weeks Ended | |||||||||||
| November 1, 2025 | November 2, 2024 | ||||||||||
| (in thousands) | |||||||||||
| The Children’s Place U.S. | $ | 307,399 | $ | 356,163 | |||||||
The Children’s Place International (1) | 32,067 | 34,010 | |||||||||
| Total net sales | $ | 339,466 | $ | 390,173 | |||||||
| The Children’s Place U.S. | $ | 8,985 | $ | 28,120 | |||||||
The Children’s Place International (1) | (5,316) | 1,138 | |||||||||
| Total segment operating income (loss) | $ | 3,669 | $ | 29,258 | |||||||
| The Children’s Place U.S. | 2.9 | % | 7.9 | % | |||||||
The Children’s Place International (1) | (16.6) | % | 3.3 | % | |||||||
| Total segment operating income (loss) as a percentage of net sales | 1.1 | % | 7.5 | % | |||||||
(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.
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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.
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 | |||||||||||||||||||||
| November 1, 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).
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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.
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The following table sets forth Net sales and Operating loss, respectively, by segment, for the periods indicated:
| Thirty-nine Weeks Ended | |||||||||||
| November 1, 2025 | November 2, 2024 | ||||||||||
| (in thousands) | |||||||||||
| The Children’s Place U.S. | $ | 802,353 | $ | 894,744 | |||||||
The Children’s Place International (1) | 77,244 | 82,962 | |||||||||
| Total net sales | $ | 879,597 | $ | 977,706 | |||||||
| The Children’s Place U.S. | $ | (4,446) | $ | (15,531) | |||||||
The Children’s Place International (1) | (11,896) | (4,975) | |||||||||
| Total segment operating loss | $ | (16,342) | $ | (20,506) | |||||||
| The Children’s Place U.S. | (0.6) | % | (1.7) | % | |||||||
The Children’s Place International (1) | (15.4) | % | (6.0) | % | |||||||
| Total segment operating loss as a percentage of net sales | (1.9) | % | (2.1) | % | |||||||
(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.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
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.
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.
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As of November 1, 2025, we had $297.2 million of outstanding borrowings under our $433.0 million ABL Credit Facility and no borrowings under our $40.0 million senior unsecured credit facility with Mithaq (the “Mithaq Credit Facility”).
On December 16, 2025, we completed our refinancing of the ABL Credit Facility which, among other things, reduced the ABL Credit Facility to $350.0 million. At the same time, the Company and certain subsidiaries entered into the SLR Loan Agreement with SLR for a $100.0 million SLR Term Loan, and we used the net proceeds to partially pay down our borrowings under the ABL Credit Facility.
Our working capital deficit decreased $3.8 million to $42.5 million as of November 1, 2025, compared to $46.3 million as of November 2, 2024, primarily reflecting a decrease in our accounts payable balances as we paid down past due vendors and reduced inventory purchases, and a decrease in outstanding borrowings under our ABL Credit Facility, partially offset by a decrease in inventory due to improved inventory management as we continue to align our inventory levels with our growth and product strategy, and better balance the mix of fashion and basic product.
As of November 1, 2025, we had total liquidity of $93.4 million, including $46.1 million of availability under our ABL Credit Facility, $40.0 million of availability under our Mithaq Credit Facility, and $7.3 million of cash on hand. As of November 1, 2025, we had $18.2 million of outstanding letters of credit, with an additional $6.8 million available for issuing letters of credit under our ABL Credit Facility.
As of November 1, 2025, we would have increased our liquidity by $35 million to $40 million, bringing our total liquidity to $128 million to $133 million on a proforma basis had the refinancing of the ABL Credit Facility and SLR Term Loan issuance been completed as of that date.
We expect to be able to meet our working capital and capital expenditure requirements for at least the next twelve months from the date that our consolidated financial statements for the Third Quarter 2025 were issued, by using our cash on hand, cash flows from operations, and availability under our ABL Credit Facility and Mithaq Credit Facility.
Share Repurchase Program
In November 2021, our Board of Directors (the “Board”) authorized a $250.0 million share repurchase program (the “Share Repurchase Program”). Currently, given the terms of our credit agreement with Wells Fargo 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.
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.
Our ability to continue to meet our capital requirements in Fiscal 2025 depends on our cash on hand, our ability to generate cash flows from operations, and available borrowings under our ABL Credit Facility and Mithaq Credit Facility. Cash flows generated from operations depends 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.
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Selected Consolidated Balance Sheets Data
Certain components of our Consolidated Balance Sheets were as follows:
| November 1, 2025 | February 1, 2025 | November 2, 2024 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Accounts receivable | $ | 43,433 | $ | 42,701 | $ | 62,214 | |||||||||||
| Inventories | 390,330 | 399,602 | 491,619 | ||||||||||||||
| Accounts payable | 86,151 | 126,716 | 125,912 | ||||||||||||||
Accounts receivable were $43.4 million as of November 1, 2025, compared to $62.2 million as of November 2, 2024 and $42.7 million as of February 1, 2025. The decrease of $18.8 million, or 30.2%, compared to November 2, 2024 was primarily driven by a decrease in wholesale receivables due to lower order commitments as a result of higher purchases earlier in the year. There was no significant change in balance compared to February 1, 2025.
Inventories were $390.3 million as of November 1, 2025, compared to $491.6 million as of November 2, 2024 and $399.6 million as of February 1, 2025. The decrease of $101.3 million, or 20.6% compared to November 2, 2024 was primarily driven by improved inventory management as we continue to align our inventory levels with our growth and product strategy and better balance the mix of fashion and basic product. There was no significant change in balance compared to February 1, 2025.
Accounts payable were $86.2 million as of November 1, 2025, compared to $125.9 million as of November 2, 2024 and $126.7 million as of February 1, 2025. The decrease of $39.7 million, or 31.5%, compared to November 2, 2024, and the decrease of $40.5 million, or 32.0%, compared to February 1, 2025, was primarily the result of lower inventory purchases during Fiscal 2025 and better cash management.
ABL Credit Facility
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:
(i)the prime rate per annum, plus a margin of 1.750% or 2.000%; or
(ii)the Secured Overnight Financing Rate (“SOFR”) per annum, plus 0.100%, plus a margin of 2.750% or 3.000%.
As of April 18, 2024, based on the size of the unused portion of the commitments, we are charged a fee ranging from 0.250% to 0.375%.
As of February 4, 2025, letter of credit fees range from 1.000% to 1.125% for commercial letters of credit and range from 1.500% to 1.750% for standby letters of credit. 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.
The outstanding obligations under the ABL Credit Facility may be accelerated upon the occurrence of certain customary events of default, as described below. We are not subject to any early termination fees.
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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.
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.
The tables below present the components of our ABL Credit Facility:
| November 1, 2025 | February 1, 2025 | November 2, 2024 | |||||||||||||||
| (in millions) | |||||||||||||||||
Total borrowing base availability | $ | 361.5 | $ | 301.9 | $ | 422.9 | |||||||||||
Credit facility availability (1) | 433.0 | 433.0 | 433.0 | ||||||||||||||
Maximum borrowing availability (2) | 361.5 | 301.9 | 422.9 | ||||||||||||||
| Outstanding borrowings | 297.2 | 245.7 | 362.4 | ||||||||||||||
| Letters of credit outstanding—standby | 18.2 | 16.0 | 12.2 | ||||||||||||||
| Utilization of credit facility at end of period | 315.4 | 261.7 | 374.6 | ||||||||||||||
Availability (3) | $ | 46.1 | $ | 40.2 | $ | 48.3 | |||||||||||
| Interest rate at end of period | 7.3% | 7.6% | 8.1% | ||||||||||||||
| Average end-of-day loan balance during the period | $ | 269.1 | $ | 284.5 | $ | 280.9 | |||||||||||
| Highest end-of-day loan balance during the period | $ | 302.7 | $ | 366.9 | $ | 366.9 | |||||||||||
| 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. 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. 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.
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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. 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. 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, 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.
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Maturities of our principal debt payments on the Mithaq Term Loans as of November 1, 2025 are as follows:
| November 1, 2025 | |||||
| (in thousands) | |||||
Remainder of 2025 | $ | — | |||
| 2026 | — | ||||
| 2027 | 108,400 | ||||
Thereafter (1) | — | ||||
Total related party debt | $ | 108,400 | |||
____________________________________________
(1)Pursuant to our recent refinancing transactions, the Mithaq Term Loans were amended to extend both of their maturity dates to April 16, 2031.
Mithaq Commitment Letter
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. 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.
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.
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the amounts of revenues and expenses reported during the period. We continuously review the appropriateness of the estimates used in preparing our financial statements; however, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information. 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. There have been no material changes in these critical accounting estimates from those described in our most recent Annual Report on Form 10-K.
Recent Accounting Standards Updates
Refer to “Note 1. Basis of Presentation” of the accompanying consolidated financial statements for discussion regarding the impact of recently issued accounting standards on our consolidated financial statements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In the normal course of business, our financial position and results of operations are routinely subject to market risk associated with interest rate movements on borrowings and investments and currency rate movements on non-U.S. dollar denominated assets, liabilities, income, and expenses. We utilize cash from operations and short-term borrowings to fund our working capital and investment needs.
Cash and Cash Equivalents
Cash and cash equivalents are normally invested in short-term financial instruments that will be used in operations within 90 days of the balance sheet date. Because of the short-term nature of these instruments, changes in interest rates would not materially affect their fair values.
Interest Rates
On the first day of each fiscal quarter, based on the amount of our average daily excess availability under the ABL Credit Facility, borrowings outstanding under the facility bear interest, at our option, at (i) the prime rate per annum, plus a margin of 1.750% or 2.000%; or (ii) the SOFR per annum, plus 0.100%, plus a margin of 2.750% or 3.000%. Pursuant to our recent refinancing transactions, these interest rates have all been lowered. As of November 1, 2025, we had $297.2 million in borrowings under our ABL Credit Facility. A 10% change in the prime rate or SOFR would not have had a material impact on our interest expense.
The New Mithaq Term Loan requires monthly payments equivalent to interest charged at the SOFR per annum plus 4.000% per annum, 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. Pursuant to our recent refinancing transactions, the New Mithaq Term Loan was also amended to allow us to defer our monthly payments upon written notice to Mithaq. A 10% change in the prime rate or SOFR would not have had a material impact on our interest expense.
As of November 1, 2025, we had no borrowings under our Mithaq Credit Facility. 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. Pursuant to our recent refinancing transactions, the Mithaq Credit Facility was amended to increase the rate for any monthly payments for borrowings equivalent to interest charged to the SOFR plus 9.000% per annum.
On December 16, 2025, the Company and certain of its subsidiaries entered into the SLR Loan Agreement with SLR for a $100.0 million SLR Term Loan. The SLR Term Loan 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. Refer to “Recent Developments” above for further information.
Assets and Liabilities of Foreign Subsidiaries
Assets and liabilities outside the United States are primarily located in Canada and Hong Kong, where our investments in our subsidiaries are considered long-term. As of November 1, 2025, net liabilities in Canada and Hong Kong amounted to $13.2 million. A 10% increase or decrease in the Canadian and Hong Kong foreign currency exchange rates would increase or decrease the corresponding net investment by $1.3 million. All changes in the net investments in our foreign subsidiaries are recorded in other comprehensive loss.
As of November 1, 2025, we had $4.9 million of our cash and cash equivalents held in foreign subsidiaries, of which $1.7 million was in Canada, $1.0 million was in India, $0.7 million was in China, $0.6 million was in Mauritius, $0.6 million was in Hong Kong, and $0.3 million was held in other foreign countries.
We have subsidiaries whose operating results are based in foreign currencies and are thus subject to the fluctuations of the corresponding translation rates into U.S. dollars.
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The table below summarizes the average translation rates that most significantly impact our operating results:
____________________________________________
| Thirteen Weeks Ended | Thirty-nine Weeks Ended | ||||||||||||||||||||||
| November 1, 2025 | November 2, 2024 | November 1, 2025 | November 2, 2024 | ||||||||||||||||||||
Average Translation Rates (1) | |||||||||||||||||||||||
| Canadian dollar | 0.7206 | 0.7324 | 0.7178 | 0.7325 | |||||||||||||||||||
| Hong Kong dollar | 0.1283 | 0.1285 | 0.1282 | 0.1281 | |||||||||||||||||||
(1)The average translation rates are the average of the monthly translation rates used during each fiscal year to translate the respective income statements. Each rate represents the U.S. dollar equivalent of the respective foreign currency.
Foreign Operations
We have exchange rate exposure primarily with respect to certain revenues and expenses denominated in Canadian and Hong Kong dollars. As a result, fluctuations in exchange rates impact the amount of our reported sales and expenses. Assuming a 10% change in foreign currency exchange rates, the Third Quarter 2025 net sales would have decreased or increased by approximately $7.2 million, and total costs and expenses would have decreased or increased by approximately $8.5 million. Additionally, we have foreign currency denominated receivables and payables that, when settled, result in transaction gains or losses. A 10% change in foreign currency exchange rates would not result in a significant transaction gain or loss in earnings.
We import a vast majority of our merchandise from foreign countries, primarily Bangladesh, Vietnam, Ethiopia, Indonesia, India, Kenya, Cambodia, and China. Consequently, any significant or sudden change in the political, foreign trade, financial, banking, currency policies and practices, or the occurrence of significant labor unrest in these countries or changes in foreign policies of the United States, could have a material adverse impact on our business, financial position, results of operations, and cash flows.
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ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed only to provide “reasonable assurance” that the controls and procedures will meet their objectives. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.
Management, including our President and Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of November 1, 2025.
Based on that evaluation, our President and Chief Executive Officer and our Chief Financial Officer, concluded that our disclosure controls and procedures were effective at the reasonable assurance level, as of November 1, 2025, to ensure that all information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our principal executive, principal accounting, and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(f) and 15d-15(f) of the Exchange Act that occurred during the quarter ended November 1, 2025 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS.
Certain legal proceedings in which we are involved are discussed in “Note 7. Commitments and Contingencies” to the accompanying consolidated financial statements and Part I, Item 3 of our Annual Report on Form 10-K for the year ended February 1, 2025.
ITEM 1A.RISK FACTORS.
There were no material changes to the risk factors disclosed in Item 1A of Part I in our Annual Report on Form 10-K for the year ended February 1, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
In November 2021, our Board of Directors authorized a $250.0 million share repurchase program (the “Share Repurchase Program”). Under this program, we may repurchase shares on the open market at current market prices at the time of purchase or in privately negotiated transactions. The timing and actual number of shares repurchased under the program will depend on a variety of factors, including price, corporate and regulatory requirements, and other market and business conditions. We may suspend or discontinue the program at any time and may thereafter reinstitute purchases, all without prior announcement. Currently, given the terms of our credit agreement, dated as of May 9, 2019, (as amended from time to time, the “Credit Agreement”), by and among the Company and certain subsidiaries, and the lenders party thereto, the repurchase of any shares would require fulfilling the heightened payment conditions under our Credit Agreement, except that repurchases of shares as described below, 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.
Pursuant to our practice, including due to restrictions imposed by our insider trading policy during black-out periods, we withhold and repurchase shares of vesting stock awards and make payments to taxing authorities as required by law to satisfy the withholding tax requirements of all equity award recipients. Our payment of the withholding taxes in exchange for the surrendered shares constitutes a repurchase of our common stock. We also acquire shares of our common stock in conjunction with liabilities owed under our deferred compensation plan, which are held in treasury.
There was no share repurchase activity during the Third Quarter 2025.
ITEM 5. OTHER INFORMATION.
During the Third Quarter 2025, none of the Company’s directors or officers, as defined in Section 16 of the Exchange Act, adopted terminated
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ITEM 6. EXHIBITS.
The following exhibits are filed with this Quarterly Report on Form 10-Q:
| 101.INS* | Inline XBRL Instance Document. | |||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema. | |||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase. | |||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase. | |||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase. | |||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase. | |||||||
| 104* | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). | |||||||
____________________________________________
(*) Compensation Arrangement.
(+) Filed herewith.
*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| THE CHILDREN’S PLACE, INC. | |||||||||||
| Date: | December 16, 2025 | By: | /S/ Muhammad Umair | ||||||||
| Muhammad Umair | |||||||||||
| President and Chief Executive Officer | |||||||||||
| (Principal Executive Officer) | |||||||||||
| Date: | December 16, 2025 | By: | /S/ John Szczepanski | ||||||||
| John Szczepanski | |||||||||||
| Chief Financial Officer | |||||||||||
| (Principal Financial Officer and Principal Accounting Officer) | |||||||||||
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