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The Children's Place(PLCE) - 2021 Q1 - Earnings Call Transcript
2021-05-20 17:20
The Children's Place, Inc. (NASDAQ:PLCE) Q1 2021 Earnings Conference Call May 20, 2021 8:00 AM ET Company Participants Jane Elfers - President and Chief Executive Officer Rob Helm - Chief Financial Officer Conference Call Participants Dana Telsey - Telsey Advisory Group Jim Chartier - Monness, Crespi, Hardt & Company Jay Sole - UBS Susan Anderson - B. Riley Operator Good morning and welcome to The ChildrenÂ's Place First Quarter 2021 Earnings Conference Call. On the call today are Jane Elfers, President and ...
The Children's Place(PLCE) - 2021 Q4 - Annual Report
2021-03-29 13:15
PART I [Item 1. Business](index=3&type=section&id=Item%201.%20Business) North America's largest children's apparel retailer, impacted by COVID-19, focuses on product, digital, and fleet optimization - The company designs, contracts to manufacture, sells at retail and wholesale, and licenses children's apparel, footwear, and accessories under "The Children's Place," "Place," "Baby Place," and "Gymboree" brand names[16](index=16&type=chunk) - Merchandise is available in physical stores (segmented by age: girls/boys 4-18, toddler 6 months-5T, baby 0-24 months) and online at www.childrensplace.com and www.gymboree.com[16](index=16&type=chunk)[17](index=17&type=chunk) - The company was founded in 1969 and became publicly traded in 1997[18](index=18&type=chunk) - The Children's Place, Inc. is the largest pure-play children's specialty apparel retailer in North America, operating under proprietary brands such as "The Children's Place," "Place," "Baby Place," and "Gymboree"[16](index=16&type=chunk) - As of January 30, 2021, the company operated **749 stores** across North America and online stores, having closed **178 stores in Fiscal 2020** and **60 in Fiscal 2019**[18](index=18&type=chunk) - Key strategic initiatives include superior product offerings (relaunching Gymboree), digital transformation (redesigned responsive sites, mobile apps, personalization, ship-from-store capabilities), and fleet optimization (targeting **300 store closures in Fiscal 2020-2021**, totaling approximately **570 since 2013**)[22](index=22&type=chunk) - The COVID-19 pandemic led to temporary closure of all U.S. and Canadian stores on March 18, 2020, with most re-opening by late June. As of January 30, 2021, **680 of 749 stores were open**[21](index=21&type=chunk) - In response to COVID-19, the company reduced non-essential expenses, deferred capital expenditures, extended vendor payment terms, suspended rent payments (later resumed modified), targeted **300 store closures through Fiscal 2021**, implemented executive salary reductions/forfeitures, furloughed staff, and temporarily suspended capital return programs (share repurchases and dividends)[22](index=22&type=chunk)[26](index=26&type=chunk) - The company acquired Gymboree Group, Inc. intellectual property and related assets on April 4, 2019, including the "Gymboree" and "Crazy 8" brands, relaunching Gymboree in February 2020[25](index=25&type=chunk) Net Sales and Operating Income by Segment (In thousands) | Segment | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | Fiscal Year Ended Feb 2, 2019 | | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | **Net Sales:** | | | | | The Children's Place U.S. | $1,372,079 | $1,671,165 | $1,727,907 | | The Children's Place International | $150,519 | $199,502 | $210,177 | | **Total Net Sales** | **$1,522,598** | **$1,870,667** | **$1,938,084** | | **Operating Income (Loss):** | | | | | The Children's Place U.S. | $(196,565) | $77,989 | $86,983 | | The Children's Place International | $(3,350) | $18,369 | $24,345 | | **Total Operating Income (Loss)** | **$(199,915)** | **$96,358** | **$111,328** | | **Operating Income as % of Net Sales:** | | | | | The Children's Place U.S. | (14.3)% | 4.7% | 5.0% | | The Children's Place International | (2.2)% | 9.2% | 11.6% | | **Total Operating Income as % of Net Sales** | **(13.1)%** | **5.2%** | **5.7%** | Total Assets by Segment (In thousands) | Segment | January 30, 2021 | February 1, 2020 | | :----------------------------- | :----------------------------- | :----------------------------- | | The Children's Place U.S. | $1,054,339 | $1,080,665 | | The Children's Place International | $85,788 | $100,732 | | **Total Assets** | **$1,140,127** | **$1,181,397** | [General](index=3&type=section&id=General) The Children's Place is North America's leading children's specialty apparel retailer, operating stores and e-commerce under proprietary brands - The company designs, contracts to manufacture, sells at retail and wholesale, and licenses children's apparel, footwear, and accessories under "The Children's Place," "Place," "Baby Place," and "Gymboree" brand names[16](index=16&type=chunk) - Merchandise is available in physical stores (segmented by age: girls/boys 4-18, toddler 6 months-5T, baby 0-24 months) and online at www.childrensplace.com and www.gymboree.com[16](index=16&type=chunk)[17](index=17&type=chunk) - The company was founded in 1969 and became publicly traded in 1997[18](index=18&type=chunk) [COVID-19 Pandemic](index=4&type=section&id=COVID-19%20Pandemic) COVID-19 severely impacted operations, leading to store closures, reduced spending, and aggressive financial and safety measures - The COVID-19 pandemic caused significant adverse economic conditions, business disruptions, and volatility in retail markets, leading to a decline in retail traffic and consumer spending on discretionary items[20](index=20&type=chunk) - All U.S. and Canadian stores were temporarily closed on March 18, 2020, with most reopening in late June. As of January 30, 2021, **680 of 749 stores were open**[21](index=21&type=chunk) - Financial flexibility actions included reducing/deferring non-essential expenses and capital expenditures, extending vendor payment terms, temporarily suspending and then modifying rent payments, accelerating store closures (targeting **300 in FY2020-2021**), executive salary reductions, employee furloughs, and suspending capital return programs[22](index=22&type=chunk)[26](index=26&type=chunk) - Health and safety measures included incentive pay, emergency leave, sick pay, health insurance programs for employees, training, health screenings, PPE, plexiglass partitions, rigorous cleaning, and limited store/distribution center capacity[24](index=24&type=chunk) [Gymboree Acquisition](index=5&type=section&id=Gymboree%20Acquisition) Acquired Gymboree and Crazy 8 brands in April 2019, relaunching Gymboree in February 2020 via e-commerce and co-branded stores - On April 4, 2019, the company acquired intellectual property and assets of Gymboree Group, Inc., including worldwide rights to "Gymboree" and "Crazy 8" names, trademarks, domain names, copyrights, and customer databases[25](index=25&type=chunk) - The Gymboree brand was relaunched in February 2020 via www.gymboree.com and co-branded sections within select The Children's Place stores[25](index=25&type=chunk) [Segment Reporting](index=5&type=section&id=Segment%20Reporting) Reports two segments, U.S. and International, measuring profitability by operating income with allocated corporate costs - Segments are The Children's Place U.S. (U.S. and Puerto Rico stores, U.S. wholesale) and The Children's Place International (Canadian stores, Canadian wholesale, international franchisees)[26](index=26&type=chunk) - Both segments include e-commerce businesses at www.childrensplace.com and www.gymboree.com[26](index=26&type=chunk) - Segment profitability is based on operating income. Corporate overhead and certain inventory procurement functions are managed by the U.S. segment and allocated to the International segment primarily based on net sales[26](index=26&type=chunk) Total Assets by Segment (In thousands) | Segment | January 30, 2021 | February 1, 2020 | | :----------------------------- | :----------------------------- | :----------------------------- | | The Children's Place U.S. | $1,054,339 | $1,080,665 | | The Children's Place International | $85,788 | $100,732 | | **Total Assets** | **$1,140,127** | **$1,181,397** | [Key Capabilities](index=6&type=section&id=Key%20Capabilities) Aims to offer high-quality, value-priced, trend-right children's merchandise through strong merchandising, brand, and global sourcing - Objective: sell high quality, value priced, trend right children's merchandise, offering one-stop shopping across apparel, footwear, and accessories[29](index=29&type=chunk) [Merchandising Strategy](index=6&type=section&id=Merchandising%20Strategy) Delivers coordinated apparel, footwear, and accessories monthly, enabling head-to-toe outfit purchases based on seasonal trends - Strategy delivers compelling, coordinated assortments of apparel, footwear, and accessories for head-to-toe outfits[30](index=30&type=chunk) - Merchandise deliveries are seasonal, with new products introduced monthly[30](index=30&type=chunk) [High Quality and Value](index=6&type=section&id=High-Quality%20and%20Value) High-quality, value-priced, and trend-right products under proprietary brands provide a significant competitive advantage - Offering high quality, value priced, trend right apparel, footwear, and accessories under "The Children's Place," "Place," "Baby Place," and "Gymboree" brand names is a competitive advantage[31](index=31&type=chunk) [Brand Image](index=7&type=section&id=Brand%20Image) Strengthens brand image and loyalty through high-quality, value-priced products, coordinated outfits, and a loyalty program - Focus on brand image and customer loyalty through: high quality, age-appropriate, trend-right products at value prices; coordinated outfits; exclusive e-commerce products; strong merchandising; consistent marketing; personalized communications; and MyPLACE Loyalty Rewards program and private label credit card[39](index=39&type=chunk) [Low-Cost Global Sourcing](index=7&type=section&id=Low-Cost%20Global%20Sourcing) Designs and sources most branded products globally, using vendor relationships and sourcing offices for quality and cost control - The company designs, sources, and contracts to manufacture the substantial majority of its branded products, essential for consistency, quality, and value[32](index=32&type=chunk) - Maintains strong multi-year relationships with vendors and an extensive global sourcing network (China, Bangladesh, Indonesia, Ethiopia, Cambodia, etc.) to manage costs and quality[32](index=32&type=chunk) [Merchandising Process](index=7&type=section&id=Merchandising%20Process) Collaborative merchandising process develops seasonal strategies and manages inventory flow based on trend information and store types - Strong collaboration between design, merchandising, sourcing, and planning teams is key to brand building[33](index=33&type=chunk) - Design team gathers trend information; merchandising develops seasonal strategies; planning and allocation manage sales, margin plans, and inventory flow based on store types[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) [Production, Quality Assurance, and Responsible Sourcing](index=7&type=section&id=Production,%20Quality%20Assurance,%20and%20Responsible%20Sourcing) Contracts with global vendors for manufacturing, ensuring quality, responsible sourcing, and sustainability through audits and worker programs - Merchandise is sourced directly from a diversified network of independent contract vendors primarily in Bangladesh, Cambodia, China, Ethiopia, Vietnam, and Indonesia[37](index=37&type=chunk)[38](index=38&type=chunk) - Responsible sourcing program provides guidance to global vendors on safe and appropriate working conditions, monitoring local laws and conditions[39](index=39&type=chunk)[40](index=40&type=chunk) - Sustainability program components include: Vendor Code of Conduct (prohibiting child/forced labor, harassment, discrimination); Addressing Forced Labor (no sourcing from Xinjiang Province, due diligence); Ongoing Auditing Program (internal and third-party audits); Corrective Action Plans; Vendor Factory Engagement[42](index=42&type=chunk) - Partnerships for safe and fair working conditions: ILO's BetterWork program (**60+ factories in 7 countries**), Social & Labor Convergence Project (SLCP), Nirapon (Bangladesh worker safety), and various Worker Well-Being Programs (BSR's HERproject, CARE's Healthy Food Healthy Workplace, The Centre for Child Rights and Business, The Solidarity Center)[42](index=42&type=chunk)[44](index=44&type=chunk)[46](index=46&type=chunk) - Environmental Stewardship initiatives include: mapping and reducing Greenhouse Gas (GHG) Emissions (Science Based Targets Initiative approved goals); Responsibly Sourced Raw Materials (Better Cotton Initiative, increased use of sustainable materials like FSC mix paper, recycled plastic, recycled polyester, sustainable inks/dyes); Chemical Management (AFIRM member); Wastewater and Effluent (Sustainable Apparel Coalition member)[46](index=46&type=chunk)[52](index=52&type=chunk) [Company Stores](index=11&type=section&id=Company%20Stores) Operates 749 stores and 230 international points, continuing fleet optimization with 300 targeted closures in FY2020-2021 Number of Stores by Location | Location | January 30, 2021 | February 1, 2020 | | :--------- | :--------------- | :--------------- | | United States | 640 | 795 | | Canada | 101 | 121 | | Puerto Rico | 8 | 8 | | **Total Stores** | **749** | **924** | - The company also has **230 international points of distribution** with eight partners in **19 countries**[49](index=49&type=chunk) - Store concepts range from **3,400 to 7,100 square feet**, designed for an open, brightly lit environment with white fixtures to highlight products[50](index=50&type=chunk) - Fleet optimization initiative has closed **449 stores since 2013**, including **178 in Fiscal 2020**. The company targets **300 closures in Fiscal 2020 and 2021**, bringing the total to approximately **570**[51](index=51&type=chunk) - Store closures have reduced total square footage from **5.2 million to 3.5 million**, resulting in improved profitability and operating margin due to sales transfer to remaining stores/e-commerce and elimination of underperforming locations[51](index=51&type=chunk) [E-commerce Sales](index=12&type=section&id=E-commerce%20Sales) E-commerce is a top strategic priority, investing in infrastructure and technology for a best-in-class online shopping experience - E-commerce is a top strategic priority for U.S. and International segments, operating at www.childrensplace.com and www.gymboree.com[53](index=53&type=chunk) - Commitment to best-in-class, end-to-end user experience, including product assortment, website operation, fulfillment, and customer service[53](index=53&type=chunk) - Investments in back-end infrastructure and front-end technology (e.g., mobile optimization) are ongoing to improve customer experience[53](index=53&type=chunk) [International Franchisees and Wholesale](index=12&type=section&id=International%20Franchisees%20and%20Wholesale) Expands globally via 230 international points with partners, generating revenue from product sales, royalties, and wholesale - Operates **230 international points of distribution** (stores, shop-in-shops, e-commerce) with eight partners in **19 countries**[54](index=54&type=chunk) - Generates revenue from franchisees through product sales and sales royalties[54](index=54&type=chunk) - Wholesale business includes a relationship with Amazon[54](index=54&type=chunk) [Store Operations](index=12&type=section&id=Store%20Operations) Geographically organized store operations with centralized support, incentivizing managers based on selling productivity and financial goals - Store operations are organized by geographical region with centralized corporate support[55](index=55&type=chunk) - Store managers focus on selling productivity, including greeting, replenishment, presentation standards, and controls[55](index=55&type=chunk) - Store management is motivated by a monthly incentive compensation plan based on financial goals[55](index=55&type=chunk) [Seasonality](index=12&type=section&id=Seasonality) Business is seasonal, with sales concentrated in back-to-school and holidays, though COVID-19 disrupted patterns in Fiscal 2020 - Business is seasonal, with heavier sales concentrations during back-to-school and holiday seasons[56](index=56&type=chunk) - First fiscal quarter depends on Easter sales, second/third on back-to-school, and fourth on holiday sales[56](index=56&type=chunk) - COVID-19 pandemic significantly disrupted seasonal influences in Fiscal 2020[56](index=56&type=chunk) Quarterly Net Sales and Operating Income (Loss) as a Percentage of Full Year | | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | | :------------------------------------------------ | :------------ | :------------- | :------------ | :------------- | | **Quarterly net sales as a percentage of full year:** | | | | | | Fiscal 2020 | 16.8 % | 24.2 % | 27.9 % | 31.1 % | | Fiscal 2019 | 22.0 % | 22.5 % | 28.1 % | 27.4 % | | **Quarterly operating income (loss) as a percentage of full year:** | | | | | | Fiscal 2020 | (86.6)% | (32.3)% | 11.7 % | 7.2 % | | Fiscal 2019 | 5.2 % | 4.0 % | 60.1 % | 30.7 % | [Marketing](index=12&type=section&id=Marketing) Promotes brands via online/offline direct marketing, emphasizing value and fashion, with loyalty programs driving 80% of sales - Marketing utilizes both online and offline channels, emphasizing value fashion[57](index=57&type=chunk) - Relaunched Gymboree brand in February 2020 with improved digital experience and shop-in-shop locations[57](index=57&type=chunk) - MyPLACE Rewards loyalty program and private label credit card members accounted for approximately **80% of sales** at the end of Fiscal 2020[59](index=59&type=chunk) [Distribution](index=13&type=section&id=Distribution) Operates distribution centers in Alabama and Ontario, supplemented by third-party providers for e-commerce and international - Owns and operates a **700,000 sq ft distribution center** in Alabama for U.S. retail and e-commerce[60](index=60&type=chunk) - Leases and operates a **95,000 sq ft distribution center** in Ontario, Canada for Canadian retail[60](index=60&type=chunk) - Utilizes third-party providers in Indiana and Ontario, Canada for U.S. and Canadian e-commerce operations, and in Malaysia and China for international franchise business[60](index=60&type=chunk) [Competition](index=13&type=section&id=Competition) Operates in a highly competitive market, facing diverse retailers including specialty, mass, off-price, and e-commerce - Highly competitive market, competing with specialty stores, mass merchants, off-price stores, catalog companies, and e-commerce retailers (e.g., Target, Old Navy, GapKids, Carter's, T.J. Maxx, Marshall's, Burlington Coat Factory, Kohl's, Walmart, Amazon)[61](index=61&type=chunk) [Trademarks and Service Marks](index=13&type=section&id=Trademarks%20and%20Service%20Marks) Owns and protects key trademarks like "The Children's Place" and "Gymboree," registered globally as significant assets - Owns registered trademarks and service marks including "The Children's Place," "Place," "Baby Place," "Gymboree," and "Crazy 8"[62](index=62&type=chunk) - Trademarks are registered in the U.S., Canada, and other foreign countries where products are sourced or franchising operations exist[62](index=62&type=chunk) [Government Regulation](index=13&type=section&id=Government%20Regulation) Subject to extensive regulations covering product safety, consumer protection, and labor, adhering to acts like CPSIA and customs laws - Subject to extensive federal, state, local, provincial, and international laws and regulations (product testing/safety, consumer protection, privacy, advertising, customs, wage/hour, zoning)[63](index=63&type=chunk) - Adheres to CPSIA, Federal Hazardous Substances Act, Flammable Fabrics Act, Textile Fiber Product Identification Act, CCPSA, Canadian Textile Labelling Act, and Canadian Care Labelling Program[64](index=64&type=chunk) - Products are imported and subject to U.S. and Canadian customs laws, tariffs, anti-dumping, and countervailing duties[65](index=65&type=chunk) [Human Capital](index=14&type=section&id=Human%20Capital) Manages 13,300 employees, with Board oversight on talent, development, diversity, and pay equity, emphasizing internal promotions - As of January 30, 2021, the company had approximately **13,300 employees** (**1,900 corporate/distribution**, **1,700 full-time store**, **9,700 part-time/seasonal store**)[66](index=66&type=chunk) - Board of Directors and Compensation Committee oversee human capital management, including talent and succession planning[67](index=67&type=chunk) - Senior leadership team has an average tenure of over **seven years**; **67% of senior leadership** and **65% of corporate roles** filled internally[67](index=67&type=chunk) - Diversity and inclusion, pay equity, employee relations, recruiting, and development programs are top priorities[68](index=68&type=chunk)[69](index=69&type=chunk) [Internet Access to Reports](index=14&type=section&id=Internet%20Access%20to%20Reports) SEC filings and corporate governance materials are accessible on the company's corporate website - Company files periodic reports, proxy statements, and other information with the SEC (http://www.sec.gov)[70](index=70&type=chunk) - Copies of Proxy Statement, 10-K, 10-Q, 8-K, and corporate governance materials are available on http://corporate.childrensplace.com[71](index=71&type=chunk)[72](index=72&type=chunk) [Item 1A. Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) Faces risks from COVID-19, strategy execution, cash flow, supply chain, competition, cybersecurity, and regulatory changes - COVID-19 pandemic has significantly disrupted business, leading to store closures, reduced demand, supply chain disruptions, increased e-commerce fulfillment costs, and potential asset impairment triggers[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - Failure to successfully execute business strategies (superior product, digital transformation, fleet optimization) could materially adversely affect financial results[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - Dependence on sufficient cash flows, which are influenced by seasonal fluctuations, store/e-commerce operations, inventory timing, vendor terms, and economic conditions (including COVID-19 effects)[83](index=83&type=chunk)[85](index=85&type=chunk) - Risks related to global operations include reliance on unaffiliated manufacturers/suppliers, transportation companies, international business risks (tariffs, foreign regulations, political instability, currency fluctuations), and potential disruptions at ports[87](index=87&type=chunk)[91](index=91&type=chunk)[93](index=93&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) - Retail and apparel industry risks include inability to anticipate fashion trends, marketing changes, or customer shopping patterns; decline in consumer confidence/spending; fluctuations in raw material, labor, and energy prices; product liability costs; and intense competition[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - Cybersecurity, data privacy, and IT risks include privacy breaches, failure to comply with privacy laws (e.g., CCPA), cybersecurity incidents (theft, data loss, operational delays, reputational damage, fines), and reliance on third-party vendors for IT systems[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - Risks related to stock and stock price include volatility due to fluctuations in financial results, market conditions, competitor actions, and legislative/regulatory changes. Highly concentrated stock holdings could influence stockholder proposals[128](index=128&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - Legal and regulatory risks include inability to protect intellectual property, impacts from federal tax and other legislation (e.g., Tax Cuts and Jobs Act, minimum wage), non-compliance with laws (wage/hour, product safety), and litigation[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) [Item 1B. Unresolved Staff Comments](index=27&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments to report - No unresolved staff comments[147](index=147&type=chunk) [Item 2. Properties](index=27&type=section&id=Item%202.%20Properties) Leases all retail stores, owns a 700,000 sq ft Alabama distribution center, and leases other key facilities - All existing store locations in the U.S., Puerto Rico, and Canada are leased, with terms expiring through 2029 and an average unexpired term of approximately **2 years**[148](index=148&type=chunk) Non-Store Locations as of January 30, 2021 | Location | Use | Approximate Sq. Footage | Current Lease Term Expiration | | :------------------------ | :-------------------------- | :---------------------- | :---------------------------- | | Fort Payne, AL | Warehouse Distribution Center | 700,000 | Owned | | Ontario, Canada | Warehouse Distribution Center | 95,000 | 4/30/2024 | | 500 Plaza Drive, Secaucus, NJ | Corporate Offices | 200,000 | 5/31/2029 | | Hong Kong, China | Product Support | 28,000 | 4/30/2021 | | Brownsburg, Indiana | Warehouse Distribution Center | 315,000 | 8/31/2024 | - The Fort Payne, AL facility supports U.S. stores, wholesale, and e-commerce. The Ontario, Canada facility supports Canadian stores and e-commerce. The Secaucus, NJ corporate offices support all segments. The Hong Kong office supports product. The Brownsburg, Indiana facility supports U.S. e-commerce[149](index=149&type=chunk)[150](index=150&type=chunk) [Item 3. Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) Defendant in a class action lawsuit for false advertising, with a $5.0 million settlement reserve and deferred final ruling - Defendant in Rael v. The Children's Place, Inc., a class action alleging false advertising of discount prices[152](index=152&type=chunk) - A definitive settlement agreement was signed in November 2017, providing merchandise vouchers for class members and covering legal/administration expenses[153](index=153&type=chunk) - Preliminary court approval for the settlement was granted on January 28, 2020; final ruling deferred after July 31, 2020 hearing[153](index=153&type=chunk) - A **$5.0 million reserve** was recorded in Q1 2017 for the proposed settlement[153](index=153&type=chunk) - Management believes other legal proceedings in the normal course of business will not have a material adverse effect on financial position, results of operations, or cash flows[154](index=154&type=chunk) [Item 4. Mine Safety Disclosure](index=28&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This item is not applicable to the company - Not applicable[155](index=155&type=chunk) PART II [Item 5. Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities](index=29&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%20and%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Common stock listed on Nasdaq (PLCE); share repurchases and dividends suspended due to COVID-19, with $92.8 million remaining on repurchase program - Common stock is listed on the Nasdaq Global Select Market under the symbol "PLCE"[158](index=158&type=chunk) - As of March 24, 2021, there were **38 holders of record** and approximately **19,600 beneficial holders** of common stock[158](index=158&type=chunk) - The **$250 million 2018 Share Repurchase Program** had approximately **$92.8 million remaining** at January 30, 2021. Share repurchases were temporarily suspended in March 2020 due to COVID-19[159](index=159&type=chunk) - Dividend payments were temporarily suspended in March 2020 due to COVID-19. In Fiscal 2019, **$34.9 million in cash dividends** were paid[160](index=160&type=chunk) Share Repurchases (In thousands) | Share Repurchases Related To: | Fiscal Year Ended Jan 30, 2021 (Shares) | Fiscal Year Ended Jan 30, 2021 (Value) | Fiscal Year Ended Feb 1, 2020 (Shares) | Fiscal Year Ended Feb 1, 2020 (Value) | | :---------------------------- | :-------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | | 2018 Share Repurchase Program | 294 | $15,490 | 1,585 | $131,393 | | Shares acquired and held in treasury | 6 | $209 | 4 | $271 | Equity Plan Compensation Information as of January 30, 2021 | Plan Category | Securities to be issued upon exercise of outstanding options | Weighted average exercise price of outstanding options | Securities remaining available for future issuances | | :---------------------------- | :--------------------------------------------------------- | :------------------------------------------- | :------------------------------------------------ | | Approved by Security Holders | N/A | N/A | 725,248 | | Not Approved by Security Holders | N/A | N/A | N/A | | **Total** | **N/A** | **N/A** | **725,248** | [Item 6. Selected Financial Data](index=32&type=section&id=Item%206.%20Selected%20Financial%20Data) Provides a five-year financial summary, showing Fiscal 2020's significant net loss and sales decrease due to COVID-19 Selected Statement of Operations Data (in thousands, except per share) | Metric | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | Fiscal Year Ended Feb 2, 2019 | Fiscal Year Ended Feb 3, 2018 | Fiscal Year Ended Jan 28, 2017 | | :------------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net sales | $1,522,598 | $1,870,667 | $1,938,084 | $1,870,275 | $1,785,316 | | Gross profit | $333,251 | $655,305 | $683,596 | $711,355 | $671,593 | | Selling, general, and administrative expenses | $428,234 | $478,120 | $498,343 | $476,486 | $454,143 | | Asset impairment charges | $38,527 | $6,039 | $6,096 | $5,190 | $4,026 | | Operating income (loss) | $(199,915) | $96,358 | $111,328 | $161,510 | $147,408 | | Net income (loss) | $(140,365) | $73,300 | $100,960 | $84,698 | $102,336 | | Diluted income (loss) per common share | $(9.59) | $4.68 | $6.01 | $4.67 | $5.40 | | Cash dividends declared and paid per common share | $— | $2.24 | $2.00 | $1.60 | $0.80 | | Number of Company stores at end of period | 749 | 924 | 972 | 1,014 | 1,039 | | Comparable retail sales increase (decrease) | N/A | (2.7)% | 4.6 % | 5.8 % | 4.9 % | Selected Balance Sheet Data (in thousands) | Metric | January 30, 2021 | February 1, 2020 | | :-------------------- | :--------------- | :--------------- | | Working capital (deficit) | $(171,416) | $(145,127) | | Total assets | $1,140,127 | $1,181,397 | | Revolving loan | $169,778 | $170,808 | | Long-term debt | $75,346 | $— | | Stockholders' equity | $93,377 | $235,187 | - Fiscal 2020 was a **52-week year**, while Fiscal 2018 was a **53-week year**[173](index=173&type=chunk) - Working capital deficit for Fiscal 2020 and 2019 includes current lease liabilities of **$174.6 million** and **$121.9 million**, respectively, due to the adoption of FASB ASC 842—Leases[174](index=174&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes financial condition and operations, highlighting COVID-19's impact on sales, profitability, liquidity, and accounting policies [OVERVIEW](index=35&type=section&id=OVERVIEW) North America's largest children's apparel retailer, severely impacted by COVID-19 in Fiscal 2020, implemented mitigation and growth strategies - The company is the largest pure-play children's specialty apparel retailer in North America, operating **749 stores** and **230 international points of distribution** as of January 30, 2021[179](index=179&type=chunk) - COVID-19 pandemic caused significant business disruption, including temporary closure of all U.S. and Canadian stores on March 18, 2020, and a significant decrease in back-to-school demand[181](index=181&type=chunk)[182](index=182&type=chunk)[186](index=186&type=chunk) - Net sales decreased by **$348.1 million (18.6%)** to **$1,522.6 million** in Fiscal 2020 from **$1,870.7 million** in Fiscal 2019, primarily due to COVID-19 impacts, partially offset by increased e-commerce sales[186](index=186&type=chunk) - Gross profit decreased by **$322.0 million (49.1%)** to **$333.3 million** in Fiscal 2020, with consolidated gross margin decreasing **1,310 basis points to 21.9%**[187](index=187&type=chunk) - Net loss was **$(140.4) million** in Fiscal 2020, compared to net income of **$73.3 million** in Fiscal 2019. Diluted EPS was **$(9.59)** in Fiscal 2020 vs. **$4.68** in Fiscal 2019[191](index=191&type=chunk) - Key strategic growth initiatives remain superior product (Gymboree relaunch), digital transformation (redesigned site, mobile app, personalization, ship-from-store), and fleet optimization (targeting **570 total store closures since 2013**)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) Average Foreign Currency Translation Rates | Currency | Fiscal 2020 | Fiscal 2019 | Fiscal 2018 | | :--------------- | :---------- | :---------- | :---------- | | Canadian Dollar | 0.7481 | 0.7550 | 0.7675 | | Hong Kong Dollar | 0.1290 | 0.1277 | 0.1276 | | China Yuan Renminbi | 0.1459 | 0.1446 | 0.1503 | [CRITICAL ACCOUNTING POLICIES](index=37&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Critical accounting policies involve estimates for inventory, stock compensation, asset impairment, income taxes, fair value, and insurance liabilities - Inventory is valued at the lower of cost or net realizable value using an average cost method, with estimates based on historical sales, market trends, and future demand[200](index=200&type=chunk) - Stock-based compensation (time vesting and performance-based awards) is expensed at fair value over vesting periods, with a forfeiture estimate[203](index=203&type=chunk) - Long-lived assets are reviewed for impairment when events indicate carrying value may not be recoverable, comparing undiscounted cash flows to net book value. Fair value is determined primarily using discounted future cash flows[204](index=204&type=chunk)[205](index=205&type=chunk) - Income taxes are accounted for using the liability method, with deferred taxes based on temporary differences. A valuation allowance is recorded if deferred tax assets are unlikely to be realized[207](index=207&type=chunk) - Fair value measurement uses a three-level hierarchy (Level 1: quoted prices, Level 2: observable inputs, Level 3: unobservable inputs). Cash, receivables, payables, and revolving loan are Level 1; derivatives are Level 2; long-lived assets measured on a nonrecurring basis are Level 3[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) - Self-insurance and purchased insurance policies cover workers' compensation, general liability, property losses, cyber-security, D&O, vehicle liability, and employee medical benefits. Liabilities are estimated based on historical claims and actuarial assumptions[214](index=214&type=chunk) - Adopted new FASB guidance in Fiscal 2020 related to cloud computing implementation costs, fair value measurement disclosures, and financial instrument credit losses, none of which had a material impact[215](index=215&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) [RESULTS OF OPERATIONS](index=40&type=section&id=RESULTS%20OF%20OPERATIONS) Fiscal 2020 saw significant sales decline and net loss due to COVID-19, impacting gross margin and increasing impairment charges Selected Income Statement Data as a Percentage of Net Sales | Metric | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | Fiscal Year Ended Feb 2, 2019 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Net sales | 100.0 % | 100.0 % | 100.0 % | | Cost of sales (exclusive of depreciation and amortization) | 78.1 % | 65.0 % | 64.7 % | | Gross profit | 21.9 % | 35.0 % | 35.3 % | | Selling, general, and administrative expenses | 28.1 % | 25.6 % | 25.7 % | | Depreciation and amortization | 4.4 % | 4.0 % | 3.6 % | | Asset impairment charges | 2.5 % | 0.3 % | 0.3 % | | Operating income (loss) | (13.1)% | 5.2 % | 5.7 % | | Income (loss) before provision for income taxes | (13.9)% | 4.7 % | 5.6 % | | Provision (benefit) for income taxes | (4.7)% | 0.8 % | 0.4 % | | Net income (loss) | (9.2)% | 3.9 % | 5.2 % | | Number of Company stores, end of period | 749 | 924 | 972 | Net Sales by Segment (In thousands) | Segment | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | Fiscal Year Ended Feb 2, 2019 | | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | The Children's Place U.S. | $1,372,079 | $1,671,165 | $1,727,907 | | The Children's Place International | $150,519 | $199,502 | $210,177 | | **Total net sales** | **$1,522,598** | **$1,870,667** | **$1,938,084** | - **Fiscal 2020 vs. Fiscal 2019:** Net sales decreased by **$348.1 million (18.6%)** due to COVID-19 disruptions, accelerated store closures, and decreased back-to-school demand, partially offset by increased e-commerce sales. E-commerce sales increased to approximately **53% of net sales** from **31%**[222](index=222&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) - **Fiscal 2020 vs. Fiscal 2019:** Gross profit decreased by **$322.0 million (49.1%)**, and gross margin decreased by **1,310 basis points to 21.9%**, primarily due to higher e-commerce fulfillment costs, decreased merchandise margin from pandemic-driven actions, and deleverage of fixed expenses[227](index=227&type=chunk) - **Fiscal 2020 vs. Fiscal 2019:** SG&A expenses decreased by **$49.9 million (10.4%)** but increased as a percentage of net sales by **250 basis points to 28.1%** due to deleverage of fixed expenses and higher incentive compensation accruals, partially offset by reduced store expenses[229](index=229&type=chunk) - **Fiscal 2020 vs. Fiscal 2019:** Asset impairment charges increased to **$38.5 million** (primarily for **419 stores**) from **$6.0 million**, driven by decreased net revenues and cash flow projections due to COVID-19[230](index=230&type=chunk) - **Fiscal 2020 vs. Fiscal 2019:** Net loss of **$(140.4) million** compared to net income of **$73.3 million**. Diluted EPS was **$(9.59)** vs. **$4.68**[233](index=233&type=chunk) - **Fiscal 2019 vs. Fiscal 2018:** Net sales decreased by **$67.4 million (3.5%)** due to a **2.7% comparable retail sales decrease**, competitor liquidations, and fewer stores. E-commerce sales increased to **31% of net sales** from **28%**[234](index=234&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk) - **Fiscal 2019 vs. Fiscal 2018:** Gross profit decreased by **$28.3 million (4.1%)**, and gross margin decreased by **30 basis points to 35.0%** due to deleverage of fixed expenses and increased e-commerce penetration, partially offset by increased merchandise margins[238](index=238&type=chunk) - **Fiscal 2019 vs. Fiscal 2018:** Operating income decreased by **$14.9 million (13.4%)** to **$96.4 million**, and as a percentage of net sales, decreased by **50 basis points to 5.2%**[243](index=243&type=chunk) - **Fiscal 2019 vs. Fiscal 2018:** Net income was **$73.3 million** compared to **$101.0 million**. Diluted EPS was **$4.68** vs. **$6.01**[245](index=245&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=43&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) COVID-19 impacted liquidity, leading to a working capital deficit, mitigated by expense cuts, credit facility amendments, and an $80 million term loan - Working capital deficit increased by **$26.3 million** to **$171.4 million** at January 30, 2021, primarily due to COVID-19 impact, partially offset by strategic cash management[248](index=248&type=chunk) - In Fiscal 2020, repurchased **0.3 million shares for $15.5 million** (prior to suspension). In Fiscal 2019, repurchased **1.6 million shares for $131.4 million** and paid **$34.9 million in dividends**[248](index=248&type=chunk) - ABL Credit Facility increased borrowing capacity from **$325 million to $360 million** for one year (until April 2021), then reverts to **$325 million**. Expires May 2024[252](index=252&type=chunk) - As of January 30, 2021, **$169.8 million outstanding borrowings** and **$104.2 million available** under the ABL Credit Facility[249](index=249&type=chunk) - Secured an **$80 million Term Loan** on October 5, 2020, with net proceeds used to pay down revolving credit facility borrowings. The Term Loan matures October 5, 2025, or May 2024 (ABL maturity)[252](index=252&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) - Cash flows used in operating activities were **$35.7 million** in Fiscal 2020 (vs. **$177.9 million provided in Fiscal 2019**) due to net loss from COVID-19, partially offset by working capital management[266](index=266&type=chunk) - Cash flows used in investing activities were **$30.4 million** in Fiscal 2020 (vs. **$134.4 million in Fiscal 2019**), primarily due to lower capital expenditures and the Gymboree acquisition in Fiscal 2019[268](index=268&type=chunk) - Cash flows provided by financing activities were **$60.9 million** in Fiscal 2020 (vs. **$44.4 million used in Fiscal 2019**), driven by Term Loan proceeds, decreased stock repurchases, and suspended dividends[269](index=269&type=chunk) [CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS](index=46&type=section&id=CONTRACTUAL%20OBLIGATIONS%20AND%20COMMERCIAL%20COMMITMENTS) Total contractual obligations and commercial commitments were $805.3 million, including leases, a term loan, and purchase commitments Contractual Obligations and Other Commercial Commitments as of January 30, 2021 (dollars in thousands) | Obligation Type | Total | 1 year or less | 1-3 years | 3-5 years | More than 5 years | | :------------------------------------------ | :------ | :------------- | :---------- | :---------- | :---------------- | | Operating leases | $425,602 | $189,481 | $155,352 | $47,164 | $33,605 | | Term Loan | $80,000 | $3,000 | $13,000 | $64,000 | $— | | Purchase commitments--merchandise | $276,397 | $276,397 | $— | $— | $— | | Purchase commitments--non-merchandise | $15,142 | $15,142 | $— | $— | $— | | Standby letters of credit | $8,200 | $8,200 | $— | $— | $— | | **Total** | **$805,341** | **$492,220** | **$168,352** | **$111,164** | **$33,605** | - Insurance reserves of approximately **$2.2 million** are included in other long-term liabilities, with the long-term portion not estimable by period[272](index=272&type=chunk) - Unrecognized tax benefits of approximately **$6.3 million** (including interest and penalties) are included in long-term liabilities, with future payment amounts and periods not reasonably estimable[274](index=274&type=chunk) [Off-Balance Sheet Arrangements](index=47&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has no off-balance sheet arrangements - No off-balance sheet arrangements[275](index=275&type=chunk) [QUARTERLY RESULTS AND SEASONALITY](index=47&type=section&id=QUARTERLY%20RESULTS%20AND%20SEASONALITY) Quarterly results fluctuate due to seasonality and economic factors, with COVID-19 causing significant losses in early Fiscal 2020 - Quarterly results fluctuate due to economic conditions, store changes, comparable retail sales, weather, holidays, and merchandise mix[276](index=276&type=chunk) - Fiscal 2020 results were significantly impacted by the COVID-19 pandemic, including government-mandated temporary store closures[276](index=276&type=chunk) Quarterly Consolidated Statements of Income (Fiscal Year Ended January 30, 2021) (in thousands, except earnings per share) | Metric | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | | :------------------------------------------ | :------------ | :------------- | :------------ | :------------- | | Net sales | $255,207 | $368,923 | $425,571 | $472,897 | | Gross profit (loss) | $(19,673) | $67,080 | $146,065 | $139,779 | | Selling, general, and administrative expenses | $98,491 | $114,312 | $106,639 | $108,792 | | Asset impairment charges | $37,091 | $544 | $294 | $598 | | Depreciation and amortization | $17,888 | $16,708 | $15,809 | $16,000 | | Operating income (loss) | $(173,143) | $(64,484) | $23,323 | $14,389 | | Net income (loss) | $(114,810) | $(46,639) | $13,320 | $7,764 | | Diluted (loss) earnings per share | $(7.86) | $(3.19) | $0.91 | $0.53 | [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=47&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Exposed to market risks from interest rate and foreign currency fluctuations, particularly for Canadian dollar transactions and imports - Financial position and results are subject to market risk from interest rate movements on borrowings and investments, and currency rate movements on non-U.S. dollar denominated items[278](index=278&type=chunk) - Cash and cash equivalents are invested in short-term instruments, so interest rate changes would not materially affect their fair value[280](index=280&type=chunk) - ABL Credit Facility and Term Loan bear floating interest rates (prime/LIBOR plus spread). A **10% change** in these rates would not materially impact interest expense[281](index=281&type=chunk)[282](index=282&type=chunk) - Foreign assets and liabilities are primarily in Canada and Hong Kong. A **10% change** in Canadian or Hong Kong Dollars would increase/decrease net investment by **$3.0 million** and **$4.2 million**, respectively[283](index=283&type=chunk) - As of January 30, 2021, **$58.4 million of cash and cash equivalents** were held in foreign subsidiaries (**$21.1 million in Canada**, **$34.5 million in Hong Kong**, **$2.8 million in other**)[284](index=284&type=chunk) - Foreign exchange rate exposure primarily from Canadian dollar-denominated revenues and expenses. A **10% change** in rates could decrease/increase Fiscal 2020 net sales by **$13.7 million** and total costs/expenses by **$18.4 million**[285](index=285&type=chunk) - Significant or sudden changes in political, foreign trade, financial, banking, or currency policies in countries like Bangladesh, Cambodia, China, Ethiopia, Vietnam, and Indonesia (where merchandise is imported) could materially impact the business[286](index=286&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=48&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Incorporates consolidated financial statements and supplementary data by reference from Item 15 of Part IV - Information required by this Item is incorporated by reference to "Item 15-Exhibits and Financial Statement Schedules" of Part IV[287](index=287&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=48&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes in or disagreements with accountants on accounting and financial disclosure to report - Not applicable[288](index=288&type=chunk) [Item 9A. Controls and Procedures](index=49&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and auditors concluded disclosure controls and internal control over financial reporting were effective as of January 30, 2021 - Disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of January 30, 2021[290](index=290&type=chunk) - Management concluded that internal control over financial reporting was effective as of January 30, 2021, based on the COSO framework[292](index=292&type=chunk) - Ernst & Young LLP issued an unqualified opinion on the effectiveness of internal control over financial reporting[296](index=296&type=chunk) - No changes in internal control over financial reporting occurred during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[293](index=293&type=chunk) [Item 9B. Other Information](index=51&type=section&id=Item%209B.%20Other%20Information) No other information to report under this item - None[304](index=304&type=chunk) PART III [Item 10. Directors and Executive Officers of the Registrant and Corporate Governance](index=51&type=section&id=Item%2010.%20Directors%20and%20Executive%20Officers%20of%20the%20Registrant%20and%20Corporate%20Governance) Information incorporated by reference from the Definitive Proxy Statement for the May 12, 2021 Annual Meeting - Information incorporated by reference from the Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 12, 2021[306](index=306&type=chunk) [Item 11. Executive Compensation](index=51&type=section&id=Item%2011.%20Executive%20Compensation) Information incorporated by reference from the Definitive Proxy Statement for the May 12, 2021 Annual Meeting - Information incorporated by reference from the Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 12, 2021[307](index=307&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=51&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information incorporated by reference from the Definitive Proxy Statement for the May 12, 2021 Annual Meeting - Information incorporated by reference from the Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 12, 2021[308](index=308&type=chunk) [Item 13. Certain Relationships and Related Transactions and Director Independence](index=51&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information incorporated by reference from the Definitive Proxy Statement for the May 12, 2021 Annual Meeting - Information incorporated by reference from the Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 12, 2021[309](index=309&type=chunk) [Item 14. Principal Accountant Fees and Services](index=51&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information incorporated by reference from the Definitive Proxy Statement for the May 12, 2021 Annual Meeting - Information incorporated by reference from the Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 12, 2021[310](index=310&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=52&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) Lists all financial statements, supplementary data, and exhibits filed as part of the 10-K report - Includes Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Changes in Stockholders' Equity, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[312](index=312&type=chunk) - Ernst & Young LLP provided an unqualified opinion on the consolidated financial statements for the three years ended January 30, 2021[314](index=314&type=chunk) - The company adopted Accounting Standards Update No. 2016-02, Leases (Topic 842), effective February 3, 2019, using the modified retrospective transition method[316](index=316&type=chunk) Consolidated Balance Sheets (In thousands) | Asset/Liability/Equity | January 30, 2021 | February 1, 2020 | | :------------------------------------------ | :--------------- | :--------------- | | **ASSETS:** | | | | Cash and cash equivalents | $63,548 | $68,487 | | Accounts receivable | $39,534 | $32,812 | | Inventories | $388,141 | $327,165 | | Prepaid expenses and other current assets | $55,860 | $21,416 | | **Total current assets** | **$547,083** | **$449,880** | | Property and equipment, net | $181,801 | $236,898 | | Right-of-use assets | $283,624 | $393,820 | | Tradenames, net | $72,492 | $73,291 | | Deferred income taxes | $45,579 | $12,941 | | Other assets | $9,548 | $14,567 | | **Total assets** | **$1,140,127** | **$1,181,397** | | **LIABILITIES:** | | | | Revolving loan | $169,778 | $170,808 | | Accounts payable | $252,124 | $213,115 | | Current lease liabilities | $174,585 | $121,868 | | Income taxes payable (current) | $5,508 | $5,607 | | Accrued expenses and other current liabilities | $116,504 | $83,609 | | **Total current liabilities** | **$718,499** | **$595,007** | | Long-term debt | $75,346 | $— | | Long-term lease liabilities | $214,173 | $311,908 | | Other tax liabilities | $6,304 | $6,782 | | Income taxes payable (long-term) | $14,939 | $17,589 | | Other long-term liabilities | $17,489 | $14,924 | | **Total liabilities** | **$1,046,750** | **$946,210** | | **STOCKHOLDERS' EQUITY:** | | | | Common stock | $1,464 | $1,476 | | Additional paid-in capital | $148,519 | $139,041 | | Treasury stock, at cost | $(3,164) | $(2,956) | | Deferred compensation | $3,164 | $2,956 | | Accumulated other comprehensive loss | $(13,816) | $(13,545) | | Retained earnings (deficit) | $(42,790) | $108,215 | | **Total stockholders' equity** | **$93,377** | **$235,187** | | **Total liabilities and stockholders' equity** | **$1,140,127** | **$1,181,397** | Consolidated Statements of Operations (In thousands, except earnings per share) | Metric | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | Fiscal Year Ended Feb 2, 2019 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Net sales | $1,522,598 | $1,870,667 | $1,938,084 | | Cost of sales (exclusive of depreciation and amortization) | $1,189,347 | $1,215,362 | $1,254,488 | | Gross profit | $333,251 | $655,305 | $683,596 | | Selling, general, and administrative expenses | $428,234 | $478,120 | $498,343 | | Depreciation and amortization | $66,405 | $74,788 | $68,884 | | Asset impairment charges | $38,527 | $6,039 | $6,096 | | Other income | $— | $— | $(1,055) | | Operating income (loss) | $(199,915) | $96,358 | $111,328 | | Interest expense | $(11,906) | $(8,194) | $(3,534) | | Interest income | $63 | $253 | $730 | | Income (loss) before provision for income taxes | $(211,758) | $88,417 | $108,524 | | Provision (benefit) for income taxes | $(71,393) | $15,117 | $7,564 | | Net income (loss) | $(140,365) | $73,300 | $100,960 | | Earnings (loss) per common share - Basic | $(9.59) | $4.71 | $6.10 | | Earnings (loss) per common share - Diluted | $(9.59) | $4.68 | $6.01 | | Weighted average common shares outstanding - Basic | 14,631 | 15,547 | 16,542 | | Weighted average common shares outstanding - Diluted | 14,631 | 15,653 | 16,805 | Consolidated Statements of Comprehensive Income (Loss) (In thousands) | Metric | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | Fiscal Year Ended Feb 2, 2019 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(140,365) | $73,300 | $100,960 | | Other comprehensive income (loss): | | | | | Foreign currency translation adjustment | $477 | $1,388 | $(2,178) | | Change in fair value of cash flow hedges, net of income taxes | $(748) | $1 | $75 | | **Total comprehensive income (loss)** | **$(140,636)** | **$74,689** | **$98,857** | Consolidated Statements of Cash Flows (In thousands) | Cash Flow Activity | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | Fiscal Year Ended Feb 2, 2019 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $(35,717) | $177,902 | $139,914 | | Net cash used in investing activities | $(30,374) | $(134,350) | $(56,863) | | Net cash provided by (used in) financing activities | $60,929 | $(44,374) | $(259,183) | | Effect of exchange rate changes on cash and cash equivalents | $223 | $173 | $749 | | Net decrease in cash and cash equivalents | $(4,939) | $(649) | $(175,383) | | Cash and cash equivalents, beginning of period | $68,487 | $69,136 | $244,519 | | **Cash and cash equivalents, end of period** | **$63,548** | **$68,487** | **$69,136** | [(a)(1) Financial Statements](index=52&type=section&id=(a)(1)%20Financial%20Statements) Includes audited consolidated financial statements: Balance Sheets, Statements of Operations, Comprehensive Income, Equity, Cash Flows, and Notes [1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=62&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Outlines business, fiscal year, segments, estimates, consolidation, and specific accounting policies for various financial items - The company is the largest pure-play children's specialty apparel retailer in North America, with two segments: The Children's Place U.S. and The Children's Place International[344](index=344&type=chunk)[345](index=345&type=chunk) - Fiscal years are **52-week or 53-week periods** ending on the Saturday nearest January 31. Fiscal 2020, 2019, and 2018 were **52-week years**[346](index=346&type=chunk) - Significant estimates include inventory realizability, litigation reserves, useful lives and impairments of long-lived assets, fair value measurements, income taxes, insurance reserves, intangible assets, and stock-based compensation[347](index=347&type=chunk) - Adopted FASB ASC 842—Leases on February 3, 2019, requiring all leases over **12 months** to be recorded on the balance sheet as right-of-use assets with corresponding liabilities[351](index=351&type=chunk) - Inventory is stated at the lower of cost or net realizable value, using an average cost basis, capitalizing certain buying, design, and supply chain costs[352](index=352&type=chunk) - Cost of sales includes inventory cost, buying, design, distribution expenses, shipping/handling, and letter of credit fees. All occupancy costs are in cost of sales, except administrative office buildings[353](index=353&type=chunk) - Stock-based compensation is expensed at fair value over vesting periods, including a forfeiture estimate. Performance-based awards reflect changes in probability of achieving performance criteria[355](index=355&type=chunk) - Long-lived assets are reviewed for impairment when events indicate carrying value may not be recoverable, comparing undiscounted cash flows to net book value and writing down to fair market value if impaired[364](index=364&type=chunk)[365](index=365&type=chunk) - Intangible assets include indefinite-lived trademarks/trade names (tested annually for impairment using relief-from-royalty method) and finite-lived customer lists/acquisition-related assets (amortized over useful lives and reviewed for impairment)[366](index=366&type=chunk) - Income taxes are accounted for using the liability method, with deferred taxes based on temporary differences. A valuation allowance is recorded if deferred tax assets are unlikely to be realized[370](index=370&type=chunk) - Fair value measurement uses a three-level hierarchy: Level 1 (quoted prices), Level 2 (observable inputs), Level 3 (unobservable inputs)[380](index=380&type=chunk) - Recently adopted accounting updates in Fiscal 2020 for cloud computing, fair value measurement disclosures, and financial instrument credit losses did not have a material impact[385](index=385&type=chunk)[386](index=386&type=chunk)[387](index=387&type=chunk) [2. REVENUES](index=68&type=section&id=2.%20REVENUES) Revenue recognized upon transfer of control, net of returns, including e-commerce, credit card, loyalty, gift card, and franchisee sales - Revenue is recognized when control of promised goods or services is transferred to customers, net of coupon redemptions and anticipated sales returns[391](index=391&type=chunk) - E-commerce revenue is recognized when the customer receives the product[391](index=391&type=chunk) Revenues Disaggregated by Geography (In thousands) | Geography | January 30, 2021 | February 1, 2020 | February 2, 2019 | | :---------------- | :--------------- | :--------------- | :--------------- | | South | $579,348 | $659,519 | $670,232 | | Northeast | $325,124 | $429,857 | $460,682 | | West | $219,686 | $290,290 | $300,225 | | Midwest | $197,697 | $234,621 | $245,954 | | International and other | $200,743 | $256,380 | $260,991 | | **Total net sales** | **$1,522,598** | **$1,870,667** | **$1,938,084** | - Private label credit card revenue is allocated between brand obligation (recognized straight-line over term) and reward obligation (recognized point-in-time as redemptions occur)[393](index=393&type=chunk)[394](index=394&type=chunk) - Points-based loyalty program creates a contract liability (deferred revenue) based on standalone selling price of benefits and redemption experience[395](index=395&type=chunk) - Gift card revenue is recognized upon redemption. Breakage income is recognized proportionally when expected and no legal obligation to remit[398](index=398&type=chunk) Reconciliation of Contract Liability Related to Gift Cards (In thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance at February 1, 2020 | $16,099 | | Gift cards sold | $19,760 | | Gift cards redeemed | $(19,289) | | Gift card breakage | $(2,936) | | **Balance at January 30, 2021** | **$13,634** | - International franchisee revenue from product sales (when ownership transfers) and sales royalties (when franchisee sells to customers). Territorial fees are deferred and amortized over the agreement life[398](index=398&type=chunk) [3. LEASES](index=69&type=section&id=3.%20LEASES) Adopted ASC 842 in Fiscal 2019, recognizing ROU assets and lease liabilities for operating leases, with COVID-19 rent concessions - Adopted FASB ASC 842—Leases on February 3, 2019, using the modified retrospective method, resulting in a **$1.7 million cumulative-effect charge** to retained earnings[399](index=399&type=chunk)[400](index=400&type=chunk) - Operating leases for retail stores, corporate offices, distribution facilities, and equipment have terms up to **10 years**, with renewal/termination options[402](index=402&type=chunk) - Lease liability is present value of unpaid lease payments; ROU asset is lease liability plus initial direct costs, less accrued payments and unamortized incentives[403](index=403&type=chunk) - Elected not to apply recognition requirements of Topic 842 to leases with initial terms of **12 months or less**, expensing them straight-line[406](index=406&type=chunk) - Elected to account for lease and non-lease components as a single component for all asset classes[407](index=407&type=chunk) - COVID-19 related rent concessions are accounted for as reductions to variable lease cost, not requiring reassessment of lease modification guidance[411](index=411&type=chunk)[412](index=412&type=chunk) Components of Lease Expense (In thousands) | Lease Component | January 30, 2021 | February 1, 2020 | | :---------------- | :--------------- | :--------------- | | Operating lease cost | $128,373 | $149,006 | | Variable lease cost | $44,085 | $64,228 | | **Total lease cost** | **$172,458** | **$213,234** | - Variable lease cost for Fiscal 2020 includes approximately **$12.9 million in lease abatements** under the COVID-19 expedient[414](index=414&type=chunk) - As of January 3
The Children's Place(PLCE) - 2020 Q4 - Earnings Call Presentation
2021-03-09 19:58
PLACE | COMPANY OVERVIEW AS OF Q4|2020 THE CHILDREN'S PLACE T SAFE HARBOR STATEMENT Forward Looking Statements This presentation 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 adjusted net income per diluted share. Forward-looking statements typically are identified by use of terms such as "may," "will," "should," ...
The Children's Place(PLCE) - 2020 Q4 - Earnings Call Transcript
2021-03-09 19:14
The ChildrenÂ's Place Inc. (NASDAQ:PLCE) Q4 2020 Earnings Conference Call March 9, 2021 8:00 AM ET Â Company Participants Jane Elfers – President and Chief Executive Officer Mike Scarpa – Chief Financial Officer Rob Helm – Senior Vice President-Finance Conference Call Participants Dana Telsey – Telsey Advisory Group Jay Sole – UBS Jim Chartier – Monness, Crespi, and Hardt Susan Anderson – B. Riley Paul Lejuez – Citi Marni Shapiro – The Retail Tracker Operator Good morning, and welcome to The ChildrenÂ's Pla ...
The Children's Place(PLCE) - 2020 Q3 - Earnings Call Transcript
2020-11-19 17:26
The Children's Place, Inc. (NASDAQ:PLCE) Q3 2020 Earnings Conference Call November 19, 2020 8:00 AM ET Company Participants Jane Elfers – President and Chief Executive Officer Mike Scarpa – Chief Financial Officer Conference Call Participants Dana Telsey – Telsey Advisory Group Jim Chartier – Monness, Crespi, Hardt Adrienne Yih – Barclays David Buckley – Bank of America Susan Anderson – B. Riley Marni Shapiro – Retail Tracker Operator Good morning and welcome to The ChildrenÂ's Place Third Quarter 2020 Earn ...
The Children's Place(PLCE) - 2020 Q2 - Earnings Call Presentation
2020-08-25 17:57
型工程 | INVESTOR PRESENTATION AS OF Q2|2020 SAFE HARBOR STATEMENT Forward Looking Statements This presentation 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 adjusted net income per diluted share. Forward-looking statements typically are identified by use of terms such as "may," "will," "should," "plan," "project," ...
The Children's Place(PLCE) - 2020 Q2 - Earnings Call Transcript
2020-08-25 17:09
The Children's Place, Inc. (NASDAQ:PLCE) Q2 2020 Results Conference Call August 25, 2020 8:00 AM ET Company Participants Anthony Attardo - Director, Investor Relations Jane Elfers - President and Chief Executive Officer Mike Scarpa - Chief Operating Officer and Chief Financial Officer Conference Call Participants Dana Telsey - Telsey Advisory Group Jim Chartier - Monness Crespi Hardt Adrienne Yih - Barclays Jay Sole - UBS Paul Lejuez - Citi Susan Anderson - B. Riley David Buckley - Bank of America Marni Sha ...
The Children's Place(PLCE) - 2020 Q1 - Earnings Call Transcript
2020-06-11 17:45
The Children's Place, Inc. (NASDAQ:PLCE) Q1 2020 Earnings Conference Call June 11, 2020 8:00 AM ET Company Participants Anthony Attardo - Director, Investor Relations Jane Elfers - President and Chief Executive Officer Mike Scarpa - Chief Operating Officer and Chief Financial Officer Conference Call Participants Adrienne Yih - Barclays Tiffany Kanaga - Deutsche Bank Jim Chartier - Monness, Crespi Hardt Dana Telsey - Telsey Advisory Group Paul Lejuez - Citi Susan Anderson - B. Riley FBR David Buckley - Bank ...
The Children's Place(PLCE) - 2020 Q1 - Earnings Call Presentation
2020-06-11 17:43
PLACE | INVESTOR PRESENTATION AS OF Q1|2020 SAFE HARBOR STATEMENT Forward Looking Statements This press release 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 adjusted net income per diluted share. Forward-looking statements typically are identified by use of terms such as "may," "will," "should," "plan," "project ...
The Children's Place(PLCE) - 2019 Q3 - Earnings Call Transcript
2019-12-11 16:01
The Children's Place, Inc. (NASDAQ:PLCE) Q3 2019 Earnings Conference Call December 11, 2019 10:30 AM ET Company Participants Anthony Attardo - Director, IR Jane Elfers - President & CEO Mike Scarpa - COO & CFO Conference Call Participants John Morris - D.A. Davidson Susan Anderson - B. Riley FBR Tiffany Kanaga - Deutsche Bank Paul Lejuez - Citi Research David Buckley - Bank of America Jim Chartier - Monness, Crespi, Hardt Operator Ladies and gentlemen, thank you for standing by, and welcome to The Children' ...