The Children's Place(PLCE) - 2026 Q3 - Quarterly Report

Financial Performance - Net sales decreased by $50.7 million, or 13.0%, to $339.5 million in Q3 2025 from $390.2 million in Q3 2024, primarily due to lower wholesale revenue and e-commerce sales[164]. - Gross profit fell by $26.0 million to $112.3 million in Q3 2025, with gross margin decreasing 240 basis points to 33.1% of net sales[165]. - Operating income dropped to $3.7 million in Q3 2025 from $29.3 million in Q3 2024, reflecting a significant decline in profitability[169]. - Net loss was $(4.3) million, or $(0.19) per diluted share, in Q3 2025, compared to net income of $20.1 million, or $1.57 per diluted share, in Q3 2024[172]. - Year-to-date net sales decreased by $98.1 million, or 10.0%, to $879.6 million in 2025, impacted by lower e-commerce traffic and brick-and-mortar revenue[178]. - Year-to-date gross profit decreased by $58.5 million to $284.4 million, with gross margin down 280 basis points to 32.3% of net sales[179]. - The Children's Place U.S. net sales decreased by $48.8 million, or 13.7%, to $307.4 million in Q3 2025, attributed to lower wholesale revenue and e-commerce sales[175]. - The Children's Place International net sales decreased by $1.9 million, or 5.6%, to $32.1 million in Q3 2025, primarily due to lower e-commerce sales[176]. Expenses and Costs - Selling, general, and administrative expenses increased to $101.3 million in Q3 2025 from $99.8 million in Q3 2024, driven by higher marketing expenses and costs related to the My Place Rewards loyalty program[167]. - Selling, general, and administrative expenses decreased to $277.6 million in Year-To-Date 2025 from $305.0 million in Year-To-Date 2024, with Adjusted SG&A expenses at $275.1 million compared to $270.8 million, representing a 360 basis points deleverage to 31.3% of net sales[181]. - Depreciation and amortization expenses were $23.1 million in Year-To-Date 2025, down from $30.4 million in Year-To-Date 2024, with no asset impairment charges compared to $28.0 million in the prior year[182]. Liquidity and Financing - The Children's Place has amended its asset-based revolving credit facility to $350 million and entered into a $100 million term loan agreement to improve liquidity and financial flexibility[158][159]. - Total liquidity as of November 1, 2025, was $93.4 million, including $46.1 million available under the ABL Credit Facility and $40.0 million under the Mithaq Credit Facility[199]. - Cash used in operating activities was $67.2 million in Year-To-Date 2025, a significant decrease from $238.9 million in Year-To-Date 2024, primarily due to reduced inventory purchases[203]. - Inventories decreased to $390.3 million as of November 1, 2025, down from $491.6 million as of November 2, 2024, reflecting improved inventory management[208]. - Accounts payable decreased to $86.2 million as of November 1, 2025, from $125.9 million as of November 2, 2024, a reduction of 31.5%[209]. Market Conditions and Strategy - The company has reported a decrease in consumer discretionary apparel purchases due to macroeconomic pressures, which are expected to continue impacting performance through the remainder of Fiscal 2025[153]. - The company anticipates that macroeconomic conditions, including inflation and geopolitical factors, will continue to adversely affect its core customer base[153]. - The revamped My Place Rewards loyalty program aims to enhance customer engagement and retention through tiered memberships and exclusive incentives, which is expected to drive customer acquisition[157]. - The Children's Place operates 499 stores in North America and has 227 international points of distribution across 12 countries, emphasizing its omni-channel retail strategy[151]. - The company's e-commerce and brick-and-mortar operations are interdependent, with performance evaluated as a percentage of net sales rather than absolute dollar changes[162]. Tax and Regulatory Considerations - The company is closely monitoring the implementation of the OECD's Pillar Two global minimum corporate tax rate, which is not expected to materially impact its effective tax rate[161]. Foreign Currency and Trade - The company imports a majority of its merchandise from countries such as Bangladesh, Vietnam, and China, making it susceptible to changes in foreign trade and currency policies[251]. - The company had net liabilities in Canada and Hong Kong amounting to $13.2 million as of November 1, 2025, with a 10% change in foreign currency exchange rates potentially impacting net investment by $1.3 million[247]. - A 10% change in foreign currency exchange rates could have resulted in a $7.2 million increase or decrease in net sales and an $8.5 million change in total costs and expenses for Q3 2025[250]. - The average translation rate for the Canadian dollar was 0.7206 for the thirteen weeks ended November 1, 2025, compared to 0.7324 for the same period in 2024[249].