The Children's Place(US:PLCE)2022-06-01 20:56Financial Performance - Net sales decreased by $73.1 million, or 16.8%, to $362.4 million in Q1 2022 from $435.5 million in Q1 2021, primarily due to the impact of COVID-19 stimulus relief lapsing and inflation [103]. - Comparable retail sales decreased by 16.9% for Q1 2022 [103]. - Gross profit decreased by $46.3 million to $141.9 million in Q1 2022, with gross margin dropping 406 basis points to 39.2% of net sales [104]. - Operating income fell by $46.6 million to $19.3 million in Q1 2022, representing 5.3% of net sales, a decrease of 982 basis points [105]. - Net income decreased by $25.4 million to $19.8 million, or $1.43 per diluted share, in Q1 2022 compared to $45.2 million, or $3.01 per diluted share, in Q1 2021 [105]. - The Children's Place U.S. net sales fell by $71.7 million or 17.9% to $328.0 million in Q1 2022 compared to $399.7 million in Q1 2021 [120]. - Total e-commerce sales accounted for 42.1% of net sales in Q1 2022, slightly down from 42.6% in Q1 2021 [122]. Expenses and Costs - Selling, general, and administrative expenses increased by $2.3 million to $109.0 million in Q1 2022, representing 30.1% of net sales, a decrease of 558 basis points [125]. - Increased costs of goods and services, including raw materials and transportation, are expected to impact operations for the remainder of 2022 [100]. Share Repurchase and Store Closures - The company repurchased approximately 0.7 million shares for $38.8 million during Q1 2022, with $218.6 million remaining under the share repurchase program [106]. - The company closed 534 stores since 2013, including 7 stores in Q1 2022, and plans to close approximately 40 stores this year [109]. Cash Flow and Capital Expenditures - Cash used in operating activities was $18.8 million in Q1 2022, compared to $16.6 million in Q1 2021, primarily due to inventory timing issues [146]. - Cash used in investing activities increased to $11.0 million in Q1 2022 from $6.7 million in Q1 2021, driven by capital expenditure timing [147]. - Cash provided by financing activities increased to $33.9 million in Q1 2022 from $24.5 million in Q1 2021, driven by additional net borrowings [148]. - Total capital expenditures are expected to be approximately $55 million in Fiscal 2022, up from $29.3 million in Fiscal 2021, focusing on digital and supply chain initiatives [149]. Debt and Borrowings - As of April 30, 2022, the company had $249.5 million in borrowings under its ABL Credit Facility, with a 10% change in interest rates not materially impacting interest expense [152]. - The outstanding balance of the Term Loan was $50.0 million as of April 30, 2022, with a 10% change in the three-month LIBOR Rate not materially affecting interest expense [153]. Foreign Operations and Currency Risk - Net assets in Canada and Hong Kong amounted to $70.7 million as of April 30, 2022, with a 10% change in foreign currency exchange rates potentially impacting net investment by $7.1 million [154]. - The company held $51.4 million of cash and cash equivalents in foreign subsidiaries, with $36.2 million in Hong Kong and $10.4 million in Canada [155]. - A 10% change in foreign currency exchange rates could have resulted in a $3.0 million change in net sales and a $3.8 million change in total costs and expenses for Q1 2022 [157]. - The company imports most merchandise from countries including Vietnam, Cambodia, and China, making it vulnerable to political and economic changes in these regions [158]. Strategic Initiatives - The company continues to focus on strategic growth initiatives, including superior product offerings, digital transformation, and fleet optimization [107]. - The digital capabilities have been enhanced with a redesigned responsive site and mobile application to improve customer experience and support e-commerce operations [108]. Working Capital - The working capital deficit improved by $66.8 million to a deficit of $30.2 million at April 30, 2022, compared to a deficit of $97.0 million at May 1, 2021 [133].