US' The Children's Place narrows net loss despite revenue decline

The company’s sales were further pressured by a challenging macroeconomic environment and tariff-related uncertainties dampening consumer sentiment. Comparable retail sales declined 4.7 per cent in Q2.

E-commerce sales fell due to weaker traffic and conversion, although trends improved compared to Q1 on the back of revised marketing and product strategies. The gross profit dropped $10.5 million to $101.3 million, with gross margin narrowing 100 basis points (bps) to 34 per cent. The decline was linked to lower inventory balances and shifts in channel mix, partially offset by stronger product margins and promotional improvements, The Children’s Place said in a press release.

Selling, general, and administrative (SG&A) expenses declined to $89.6 million, primarily reflecting reduced one-time restructuring costs from the prior year, partly offset by higher marketing investments. Adjusted SG&A stood at $87.6 million, down slightly from $88.3 million a year earlier, but deleveraged to 29.4 per cent of net sales due to lower revenues.

The operating income was $4.1 million, compared with a prior-year loss that included a $28 million Gymboree tradename impairment. Adjusted operating income fell to $6.1 million from $14.2 million last year.

The net interest expense decreased to $8 million from $9.2 million, aided by lower borrowings and interest rates. Net loss for the quarter was $(5.4) million, or $(0.24) per diluted share, compared with $(32.1) million, or $(2.51) per diluted share, a year earlier. The adjusted net loss was $(3.4) million, or $(0.15) per diluted share, against adjusted net income of $3.9 million in Q2 FY24.

During Q2, the company opened one store and closed two, ending the quarter with 494 stores, down from 515 in the same period last year.

During the second quarter, the company opened one store and closed two stores and ended the quarter with 494 stores. The store count at the end of the second quarter of FY24 was 515.

For the first half (H1) of FY25, net sales declined 8.1 per cent to $540.1 million, with comparable retail sales down 8.9 per cent. The gross profit fell to $172.1 million, down $32.5 million from the prior year, as gross margin contracted 290 basis points to 31.9 per cent, impacted by lower inventory balances and greater wholesale mix.

SG&A expenses dropped to $176.3 million from $205.2 million last year, largely due to the absence of one-time costs linked to leadership changes and a broken financing deal. Adjusted SG&A was $174.2 million, compared to $177.0 million in the prior year, though deleveraged to 32.2 per cent of net sales.

The company reported an operating loss of $20 million, narrowing from $49.8 million last year. Adjusted operating loss stood at $17.9 million versus adjusted operating income of $9.2 million in the same period a year earlier.

The net interest expense was $16.6 million, slightly down from $17 million, reflecting lower rates, offset by deferred financing cost write-offs linked to debt restructuring and rights offering. The net loss in H1 FY25 was $39.4 million, or $1.8 per diluted share, compared to a loss of $69.9 million, or $5.49 per diluted share. The adjusted net loss widened to $36.3 million from $11 million.

“This quarter began with operating results that reflected the difficulties we faced in the previous quarter, including unusually cold and wet weather early in the quarter that dampened seasonal demand,” said Muhammad Umair, president and interim chief executive officer (CEO) at The Children’s Place. “However, we ended the quarter with strong momentum for our back-to-school season, and we saw a significant improvement in comparable sales relative to the start of the year.”

“The expansion of licensing, a greater emphasis on fashion-forward assortments, and new partnerships are resonating strongly with our core customer, helping to reinforce our brand promise of delivering amazing fashion at a great value for parents. While we continue to be challenged by the macroeconomic environment, we remain laser-focused on driving profitability in the near and long term,” added Umair.

John Szczepanski, chief financial officer (CFO) said, “We will be implementing an in-depth long-range plan that will better streamline the Company’s operations to yield over $40 million of gross benefits over the next three years. We will be 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 the Company’s strategic shift from closing stores to opening stores instead, as we revitalize the look, feel and experience for our customers when they enter our stores and visit our website, with a focus on improving top-line sales.”

ALCHEMPro News Desk (SG)