Childrens Place Q2 sales drop 19%, loss widens
The Children’s Place, Inc. (PLCE) reported sharply weaker results for the thirteen and twenty-six weeks ended August 1, 2026, as macro pressures and lower traffic reduced demand.
The Children’s Place, Inc. (PLCE) reported sharply weaker results for the thirteen and twenty-six weeks ended August 1, 2026, as macro pressures and lower traffic reduced demand. Second-quarter net sales fell to $241.8 million, down 18.9% from a year earlier, and the company posted a net loss of $30.9 million versus a $5.4 million loss in 2025.
Gross profit declined to $83.3 million, with gross margin at 34.4%, supported by about $39 million in tariff refunds recorded as a reduction of cost of sales; excluding this benefit, underlying margin was much weaker due to heavier markdowns, higher tariffs, occupancy, and inventory reserves. SG&A was roughly flat in dollars but rose to 37.2% of sales, and operating results swung to a $(13.0) million loss.
Year-to-date, net sales fell 15.4% to $457.0 million and net loss more than doubled to $84.1 million. The balance sheet showed a $139.0 million stockholders’ deficit, debt including $160.1 million drawn on the ABL facility and $111.1 million Mithaq term loans, and total liquidity of $79.7 million. Inventories were reduced by 23.2% year over year as management worked to align stock with softer demand.
Positive
- Tariff refund of about $39 million in Second Quarter 2026 boosted gross margin by reducing Cost of sales and was largely used to pay down short‑term debt.
- Year-over-year inventory reduction of $102.5 million (23.2%) to $340.2 million reflects progress aligning inventory with demand and liquidating excess stock.
- The company reported total liquidity of $79.7 million, including $47.5 million ABL availability, $25.0 million Mithaq Credit Facility availability, and $7.2 million cash on hand.
Negative
- Second-quarter net sales declined 18.9% to $241.8 million, with comparable retail sales in the DTC business down 16.7%, indicating materially weaker demand.
- Second-quarter net loss widened to $30.9 million (from $5.4 million), and year-to-date net loss more than doubled to $84.1 million, showing significant earnings deterioration.
- The company reported a substantial stockholders’ deficit of $138.97 million and total liabilities of $881.3 million, highlighting a highly leveraged capital structure.
- Net interest expense rose to $18.3 million in the quarter and $27.9 million year-to-date, driven by financing costs from monetizing tariff and tax refund claims, pressuring bottom-line results.
- Segment operating performance weakened: U.S. and International segments both reported operating losses in Second Quarter 2026, with International operating loss at 25.0% of its net sales.
Filing Explained
The CEO transition adds conditional equity awards that may dilute holders, but vesting depends on market-capitalization milestones and continued employment.
The Children’s Place’s Form 10-Q, an unaudited quarterly report, discloses a September 11 adjustment letter moving Muhammad Umair from chief executive officer to chief strategy officer and granting conditional equity awards that could dilute existing holders if shares are ultimately delivered.
The company granted 125,000 restricted shares and 125,000 performance-based restricted stock units, with each award vesting in two equal tranches only if the company’s 90-day volume-weighted average market capitalization reaches
His prior equity awards were forfeited, he became ineligible for the annual management incentive plan, and his revised annual salary is
The stated resolution points are the market-capitalization thresholds and the third anniversary of the grant date: unvested awards are forfeited then, subject to possible extensions through the seventh anniversary at the company’s discretion.
Key Figures
Net sales (Second Quarter 2026): $241.8 million
Net loss (Second Quarter 2026): $30.95 million
Net loss (Year-To-Date 2026): $84.14 million
+5 more
8 metrics
Net sales (Second Quarter 2026)
$241.8 million
Thirteen weeks ended August 1, 2026, down 18.9% from $298.0 million in Second Quarter 2025
Net loss (Second Quarter 2026)
$30.95 million
Thirteen weeks ended August 1, 2026, versus $5.37 million net loss a year earlier
Net loss (Year-To-Date 2026)
$84.14 million
Twenty-six weeks ended August 1, 2026, versus $39.39 million net loss in Year-To-Date 2025
Gross margin (Second Quarter 2026)
34.4%
Gross profit of $83.28 million as a percentage of net sales, versus 34.0% in Second Quarter 2025
Tariff refunds received
Approximately $39 million
Second Quarter 2026, recorded as a reduction of Cost of sales for inventory previously sold
Inventories
$340.21 million
Balance as of August 1, 2026, down from $442.71 million as of August 2, 2025
Stockholders’ deficit
$138.97 million
Total stockholders’ deficit as of August 1, 2026, versus $4.87 million deficit a year earlier
Total liquidity
$79.7 million
As of August 1, 2026, including cash, ABL availability, and Mithaq Credit Facility availability
Key Terms
asset-based revolving credit facility, IEEPA tariffs, Comparable Retail Sales, Adjusted gross profit, +2 more
6 terms
asset-based revolving credit facility financial
"maintain the $350.0 million asset-based revolving credit facility (the “ABL Credit Facility”)"
A loan arrangement where a lender agrees to make funds available up to a set limit that a borrower can draw, repay, and draw again, with the amount available tied to the value of specific assets (like inventory, receivables, or equipment) pledged as collateral. It matters to investors because it provides flexible working capital while limiting risk exposure: the company can fund growth or cover shortfalls quickly, but borrowing capacity can shrink if asset values fall.
IEEPA tariffs regulatory
"tariffs imposed under the International Emergency Economic Powers Act of 1977 (“IEEPA”)"
Measures labeled as IEEPA tariffs are trade restrictions or charges imposed under the U.S. International Emergency Economic Powers Act, a law that lets the government respond to national emergencies with economic tools. For investors, these actions are like suddenly adding a toll to certain imports, exports or transactions: they can raise costs, disrupt supply chains, limit market access, and change a company’s revenue or risk profile overnight.
Comparable Retail Sales financial
"Comparable Retail Sales — Net sales from stores that have been open for at least 14 consecutive months"
Comparable retail sales measure how much revenue stores open for a year or more earned over a period, excluding new or recently closed outlets so the comparison is apples-to-apples. Investors use this metric to see whether the core business is growing from deeper customer demand or better sales per location, rather than from adding more stores, making it a clearer indicator of underlying health and momentum.
Adjusted gross profit financial
"Adjusted gross profit decreased $17.6 million to $83.7 million during the Second Quarter 2026"
Adjusted gross profit is a company’s revenue from selling goods or services minus the direct costs of producing them, with one-time or unusual items added back or removed to show the core margin. Investors use it like a cleaned-up snapshot of how much a business actually earns on its products, similar to measuring body weight after removing heavy clothes, because it helps compare performance across periods and companies without noise from rare events.
Mithaq Term Loans financial
"the First Mithaq Term Loan and the Second Mithaq Term Loan, collectively, the “Initial Mithaq Term Loans”"
valuation allowance financial
"We continue to adjust our valuation allowance based on ongoing operating results."
A valuation allowance is a reserve set aside to reduce the value of certain assets on a company's financial records when there is uncertainty about whether they will generate the expected benefits. It acts like a caution sign, indicating that some assets might not be fully recoverable or worth their recorded amount. This matters to investors because it provides a more realistic picture of a company's financial health and potential risks.
Earnings Snapshot
Net sales (Q2 2026): $241.8 million
Thirteen and twenty-six weeks ended August 1, 2026
Net sales (Q2 2026)
$241.8 million
decreased 18.9% from $298.0 million in Q2 2025
Net loss (Q2 2026)
$30.95 million
worsened from $5.37 million net loss in Q2 2025
Net sales (Year-To-Date 2026)
$457.0 million
decreased 15.4% from $540.1 million in Year-To-Date 2025
Net loss (Year-To-Date 2026)
$84.1 million
increased from $39.4 million net loss in Year-To-Date 2025
Gross margin (Q2 2026)
34.4%
up 40 basis points from 34.0% in Q2 2025, aided by tariff refunds
Comparable retail sales (DTC, Q2 2026)
decrease of 16.7%
compared with Second Quarter 2025, reflecting lower traffic
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How did PLCE’s revenue perform in the Second Quarter 2026?
Net sales were $241.8 million in Second Quarter 2026, an 18.9% decline from $298.0 million a year earlier. The decrease was driven by lower direct-to-consumer traffic and reduced wholesale shipments to align customer inventory positions and clear aged fashion inventories.
What was The Children’s Place (PLCE) profitability in Second Quarter 2026?
The company reported a net loss of $30.9 million, or $(1.39) per diluted share, in Second Quarter 2026, versus a $5.4 million net loss, or $(0.24) per diluted share, in the prior-year quarter. Operating results shifted from $4.1 million income to a $(13.0) million loss.
How did tariffs and refunds affect PLCE’s results?
The company paid about $40 million in IEEPA tariffs in Fiscal 2025–2026 and received approximately $39 million in refunds during Second Quarter 2026. These refunds were recorded as a reduction of Cost of sales, boosting reported gross margin, and were used primarily to pay down short-term debt.
What is PLCE’s liquidity and debt position as of August 1, 2026?
Total liquidity was $79.7 million, including $7.2 million cash, $47.5 million ABL availability, and $25.0 million remaining under the Mithaq Credit Facility. Debt included $160.1 million outstanding on the ABL Credit Facility and $111.1 million aggregate Mithaq term loans, plus a $100.0 million SLR term loan.
How have PLCE’s gross margin and SG&A expenses changed year over year?
Second-quarter gross margin was 34.4% versus 34.0% a year ago, supported by tariff refunds; excluding those, underlying gross margin fell. SG&A was nearly flat in dollars at $90.1 million but rose from 30.1% to 37.2% of net sales due to deleverage and higher store expenses.
What are PLCE’s key year-to-date 2026 results?
For the twenty-six weeks ended August 1, 2026, net sales were $457.0 million, down 15.4% from $540.1 million a year earlier. Net loss was $84.1 million, or $(3.79) per diluted share, compared to a $39.4 million net loss, or $(1.80) per diluted share, in Year-To-Date 2025.
Does PLCE rely on any major customers in its wholesale channel?
Yes. The company disclosed one U.S. wholesale customer that accounted for more than 10% of Net sales, including $25.1 million in Second Quarter 2026, and held a majority of accounts receivable, with balances of $19.2 million, $13.7 million, and $31.8 million on the stated dates.
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Table of Contents
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 August 1, 2026
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 September 8, 2026: 22,237,067 .
Table of Contents
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED AUGUST 1, 2026
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION | PAGE | |||||||
Item 1. | Financial Statements. | |||||||
Consolidated Balance Sheets as of August 1, 2026, January 31, 2026 and August 2, 2025 | 1 | |||||||
Consolidated Statements of Operations for the thirteen weeks and twenty-six weeks ended August 1, 2026 and August 2, 2025 | 2 | |||||||
Consolidated Statements of Comprehensive Loss for the thirteen weeks and twenty-six weeks ended August 1, 2026 and August 2, 2025 | 3 | |||||||
Consolidated Statements of Changes in Stockholders’ Deficit for the thirteen and twenty-six weeks ended August 1, 2026 and August 2, 2025 | 4 | |||||||
Consolidated Statements of Cash Flows for the twenty-six weeks ended August 1, 2026 and August 2, 2025 | 6 | |||||||
Notes to Consolidated Financial Statements | 7 | |||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 25 | ||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 41 | ||||||
Item 4. | Controls and Procedures. | 43 | ||||||
PART II — OTHER INFORMATION | ||||||||
Item 1. | Legal Proceedings. | 44 | ||||||
Item 1A. | Risk Factors. | 44 | ||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 44 | ||||||
Item 5. | Other Information. | 44 | ||||||
Item 6. | Exhibits. | 45 | ||||||
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS.
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| August 1, 2026 | January 31, 2026 | August 2, 2025 | |||||||||||||||
| (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 | |||||||||||||||||
| Short-term debt | |||||||||||||||||
| Accrued expenses and other current liabilities | |||||||||||||||||
| Total current liabilities | |||||||||||||||||
| Long-term liabilities: | |||||||||||||||||
| Long-term debt | |||||||||||||||||
| 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
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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||||||||||
| August 1, 2026 | August 2, 2025 | August 1, 2026 | August 2, 2025 | ||||||||||||||||||||
| (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 | |||||||||||||||||||||||
| Operating income (loss) | ( | ( | ( | ||||||||||||||||||||
| Related party interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Other interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Loss before provision (benefit) for income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Provision (benefit) for income taxes | ( | ||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Loss per common share | |||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying notes to these consolidated financial statements.
2
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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
| Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||||||||||
| August 1, 2026 | August 2, 2025 | August 1, 2026 | August 2, 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | ( | ||||||||||||||||||||
| Total comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
See accompanying notes to these consolidated financial statements.
3
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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
Thirteen Weeks Ended August 1, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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, May 2, 2026 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of stock awards | ( | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation benefit | — | — | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase and retirement of common stock | ( | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, August 1, 2026 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Twenty-six Weeks Ended August 1, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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, January 31, 2026 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of stock awards | ( | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation benefit | — | — | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase and retirement of common stock | ( | ( | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, August 1, 2026 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to these consolidated financial statements.
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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
Thirteen Weeks Ended August 2, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In | Deferred | Accumulated | Comprehensive | Treasury Stock | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Shares | Amount | Capital | Compensation | Deficit | Loss | Shares | Amount | (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, May 3, 2025 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of stock awards | ( | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase and retirement of common stock | ( | ( | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, August 2, 2025 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
Twenty-six Weeks Ended August 2, 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, August 2, 2025 | $ | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to these consolidated financial statements.
5
Table of Contents
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Twenty-six Weeks Ended | |||||||||||
| August 1, 2026 | August 2, 2025 | ||||||||||
| (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 | |||||||||||
| Amortization of financing costs | |||||||||||
| Non-cash stock-based compensation expense (benefit), net | ( | ||||||||||
| Loss on extinguishment of debt | |||||||||||
| Other non-cash charges, net | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Inventories | ( | ( | |||||||||
| Accounts receivable | ( | ( | |||||||||
| Prepaid expenses | ( | ||||||||||
| Income taxes payable, net of prepayments | ( | ||||||||||
| Other non-current assets | ( | ||||||||||
| 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 | ( | ( | |||||||||
| Proceeds from issuance of related party term loan | |||||||||||
| Repayment of related party term loan | ( | ||||||||||
| Payment of debt issuance costs | ( | ||||||||||
| Proceeds from short-term debt | |||||||||||
| Repayment of short-term debt | ( | ||||||||||
| Payment of stock issuance costs | ( | ||||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net increase 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 | |||||||||||
| Purchases of property and equipment not yet paid | |||||||||||
See accompanying notes to these consolidated financial statements.
6
Table of Contents
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 retailers in North America with an omni-channel presence. 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” and “Gymboree”. Its global retail and wholesale network includes two digital storefronts, 514 stores in North America, wholesale marketplaces, 323 international points of distribution in 13 countries through ten international franchise and wholesale partners and social media channels on Instagram, Facebook, and X, formerly known as Twitter. 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:
•Second Quarter 2026 — The thirteen weeks ended August 1, 2026
•Second Quarter 2025 — The thirteen weeks ended August 2, 2025
•Year-To-Date 2026 — The twenty-six weeks ended August 1, 2026
•Year-To-Date 2025 — The twenty-six weeks ended August 2, 2025
•Fiscal 2026 — The fifty-two weeks ending January 30, 2027
•Fiscal 2025 — The fifty-two weeks ended 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 August 1, 2026, January 31, 2026 and August 2, 2025, 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 August 1, 2026 and August 2, 2025, the results of its consolidated operations, consolidated comprehensive loss, and consolidated changes in stockholders’ deficit for the thirteen and twenty-six weeks ended August 1, 2026 and August 2, 2025, and consolidated cash flows for the twenty-six weeks ended August 1, 2026 and August 2, 2025. The consolidated balance sheet as of January 31, 2026 was derived from audited financial statements. Due to the seasonal nature of the Company’s business, the results of operations for the thirteen and twenty-six weeks ended August 1, 2026 and August 2, 2025 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 January 31, 2026.
Fiscal Year
The Company’s fiscal year is a fifty-two week or fifty-three week period ending on the Saturday on or nearest to January 31.
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.
Significant Accounting Policy Updates
IEEPA Tariff Refund Claims
During the first quarter of 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act of 1977 (“IEEPA”) were unlawful and thus deemed invalid. During Fiscal 2025 and Fiscal 2026, the Company paid approximately $40 million in IEEPA tariffs, which the Company has mostly recovered from the U.S. Customs and Border Protection.
The Company has elected to apply the loss recovery guidance under FASB ASC 450 — Contingencies to account for the recognition of these claims. Any future recovery of tariff refund claims will be recognized as a receivable when the claim becomes probable and will be reflected as a reduction of Cost of sales for inventory previously sold, or as a reduction of inventory for goods that remain unsold.
During the Second Quarter 2026, the Company received tariff refunds amounting to approximately $39 million (excluding interest) which was recorded as a reduction of Cost of sales for inventory previously sold. No asset has been recognized as of the end of the Second Quarter 2026 for any future recovery of tariff refund claims. Refer to “Note 6. Debt” for more information.
Recent Accounting Standards Updates
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 | Twenty-six Weeks Ended | ||||||||||||||||||||||||||||||||||
| August 1, 2026 | August 2, 2025 | August 1, 2026 | August 2, 2025 | ||||||||||||||||||||||||||||||||
| (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 $8.6 million, $6.3 million, and $10.6 million within Accrued expenses and other current liabilities as of August 1, 2026, January 31, 2026, and August 2, 2025, 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 $6.7 million, $12.3 million, and $6.9 million as of August 1, 2026, January 31, 2026, and August 2, 2025, 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 $1.5 million, $0.7 million, and $2.0 million as of August 1, 2026, January 31, 2026, and August 2, 2025, 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 United States 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. During Fiscal 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 $16.8 million, $11.7 million, and $6.0 million as of August 1, 2026, January 31, 2026, and August 2, 2025, respectively. During the Second Quarter 2026 and Second Quarter 2025, the Company recognized Net sales of $6.3 million and $3.7 million related to the points-based customer loyalty program balance that existed at January 31, 2026 and February 1, 2025, respectively. During Year-To-Date 2026 and Year-To-Date 2025, the Company recognized Net sales of $10.8 million and $3.7 million related to the points-based customer loyalty program balance that existed at January 31, 2026 and February 1, 2025, 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 August 1, 2026, January 31, 2026, and August 2, 2025 was $2.8 million, $3.2 million, and $4.3 million, respectively. During the Second Quarter 2026 and the Second Quarter 2025, the Company recognized Net sales of $0.7 million and $0.9 million related to the gift card liability balance that existed at January 31, 2026 and February 1, 2025, respectively. During the Year-To-Date 2026 and the Year-To-Date 2025, the Company recognized Net sales of $1.8 million and $2.3 million related to the gift card liability balance that existed at January 31, 2026 and February 1, 2025, 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:
| August 1, 2026 | ||||||||||||||||||||||||||
| Useful Life | Gross Amount | Accumulated Amortization | Net Amount | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
Gymboree tradename | Indefinite | $ | $ | — | $ | |||||||||||||||||||||
| Total intangible assets | $ | $ | $ | |||||||||||||||||||||||
| January 31, 2026 | ||||||||||||||||||||||||||
| Useful Life | Gross Amount | Accumulated Amortization | Net Amount | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
Gymboree tradename | Indefinite | $ | $ | — | $ | |||||||||||||||||||||
| Total intangible assets | $ | $ | $ | |||||||||||||||||||||||
| August 2, 2025 | ||||||||||||||||||||||||||
| Useful Life | Gross Amount | Accumulated Amortization | Net Amount | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
Gymboree tradename | Indefinite | $ | $ | — | $ | |||||||||||||||||||||
| Total intangible assets | $ | $ | $ | |||||||||||||||||||||||
The Company did not
4. PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
| August 1, 2026 | January 31, 2026 | August 2, 2025 | |||||||||||||||
| (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 | $ | $ | $ | ||||||||||||||
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
11
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 eleven 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 | Twenty-six Weeks Ended | ||||||||||||||||||||||||||||||||||
| August 1, 2026 | August 2, 2025 | August 1, 2026 | August 2, 2025 | ||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Fixed operating lease cost | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
Variable operating lease cost | |||||||||||||||||||||||||||||||||||
| Total operating lease cost | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
The following table presents key information related to the Company’s operating leases, including weighted-average remaining lease term and discount rate, cash paid for operating lease liabilities, and right-of-use (“ROU”) assets obtained in exchange for new operating lease liabilities:
| Twenty-six Weeks Ended | |||||||||||
| August 1, 2026 | August 2, 2025 | ||||||||||
| Weighted-average remaining lease term (years) | |||||||||||
| Weighted average discount rate (%) | |||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities ($, in thousands) | |||||||||||
| ROU assets obtained in exchange for new operating lease liabilities ($, in thousands) | |||||||||||
As of August 1, 2026, the maturities of operating lease liabilities were as follows:
| August 1, 2026 | |||||
| (in thousands) | |||||
Remainder of 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 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 $350.0 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”), as the sole lender party thereto, and as Administrative Agent, Collateral Agent, and Swing Line Lender. The ABL Credit Facility will mature on the earlier of December 16, 2030, or the maturity date under the Company’s term loan agreement with SLR Credit Solutions (“SLR”) as further described below.
As of December 16, 2025, which is the effective date of the eighth amendment to the Credit Agreement (the “Eighth Amendment”), the ABL Credit Facility includes a $25.0 million Canadian sublimit and a $30.0 million sublimit for standby and documentary letters of credit.
As of February 1, 2026, 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 1.000 %, 1.250 % or 1.500 %; or
(ii)the Secured Overnight Financing Rate (“SOFR”) per annum, plus a margin of 2.000 %, 2.250 % or 2.500 %.
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 1, 2026, letter of credit fees range from 0.500 % to 0.750 % for commercial letters of credit and range from 1.000 % to 1.500 % for standby letters of credit. These fees are determined based on the amount of the Company’s average daily excess availability under the facility.
As of December 16, 2025, 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, and certain inventory, subject to certain reserves.
For the Second Quarter 2026 and Second Quarter 2025, the Company recognized $2.6 million and $5.4 million, respectively, in interest expense related to the ABL Credit Facility. During the Year-To-Date 2026 and the Year-To-Date 2025, the Company recognized $4.8 million and $10.2 million, respectively, in interest expense related to the ABL Credit Facility.
As of December 16, 2025, credit extended under the ABL Credit Facility is secured by a first priority security interest in substantially all of the Company’s U.S. and Canadian assets, other than intellectual property, real estate, certain furniture, fixtures and equipment, and pledges of subsidiary capital stock, and a second priority security interest in the Company’s intellectual property, real estate, certain furniture, fixtures and 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 a prior amendment, the requisite payment condition thresholds for some of these covenants were 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 Company may be subject to cash dominion, and pursuant to the Eighth Amendment, the Company is required to maintain excess availability of at least $35.0 million, subject to increase based on the Company’s borrowing base (the “excess availability requirement”). The Company was in compliance with this excess availability requirement as of August 1, 2026.
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 August 1, 2026, January 31, 2026, and August 2, 2025, unamortized deferred financing costs amounted to $5.0 million, $5.6 million, and $2.7 million, related to the ABL Credit Facility.
13
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The table below presents the components of the ABL Credit Facility:
____________________________________________
| August 1, 2026 | January 31, 2026 | August 2, 2025 | |||||||||||||||
| (in millions) | |||||||||||||||||
Borrowing base | $ | $ | $ | ||||||||||||||
Credit facility size | |||||||||||||||||
Maximum borrowing availability (1) | |||||||||||||||||
| Outstanding borrowings | |||||||||||||||||
| Letters of credit outstanding—standby | |||||||||||||||||
| Utilization of credit facility at end of period | |||||||||||||||||
Availability (2) | $ | $ | $ | ||||||||||||||
| Interest rate at end of period | |||||||||||||||||
| Average interest rate | |||||||||||||||||
| Average end-of-day loan balance during the period | $ | $ | $ | ||||||||||||||
| Highest end-of-day loan balance during the period | $ | $ | $ | ||||||||||||||
(1)Prior to the Eighth Amendment, the lower of the credit facility size and the borrowing base, without factoring in any excess availability requirement. Pursuant to the Eighth Amendment, as of December 16, 2025, the Company’s maximum borrowing availability is the lower of the credit facility size and the borrowing base, net of the new excess availability requirement.
(2)The sublimit availability for letters of credit was $8.5 million as of August 1, 2026, $6.3 million as of January 31, 2026, and $6.8 million as of August 2, 2025.
SLR Term Loan
On December 16, 2025, the Company and certain of its subsidiaries entered into a term loan agreement (the “SLR Loan Agreement”) with SLR and other affiliated SLR entities as the lenders party thereto, and SLR as Administrative Agent, and Collateral Agent, providing for a $100.0 million term loan (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.
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 secured by a first priority security interest under the ABL Credit Facility. The SLR Term Loan is guaranteed by each of the Company’s subsidiaries that guarantees the ABL Credit Facility.
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.
14
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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. Additionally, the SLR Term Loan contains the same excess availability requirement as the ABL Credit Facility. The Company was in compliance with this excess availability requirement as of August 1, 2026.
For the Second Quarter 2026 and Year-To-Date 2026, the Company recognized $2.4 million and $4.6 million in interest expense related to the SLR Term Loan. As of August 1, 2026, the interest rate was 10.1 %.
As of August 1, 2026 and January 31, 2026, unamortized deferred financing costs amounted to $2.3 million and $2.4 million, respectively, related to the SLR Term Loan.
Initial 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 (the “First Mithaq Term Loan”), dated February 29, 2024, by and among the Company, certain of its subsidiaries, and Mithaq. During Fiscal 2025, $60.2 million under the First 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 First Mithaq Term Loan as of August 1, 2026.
The First Mithaq Term Loan matures on April 16, 2031 and is guaranteed by each of the Company’s subsidiaries that guarantees the ABL Credit Facility and the SLR Term Loan.
The Company and certain subsidiaries also maintain an unsecured and subordinated promissory note with Mithaq for a $90.0 million term loan (the “Second Mithaq Term Loan”; and together with the First Mithaq Term Loan, collectively, the “Initial Mithaq Term Loans”), dated April 16, 2024, by and among the Company, certain of its subsidiaries, and Mithaq.
The Second Mithaq Term Loan also matures on April 16, 2031, and requires monthly payments equivalent to interest charged at the SOFR per annum plus 4.000 %, 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 Second 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 Second Mithaq Term Loan is guaranteed by each of the Company’s subsidiaries that guarantees the ABL Credit Facility and the SLR Term Loan.
Pursuant to the Company’s refinancing transactions on December 16, 2025, the Second Mithaq Term Loan was further 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, leaving an aggregate of $111.1 million outstanding under the Initial Mithaq Term Loans. These amendments were evaluated under FASB ASC 470 — Debt, and accounted for as debt modifications.
For the Second Quarter 2026 and Second Quarter 2025, the Company recognized $1.8 million and $1.9 million, respectively, in interest-equivalent expense related to the Second Mithaq Term Loan. During the Year-To-Date 2026 and the Year-To-Date 2025, the Company recognized $3.5 million and $3.7 million, respectively, in interest expense related to the Second Mithaq Term Loan. As of August 1, 2026, the interest-equivalent rate was 7.6 %.
During the Second Quarter 2026, the Company deferred all interest-equivalent payments to Mithaq, which is expected to be settled upon maturity of the Second Mithaq Term Loan. During the Second Quarter 2025, the Company paid $3.3 million 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 were accounted for in accordance with FASB ASC 610 — Other income, and presented on a net basis within Related party interest expense. As of August 1, 2026, January 31, 2026, and August 2, 2025, interest-equivalent expense payable to Mithaq was $9.1 million, $5.6 million, and $7.0 million, respectively. As the payments due as of August 1, 2026 are not expected to be settled within 12 months due to payment condition restrictions within the Credit Agreement, the amounts payable are recorded within Other long-term liabilities.
The Initial 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 Initial Mithaq Term Loans are subordinated in payment priority to the obligations of the Company and its subsidiaries under the Credit Agreement.
15
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Pursuant to the Company’s refinancing transactions in December 2025, the Initial 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 Initial Mithaq Term Loans are prepayable at any time and from time to time without penalty and do not require any mandatory prepayments.
The Initial 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 Initial 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 Initial 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 Initial 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 Initial Mithaq Term Loans.
As of August 1, 2026, January 31, 2026, and August 2, 2025, unamortized deferred financing costs amounted to $3.2 million, $3.6 million, and $1.2 million, respectively, related to the Initial Mithaq Term Loans.
Mithaq Commitment Letter
On May 2, 2024, the Company entered into a commitment letter (the “Commitment Letter”) with Mithaq for a $40.0 million credit facility (the “Mithaq Credit Facility”). Initially, under the Mithaq Credit Facility, the Company had the ability to request for advances at any time prior to July 1, 2025. On December 16, 2025, the Company and Mithaq entered into an Amendment No. 3 to the Commitment Letter, that extended the deadline for requesting advances until December 16, 2030.
If any debt is incurred under the Mithaq Credit Facility, it shall require monthly payments equivalent to interest charged at the SOFR per annum plus 9.000 %. Such debt shall be unsecured and shall be guaranteed by each of the Company’s subsidiaries that guarantees the ABL Credit Facility and the SLR Term Loan. Similar to the Initial 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 December 16, 2030.
On July 1, 2026, the Company and certain of its subsidiaries entered into a Shariah compliant, unsecured and subordinated promissory note with Mithaq for a $15.0 million term loan (the “Third Mithaq Term Loan”; and collectively with the Initial Mithaq Term Loans, the “Mithaq Term Loans”), as the first advance under the Company’s $40.0 million Mithaq Credit Facility. The net proceeds from the Third Mithaq Term Loan were received by the Company on July 1, 2026 and used to partially pay down its borrowings under the ABL Credit Facility, to reduce a portion of its accounts payable balances with vendors, and for other working capital purposes. As of August 1, 2026, the Company’s remaining availability under the Mithaq Credit Facility was $25.0 million.
Similar to the Initial Mithaq Term Loans, the Third Mithaq Term Loan matures on April 16, 2031, and is guaranteed by each of the Company’s subsidiaries that guarantees the ABL Credit Facility and the SLR Term Loan.
Similar to the Second Mithaq Term Loan, the Third Mithaq Term Loan requires monthly payments equivalent to interest charged at the SOFR per annum plus 9.000 %, with such payments subject to deferral by the Company upon written notice to Mithaq.
For the Second Quarter 2026 and Year-To-Date 2026, the Company recognized $0.2 12.6 %.
In addition, similar to the Initial Mithaq Term Loans, the Third Mithaq Term Loan is subject to the Mithaq Subordination Agreement, pursuant to which the Third Mithaq Term Loan is also subordinated in payment priority to the obligations of the Company and its subsidiaries under the Credit Agreement and the SLR Loan Agreement. Subject to such subordination terms, the Third Mithaq Term Loan is also prepayable at any time and from time to time without penalty and does not require any mandatory prepayments.
16
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Similar to the Initial Mithaq Term Loans, the Third Mithaq Term Loan also 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 Third Mithaq Term Loan, however, does not provide for any closing, prepayment or exit fees, or other fees typical for transactions of this nature, does not impose additional reserves on borrowings under the Credit Agreement, and does not contain certain other restrictive covenants.
Similar to the Initial Mithaq Term Loans, the Third Mithaq Term Loan also 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 Third Mithaq 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 Third Mithaq Term Loan.
Maturities of the Company’s principal debt payments on the SLR Term Loan, and the Mithaq Term Loans are as follows:
| August 1, 2026 | |||||
| (in thousands) | |||||
| Remainder of 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
Total principal debt payments | $ | ||||
Monetization of Income Tax Receivable Claim
On February 5, 2026, the Company entered into a Receivables Purchase Agreement (the “RPA”) with TRMEF Basis II LLC (“TRMEF”) to monetize its CARES Act income tax receivable claim of $19.1 million plus accrued interest of $3.7 million at a purchase rate of 88.5 %, for a total purchase price of $20.1 million. The Company received net cash proceeds of $15.9 million, after insurance and legal fees amounting to $0.7 million. The remaining proceeds of $3.5 million are expected to be received in two tranches as follows: (i) upon confirmation by the IRS of submission by the IRS of the Revenue Agent Report to the Joint Committee on Taxation, TRMEF shall pay $2.5 million to the Company, less the amount of any downward adjustments in respect of the tax refund claim set forth in such Revenue Agent Report, and (ii) on the date on which TRMEF receives payment in full in cash of the refund claim, TRMEF shall pay $1.0 million to the Company, less 10 % of accrued interest as of the effective date of the RPA.
The monetization of the Company’s income tax receivable claim was accounted for in accordance with FASB ASC 470 — Debt, and presented as Short-term debt. As of August 1, 2026, the unamortized financing costs amounted to $2.2 million. These costs are being amortized through the expected settlement date of the claim and recorded in Interest expense based on an effective interest rate of 18.0 %.
Monetization of IEEPA Tariff Refund Claims
On March 31, 2026, the Company entered into a Claim Sale and Purchase Agreement with Alnus Investors, LLC (“Alnus”) to monetize its claims for refunds of tariffs previously paid to the U.S. Customs and Border Protection (“CBP”), related to those tariffs originally invoked under the International Emergency Economics Powers Act of 1977, for which such tariffs were ruled unlawful by the United States Supreme Court on February 20, 2026. Alnus purchased an aggregate amount of $38.2 million of the approximately $40 million refund claims submitted to the CBP at a purchase rate of 67.2 %, for a total purchase price of $25.7 million.
The monetization of the Company’s tariff refund claims was accounted for in accordance with FASB ASC 470 — Debt, and presented as Short-term debt. During the Second Quarter 2026, the Company received tariff refunds amounting to approximately $39 million (excluding interest), the majority of which was remitted to Alnus which reduced the Short-term debt outstanding. As of August 1, 2026, the unamortized financing costs amounted to $0.6 million. These costs are being amortized through the expected settlement date of the claim and recorded in Interest expense. Refer to “Note 1. Basis of Presentation” for the related accounting policy update on tariff refund claims.
17
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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. The plaintiffs then filed a Motion for Class Certification on September 1, 2026. The Company’s opposition will be due by October 27, 2026. Prior to filing the opposition, the Company will take the depositions of plaintiffs’ class certification experts by the end of September 2026. Discovery relating to the Motion for Class Certification is anticipated to be conducted through the end of 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.
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
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 and SLR Loan Agreement, the repurchase of any shares would require fulfilling stringent payment conditions under those agreements, 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 August 1, 2026, 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.
18
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table summarizes the Company’s share repurchases:
| Twenty-six Weeks Ended | ||||||||||||||||||||||||||
| August 1, 2026 | August 2, 2025 | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Share repurchases related to: | ||||||||||||||||||||||||||
Share repurchase program | $ | $ | ||||||||||||||||||||||||
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. The Company has no current plans to pay regular cash dividends in Fiscal 2026 pursuant to the terms of the Company’s Credit Agreement and SLR Loan Agreement, which impose certain restrictions on the Company’s ability to pay dividends.
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 (benefit):
| Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||||||||||||||||||||||
| August 1, 2026 | August 2, 2025 | August 1, 2026 | August 2, 2025 | ||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Deferred Awards | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||
Performance Awards | ( | ||||||||||||||||||||||||||||||||||
Total stock-based compensation expense (benefit) (1) | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||
(1)Stock-based compensation expense (benefit) recorded within Cost of sales (exclusive of depreciation and amortization) amounted to $0.2 million in the Second Quarter 2025, and $(0.2 ) million and $0.4 million in Year-To-Date 2026 and Year-To-Date 2025, respectively. All other stock-based compensation expense (benefit) is included in Selling, general, and administrative expenses.
19
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
10. LOSS PER COMMON SHARE
The following table reconciles Net loss and common share amounts utilized to calculate basic and diluted loss per common share:
| Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||||||||||||||||||||||
| August 1, 2026 | August 2, 2025 | August 1, 2026 | August 2, 2025 | ||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||
| Basic weighted average common shares outstanding | |||||||||||||||||||||||||||||||||||
| Diluted weighted average common shares outstanding | |||||||||||||||||||||||||||||||||||
| Anti-dilutive shares excluded from diluted 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 First Mithaq Term Loan with a carrying value (gross of debt issuance costs) of $18.4 million as of August 1, 2026, was $12.1 million. The fair value of the Second Mithaq Term Loan with a carrying value (gross of debt issuance costs) of $92.7 million as of August 1, 2026, was $87.4 million. The fair value of the Mithaq Term Loans 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 carrying amount of the Company’s remaining short-term and long-term borrowings, which are considered Level 2 liabilities, approximates fair value based on current rates and terms available to the Company for similar debt.
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 store-related 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
20
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. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities, as well as for net operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using currently enacted tax rates applied to taxable income in effect for the years in which the basis differences and tax assets are expected to be realized.
The Company’s benefit for income taxes was $(0.3 ) million during the Second Quarter 2026, compared to a provision of $1.5 million during the Second Quarter 2025. The Company’s effective tax rate was a benefit of 1.1 % in the Second Quarter 2026, compared to a provision of (37.1 )% in the Second Quarter 2025. The change in the effective tax rate was due to a combination of a higher pretax loss during the Second Quarter 2026 compared to the Second Quarter 2025, and changes in the Company’s forecasted earnings mix. The Company continues to adjust its valuation allowance based upon its ongoing operating results.
The Company’s provision for income taxes was $1.0 million during the Year-To-Date 2026, compared to $2.8 million during the Year-To-Date 2025. The Company’s effective tax rate was a provision of (1.2 )% in the Year-To-Date 2026, compared to (7.6 )% in the Year-To-Date 2025. The change in the effective tax rate was due to a combination of a higher pretax loss during the Year-To-Date 2026 compared to the Year-To-Date 2025, and changes in the Company’s forecasted earnings mix. 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 August 1, 2026, January 31, 2026, and August 2, 2025, the remaining income tax receivable of $19.1
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 $5.1 million, $4.9 million, and $6.7 million as of August 1, 2026, January 31, 2026, and August 2, 2025, respectively, and is included within Long-term liabilities. Additional interest expense recognized in the Second Quarter 2026 and Second Quarter 2025, and Year-To-Date 2026 and Year-To-Date 2025 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.
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 Interim 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.
21
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In accordance with FASB ASC 280 — Segment Reporting, 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 amounting to $25.1 million for the Second Quarter 2026, and $42.3 million and $74.5 million for the Second Quarter 2025 and Year-To-Date 2025, respectively. The customer also accounted for a majority of the Company’s accounts receivable, amounting to $19.2 million, $13.7 million, and $31.8 million as of August 1, 2026, January 31, 2026, and August 2, 2025.
Store Count by Segment
As of August 1, 2026, The Children’s Place U.S. had 458 stores and The Children’s Place International had 56 stores. As of August 2, 2025, The Children’s Place U.S. had 437 stores and The Children’s Place International had 57 stores.
The tables below present certain segment information, including significant segment expenses, for our reportable segments for the periods indicated:
| Thirteen Weeks Ended August 1, 2026 | |||||||||||||||||
| The Children’s Place U.S. | The Children’s Place International (1) | Total | |||||||||||||||
| Net sales | $ | $ | $ | ||||||||||||||
Cost of sales (exclusive of depreciation and amortization) (2) | |||||||||||||||||
Selling, general, and administrative expenses (3) | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Segment operating loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Segment operating loss as a percentage of net sales | ( | % | ( | % | ( | % | |||||||||||
| Twenty-six Weeks Ended August 1, 2026 | |||||||||||||||||
| The Children’s Place U.S. | The Children’s Place International (1) | Total | |||||||||||||||
| Net sales | $ | $ | $ | ||||||||||||||
Cost of sales (exclusive of depreciation and amortization) (2) | |||||||||||||||||
Selling, general, and administrative expenses (3) | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Segment operating loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Segment operating loss as a percentage of net sales | ( | % | ( | % | ( | % | |||||||||||
22
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| Thirteen Weeks Ended August 2, 2025 | |||||||||||||||||
| The Children’s Place U.S. | The Children’s Place International (1) | Total | |||||||||||||||
| Net sales | $ | $ | $ | ||||||||||||||
Cost of sales (exclusive of depreciation and amortization) (2) | |||||||||||||||||
Selling, general, and administrative expenses (3) | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Segment operating income (loss) | $ | $ | ( | $ | |||||||||||||
| Segment operating income (loss) as a percentage of net sales | ( | ||||||||||||||||
| Twenty-six Weeks Ended August 2, 2025 | |||||||||||||||||
| The Children’s Place U.S. | The Children’s Place International (1) | Total | |||||||||||||||
| Net sales | $ | $ | $ | ||||||||||||||
Cost of sales (exclusive of depreciation and amortization) (2) | |||||||||||||||||
Selling, general, and administrative expenses (3) | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Segment operating loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Segment operating 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, and other administrative expenses.
The table below presents a reconciliation of reportable segment operating income (loss) to Loss before provision (benefit) for income taxes:
| Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||||||||||||||||||||||
| August 1, 2026 | August 2, 2025 | August 1, 2026 | August 2, 2025 | ||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Total segment operating income (loss) | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| Related party interest expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Other interest expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||||||||||||||
| Loss before provision (benefit) for income taxes | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||
23
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Additional Segment Data
| Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||||||||||||||||||||||
| August 1, 2026 | August 2, 2025 | August 1, 2026 | August 2, 2025 | ||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Capital expenditures: | |||||||||||||||||||||||||||||||||||
| The Children’s Place U.S. | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| The Children’s Place International | |||||||||||||||||||||||||||||||||||
| Total capital expenditures | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| August 1, 2026 | January 31, 2026 | August 2, 2025 | |||||||||||||||
| (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.
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 January 31, 2026. 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 January 31, 2026.
Terms that are commonly used in our Management’s Discussion and Analysis of Financial Condition and Results of Operations are defined as follows:
•Second Quarter 2026 — The thirteen weeks ended August 1, 2026
•Second Quarter 2025 — The thirteen weeks ended August 2, 2025
•Year-To-Date 2026 — The twenty-six weeks ended August 1, 2026
•Year-To-Date 2025 — The twenty-six weeks ended August 2, 2025
•Fiscal 2026 — The fifty-two weeks ending January 30, 2027
•Fiscal 2025 — The fifty-two weeks ended January 31, 2026
•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
25
•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 retailers in North America with an omni-channel presence. 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” and “Gymboree”. Our global retail and wholesale network includes two digital storefronts, 514 stores in North America, wholesale marketplaces, 323 international points of distribution in 13 countries through our ten international franchise and wholesale partners, and social media channels on Instagram, Facebook, and X, formerly known as Twitter. 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 the Second Quarter 2026.
Recent Developments
Macroeconomic conditions, including inflationary pressures, higher gas prices, higher interest rates, tariffs, and other domestic and geopolitical factors, continued to adversely affect our core customer. During the Second Quarter 2026, these pressures contributed to a decrease in consumer discretionary apparel purchases. We expect these macroeconomic conditions, including but not limited to increased gas prices, 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 2026.
During the first quarter of 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act of 1977 (“IEEPA”) were unlawful and thus deemed invalid. During Fiscal 2025 and Fiscal 2026, we paid approximately $40 million in IEEPA tariffs. During the Second Quarter 2026, we submitted tariff refund claims to the U.S. Customs and Border Protection (“CBP”) and received refunds amounting to approximately $39 million (excluding interest) which was recorded as a reduction of Cost of sales for inventory previously sold. As previously disclosed, we monetized most of these tariff refund claims at a discounted rate by selling the future receipt of these funds to a purchaser. The refunds received were used primarily to pay down our short-term debt. For more information about the monetization of these IEEPA tariff refund claims, see “Note 6. Debt” of the accompanying consolidated financial statements.
26
As previously disclosed, on July 6, 2026, Muhammad Umair resigned as President and Chief Executive Officer of the Company, but not as an employee, and the board of directors of the Company (the “Board”) appointed Muhammad Asif Seemab as President and Interim Chief Executive Officer. The Company indicated at that time that there were ongoing negotiations regarding Mr. Umair taking on a new role with the Company and potential adjustments to his compensation in connection with such change in role. On September 11, 2026, the Company entered into an employment adjustment letter (the “Adjustment Letter”) with Mr. Umair, effective as of July 1, 2026, pursuant to which Mr. Umair transitioned from the position of President and Chief Executive Officer to the position of Chief Strategy Officer of the Company. Mr. Umair will continue to serve as a member of the Board. Under the Adjustment Letter, Mr. Umair’s annual base salary was revised to $497,500, his existing equity awards granted in connection with his prior position were forfeited, and he would no longer be eligible to participate in the Company’s annual management incentive plan. All other terms and conditions of Mr. Umair’s employment, from his employment letter dated May 29, 2024 remain the same.
In connection with Mr. Umair’s transition, the Company granted Mr. Umair the following one-time awards pursuant to the Adjustment Letter: (i) a grant of 125,000 shares of the Company’s common stock, subject to certain restrictions on transfer and risks of forfeiture (the “Umair Restricted Shares”); (ii) a grant of 125,000 performance-based restricted stock units, each representing the right to receive one share of the Company’s common stock, subject to certain restrictions on transfer and risks of forfeiture (the “Umair PSUs”); and (iii) a one-time cash award of $350,000, payable within 30 days of the date of the Adjustment Letter. Each of the Umair Restricted Shares and Umair PSUs vest in two equal tranches upon the Company’s market capitalization (measured using a 90-day volume-weighted average price) equaling or exceeding $265 million and $400 million, respectively, subject to Mr. Umair’s continued employment with the Company. Any Umair Restricted Shares or Umair PSUs that have not vested by the third anniversary of the grant date will be forfeited and returned to the Company, subject to extensions up to the seventh anniversary of the grant date, at the Company’s discretion.
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”). To the extent that our sales have increased at a faster rate than our costs (i.e., “leverage”), the more efficiently we have utilized the investments we have made in our business. Conversely, if our sales have decreased or if our costs have grown at a faster pace than our sales (i.e., “deleverage”), we have utilized the investments we have made in our business less efficiently.
Second Quarter 2026 Compared to Second Quarter 2025
| Thirteen Weeks Ended | Thirteen Weeks Ended | Variance | |||||||||||||||||||||
| August 1, 2026 | % of Net Sales | August 2, 2025 | % of Net Sales | $ | % | % of Net Sales | |||||||||||||||||
| (amounts in thousands) | |||||||||||||||||||||||
| Net sales | $ | 241,800 | 100.0 | % | $ | 298,006 | 100.0 | % | $ | (56,206) | (18.9) | % | — | % | |||||||||
| Cost of sales (exclusive of depreciation and amortization) | 158,522 | 65.6 | % | 196,734 | 66.0 | % | 38,212 | 19.4 | % | 0.4 | % | ||||||||||||
| Gross profit | 83,278 | 34.4 | % | 101,272 | 34.0 | % | (17,994) | (17.8) | % | 0.4 | % | ||||||||||||
| Selling, general, and administrative expenses | 90,061 | 37.2 | % | 89,596 | 30.1 | % | (465) | (0.5) | % | (7.1) | % | ||||||||||||
| Depreciation and amortization | 6,254 | 2.6 | % | 7,570 | 2.5 | % | 1,316 | 17.4 | % | (0.1) | % | ||||||||||||
| Operating income (loss) | (13,037) | (5.4) | % | 4,106 | 1.4 | % | (17,143) | (417.5) | % | (6.8) | % | ||||||||||||
| Related party interest expense | (2,099) | (0.9) | % | (1,868) | (0.6) | % | (231) | (12.4) | % | (0.3) | % | ||||||||||||
| Other interest expense, net | (16,153) | (6.7) | % | (6,150) | (2.1) | % | (10,003) | (162.7) | % | (4.6) | % | ||||||||||||
| Loss before provision (benefit) for income taxes | (31,289) | (12.9) | % | (3,912) | (1.3) | % | (27,377) | (699.8) | % | (11.6) | % | ||||||||||||
| Provision (benefit) for income taxes | (338) | (0.1) | % | 1,453 | 0.5 | % | 1,791 | 123.3 | % | 0.6 | % | ||||||||||||
| Net loss | $ | (30,951) | (12.8) | % | $ | (5,365) | (1.8) | % | $ | (25,586) | (476.9) | % | (11.0) | % | |||||||||
27
Net sales decreased $56.2 million, or 18.9%, to $241.8 million during the Second Quarter 2026 from $298.0 million during the Second Quarter 2025. The decrease in net sales was driven by a decrease in direct-to-consumer (“DTC”) sales of 15.0% due to lower traffic compared to the Second Quarter 2025. Comparable retail sales in our owned and operated DTC business decreased 16.7% for the Second Quarter 2026. Our consolidated results were also impacted by the planned reduction in shipments for our wholesale channel to align inventory positions with our customers, and to liquidate aged fashion inventories.
Gross profit decreased $18.0 million to $83.3 million during the Second Quarter 2026, compared to $101.3 million during the Second Quarter 2025. Gross margin increased 40 basis points (“bps”) to 34.4% of Net sales in the Second Quarter 2026, compared to 34.0% of Net sales in the Second Quarter 2025. The increase in gross margin was caused primarily by the impact of tariff refunds recognized during the Second Quarter 2026 amounting to approximately $39 million, which was accounted for as a reduction of Cost of sales. Excluding the impact of these refunds, our gross margin decreased 1,550 bps, primarily due to a higher penetration of markdown sales (590 bps), higher tariffs on our product (330 bps), increased store occupancy costs due to new store openings (260 bps), and an increase in inventory reserves (250 bps), partially offset by favorable product mix and costs (100 bps). Adjusted gross profit decreased $17.6 million to $83.7 million during the Second Quarter 2026, compared to $101.3 million during the Second Quarter 2025. Adjusted gross margin increased 60 bps to 34.6% of Net sales during the Second Quarter 2026, compared to 34.0% during the Second Quarter 2025, inclusive of the impact of tariff refunds.
Gross profit is calculated as consolidated Net sales less Cost of sales (exclusive of depreciation and amortization). 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.
Selling, general, and administrative expenses increased $0.5 million to $90.1 million during the Second Quarter 2026, compared to $89.6 million during the Second Quarter 2025, and deleveraged 710 bps to 37.2% of Net sales. The increase was primarily due to an increase in store expenses as we opened 19 new stores, combined with the impact of unfavorable foreign currency exchange movements, partially offset by lower marketing expense as we continue to focus on rationalizing our spend, and lower payroll costs from our transformation efforts. Adjusted SG&A expenses were $88.3 million during the Second Quarter 2026, compared to $87.6 million during the Second Quarter 2025, and deleveraged 710 bps to 36.5% of Net sales.
Depreciation and amortization was $6.3 million during the Second Quarter 2026, compared to $7.6 million during the Second Quarter 2025. The decrease was primarily driven by reduced depreciation of capitalized software.
Operating income (loss) was a loss of $(13.0) million during the Second Quarter 2026, compared to income of $4.1 million during the Second Quarter 2025 due to the factors described above, and deleveraged 680 bps to (5.4)% of Net sales. Adjusted operating loss was $(10.9) million in the Second Quarter 2026, compared to Adjusted operating income of $6.1 million in the Second Quarter 2025, and deleveraged 650 bps to (4.5)% of Net sales.
Related party interest expense was $2.1 million during the Second Quarter 2026 compared to $1.9 million during the Second Quarter 2025.
Net interest expense was $18.3 million during the Second Quarter 2026, compared to $8.0 million during the Second Quarter 2025. The increase was due to the amortization of financing costs associated with the monetization of our tariff refund claims and income tax receivable claim. Excluding the impact of these financing costs, net interest expense decreased $0.4 million due to lower average borrowings and interest rates on our debt facilities.
Provision (benefit) for income taxes was a benefit of $(0.3) million during the Second Quarter 2026, compared to a provision of $1.5 million during the Second Quarter 2025. Our effective tax rate was a benefit of 1.1% and a provision of (37.1)% in the Second Quarter 2026 and Second Quarter 2025, respectively. The change in the effective tax rate was primarily due to a higher pretax loss and changes in forecasted earnings mix. We continue to adjust our valuation allowance based on ongoing operating results.
Net loss was $(31.0) million, or $(1.39) per diluted share, during the Second Quarter 2026, compared to $(5.4) million, or $(0.24) per diluted share, during the Second Quarter 2025, due to the factors described above. Adjusted net loss was $(18.2) million, or $(0.82) per diluted share, during the Second Quarter 2026, compared to $(3.4) million, or $(0.15) per diluted share, during the Second Quarter 2025.
28
The following table sets forth Net sales and Operating income (loss), respectively, by segment, for the periods indicated:
___________________________________________
| Thirteen Weeks Ended | |||||||||||||||||||||||
| August 1, 2026 | August 2, 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| The Children’s Place U.S. | $ | 220,116 | $ | 273,187 | |||||||||||||||||||
The Children’s Place International (1) | 21,684 | 24,819 | |||||||||||||||||||||
| Total net sales | $ | 241,800 | $ | 298,006 | |||||||||||||||||||
| The Children’s Place U.S. | $ | (7,622) | $ | 6,284 | |||||||||||||||||||
The Children’s Place International (1) | (5,415) | (2,178) | |||||||||||||||||||||
| Total segment operating income (loss) | $ | (13,037) | $ | 4,106 | |||||||||||||||||||
| The Children’s Place U.S. | (3.5) | % | 2.3 | % | |||||||||||||||||||
The Children’s Place International (1) | (25.0) | % | (8.8) | % | |||||||||||||||||||
| Total segment operating income (loss) as a percentage of net sales | (5.4) | % | 1.4 | % | |||||||||||||||||||
(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.
The Children’s Place U.S. Net sales decreased $53.1 million, or 19.4%, to $220.1 million during the Second Quarter 2026, compared to $273.2 million during the Second Quarter 2025, driven by a decrease in DTC sales due to lower traffic compared to the Second Quarter 2025. Our results were also impacted by the planned reduction in shipments for our wholesale channel to align inventory positions with our customers, and to liquidate aged fashion inventories.
The Children’s Place International Net sales decreased $3.1 million, or 12.5%, to $21.7 million during the Second Quarter 2026, compared to $24.8 million during the Second Quarter 2025, driven by a decrease in DTC sales due to lower traffic compared to the Second Quarter 2025.
The Children’s Place U.S. Operating loss was $(7.6) million during the Second Quarter 2026, compared to Operating income of $6.3 million during the Second Quarter 2025, primarily due to lower net sales, as described above.
The Children’s Place International Operating loss was $(5.4) million during the Second Quarter 2026, compared to $(2.2) million during the Second Quarter 2025, primarily due to higher merchandise costs which negatively impacted our margins.
Year-To-Date 2026 Compared to Year-To-Date 2025
| Twenty-six Weeks Ended | Twenty-six Weeks Ended | Variance | |||||||||||||||||||||
| August 1, 2026 | % of Net Sales | August 2, 2025 | % of Net Sales | $ | % | % of Net Sales | |||||||||||||||||
| (amounts in thousands) | |||||||||||||||||||||||
| Net sales | $ | 457,025 | 100.0 | % | $ | 540,131 | 100.0 | % | $ | (83,106) | (15.4) | % | — | % | |||||||||
| Cost of sales (exclusive of depreciation and amortization) | 320,397 | 70.1 | % | 368,076 | 68.1 | % | 47,679 | 13.0 | % | (2.0) | % | ||||||||||||
| Gross profit | 136,628 | 29.9 | % | 172,055 | 31.9 | % | (35,427) | (20.6) | % | (2.0) | % | ||||||||||||
| Selling, general, and administrative expenses | 178,925 | 39.1 | % | 176,266 | 32.6 | % | (2,659) | (1.5) | % | (6.5) | % | ||||||||||||
| Depreciation and amortization | 12,920 | 2.8 | % | 15,800 | 2.9 | % | 2,880 | 18.2 | % | 0.1 | % | ||||||||||||
| Operating loss | (55,217) | (12.1) | % | (20,011) | (3.7) | % | (35,206) | (175.9) | % | (8.4) | % | ||||||||||||
| Related party interest expense | (4,041) | (0.9) | % | (3,740) | (0.7) | % | (301) | (8.0) | % | (0.2) | % | ||||||||||||
| Other interest expense, net | (23,900) | (5.2) | % | (12,840) | (2.4) | % | (11,060) | (86.1) | % | (2.8) | % | ||||||||||||
| Loss before provision for income taxes | (83,158) | (18.2) | % | (36,591) | (6.8) | % | (46,567) | (127.3) | % | (11.4) | % | ||||||||||||
| Provision for income taxes | 984 | 0.2 | % | 2,797 | 0.5 | % | 1,813 | 64.8 | % | 0.3 | % | ||||||||||||
| Net loss | $ | (84,142) | (18.4) | % | $ | (39,388) | (7.3) | % | $ | (44,754) | (113.6) | % | (11.1) | % | |||||||||
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Net sales decreased $83.1 million, or 15.4%, to $457.0 million during Year-To-Date 2026 from $540.1 million during Year-To-Date 2025. The decrease in net sales was driven by a decrease in DTC sales due to lower traffic. Comparable retail sales in our owned and operated DTC business decreased 12.9% during Year-To-Date 2026. Our consolidated results were also impacted by the planned reduction in shipments for our wholesale channel to align inventory positions with our customers, and to liquidate aged fashion inventories.
Gross profit decreased $35.4 million to $136.6 million during Year-To-Date 2026, compared to $172.1 million during Year-To-Date 2025. Gross margin decreased 200 bps to 29.9% of Net sales during Year-To-Date 2026, compared to 31.9% of Net sales in Year-To-Date 2025. Excluding the impact of tariff refunds recognized during Year-To-Date 2026 amounting to approximately $39 million, which was accounted for as a reduction of Cost of sales, our gross margin decreased 1,040 bps primarily due to a higher penetration of markdown sales (420 bps), higher tariffs on our product (350 bps), increased store occupancy costs due to new store openings (190 bps), and an increase in inventory reserves (170 bps), partially offset by favorable product mix and costs (190 bps). Adjusted gross profit decreased $30.8 million to $141.3 million during Year-To-Date 2026, compared to $172.1 million during Year-To-Date 2025. Adjusted gross margin decreased 100 bps to 30.9% of Net sales during Year-To-Date 2026, compared to 31.9% of Net sales in Year-To-Date 2025, inclusive of the impact of tariff refunds.
Selling, general, and administrative expenses increased $2.7 million to $178.9 million during Year-To-Date 2026, compared to $176.3 million during Year-To-Date 2025, and deleveraged 650 bps to 39.1% of Net sales during Year-To-Date 2026. The increase was primarily due to an increase in store expenses as we opened 20 new stores, combined with the impact of unfavorable foreign currency exchange movements, partially offset by a reduction in marketing expense as we continue to focus on rationalizing our spend, and a decrease in long-term incentive compensation. Adjusted SG&A expenses were $175.8 million during Year-To-Date 2026, compared to $174.2 million during Year-To-Date 2025, and deleveraged 630 bps to 38.5% of Net sales.
Depreciation and amortization was $12.9 million during Year-To-Date 2026, compared to $15.8 million during Year-To-Date 2025. The decrease was primarily driven by reduced depreciation of capitalized software.
Operating loss was $(55.2) million during Year-To-Date 2026, compared to $(20.0) million during Year-To-Date 2025 due to the factors described above, and deleveraged 840 bps to (12.1)% of Net sales. Adjusted operating loss was $(47.1) million during Year-To-Date 2026, compared to $(17.9) million during Year-To-Date 2025.
Related party interest expense was $4.0 million during Year-To-Date 2026, compared to $3.7 million during Year-To-Date 2025.
Net interest expense, was $27.9 million during Year-To-Date 2026, compared to $16.6 million during Year-To-Date 2025. The increase was due to the amortization of financing costs associated with the monetization of our tariff refund claims and income tax receivable claim. Excluding the impact of these financing costs, net interest expense decreased $1.0 million due to lower average borrowings and interest rates on our debt facilities.
Provision for income taxes was $1.0 million during Year-To-Date 2026, compared to $2.8 million during Year-To-Date 2025. Our effective tax rate was a provision of (1.2)% and (7.6)% during Year-To-Date 2026 and Year-To-Date 2025, respectively. The change in the effective tax rate was primarily due to a higher pretax loss and changes in forecasted earnings mix. We continue to adjust our valuation allowance based on ongoing operating results.
Net loss was $(84.1) million, or $(3.79) per diluted share, during Year-To-Date 2026, compared to $(39.4) million, or $(1.80) per diluted share, during Year-To-Date 2025. Adjusted net loss was $(62.6) million, or $(2.82) per diluted share during Year-To-Date 2026, compared to $(36.3) million, or $(1.66) per diluted share, during Year-To-Date 2025.
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The following table sets forth Net sales and Operating loss, respectively, by segment, for the periods indicated:
| Twenty-six Weeks Ended | |||||||||||||||||||||||
| August 1, 2026 | August 2, 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| The Children’s Place U.S. | $ | 415,407 | $ | 494,954 | |||||||||||||||||||
The Children’s Place International (1) | 41,618 | 45,177 | |||||||||||||||||||||
| Total net sales | $ | 457,025 | $ | 540,131 | |||||||||||||||||||
| The Children’s Place U.S. | $ | (41,665) | $ | (13,431) | |||||||||||||||||||
The Children’s Place International (1) | (13,552) | (6,580) | |||||||||||||||||||||
| Total segment operating loss | $ | (55,217) | $ | (20,011) | |||||||||||||||||||
| The Children’s Place U.S. | (10.0) | % | (2.7) | % | |||||||||||||||||||
The Children’s Place International (1) | (32.6) | % | (14.6) | % | |||||||||||||||||||
| Total segment operating loss as a percentage of net sales | (12.1) | % | (3.7) | % | |||||||||||||||||||
(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.
The Children’s Place U.S. Net sales decreased $79.6 million, or 16.1%, to $415.4 million during Year-To-Date 2026, compared to $495.0 million during Year-To-Date 2025, driven by a decrease in DTC sales due to lower traffic. Our results were also impacted by the planned reduction in shipments for our wholesale channel to align inventory positions with our customers, and to liquidate aged fashion inventories.
The Children’s Place International Net sales decreased $3.7 million, or 8.1%, to $41.6 million during Year-To-Date 2026, compared to $45.2 million during Year-To-Date 2025, driven by a decrease in DTC sales due to lower traffic.
The Children’s Place U.S. Operating loss was $(41.7) million during Year-To-Date 2026, compared to $(13.4) million during Year-To-Date 2025, primarily due to lower net sales, as described above.
The Children’s Place International Operating loss was $(13.6) million during Year-To-Date 2026, compared to $(6.6) million during Year-To-Date 2025, primarily due to higher merchandise costs which negatively impacted our margins.
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 gross profit, 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, gross profit, 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.
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| Thirteen Weeks Ended | |||||||||||||||||
| August 1, 2026 | |||||||||||||||||
| (amounts in thousands, except per share amounts) | |||||||||||||||||
| Gross profit | Selling, general and administrative expenses | Operating loss | Net loss | Diluted loss per common share | |||||||||||||
| As reported (GAAP) | $ | 83,278 | $ | 90,061 | $ | (13,037) | $ | (30,951) | $ | (1.39) | |||||||
Exit from third-party distribution facility (1) | 390 | — | 390 | 390 | |||||||||||||
Financing charges on monetization of tariff refund claims (2) | — | — | — | 9,865 | |||||||||||||
Restructuring costs (3) | — | (1,713) | 1,713 | 1,713 | |||||||||||||
Financing charges on monetization of income tax receivable claim (4) | — | — | — | 762 | |||||||||||||
| Aggregate impact of non-GAAP adjustments | 390 | (1,713) | 2,103 | 12,730 | |||||||||||||
| Income tax effect | — | — | — | — | |||||||||||||
| As adjusted | $ | 83,668 | $ | 88,348 | $ | (10,934) | $ | (18,221) | $ | (0.82) | |||||||
| % of Net Sales (GAAP) | 34.4 | % | 37.2 | % | (5.4) | % | (12.8) | % | |||||||||
| % of Net Sales (As adjusted) | 34.6 | % | 36.5 | % | (4.5) | % | (7.5) | % | |||||||||
(1)Related to costs incurred due to the early exit from our third-party distribution facility.
(2)Related to amortization of financing costs associated with the monetization of our tariff refund claims.
(3)Related to one-time severance costs incurred for the senior leadership team and other positions eliminated.
(4)Related to amortization of financing costs associated with the monetization of our income tax receivable claim.
| Twenty-six Weeks Ended | |||||||||||||||||
| August 1, 2026 | |||||||||||||||||
| (amounts in thousands, except per share amounts) | |||||||||||||||||
| Gross profit | Selling, general and administrative expenses | Operating loss | Net loss | Diluted loss per common share | |||||||||||||
| As reported (GAAP) | $ | 136,628 | $ | 178,925 | $ | (55,217) | $ | (84,142) | $ | (3.79) | |||||||
Exit from third-party distribution facility (1) | 4,681 | — | 5,010 | 5,010 | |||||||||||||
Financing charges on monetization of tariff refund claims (2) | — | — | — | 11,929 | |||||||||||||
Restructuring costs (3) | — | (3,151) | 3,151 | 3,151 | |||||||||||||
Financing charges on monetization of income tax receivable claim (4) | — | — | — | 1,490 | |||||||||||||
| Aggregate impact of non-GAAP adjustments | 4,681 | (3,151) | 8,161 | 21,580 | |||||||||||||
| Income tax effect | — | — | — | — | |||||||||||||
| As adjusted | $ | 141,309 | $ | 175,774 | $ | (47,056) | $ | (62,562) | $ | (2.82) | |||||||
| % of Net Sales (GAAP) | 29.9 | % | 39.1 | % | (12.1) | % | (18.4) | % | |||||||||
| % of Net Sales (As adjusted) | 30.9 | % | 38.5 | % | (10.3) | % | (13.7) | % | |||||||||
(1)Related to the termination fee and other costs incurred due to the early exit from our third-party distribution facility.
(2)Related to amortization of financing costs associated with the monetization of our tariff refund claims.
(3)Related to one-time severance costs incurred for the senior leadership team and other positions eliminated.
(4)Related to amortization of financing costs associated with the monetization of our income tax receivable claim.
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| Thirteen Weeks Ended | |||||||||||||||||
| August 2, 2025 | |||||||||||||||||
| (amounts in thousands, except per share amounts) | |||||||||||||||||
| Gross profit | Selling, general and administrative expenses | Operating income | Net loss | Diluted loss per common share | |||||||||||||
| As reported (GAAP) | $ | 101,272 | $ | 89,596 | $ | 4,106 | $ | (5,365) | $ | (0.24) | |||||||
Restructuring costs (1) | — | (1,211) | 1,211 | 1,211 | |||||||||||||
Legal settlement accrual (2) | — | (750) | 750 | 750 | |||||||||||||
| Aggregate impact of non-GAAP adjustments | — | (1,961) | 1,961 | 1,961 | |||||||||||||
| Income tax effect | — | — | — | — | |||||||||||||
| As adjusted | $ | 101,272 | $ | 87,635 | $ | 6,067 | $ | (3,404) | $ | (0.15) | |||||||
| % of Net Sales (GAAP) | 34.0 | % | 30.1 | % | 1.4 | % | (1.8) | % | |||||||||
| % of Net Sales (As adjusted) | 34.0 | % | 29.4 | % | 2.0 | % | (1.1) | % | |||||||||
(1)Related to one-time severance costs incurred for positions eliminated.
(2)Related to the accrual of costs expected for legal settlements.
| Twenty-six Weeks Ended | |||||||||||||||||
| August 2, 2025 | |||||||||||||||||
| (amounts in thousands, except per share amounts) | |||||||||||||||||
| Gross profit | Selling, general and administrative expenses | Operating loss | Net loss | Diluted loss per common share | |||||||||||||
| As reported (GAAP) | $ | 172,055 | $ | 176,266 | $ | (20,011) | $ | (39,388) | $ | (1.80) | |||||||
Restructuring costs (1) | — | (2,145) | 2,145 | 2,145 | |||||||||||||
Reversal of legal settlement accrual (2) | — | 46 | (46) | (46) | |||||||||||||
Loss on extinguishment of debt (3) | — | — | — | 1,039 | |||||||||||||
| Aggregate impact of non-GAAP adjustments | — | (2,099) | 2,099 | 3,138 | |||||||||||||
| Income tax effect | — | — | — | — | |||||||||||||
| As adjusted | $ | 172,055 | $ | 174,167 | $ | (17,912) | $ | (36,250) | $ | (1.66) | |||||||
| % of Net Sales (GAAP) | 31.9 | % | 32.6 | % | (3.7) | % | (7.3) | % | |||||||||
| % of Net Sales (As adjusted) | 31.9 | % | 32.2 | % | (3.3) | % | (6.7) | % | |||||||||
____________________________________________
(1)Related to one-time severance costs incurred for positions eliminated.
(2)Related to the reversal of costs accrued for legal settlements.
(3)Related to write-off of debt issuance costs associated with the partial prepayment of the First Mithaq Term Loan pursuant to the completion of our rights offering in the first quarter of 2025.
33
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 $350.0 million asset-based revolving credit facility (the “ABL Credit Facility”) with Wells Fargo Bank, National Association and our term loan with SLR Credit Solutions (“SLR”), and the financing of capital projects.
During Fiscal 2024, we entered into an interest-free, unsecured and subordinated promissory note with Mithaq Capital SPC, a Cayman segregated portfolio company (“Mithaq”) for a $78.6 million term loan (the “First Mithaq Term Loan”), and a separate unsecured and subordinated promissory note for a $90.0 million term loan (the “Second Mithaq Term Loan”; and together with the First Mithaq Term Loan, collectively, the “Initial Mithaq Term Loans”). As of February 6, 2025, $60.2 million under the First 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 First Mithaq Term Loan. Pursuant to our refinancing transactions on December 16, 2025, the Second Mithaq Term Loan was 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, leaving an aggregate of $111.1 million outstanding under the Initial Mithaq Term Loans as of August 1, 2026.
On December 16, 2025, we entered into a term loan agreement with SLR for a $100.0 million term loan (the “SLR Term Loan”). We used the net proceeds to partially pay down our borrowings under the ABL Credit Facility. The principal amount outstanding as of August 1, 2026 was $100.0 million.
On July 1, 2026, we entered into a Shariah compliant, unsecured and subordinated promissory note with Mithaq for a $15.0 million term loan (the “Third Mithaq Term Loan”; and collectively with the Initial Mithaq Term Loans, the “Mithaq Term Loans”), as the first advance under our $40.0 million senior unsecured credit facility (the “Mithaq Credit Facility”) pursuant to our commitment letter with Mithaq. We received the funds on July 1, 2026, and effective upon the receipt of such funds, our remaining availability under the Mithaq Credit Facility was permanently reduced to $25.0 million.
As of August 1, 2026, we had $160.1 million of outstanding borrowings under our ABL Credit Facility.
Our working capital deficit increased $13.7 million to $53.7 million at August 1, 2026, compared to $40.0 million at August 2, 2025, primarily due to a decrease in inventory due to improved inventory management and an increase in short-term debt and accounts payable balances, partially offset by a decrease in outstanding borrowings under our ABL Credit Facility due to proceeds received from the SLR Term Loan.
As of August 1, 2026, we had total liquidity of $79.7 million, including $47.5 million of availability under our ABL Credit Facility, $25.0 million of availability under our Mithaq Credit Facility, and $7.2 million of cash on hand. At August 1, 2026, we had $21.5 million of outstanding letters of credit with an additional $8.5 million available for issuing letters of credit under our ABL Credit Facility.
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 Second Quarter 2026 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, 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 and our term loan agreement with SLR, the repurchase of any shares would require fulfilling stringent payment conditions under those agreements, 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 August 1, 2026, there was $156.1 million remaining availability under the Share Repurchase Program.
Cash Flows and Capital Expenditures
Cash used in operating activities was $32.3 million during Year-To-Date 2026, compared to $73.4 million during Year-To-Date 2025, primarily due to better working capital management with a reduction in inventory levels and an increase in accounts payable balances, partially offset by higher net losses incurred during the year.
Cash used in investing activities was $13.7 million during Year-To-Date 2026, compared to $4.8 million during Year-To-Date 2025, driven by higher capital expenditures due to store openings.
34
Cash provided by financing activities was $48.4 million during Year-To-Date 2026, compared to $77.8 million during Year-To-Date 2025. The decrease primarily resulted from lower net borrowings under our ABL Credit Facility, in addition to lower capital raised from the Third Mithaq Term Loan proceeds compared to the net proceeds from the Rights Offering in the prior year.
Our ability to continue to meet our capital requirements in Fiscal 2026 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 depend 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.
Selected Consolidated Balance Sheets Data
Certain components of our Consolidated Balance Sheets were as follows:
| August 1, 2026 | January 31, 2026 | August 2, 2025 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Accounts receivable | $ | 44,616 | $ | 25,967 | $ | 54,365 | |||||||||||
| Inventories | 340,213 | 325,100 | 442,705 | ||||||||||||||
| Accounts payable | 146,201 | 108,481 | 132,436 | ||||||||||||||
Accounts receivable were $44.6 million as of August 1, 2026, compared to $54.4 million as of August 2, 2025 and $26.0 million as of January 31, 2026. The decrease of $9.7 million, or 17.9%, compared to August 2, 2025 was primarily driven by a decrease in wholesale receivables due to lower net sales. The increase of $18.6 million or 71.8%, compared to January 31, 2026 was primarily driven by an increase in sales due to seasonality.
Inventories were $340.2 million as of August 1, 2026, compared to $442.7 million as of August 2, 2025 and $325.1 million as of January 31, 2026. The decrease of $102.5 million, or 23.2% compared to August 2, 2025 was primarily driven by improved inventory management as we continue to align our inventory levels with anticipated demand and sell through excess inventory on hand. The increase of $15.1 million, or 4.6%, compared to January 31, 2026 was primarily driven by a buildup of inventory based on seasonal needs.
Accounts payable were $146.2 million as of August 1, 2026, compared to $132.4 million as of August 2, 2025 and $108.5 million as of January 31, 2026. The increase of $13.9 million, or 10.5%, compared to August 2, 2025, was due to the timing of receipts and payments. The increase of $37.8 million, or 34.8%, compared to January 31, 2026, was primarily the result of higher inventory purchases based on seasonal needs.
ABL Credit Facility
We maintain the $350.0 million asset-based revolving credit facility (the “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”), as the sole lender party thereto, and as Administrative Agent, Collateral Agent, and Swing Line Lender. The ABL Credit Facility will mature on the earlier of December 16, 2030, or the maturity date under our term loan agreement with SLR as further described below.
As of December 16, 2025, which is the effective date of the eighth amendment to the Credit Agreement (the “Eighth Amendment”), the ABL Credit Facility includes a $25.0 million Canadian sublimit and a $30.0 million sublimit for standby and documentary letters of credit.
As of February 1, 2026, 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 1.000%, 1.250% or 1.500%; or
(ii)the Secured Overnight Financing Rate (“SOFR”) per annum, plus a margin of 2.000%, 2.250% or 2.500%.
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 1, 2026, letter of credit fees range from 0.500% to 0.750% for commercial letters of credit and range from 1.000% to 1.500% for standby letters of credit. These fees are determined based on the amount of our average daily excess availability under the facility.
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As of December 16, 2025, 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, and certain inventory, subject to certain reserves.
For the Second Quarter 2026 and Second Quarter 2025, we recognized $2.6 million and $5.4 million, respectively, in interest expense related to the ABL Credit Facility. During the Year-To-Date 2026 and the Year-To-Date 2025, we recognized $4.8 million and $10.2 million, respectively, in interest expense related to the ABL Credit Facility.
As of December 16, 2025, credit extended under the ABL Credit Facility is secured by a first priority security interest in substantially all of our U.S. and Canadian assets, other than intellectual property, real estate, certain furniture, fixtures and equipment, and pledges of subsidiary capital stock, and a second priority security interest in our intellectual property, real estate, certain furniture, fixtures and 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.
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 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 a prior amendment, the requisite payment condition thresholds for some of these covenants were 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, we may be subject to cash dominion, and pursuant to the Eighth Amendment, we are required to maintain excess availability of at least $35.0 million, subject to increase based on our borrowing base (the “excess availability requirement”). We were in compliance with this excess availability requirement as of August 1, 2026.
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 August 1, 2026, January 31, 2026, and August 2, 2025, unamortized deferred financing costs amounted to $5.0 million, $5.6 million, and $2.7 million, related to our ABL Credit Facility.
The table below presents the components of our ABL Credit Facility:
____________________________________________
| August 1, 2026 | January 31, 2026 | August 2, 2025 | |||||||||||||||
| (in millions) | |||||||||||||||||
Borrowing base | $ | 265.7 | $ | 234.2 | $ | 356.4 | |||||||||||
Credit facility size | 350.0 | 350.0 | 433.0 | ||||||||||||||
Maximum borrowing availability (1) | 229.1 | 199.2 | 356.4 | ||||||||||||||
| Outstanding borrowings | 160.1 | 131.1 | 294.4 | ||||||||||||||
| Letters of credit outstanding—standby | 21.5 | 23.7 | 18.2 | ||||||||||||||
| Utilization of credit facility at end of period | 181.6 | 154.8 | 312.6 | ||||||||||||||
Availability (2) | $ | 47.5 | $ | 44.4 | $ | 43.8 | |||||||||||
| Interest rate at end of period | 6.6% | 6.5% | 7.6% | ||||||||||||||
| Average interest rate | 6.5% | 7.6% | 7.7% | ||||||||||||||
| Average end-of-day loan balance during the period | $ | 139.6 | $ | 248.7 | $ | 261.7 | |||||||||||
| Highest end-of-day loan balance during the period | $ | 172.2 | $ | 302.7 | $ | 302.3 | |||||||||||
(1)Prior to the Eighth Amendment, the lower of the credit facility size and the borrowing base, without factoring in any excess availability requirement. Pursuant to the Eighth Amendment, as of December 16, 2025, our maximum borrowing availability is the lower of the credit facility size and the borrowing base, net of the new excess availability requirement.
(2)The sublimit availability for letters of credit was $8.5 million as of August 1, 2026, $6.3 million as of January 31, 2026, and $6.8 million as of August 2, 2025.
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SLR Term Loan
On December 16, 2025, we entered into a term loan agreement (the “SLR Loan Agreement”) with SLR and other affiliated SLR entities as the lenders party thereto, and SLR as Administrative Agent, and Collateral Agent, providing for a $100.0 million term loan (the “SLR Term Loan”). We used the net proceeds from the SLR Term Loan to partially pay down our borrowings under the ABL Credit Facility.
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 secured by a first priority security interest in our intellectual property, real estate, certain furniture, fixtures and equipment, and pledges of subsidiary capital stock, and a second priority security interest in the collateral secured by a first priority security interest under the ABL Credit Facility. The SLR Term Loan is guaranteed by each of our subsidiaries that guarantees our ABL Credit Facility.
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 our 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 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. Additionally, the SLR Term Loan contains the same excess availability requirement as the ABL Credit Facility. We were in compliance with this excess availability requirement as of August 1, 2026.
For the Second Quarter 2026 and Year-To-Date 2026, we recognized $2.4 million and $4.6 million in interest expense related to the SLR Term Loan. As of August 1, 2026, the interest rate was 10.1%.
As of August 1, 2026 and January 31, 2026, unamortized deferred financing costs amounted to $2.3 million and $2.4 million, respectively, related to the SLR Term Loan.
Initial Mithaq Term Loans
Mithaq Capital SPC, a Cayman segregated portfolio company (“Mithaq”), is a controlling stockholder of the Company. We maintain an interest-free, unsecured and subordinated promissory note with Mithaq (the “First Mithaq Term Loan”), dated February 29, 2024, by and among the Company, certain of its subsidiaries, and Mithaq. During Fiscal 2025, $60.2 million under the First 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 First Mithaq Term Loan as of August 1, 2026.
The First Mithaq Term Loan matures on April 16, 2031 and is guaranteed by each of our subsidiaries that guarantees our ABL Credit Facility and the SLR Term Loan.
We also maintain an unsecured and subordinated promissory note with Mithaq for a $90.0 million term loan (the “Second Mithaq Term Loan”; and together with the First Mithaq Term Loan, collectively, the “Initial Mithaq Term Loans”), dated April 16, 2024, by and among the Company, certain of its subsidiaries, and Mithaq.
The Second Mithaq Term Loan also matures on April 16, 2031, and requires monthly payments equivalent to interest charged at the SOFR per annum plus 4.000%, 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 Second 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 Second Mithaq Term Loan is guaranteed by each of our subsidiaries that guarantees our ABL Credit Facility and the SLR Term Loan.
Pursuant to our refinancing transactions on December 16, 2025, the Second Mithaq Term Loan was further amended to allow us 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, leaving an aggregate of $111.1 million outstanding under the Initial Mithaq Term Loans. These amendments were evaluated under FASB ASC 470 — Debt, and accounted for as debt modifications.
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For the Second Quarter 2026 and Second Quarter 2025, we recognized $1.8 million and $1.9 million, respectively, in interest-equivalent expense related to the Second Mithaq Term Loan. During the Year-To-Date 2026 and the Year-To-Date 2025, we recognized $3.5 million and $3.7 million, respectively, in interest expense related to the Second Mithaq Term Loan. As of August 1, 2026, the interest-equivalent rate was 7.6%.
During the Second Quarter 2026, we deferred all interest-equivalent payments to Mithaq, which is expected to be settled upon maturity of the Second Mithaq Term Loan. During the Second Quarter 2025, we paid $3.3 million 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 were accounted for in accordance with FASB ASC 610 — Other income, and presented on a net basis within Related party interest expense. As of August 1, 2026, January 31, 2026, and August 2, 2025, interest-equivalent expense payable to Mithaq was $9.1 million, $5.6 million, and $7.0 million, respectively. As the payments due as of August 1, 2026 are not expected to be settled within 12 months due to payment condition restrictions within the Credit Agreement, the amounts payable are recorded within Other long-term liabilities.
The Initial 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 Initial Mithaq Term Loans are subordinated in payment priority to our payment obligations under the Credit Agreement.
Pursuant to our refinancing transactions in December 2025, the Initial Mithaq Term Loans are also subordinated in payment priority to our payment obligations under the SLR Term Loan. Subject to such subordination terms, the Initial Mithaq Term Loans are prepayable at any time and from time to time without penalty and do not require any mandatory prepayments.
The Initial 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 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 Initial 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 Initial 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 Initial 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 Initial Mithaq Term Loans.
As of August 1, 2026, January 31, 2026, and August 2, 2025, unamortized deferred financing costs amounted to $3.2 million, $3.6 million, and $1.2 million, respectively, related to the Initial Mithaq Term Loans.
Mithaq Commitment Letter
On May 2, 2024, we entered into a commitment letter (the “Commitment Letter”) with Mithaq for a $40.0 million credit facility (the “Mithaq Credit Facility”). Initially, under the Mithaq Credit Facility, we had the ability to request for advances at any time prior to July 1, 2025. On December 16, 2025, the Company and Mithaq entered into an Amendment No. 3 to the Commitment Letter, that extended the deadline for requesting advances until December 16, 2030.
If any debt is incurred under the Mithaq Credit Facility, it shall require monthly payments equivalent to interest charged at the SOFR per annum plus 9.000%. Such debt shall be unsecured and shall be guaranteed by each of our subsidiaries that guarantees our ABL Credit Facility and the SLR Term Loan. Similar to the Initial 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 December 16, 2030.
On July 1, 2026, the Company and certain subsidiaries entered into a Shariah compliant, unsecured and subordinated promissory note with Mithaq for a $15.0 million term loan (the “Third Mithaq Term Loan”; and collectively with the Initial Mithaq Term Loans, the “Mithaq Term Loans”), as the first advance under our $40.0 million Mithaq Credit Facility. The net proceeds from the Third Mithaq Term Loan were received by the Company on July 1, 2026 and used to partially pay down our borrowings under the ABL Credit Facility, to reduce a portion of our accounts payable balances with vendors, and for other working capital purposes. As of August 1, 2026, our remaining availability under the Mithaq Credit Facility was $25.0 million.
Similar to the Initial Mithaq Term Loans, the Third Mithaq Term Loan matures on April 16, 2031, and is guaranteed by each of the Company’s subsidiaries that guarantees the ABL Credit Facility and the SLR Term Loan.
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Similar to the Second Mithaq Term Loan, the Third Mithaq Term Loan requires monthly payments equivalent to interest charged at the SOFR per annum plus 9.000%, with such payments subject to deferral by the Company upon written notice to Mithaq.
For the Second Quarter 2026 and Year-To-Date 2026, we recognized $0.2 million in interest expense related to the Third Mithaq Term Loan. As of August 1, 2026, the interest-equivalent rate was 12.6%.
In addition, similar to the Initial Mithaq Term Loans, the Third Mithaq Term Loan is subject to the Mithaq Subordination Agreement, pursuant to which the Third Mithaq Term Loan is also subordinated in payment priority to the obligations of the Company and our subsidiaries under the Credit Agreement and the SLR Loan Agreement. Subject to such subordination terms, the Third Mithaq Term Loan is also prepayable at any time and from time to time without penalty and does not require any mandatory prepayments.
Similar to the Initial Mithaq Term Loans, the Third Mithaq Term Loan also 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 our 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 Third Mithaq Term Loan, however, does not provide for any closing, prepayment or exit fees, or other fees typical for transactions of this nature, does not impose additional reserves on borrowings under the Credit Agreement, and does not contain certain other restrictive covenants.
Similar to the Initial Mithaq Term Loans, the Third Mithaq Term Loan also 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 Third Mithaq 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 Third Mithaq Term Loan.
Maturities of our principal debt payments on the SLR Term Loan, and the Mithaq Term Loans are as follows:
| August 1, 2026 | |||||
| (in thousands) | |||||
Remainder of 2026 | $ | — | |||
| 2027 | — | ||||
| 2028 | — | ||||
| 2029 | — | ||||
| 2030 | 100,000 | ||||
| 2031 | 126,113 | ||||
Total principal debt payments | $ | 226,113 | |||
Monetization of Income Tax Receivable Claim
On February 5, 2026, we entered into a Receivables Purchase Agreement (the “RPA”) with TRMEF Basis II LLC (“TRMEF”) to monetize our CARES Act income tax receivable claim of $19.1 million plus accrued interest of $3.7 million at a purchase rate of 88.5%, for a total purchase price of $20.1 million. We received net cash proceeds of $15.9 million, after insurance and legal fees amounting to $0.7 million. The remaining proceeds of $3.5 million are expected to be received in two tranches as follows: (i) upon confirmation by the IRS of submission by the IRS of the Revenue Agent Report to the Joint Committee on Taxation, TRMEF shall pay $2.5 million to us, less the amount of any downward adjustments in respect of the tax refund claim set forth in such Revenue Agent Report, and (ii) on the date on which TRMEF receives payment in full in cash of the refund claim, TRMEF shall pay us $1.0 million, less 10% of accrued interest as of the effective date of the RPA. We used the net proceeds to partially pay down our borrowings under the ABL Credit Facility.
The monetization of our income tax receivable claim was accounted for in accordance with FASB ASC 470 — Debt, and presented as Short-term debt. As of August 1, 2026, the unamortized financing costs amounted to $2.2 million. These costs are being amortized through the expected settlement date of the claim and recorded in Interest expense based on an effective interest rate of 18.0%.
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Monetization of IEEPA Tariff Refund Claims
On March 31, 2026, we entered into a Claim Sale and Purchase Agreement with Alnus Investors, LLC (“Alnus”) to monetize our claims for refunds of tariffs previously paid to the U.S. Customs and Border Protection (“CBP”) , related to those tariffs originally invoked under the International Emergency Economics Powers Act of 1977, for which such tariffs were ruled unlawful by the United States Supreme Court on February 20, 2026. Alnus purchased an aggregate amount of $38.2 million of the approximately $40 million refund claims submitted to the CBP at a purchase rate of 67.2%, for a total purchase price of $25.7 million. We used the net proceeds to partially pay down our borrowings under the ABL Credit Facility.
The monetization of our tariff refund claims was accounted for in accordance with FASB ASC 470 — Debt, and presented as Short-term debt. During the Second Quarter 2026, we received tariff refunds amounting to approximately $39 million (excluding interest), the majority of which was remitted to Alnus which reduced the Short-term debt outstanding. As of August 1, 2026, the unamortized financing costs amounted to $0.6 million. These costs are being amortized through the expected settlement date of the claim and recorded in Interest expense. Refer to “Note 1. Basis of Presentation” of the accompanying consolidated financial statements for the related accounting policy update on tariff refund claims.
SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES
We describe our significant accounting policies in “Note 1. Basis of Presentation 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 January 31, 2026. Except as described in “Note 1. Basis of Presentation” of the accompanying consolidated financial statements, 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 January 31, 2026. 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
From and after February 1, 2026, and on the first day of each fiscal quarter thereafter, 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 1.000%, 1.250% or 1.500%; or (ii) the SOFR per annum, plus a margin of 2.000%, 2.250% or 2.500%. As of August 1, 2026, we had $160.1 million in borrowings under our ABL Credit Facility.
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.
The Second Mithaq Term Loan requires monthly payments equivalent to interest charged at the SOFR per annum plus 4.000%, 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 Second 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 refinancing transactions in December 2025, the Second Mithaq Term Loan was further amended to allow us to defer our monthly payments upon written notice to Mithaq.
As of August 1, 2026, we had $15.0 million in outstanding borrowings under our Mithaq Credit Facility. The Third Mithaq Term Loan requires monthly payments equivalent to interest charged at the SOFR per annum plus 9.000%, with such payments subject to deferral upon written notice to Mithaq.
A 10% change in the base rate or SOFR would not have had a material impact on our interest expense for any of our indebtedness described above.
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 August 1, 2026, net liabilities in Canada and Hong Kong amounted to $24.6 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 $2.5 million. All changes in the net investments in our foreign subsidiaries are recorded in other comprehensive loss.
As of August 1, 2026, we had $3.2 million of our cash and cash equivalents held in foreign subsidiaries, of which $1.2 million was in India, $0.9 million was in China, $0.8 million was in Canada, $0.2 million was in Hong Kong, and $0.1 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 | Twenty-six Weeks Ended | ||||||||||||||||||||||||||||||||||
| August 1, 2026 | August 2, 2025 | August 1, 2026 | August 2, 2025 | ||||||||||||||||||||||||||||||||
Average Translation Rates (1) | |||||||||||||||||||||||||||||||||||
| Canadian dollar | 0.7160 | 0.7279 | 0.7227 | 0.7164 | |||||||||||||||||||||||||||||||
| Hong Kong dollar | 0.1276 | 0.1276 | 0.1277 | 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 Second Quarter 2026 net sales would have decreased or increased by approximately $3.8 million, and total costs and expenses would have decreased or increased by approximately $6.0 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, Cambodia, China, Indonesia, and Kenya. 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 Interim 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 August 1, 2026.
Based on that evaluation, our President and Interim Chief Executive Officer and our Chief Financial Officer, concluded that our disclosure controls and procedures were effective at the reasonable assurance level, as of August 1, 2026, 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 August 1, 2026 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” of the accompanying consolidated financial statements and Part I, Item 3 of our Annual Report on Form 10-K for the year ended January 31, 2026.
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 January 31, 2026.
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 May 9, 2019 (as amended from time to time), by and among the Company and certain subsidiaries, with Wells Fargo, National Association as the sole lender party thereto, and our term loan agreement with SLR Credit Solutions (“SLR”) and other affiliated SLR entities as the lenders party thereto, our repurchase of any shares would require fulfilling stringent payment conditions under those agreements, 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 August 1, 2026, 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.
The following table provides a month-to-month summary of our share repurchase activity during the Second Quarter 2026:
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value (in thousands) of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
May 3, 2026 through May 30, 2026 (1) | 1,185 | $ | 3.55 | 1,185 | $ | 156,093 | ||||||||||||||||||||
| May 31, 2026 through July 4, 2026 | — | — | — | 156,093 | ||||||||||||||||||||||
| July 5, 2026 through August 1, 2026 | — | — | — | 156,093 | ||||||||||||||||||||||
| Total | 1,185 | $ | 3.55 | 1,185 | ||||||||||||||||||||||
____________________________________________
(1)Includes 1,185 shares withheld to cover taxes in conjunction with the vesting of stock awards.
ITEM 5. OTHER INFORMATION.
During the Second Quarter 2026, 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:
10.2(+) | Letter Agreement dated September 11, 2026 between The Children’s Place, Inc. and Muhammad Umair. | |||||||
31.1(+) | Certificate of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. | |||||||
31.2(+) | Certificate of Principal Financial Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. | |||||||
32(+) | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
| 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). | |||||||
____________________________________________
(+) 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: | September 14, 2026 | By: | /S/ Muhammad Asif Seemab | ||||||||
| Muhammad Asif Seemab | |||||||||||
| President and Interim Chief Executive Officer | |||||||||||
| (Principal Executive Officer) | |||||||||||
| Date: | September 14, 2026 | By: | /S/ John Szczepanski | ||||||||
| John Szczepanski | |||||||||||
| Chief Financial Officer | |||||||||||
| (Principal Financial Officer and Principal Accounting Officer) | |||||||||||
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