Dive Brief:
- The Children’s Place has shaken up its leadership in recent days, amid reports from news outlets, including Bloomberg, that the children’s apparel retailer is mulling bankruptcy and possibly liquidation. The company hasn’t responded to Retail Dive’s request for comment on the possible restructuring.
- Interim CEO Muhammad Asif Seemab, Chief Strategy Officer Muhammad Umair, Executive Chair Turki Saleh AlRajhi and director Kim Roy have all left the company, according to a regulatory filing Wednesday.
- Seemab, who is managing director of Mithaq Holding Company and Mithaq Capital, which own a majority stake in the company, took the CEO role earlier this year. Following his resignation, Chief Financial Officer John Szczepanski is acting president and will serve as the principal executive officer, per the filing.
Dive Insight:
The Children’s Place was in dire financial straits when Saudi investment firm Mithaq Capital took a majority ownership stake two years ago, and the retailer doesn’t seem to have come very far.
In its most recent quarter, reported in mid-September, net sales plummeted nearly 20% year on year to $241.8 million, driven down in part by lower traffic, and net loss widened nearly six-fold to $31 million. At the time, Seemab said his “clear mandate” was to shore up the company’s finances and liquidity. The focus was on cost cuts and evaluating the operating model, he also said.
UBS analysts led by Jay Sole pointed to some improvements, including inventory and cash-flow trends, but warned that liquidity would remain a risk and that customer demand dropped off more than expected. The Children’s Place is unlikely to expand market share or margins for a while, according to their Sept. 15 research note.
The Children’s Place’s new management team “has made considerable progress improving profitability by reducing its cost structure,” Sole said. “However, weak customer traffic and a competitive children’s apparel environment are likely to keep the top line under pressure.”
That team has now departed. The children’s apparel market is especially tough these days due to lower fertility rates in the U.S., growing competition online and “slower real income growth limiting discretionary consumption,” according to UBS. The analysts expect the children's wear market to grow 1% in North America, down from a 2.3% average over the last decade.
Dani James contributed reporting for this story.
