Dive Brief:
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The Children’s Place filed for Chapter 11 on Sunday in the U.S. Bankruptcy Court of New Jersey, days after telling regulators that executives who were major financial backers had left.
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The children’s apparel retailer’s stores and website remain open, though store-closing sales began last week, per court documents. The company runs about 500 stores in North America.
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The goal is to sell itself by the end of the year, with bids due Dec. 9, according to court documents. Nine proposals have been received but they are “not currently actionable.” The company plans to enter into a new term loan facility provided by existing secured lenders.
Dive Insight:
The Children’s Place was founded the same year as The Gap — 1969 — but the fate of the children’s apparel specialist is far less certain, as some of the firms interested in acquiring it could liquidate its assets.
“For nearly 60 years, The Children’s Place has supported growing families with apparel that customers have come to know and love,” Rudy Morando, the company’s co-chief restructuring officer, said in a statement. “We recognize the significance of this development for our employees, customers, vendors, and other partners, and we are committed to conducting an efficient and transparent sale process.”
The company in court documents lists total debts of over $881 million and total assets of about $742 million. The retailer, whose brands include The Children’s Place and Gymboree, sells via two digital storefronts, about 500 stores in North America and wholesale marketplaces including Amazon. The retailer was still expanding quite recently, opening 19 stores in the second quarter this year. Through 10 franchises, various wholesale partnerships and social media channels, the company also sells in 13 international markets, according to financial filings and its investor site.
But in recent years the retailer watched demand for value-priced children’s clothing decline. That plus inflation, tariffs and intensifying competition in the space “have driven a sustained decline in net sales and profitability,” the company said in court documents.
Competition has come from the likes of Target, Walmart, Amazon and off-price retailers, which have improved the quality and design of their kids’ clothing and offer it at lower prices, according to GlobalData Managing Director Neil Saunders. All of those retailers have taken share in the market, he said in emailed comments.
The Children’s Place made it easier for shoppers to go elsewhere when it raised the threshold for free shipping on online orders, Saunders also said. And it made dubious financial decisions following a sales boom in 2021, like opting to buy back shares and add to its already hefty debt load.
“That proved to be a huge mistake, especially as the fortunes of the company changed in 2022 and beyond,” Saunders said.
An infusion of funds from Saudi investment firm Mithaq Capital when it took a majority ownership stake two years ago helped for a time, but at this point The Children’s Place needs “a complete financial restructuring and overhaul,” according to Saunders.
Of the nine bids the company has already received, six were for going concern and intellectual property-related transactions, while three were equity liquidation proposals involving substantially all of the retailer’s assets. The company also received three fee-based bids to liquidate The Children’s Place inventory and certain of its assets, per court documents. Discussions are ongoing, the company said.
A stalking horse bid, which would set the price that any other proposals would have to beat, is due in about a week.
“Today’s announcement marks an important step in our efforts to secure the best path forward for The Children’s Place,” Morando said.
Despite the retailer’s troubles, there is likely to be interest in acquiring the Children’s Place and Gymboree brands, including their e-commerce and possibly some stores, according to Saunders.
“This will most likely come from the big brand conglomerates who will want to integrate Children’s Place into their wider businesses,” he said.
Last month Debtwire analysts reported that The Children’s Place was mulling bankruptcy and a sale and listed J.C. Penney owner Catalyst Brands among potential bidders. Catalyst is interested in the retailer’s IP and about 200 of its locations, according to that report. Catalyst didn’t immediately return a request for comment and The Children’s Place declined to comment.
Several of the brands in Catalyst’s portfolio, including J.C. Penney, Brooks Brothers, Aeropostale and Lucky, were acquired through a bankruptcy process.
