Children's Place Loses CEO and Chair as Bankruptcy Reports Swirl

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Four senior figures have left The Children's Place within days, its interim CEO and executive chair among them. News outlets, Bloomberg included, report that the retailer is mulling bankruptcy and possibly liquidation.

A tough market for children's clothing

UBS calls children's apparel an especially hard market at the moment. It points to lower fertility rates in the U.S., more competition online and "slower real income growth limiting discretionary consumption." Its analysts expect children's wear in North America to grow 1%, compared with a 2.3% average across the previous ten years.

What UBS made of the turnaround

An analyst team led by Jay Sole saw some gains in inventory and cash-flow trends. The same note, dated Sept. 15, warned that liquidity would stay a risk and that customer demand dropped off by more than expected. It also judged that the company is unlikely to expand market share or margins for a while.

Sole said the new management team, which has since departed, "has made considerable progress improving profitability by reducing its cost structure." Weak traffic and a competitive market, he added, would likely keep sales under pressure.

Sales down, losses wider

In the quarter reported in mid-September, net sales fell nearly 20% from a year earlier to $241.8 million, partly because fewer shoppers came in. The net loss grew almost six-fold to $31 million.

CEO Muhammad Asif Seemab described his mandate then as shoring up finances and liquidity, through cost cuts and a review of the operating model.

Seemab is managing director of Mithaq Holding Company and Mithaq Capital, which own a majority stake in the retailer. He took the CEO job earlier this year. The Saudi investment firm Mithaq Capital bought into the company two years ago, when it was already in dire financial straits. Retail Dive judges that the retailer does not seem to have come very far since.

Who is left in charge

A regulatory filing on Wednesday listed the departures: Seemab, Chief Strategy Officer Muhammad Umair, Executive Chair Turki Saleh AlRajhi and director Kim Roy.

After Seemab resigned, Chief Financial Officer John Szczepanski became acting president. The filing names him principal executive officer, the title regulators use for the person who runs the company.

The company has not responded to a request for comment about a possible restructuring.

Source: Retail Dive