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The Children’s Place expanded its revolving credit facility from $350 million to $445 million.

In a June 5 press release announcing amendments to its credit agreement, Chief Financial Officer Sheamus Toal said the additional credit availability “will significantly strengthen our financial position while also supporting our seasonal working capital needs and investments in the company’s future growth.”

The Secaucus-based children’s apparel retailer also replaced the London Interbank Offered Rate (LIBOR) as the interest rate benchmark with Secured Overnight Financing Rate Data (SOFR), as well as updated interest rates to reflect current market terms.

The move comes ahead of a phaseout of U.S. dollar LIBOR tenors at the end of the month.

One of the most widely recognized interest rate benchmarks for financial products, such as credit cards, loans, bonds and mortgages, LIBOR has faced numerous scandals over the past decade, including admitting to a mass manipulation of rates, prompting the U.K. Financial Conduct Authority to announce the entity would be wound down in late 2021.

Ahead of its June 30 termination in the United States, many companies have already transitioned to SOFR, U.S. regulators’ preferred alternative to LIBOR and considered by experts to be a more secure, accurate pricing benchmark.

In a statement last week, Toal added that The Children’s Place is “extremely pleased to welcome PNC Bank as a new joint lead arranger” and thanked the institution for committing an additional $95 million toward the company’s revolving credit line.

Toal went on to add, “We are grateful for the support provided by our current banking group.”

Limited purchasing power

In its most recent earnings report, The Children’s Place missed Wall Street’s expectations for the first quarter of 2023.

For the period ending April 29, the company posted an 11.2% decrease in net sales, dropping from $362.4 million in Q1 2022 to $321.6 million in Q1 2023. Gross profit came in at $96.5 million, down from $141.9 million reported for the same quarter a year ago.

Jane Elfers, president and chief executive officer, said in a statement, “Our first quarter results were negatively impacted by the ongoing macro-tension which resulted in outsized pressure on our core customer by limiting their purchasing power.”

Digital sales outperformed brick-and-mortar sales, with 46% of transactions coming from e-commerce, a 1% increase from Q1 2022. Digital traffic also rose by double-digits this quarter, the company said.

For the past decade, the retailer – whose brand portfolio includes Gymboree, Sugar & Jade and PJ Place – has been working to shift from a traditional store concept into a digital-first business, spending $50 million to upgrade omnichannel capabilities.

As part of its fleet optimization strategy, The Children’s Place has permanently closed 600 stores and expects to close between 80 to 100 more locations this year.

Elfers said The Children’s Place is revising its top- and bottom-line expectations for the full year, citing “the ongoing outsized pressure” on the retailer’s core consumer.

“However, with input cost pressures significantly abating in the back half of the year, combined with inventory levels that are projected to continue to decline versus last year, we continue to expect to deliver double digit operating margin in the back half of 2023,” she said.