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The Children’s Place is cutting 17% of its workforce and ending the lease for its company headquarters in Secaucus early, saying that the steps are being taken as part of a shift to become a more digital-first business.

In a June 28 filing with the U.S. Securities and Exchange Commission, the children’s apparel retailer reported it will lay off 181 employees, the majority of which work at the corporate offices.

According to a notice filed with the New Jersey Department of Labor & Workforce Development, the chain reported that 138 layoffs will take effect July 14 in Secaucus.

Additionally, The Children’s Place said that it “proactively accelerated the termination of its corporate office building lease to capitalize on the prevailing tenant-favorable market conditions.” The lease will now expire four years earlier, in May 2024.

As a result, The Children’s Place expects to incur a non-operating charge in the range of $13 million to $15 million, consisting of a $4 million lease termination payment, as well as employee severance and benefits costs associated with the layoffs.

It is unclear what the company’s plans are after it leaves the Hudson County property, and a media representative for The Children’s Place did not immediately respond to a request for comment Monday afternoon.

A changing model

In the SEC filing, the company cited its “ongoing structural transformation from a legacy store operating model to a digital-first retailer” as the reason for the workforce reduction and voluntary early termination of the corporate office lease.

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

According to The Children’s Place, exiting the lease next year, along with the “workforce reduction initiative,” will enable the company to “reduce its current space configuration and capitalize on lower prevailing market rates that would have been applicable under the existing lease, which included escalations in occupancy costs.”

In March, The Children’s Place unveiled plans to shrink its brick-and-mortar footprint by half this year.

As part of its fleet optimization strategy, The Children’s Place has permanently closed 600 stores and expects to close between 80 to 100 additional locations in 2023; it anticipates starting 2024 with about 500 shops.

Since 2013, the company has permanently closed 586 stores, including 315 dating to the onset of the pandemic.

Last month, The Children’s Place announced it will expand its revolving credit facility from $350 million to $445 million.

In commenting on the 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.”

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.

However, the company noted continued growth in its digital sales trend, reporting 46% of transactions coming from e-commerce, a 1% increase from Q1 2022, and a double-digit rise in digital traffic for the quarter.