The Children’s Place will permanently close 100 stores in 2023

As part of a multi-year digital transformation strategy, The Children’s Place expects to shrink its brick-and-mortar footprint by half this year.

Altogether, the Secaucus-based children’s apparel retailer plans to close 100 stores, but has yet to share any details about which locations would be impacted.

After those stores go dark, The Children’s Place anticipates starting 2024 with an “optimized fleet” of around 500 stores, President and Chief Executive Officer Jane Elfers said during the company’s most recent earnings call on March 16.

“We are confident that our projected fleet size of approximately 500 stores allows us to maximize our omnichannel capabilities and grow our industry-leading digital penetration and service our young, digitally savvy customers through our highest operating margin channel,” she said.

“By the end of 2023, our fleet optimization strategy will be substantially complete, positioning us in the optimum brick-and-mortar locations to service our millennial and Gen Z consumers’ omnichannel shopping preferences,” Elfers said during the call. “We feel that that’ll be the right stores in the right trade areas that over-index in omnichannel capabilities and certainly are the ones that service the omnichannel needs of our millennial and Gen Z customers.”

In 2013, the retailer – whose brand portfolio includes Gymboree, Sugar & Jade and PJ Place – developed a strategic plan to transition from a traditional brick-and-mortar concept into a digital-first business, spending $50 million over the next few years to upgrade its omnichannel capabilities.

Since then, the company has permanently closed 586 stores, including 315 dating to the onset of the pandemic. The Children’s Place ended 2022 with 613 stores, a 8.3% decrease from the prior year.

Meeting customers where they are

Elfers said she believes the business is now one that “resonates with our digitally savvy millennial mom, marketing that converts and an infrastructure that is optimized for the way they shop today and will shop tomorrow,” ultimately positioning the company for long-term success.

“If we had stayed locked into our over-stored model with onerous fixed costs and multiyear double-digit traffic declines even before the pandemic, I believe we would have followed the path of dozens of other retailers who permanently closed their doors before and during the pandemic. Instead, we have transformed into a dynamic, variable-based, transactional cost structure with our industry-leading digital business, thereby reducing risk and paving the path toward sustained top- and bottom-line growth,” she said.

For full year 2022, digital represented 48% of retail sales, versus 33% in 2019.

By 2025, The Children’s Place projects more than 60% of total retail sales will be digital, doubling its digital penetration in six years and putting it on track to be a $1 billion business, according to Sheamus Toal, The Children’s Place senior vice president and chief financial officer.

Toal, who joined the company in November 2022, also said The Children’s Place will invest up to $40 million over the next 18 months in additional e-commerce fulfillment capabilities to further improve margins and increase profitability.

He went on to describe the company’s transition to “a digital-first retailer with a productive, optimized store base” as “remarkable.”

“This was a change which our younger millennial customer required us to make. I know from my past experience that the journey from a company with over 1,100 stores and a single-digit e-commerce penetration to one having approximately 600 stores and 50% of its revenues online is not easy. But The Children’s Place did it,” he said.

The benefits of this transformation are clear, as we have not only doubled our e-commerce business, which now represents approximately 50% of our revenue, but we’ve done this during a time period when we’ve closed approximately half of our retail locations.
– Sheamus Toal, senior vice president and CFO

“Ignore for a moment the impact of the macro issues, which we and all retailers faced in the last 12 months, including the unprecedented cost of cotton, shipping containers, and airfreight, as well as the impact of record inflationary pressures, which our customers confronted. To successfully transform, we needed to practically reinvent the company,” he said. “ … The benefits of this transformation are clear, as we have not only doubled our e-commerce business, which now represents approximately 50% of our revenue, but we’ve done this during a time period when we’ve closed approximately half of our retail locations.”

The comments came as The Children’s Place reported $456.1 million in net sales for the three months ending Jan. 28, 2023, a 10.2% decrease from the same period a year ago. It cited the impact of permanent store closures, a pullback in consumer spending amid inflation concerns and a record holiday season in 2021 as factors for the decline.

For 2022, net sales fell 10.8% to $1.708 billion, according to the company.

Elfers said the company is optimistic about the future.

“With our transformation phase now behind us, our team is resolutely focused on execution, and we believe we are on track to return to double digit operating margins in the back half of 2023, and are well positioned to deliver long term, consistent growth for our shareholders,” she said.