Children’s Place Inc.’s stock tumbled 39% early Friday and was headed for its lowest level in about 21 years, after the children’s clothing chain issued a profit warning for the fourth quarter and said it’s working with lenders to secure new financing.
The stock
PLCE,
was on track for its lowest level since April 2003, after it said in a filing with the Securities and Exchange Commission that it would consider strategic alternatives if it can’t secure funds needed to support operations.
Secaucus, N.J.-based Children’s Place said it now expects a fourth-quarter adjusted operating loss equal to 9% to 8% of sales, after prior guidance for adjusted operating income of about 2% to 3% of sales.
The loss “reflects the impact of lower than expected merchandise margin resulting from more aggressive promotions in an effort to maximize sales, higher than anticipated split shipments to meet customer e-commerce demand, and increased inventory valuation adjustments,” said the filing.
The number is adjusted to exclude nonrecurring costs, the gain from the settlement of a lawsuit and non-cash impairments.
The company expects sales to range from about $454 million to $456 million, down from prior guidance of $460 million to $465 million.
It expects to end the year in a clean inventory position, reducing inventory by 16% to 20% from the prior year.
As of Feb. 3, liquidity stood at about $45 million. Total indebtedness is expected to fall by more than $100 million versus the third quarter of fiscal 2023 and as of Feb. 3 is expected to be about $277 million compared with $408 million.
Children’s Place is parent to brands including Gymboree, Sugar & Jade and PJ Place. The company has more than 500 stores in North America and wholesale marketplaces and distribution in 16 countries via six international franchise partners.
The stock has fallen 53% over the last 12 months, while the S&P 500
SPX
has gained 21%.
