PLCE 10-K & 10-Q changes, risk factors and insider trading

•consumer sentiment, general business conditions, including the high levels of inflation experienced in Fiscalrecent 2024,years, macroeconomic uncertainties or slowdowns, the imposition of tariffs, and geopolitical conditions, including as a result of events such as acts of terrorism, effects of war, pandemics, or other health issues.

MostSome of these factors are beyond our control. It is difficult to predict the impact that general economic conditions, including the effects of inflation, tariffs and geopolitical conditions, will continue to have on consumer spending and our financial results. However, we believe that they could continue to result in reduced spending by our target customer, which would reduce our revenues and our cash flows from operating activities from those that otherwise would have been generated. In addition, steps that we may take to limit cash outlays, such as delaying the purchase of inventory, may not be successful or could delay the arrival of merchandise for future selling seasons, which could reduce our net sales or profitability. If we are unable to generate sufficient cash flows, we may not be able to fund our ongoing operations, planned capital expenditures, debt service requirements, or any future share repurchases, and we may be required to seek additional sources of liquidity as we did in Fiscal 2024.2025.

We require continued access to capital and our business and operating results have been and can be affected by factors such as the availability, terms of and cost of capital, increases in interest rates or a reduction in credit rating. We are party to (i) an Amended and Restated Credit Agreement dated May 9, 2019 (as amended from time to time, the “Credit Agreement”), with Wells Fargo, National Association (“Wells Fargo”), Bank of America, N.A., HSBC Bank (USA), N.A., JPMorgan Chase Bank, N.A., Truist Bank and PNC Bank, National Association, as lenders (collectively, the “Creditsole Agreementlender Lenders”),party thereto, and Wells Fargo, as Administrative Agent, Collateral Agent and Swing Line Lender.Lender and (ii) a term loan agreement dated December 16, 2025 (the “SLR Loan Agreement”), with SLR Credit Solutions (“SLR”) and other affiliated SLR entities as the lenders party thereto, and SLR as Administrative Agent, and Collateral Agent. Under the Credit AgreementAgreement, we use our asset-based revolving credit facility (the “ABL Credit Facility”) to finance our ongoing operations and our future growth, and some of the aforementioned factors have already affected our business, and could continue to: cause our cost of doing business to increase, limit our ability to pursue business opportunities, reduce cash flow used for sales and marketing, and place us at a competitive disadvantage. Further, the SLR Loan Agreement imposed new obligations for reserves and introduced additional restrictions on our ability to borrow funds under the ABL Credit Facility or to seek alternative financing options. Our historical operating results, including the operational losses experienced in Fiscal 2024,2025, macroeconomic uncertainties or slowdowns, volatility in the financial markets, significant losses in financial institutions’ U.S. retail portfolios, or environmentalenvironmental, social and socialgeopolitical concerns, are all factors that may lead to a contraction in credit availability impacting our ability to finance our operations or our ability to refinance our ABL Credit Facility or other outstanding indebtedness.

Any increase in interest rates could increase our interest expense and materially adversely affect our financial condition. These increased costs have, and could continue to, reduce our profitability and/or impair our ability to meet our debt obligations and to conduct ongoing operations. An increase in interest rates also could limit our ability to refinance existing debt upon maturity or cause us to pay higher rates upon refinancing. A significant reduction in cash flow from operations or the availability of credit could materially and adversely affect our cash available and our operating results, by inhibiting our ability to conduct ongoing operations and carry out our development plans.

Furthermore, as a retail company, we are inherently subject to the risk of inventory loss and theft. These losses may be caused by error or misconduct of associates, customers, vendors or other third parties, including through organized retail crime and professional theft. Since the occurrence of the COVID-19 pandemic, the retail industry has generally experienced an increase in inventory shrinkage, and thereThere can be no assurance that the measures we are taking will effectively reduce inventory shrinkage. Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory shrinkage or incur increased security costs to combat inventory theft, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our strategic initiatives currently involve a focus on (i) delivery of product of a quality and value that resonates with our customers, (ii) scaling and optimizing our infrastructure to support our e-commerce business given the continued shift in our customers’ shopping patterns to online shopping,business, and (iii) expanding and refurbishing our North American retail store fleet.

We will continue to implement and refine our business systems transformation initiatives designed to increase sales and profitability. Our business transformation through technology initiative has two key components: digital expansion and inventory management. With respect to digital expansion, we continue to implement a personalized customer contact strategy and are scaling our digital infrastructure to support increased digital demand. These initiatives require the execution of complex projects involving significant systems and operational changes, which place considerable demands on our management and our information and other systems. Our ability to successfully implement and capitalize on these business transformation projects is dependent on management’s ability to manage these projects effectively and implement and operate them successfully, without adversely affecting the subject and/or other systems, and on our employees’ ability to operationalize the required changes. If we fail to implement these projects effectively, including aligning them with our sourcing, distribution and logistics operations,operations; if we experience significant delay,delay or cost overruns, or unforeseen costs,overruns; or if the necessary operational changes and change management are not enacted properly, we may not realize the return on our investments that we anticipate,investments, and wesuch mayfailure adverselycould affectdisrupt theour operationexisting of other systems,systems and have a material adverse effect on our business, financial position, results of operations, and cash flows could be materially adversely affected.flows.

On the other hand, failure to achieve anticipated sales targets in newly-opened stores, and failure to properly identify customer segmentation and spending patterns to select optimal locations for the opening ofour new stores,store locations, could also have a material adverse effect on our business, financial position, results of operations, and cash flows.

Consumer demand, behavior, taste, and purchasing trends, as well as geopolitical conflicts and economic and political stability may differ in international markets and/or in the distribution channels through which our franchise and wholesale customerspartners sell products, and, as a result, sales of our products may not be successful or meet our expectations, or the margins on those sales may not be in line with those we currently anticipate. We may also face difficulties integrating foreign business operations and/or wholesaling operations with our current sourcing, distribution, information technology systems, and other operations. In addition, our expanded marketing and advertising strategies to promote sales, including the sponsorship of sweepstakes, contests and donations, and an increased online presence through collaborations with social media influencers, may not generate sufficient interest in our products while exposing us to other risks. Any of these challenges could hinder our success in new and existing markets or new and existing distribution channels. There can be no assurance that we will successfully complete any planned expansion or that any new business will be profitable or meet our expectations.

In addition, a wholly-owned subsidiary of the Company acquired certain intellectual property and related assets of Gymboree Group, Inc. and related entities, including worldwide rights to the name “Gymboree”. We have relaunched the Gymboree brand to expand our business across our retail stores, e-commerce, international, and wholesale businesses,businesses. and inIn November 2024, we opened our first Gymboree stand-alone store in Paramus, New Jersey.Jersey, Wewith alsoplans launchedto theopen Sugaradditional & Jade brandstores in NovemberFiscal 2021 and launched the PJ Place brand in October 2022.2026. The positioning of the Gymboree,Gymboree Sugar & Jadebrand and PJ Place brands and theirits products, relative to our existing products, the fashion choices we make with respect to our products, and our ability to integrate the Gymboree,Gymboree Sugar & Jadebrand and PJ Place brands and theirits products into our existing marketing, sourcing, inventory, sales/e-commerce, customer relations, and logistics operations and systems will be critical to our ability to leverage allthe of these brandsbrand to expand our business.

In addition, pursuant to U.S. GAAP, we are required to recognize an impairment charge when circumstances indicate that the carrying value of our indefinite-lived Gymboree tradename asset may not be recoverable. If a determination is made that the carrying value of the Gymboree tradename asset is not recoverable, the asset is written down to its estimated fair value. In Fiscal 2024, we recorded an impairment charge of $28.0 million on the Gymboree tradename, primarily due to reductions in Gymboree sales forecasts.

The apparel industry is cyclical in nature and is particularly affected by adverse trends in the general economy. Purchases of apparel and related merchandise are generally discretionary and, therefore, tend to decline during recessionary, inflationary and weak economic periods and also may decline at other times. This is particularly true with our target customer who is a value-conscious, lower- to middle-income mother buying for infants and children based on need rather than based on fashion, trend, or impulse. High inflation, high unemployment levels, increases in tariffs and tax rates, declines in real estate values, availability of credit, volatility in the global financial markets,markets and geopolitical conditions, and the overall level of consumer confidence have negatively impacted, and could in the future negatively impact, the level of consumer spending for discretionary items. This could adversely affect our business as it is dependent on consumer demand for our products. In North America, we have experienced and continue to experience a decrease in customer traffic, including at shopping malls, and a highly promotional environment. If the current macroeconomic environment deteriorates further, there will likely be a negative effect on our revenues, operating margins, and earnings which could have a material adverse effect on our business, financial position, results of operations, and cash flows.

The apparel industry is subject to significant pricing pressure caused by many factors, including intense competition, the highly promotional retail environment, the financial health of competitors, changes in consumer demand, and macroeconomic conditions.conditions, including the imposition of tariffs and/or any resulting retaliatory tariffs. In particular, other countries may change their business and trade policies in anticipation of or in response to increased import tariffs and other changes in trade policy and regulations already enacted or that may be enacted in the future. While some trade deals have been reached and trade negotiations are ongoing, some countries have also responded with retaliatory tariffs, and overall the global trade environment remains fluid and highly uncertain. If these factors cause us to reduce our sales prices and we fail to sufficiently reduce our product costs or operating expenses, our profitability and cash flows could decline.

Our single U.S. corporate headquarters is located in Secaucus, New Jersey. One of ourOur company-operated distribution centerscenter is located in Fort Payne, Alabama and supports our stores, wholesale, and e-commerce shipments both in the U.SU.S. and Canada. We also use a third-party warehouse provider, with distribution centers located in Brownsburg, Indiana, to support our U.S. e-commerce operations, and Mississauga, Ontario to support our Canadian e-commerce operationsoperations. Our international franchise partners receive the vast majority of shipments of merchandise from our third-party warehouse provider located in Asia. On occasion, we may utilize additional facilities to support our seasonal warehousing needs. Damage to, or prolonged interruption of operations at, any of the Company-operated or third-party facilities due to a work stoppage, war, pandemics or other health issues, weather conditions such as a tornado, hurricane or flood, other natural disaster, fire, or other event could have a material adverse effect on our business, financial position, results of operations, and cash flows.

We do not own or operate any manufacturing facilities and, therefore, are dependent upon independent third parties for the manufacture of all of our products. The vast majority of our products are currently manufactured to our specifications, pursuant to purchase orders, by independent manufacturers located primarily in Asia and Africa. We have no exclusive or long-term contracts with our manufacturers. We compete with other companies for manufacturing facilities, many of which have greater financial resources thanand wecould have or pay aafford higher unit priceprices thancompared weto do.us. If an existing manufacturer of merchandise must be replaced for any reason, we will have to find alternative sources of manufacturing or increase purchases from our other third-party manufacturers, and there is no assurance we will be able to do so or do so on terms that are acceptable to us.

•new or higher tariffs and/or any resulting retaliatory tariffs, or imposition of duties, taxes, and other charges on or costs of relying on imports;

•significant delays in the manufacture, transportation and delivery of cargo due to epidemics or pandemics, port security considerations, political unrest, war, weather conditions, or cyber-securitycybersecurity events;

•adherence to regulations under the United States Foreign Corrupt Practices Act; and

We have franchise partners located in the Middle-Eastern countries. When the current Israel-Palestine conflict began, our franchise partner in Israel had to shutter its stores temporarily, and we had provided a temporary hiatus on the collection of royalty payments from this franchise partner until December 2024. IfMore recently, in February 2026, Israel and the conflictUnited continuesStates initiated a coordinated military operation in Iran. In response, Iran launched counter-attacks against Israel and other countries in the region, including the United Arab Emirates. These conflicts in the Middle East have led to higher oil prices and created supply imbalances in the global market for oil and natural gas. The extent and duration of these effects cannot be reliably predicted, and these conflicts may have other adverse effects on the global economy. If these conflicts continue or expandsexpand further into other countries, itnot only could they adversely affect our sales with this franchise partner and all otherour franchise partners in the Middle-Eastern countries, but they could also lead to increased shipping costs, transportation delays, embargos, and itother supply chain concerns, all of which could have a material adverse effect on our business, financial position, results of operations, and cash flows.

We accept payments using a variety of methods, including cash, checks, credit and debit cards, Afterpay, ApplePay, PayPal, Venmo, our private label credit card, and gift cards. Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment card association operating rules, certification requirements and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or costly. Although no system can completely prevent theft, security countermeasures have been deployed to reduce the potential for fraud and theft by criminals. If we fail to comply with applicable rules and regulations, we may be subject to fines or higher transaction fees and may lose our ability to accept online payments or other payment card transactions. If any of these events were to occur, our business, financial position, results of operations, and cash flows could be adversely affected.

We self-insure and purchase insurance policies to provide for workers’ compensation, general liability and property losses, cyber-securitycybersecurity coverage, as well as director and officers’ liability, vehicle liability, and employee medical benefits. Claims are difficult to predict and may be volatile. Any adverse claims experience could have a material adverse effect on our business, financial position, results of operations, and cash flows.

Product liability costs, related claims, and the cost of compliance with consumer product safety laws in the U.S.United States and in Canada or our inability to comply with such laws could have a material adverse effect on our business and reputation.

We are subject to regulation by the Consumer Product Safety Commission (“CPSC”) in the U.S.,United States, Health Canada in Canada, and similar state, provincial, and international regulatory authorities. Although we test the products sold in our stores, on our website, and to our international franchise partners and our wholesale customers, concerns about product safety, including, but not limited to, concerns about those manufactured in developing countries, may lead us to recall selected products, either voluntarily or at the direction of a governmental authority, and may lead to a lack of consumer acceptance or loss of consumer trust. Product safety concerns, recalls, or the failure to properly manage recalls, defects, or errors could result in governmental fines, rejection of our products by customers, damage to our reputation, lost sales, product liability litigation, and increased costs, any or all of which could harm our business and have a material adverse effect on our business, financial position, results of operations, and cash flows.

Following any such change in the price of our common stock, we have, and could in the future, be subject to litigation from our stockholders. For example, in February 2024, a putative class action was filed against us for violations of federal securities laws in the United States District Court of New Jersey. The complaint purported to assert claims under the federal securities laws, alleging that we had made materially false and/or misleading statements, and failed to disclose material adverse facts to our investors such that the price of our common stock dropped as a result. As of November 20, 2024, this case has been dismissed in its entirety, with prejudice. See “Item 3. Legal Proceedings” of this Form 10-K for further information. Any adverse results and/or settlements from such litigation could have a material adverse effect on our business, financial position, results of operations, and cash flows.

Mithaq owns and controls the voting power of 62.2%61% of our outstanding shares of common stock as of FebruaryJanuary 6,31, 2025, subsequent to the completion of our recent rights offering.2026. As long as Mithaq continues to control a majority of our outstanding shares of common stock, it will be able to determine the outcome of all corporate actions requiring stockholder approval.

Mithaq and its affiliates engage in a broad spectrum of activities. In the ordinary course of their business activities, Mithaq and its affiliates may engage in activities where their interests may not be the same as, or may conflict with, our interests or the interests of our other stockholders. Other stockholders will not be able to affect the outcome of any stockholder vote while Mithaq controls the majority of the voting power of our outstanding shares of common stock. As a result, Mithaq will be able to control, directly or indirectly and subject to applicable law, the composition of our Board of Directors,Board, which in turn will be able to control all matters over which we have control, including, among others:

We have no current plans to pay regular cash dividends on our common stock for the foreseeable future.future pursuant to the terms of our Credit Agreement and SLR Loan Agreement, which impose certain restrictions on our ability to pay dividends. Declarations of cash dividends, and the establishment of future record and payment dates, are at the discretion of our Board of Directors based on a number of factors, including future financial performance, general business and market conditions, and other investment priorities. If payment of dividends is resumed, any subsequent reduction or discontinuance by us of the payment of quarterly cash dividends could cause the market price of our common stock to decline.

•risks associated with the failure of the computer systems that operate our website or the failure or disruption of our information technology and other business systems, including, but not limited to, inadequate system capacity, security breaches, computer viruses, human error, changes in programming, failure of third-parties to continue to support older systems or system upgrades, or unintended disruptions occasioned as a result of such upgrades, or migration of these services to new systems, including to the cloud;

•the integration of the Gymboree brand in our stores and via our e-commerce website, the continued progress of our Sugar & Jade and PJ Place brandswebsite;

We are subject to the requirements of Section 203 of the Delaware General Corporation Law (the “DGCL”), which provides that a corporation shall not engage in any business combination with any interested stockholder for a period of three years following the time that such stockholder became an interested stockholder, unless (1) prior to such time the Board of Directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (2) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (3) at or subsequent to such time the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66.67% of the outstanding voting stock which is not owned by the interested stockholder. These restrictions are subject to certain exceptions specified in Section 203(b) of the DGCL. The term “interested stockholder” is generally defined by Section 203 of the DGCL as any person that (i) is the owner of 15% or more of the outstanding voting stock of the corporation, or (ii) is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within the three-year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder, and the affiliates and associates of such person. The term “business combination” is broadly defined under Section 203 of the DGCL to include mergers, asset sales and other transactions in which the interested stockholder receives or could receive a financial benefit on other than a pro rata basis with other stockholders, as further described in the section entitled “Description of Capital Stock”.

Without having obtained the prior approval of our Board of Directors or meeting the other conditions described above, Mithaq became an “interested stockholder” with respect to the Company upon its acquisition of more than 15% of our shares of common stock in February 2024. As a result, prior to February 2027, Mithaq will generally be prevented from engaging in any business combination (as defined for purposes of Section 203 of the DGCL) with us, in the absence of the approval of our Board of Directors and the affirmative vote of at least two-thirds of our outstanding shares of common stock not owned by Mithaq.

We believe that our trademarks and service marks are important to our success and our competitive position due to their name recognition with our customers. We devote substantial resources to the establishment and protection of our trademarks and service marks on a worldwide basis, including in the countries from which we source our merchandise and in which we have business operations or plan to have business operations, including through foreign franchise partners. We are not aware of any material claims of infringement or material challenges to our right to use any of our trademarks in the United States or Canada. Nevertheless, the actions we have taken, including to establish and protect our trademarks and service marks, may not be adequate to prevent others from imitating our products or to prevent others from seeking to block sales of our products. Also, others may assert proprietary rights in our intellectual property, or may assert that we are engaging in activities that infringe on their own intellectual property, and we may not be able to successfully resolve these types of claims, any of which could have a material adverse effect on our business, financial position, results of operations, and cash flows. In particular, the recent proliferation of the use of AI increases the potential for claims of infringement or other claims, including those based on unauthorized use of third-party technology or content. In addition, the laws of certain foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States, and we may not be successful in obtaining our trademarks in foreign countries where we plan to conduct business. Our failure to protect our intellectual property rights could diminish the value of our brands, weaken our competitive position, and could have a material adverse effect on our business, reputation, financial position, results of operations, and cash flows.

If we fail to comply with applicable laws and regulations, particularly wage and hour, accessibility, privacy and information security, AI technologies and services, product safety, and pricing, children’s online privacy protection, advertising, sweepstakes, contests, and marketing laws, we could be subject to legal and reputational risk, government enforcement action, and class action civil litigation, which could have a material adverse effect on our business, financial position, results of operations, and cash flows. Changes in regulation and how regulations are enforced, such as taxes, tariffs, privacy and information security, product safety, trade, consumer credit, pricing, advertising, and marketing, healthcare or environmental protection, among others, could cause our expenses to increase, margins to decrease, or tax deductible expenses to decrease, which could lead to a material adverse effect on our business, financial position, results of operations, and cash flows.

If we have difficulty implementing and maintaining effective internal controls over financial reporting, or if we identify a material weakness in our internal controls over financial reporting in the future, we may not detect errors on a timely basis, such that it could harm our operating results, adversely affect our reputation, cause our stock price to decline, or result in inaccurate financial reporting or material misstatements in our annual or interim financial statements. We may be unable to maintain compliance with securities laws, stock exchange listing requirements and debt instruments’ covenants regarding the timely filing of accurate periodic reports, which could lead to investigations by Nasdaq, the SEC or other regulatory authorities or litigationslitigation with our creditors and/or stockholders, hence requiring additional management attention and impairing our ability to operate our business. Our liquidity, access to capital markets and perceptions of our creditworthiness may be adversely affected. We could be required to implement expensive and time-consuming remedial measures. Our independent registered public accounting firm may issue reports that are adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed, or operating, or if it is not satisfied with our remediation of any identified material weaknesses. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material adverse effect on our business, financial position, results of operations, and cash flows.

The following discussion should be read in conjunction with our audited financial statements and notes thereto included in Part IV, Item 15. Exhibits and Financial Statement Schedules. This Annual Report on Form 10-K contains or may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements relating to the Company’s strategic initiatives and results of operations, including adjusted net income (loss) per diluted share. Forward-looking statements typically are identified by use of terms such as “may,” “will,” “should,” “plan,” “project,” “expect,” “anticipate,” “estimate,” “believe,” and similar words, although some forward-looking statements are expressed differently. These forward-looking statements are based upon the Company’s current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results and performance to differ materially. Some of these risks and uncertainties are described in the Company’s filings with the Securities and Exchange Commission, including in Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K for the fiscal year ended FebruaryJanuary 1,31, 2025.2026. Included among the risks and uncertainties that could cause actual results and performance to differ materially are the risk that the Company will be unable to achieve operating results at levels sufficient to fund and/or finance the Company’s current level of operations and repayment of indebtedness, the risk that changes in trade policy and tariff regimes, including newly imposed U.S. tariffs and any responsive non-U.S. tariffs, may impact the Company’s international manufacturing and operations or customers’ discretionary spending habits, the risk that the Company will be unsuccessful in gauging fashion trends and changing consumer preferences, the risks resulting from the highly competitive nature of the Company’s business and its dependence on consumer spending patterns, which may be affected by changes in economic conditions (including inflation), the risk that changes in the Company’s plans and strategies with respect to pricing, capital allocation, capital structure, investor communications and/or operations may have a negative effect on the Company’s business, the risk that the Company’s strategic initiatives to increase sales and margin, improve operational efficiencies, enhance operating controls, decentralize operational authority and reshape the Company’s culture are delayed or do not result in anticipated improvements, the risk of delays, interruptions, disruptions and higher costs in the Company’s global supply chain, including resulting from disease outbreaks, foreign sources of supply in less developed countries, more politically unstable countries, or countries where vendors fail to comply with industry standards or ethical business practices, including the use of forced, indentured or child labor, the risk that the cost of raw materials or energy prices will increase beyond current expectations or that the Company is unable to offset cost increases through value engineering or price increases, various types of litigation, including class action litigation brought under securities, consumer protection, employment, and privacy and information security laws and regulations, the imposition of regulations affecting the importation of foreign-produced merchandise, including duties and tariffs, risks related to the existence of a controlling stockholder, and the uncertainty of weather patterns, as well as other risks discussed in the Company’s filings with the SEC from time to time. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

We are one of the largestonly pure-play children’s specialty retailerretailers in North America with an omni-channel portfolio of brands.presence. We design, contract to manufacture, and sell fashionable, high quality apparel, accessories and footwear predominantly at value prices, primarily under our proprietary brands: “The Children’s Place”, “Gymboree”, “Sugar & Jade”, and “PJ PlaceGymboree”. Our global retail and wholesale network includes two digital storefronts, 495498 stores in North America, wholesale marketplaces, 190223 international points of distribution in 1312 countries through our sixnine international franchise and wholesale partners, and social media channels on Instagram, Facebook, and X, formerly known as Twitter, YouTube and Pinterest.Twitter. Our digital storefronts are at www.childrensplace.com and www.gymboree.com, where our customers are able to shop online for the same merchandise available in our physical stores, butas alsowell as certain exclusive merchandise offered only available aton our e-commerce sites.

In accordance with FASB ASC 280 — Segment Reporting, we report segment data based on geography: The Children’s Place U.S. and The Children’s Place International. Each segment includes an e-commerce business located at www.childrensplace.com and www.gymboree.com. Included in The Children’s Place U.S. segment are our U.S. and Puerto Rico-based stores and revenue from our U.S.-based wholesale business. Included in The Children’s Place International segment are our Canadian-based stores and revenue from international franchisees. We measure our segment profitability based on operating income (loss), defined as income (loss) before interest and taxes. Net sales and direct costs are recorded by each segment. Certain inventory procurement functions such as production and design, as well as corporate overhead, including executive management, finance, real estate, human resources, legal, and information technology services, are managed by The Children’s Place U.S. segment. Expenses related to these functions, including depreciation and amortization, are allocated to The Children’s Place International segment based primarily on net sales. The assets related to these functions are not allocated. We periodically review these allocations and adjust them based upon changes in business circumstances. Net sales to external customers are derived from merchandise sales, and we have one U.S. wholesale customer that individually accounted for more than 10% of our net sales during Fiscal 2025 and Fiscal 2024. Refer to “Note 17.16. Segment Information” of the Consolidated Financial Statements ofin this Form 10-K for more information.

Macroeconomic conditions, including inflationary pressures, higher interest rates, tariffs, and other domestic and geopolitical factors, continued to adversely affect our core customercustomer. inDuring Fiscal 2024. While some of these inflationary pressures, including freight input costs and product input costs, had improved in Fiscal 2024, we may continue to experience inflationary pressures on our product input costs and distribution costs. In Fiscal 2024,2025, these pressures contributed to a decrease in consumer discretionary apparel purchases. We expect these macroeconomic conditions, including but not limited to increased product input costs, transportation costs, distribution costs, and geopolitical conditions like changes in foreign policies of the United States, and other inflationary pressures, to continue to have an adverse impact during Fiscal 2025.2026.

We believe that our e-commerce and brick-and-mortar retail store operations are highly interdependent, with both sharing common customers purchasing from a common pool of product inventory. Accordingly, we believe that consolidated omni-channel reporting presents the most meaningful and appropriate measure of our performance,performance. includingWe netprimarily sales.evaluate the results of our operations as a percentage of Net sales rather than in terms of absolute dollar increases or decreases by analyzing the year over year change in our business expressed as a percentage of Net sales (i.e., “basis points”). To the extent that our sales have increased at a faster rate than our costs (i.e., “leverage”), the more efficiently we have utilized the investments we have made in our business. Conversely, if our sales decrease or if our costs grow at a faster pace than our sales (i.e., “deleverage”), we have utilized the investments we have made in our business less efficiently.

We have presented certain measures on a non-GAAP basis. Adjusted net loss,income (loss), adjusted net income (loss) per diluted share, adjusted gross profit, adjusted selling, general, and administrative expenses, and adjusted operating income (loss) are non-GAAP measures. These measures are not intended to replace GAAP financial information, and may be different from non-GAAP measures reported by other companies. The most comparable GAAP measures are net loss,income (loss), net income (loss) per diluted share, gross profit, selling, general, and administrative expenses, and operating income (loss), respectively. We believe the income and expense items excluded as non-GAAP adjustments are not reflective of the performance of our core business, and that providing this supplemental disclosure to investors will facilitate comparisons of the past and present performance of our core business.

This Quarterly Report on Form 10-Q contains or may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements relating to the Company’s strategic initiatives and results of operations, including adjusted net income (loss) per diluted share. Forward-looking statements typically are identified by use of terms such as “may,” “will,” “should,” “plan,” “project,” “expect,” “anticipate,” “estimate,” “believe,” and similar words, although some forward-looking statements are expressed differently. These forward-looking statements are based upon the Company’s current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results and performance to differ materially. Some of these risks and uncertainties are described in the Company’s filings with the Securities and Exchange Commission, including in the "Risk Factors" section of its annual report on Form 10-K for the fiscal year ended January 31, 2026. Included among the risks and uncertainties that could cause actual results and performance to differ materially are the risk that the Company will be unable to achieve operating results at levels sufficient to fund and/or finance the Company’s current level of operations and repayment of indebtedness, the risk that changes in trade policy and tariff regimes, including newly imposed U.S. tariffs and any responsive non-U.S. tariffs, may impact the Company’s international manufacturing and operations or customers’ discretionary spending habits, the risk that the Company will be unsuccessful in gauging fashion trends and changing consumer preferences, the risks resulting from the highly competitive nature of the Company’s business and its dependence on consumer spending patterns, which may be affected by changes in economic conditions (including inflation), the risk that changes in the Company’s plans and strategies with respect to pricing, capital allocation, capital structure, investor communications and/or operations may have a negative effect on the Company’s business, the risk that the Company’s strategic initiatives to increase sales and margin, improve operational efficiencies, enhance operating controls, decentralize operational authority and reshape the Company’s culture are delayed or do not result in anticipated improvements, the risk of delays, interruptions, disruptions and higher costs in the Company’s global supply chain, including resulting from disease outbreaks, foreign sources of supply in less developed countries, more politically unstable countries, or countries where vendors fail to comply with industry standards or ethical business practices, including the use of forced, indentured or child labor, the risk that the cost of raw materials or energy prices will increase beyond current expectations or that the Company is unable to offset cost increases through value engineering or price increases, various types of litigation, including class action litigation brought under securities, consumer protection, employment, and privacy and information security laws and regulations, risks related to the existence of a controlling stockholder, and the uncertainty of weather patterns, as well as other risks discussed in the Company’s filings with the SEC from time to time. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

•FirstSecond Quarter 2026 — The thirteen weeks ended MayAugust 2,1, 2026

•FirstSecond Quarter 2025 — The thirteen weeks ended MayAugust 3,2, 2025

We are one of the only pure-play children’s specialty retailers in North America with an omni-channel presence. We design, contract to manufacture, and sell fashionable, high quality apparel, accessories and footwear predominantly at value prices, primarily under our proprietary brands: “The Children’s Place” and “Gymboree”. Our global retail and wholesale network includes two digital storefronts, 497514 stores in North America, wholesale marketplaces, 329323 international points of distribution in 13 countries through our nineten international franchise and wholesale partners, and social media channels on Instagram, Facebook, and X, formerly known as Twitter. Our digital storefronts are at www.childrensplace.com and www.gymboree.com, where our customers are able to shop online for the same merchandise available in our physical stores, as well as certain exclusive merchandise offered only on our e-commerce sites.

In accordance with FASB ASC 280 — Segment Reporting, we report segment data based on geography: The Children’s Place U.S. and The Children’s Place International. Each segment includes an e-commerce business located at www.childrensplace.com and www.gymboree.com. Included in The Children’s Place U.S. segment are our U.S. and Puerto Rico-based stores and net sales from our U.S.-based wholesale business. Included in The Children’s Place International segment are our Canadian-based stores and net sales from international franchisees. We measure our segment profitability based on operating income (loss), defined as income (loss) before interest and taxes. Net sales and direct costs are recorded by each segment. Certain inventory procurement functions such as production and design, as well as corporate overhead, including executive management, finance, real estate, human resources, legal, and information technology services, are managed by The Children’s Place U.S. segment. Expenses related to these functions, including depreciation and amortization, are allocated to The Children’s Place International segment based primarily on net sales. The assets related to these functions are not allocated. We periodically review these allocations and adjust them based upon changes in business circumstances. Net sales to external customers are derived from merchandise sales, and we have noone U.S. wholesale customer that individually accounted for more than 10% of our Net sales for the FirstSecond Quarter 2026.

Macroeconomic conditions, including inflationary pressures, higher gas prices, higher interest rates, tariffs, and other domestic and geopolitical factors, continued to adversely affect our core customer. During the FirstSecond Quarter 2026, these pressures contributed to a decrease in consumer discretionary apparel purchases. We expect these macroeconomic conditions, including but not limited to increased product input costs, gas prices, transportation costs, distribution costs, and geopolitical conditions like changes in foreign policies of the United States, and other inflationary pressures, to continue to have an adverse impact during the remainder of Fiscal 2026.

During the Firstfirst Quarterquarter of 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act of 1977 (“IEEPA”) were unlawful and thus deemed invalid. During Fiscal 2025 and Fiscal 2026, we paid approximately $40 million in IEEPA tariffs,tariffs. forDuring whichthe Second Quarter 2026, we havesubmitted submittedtariff refund claims fromto the U.S. Customs and Border Protection (“CBP”). Theseand received refunds willamounting reduceto approximately $39 million (excluding interest) which was recorded as a reduction of Cost of goods soldsales for amounts incurred for goodsinventory previously sold and will continue to improve gross margin as we sell through the remaining inventory on hand that was impacted by IEEPA tariffs. As a result, we expect the recovery of these refunds to partially offset some of our margin dilution in Fiscal 2026, which has been impacted by the current macroeconomic environment. We have received $5.5 million of these refunds from the CBP subsequent to the end of the First Quarter 2026 to date.sold. As previously disclosed, we have monetized most of these tariff refund claims at a discounted rate by selling the future receipt of these funds to a purchaser. The refunds received were used primarily to pay down our short-term debt. For more information about the monetization of these IEEPA tariff refund claims, see “Note 6. Debt” of the accompanying consolidated financial statements.

FirstSecond Quarter 2026 Compared to FirstSecond Quarter 2025

Net sales decreased $26.9$56.2 million, or 11.1%,18.9%, to $215.2$241.8 million during the FirstSecond Quarter 2026 from $242.1$298.0 million during the FirstSecond Quarter 2025,2025. The decrease in net sales was driven by a decrease in direct-to-consumer (“DTC”) sales of 10.2%15.0% due to lower traffic compared to the FirstSecond Quarter 2025, as we work to stabilize our customer file. Despite this, our DTC business experienced a sequential improvement in sales trends versus the fourth quarter of Fiscal 2025 of 40 basis points (“bps”) and an improvement in trend versus the prior year of 460 bps.2025. Comparable retail sales in our owned and operated DTC business decreased 8.3%16.7% for the FirstSecond Quarter 2026. Our consolidated results were also impacted by the planned reduction in shipments infor our wholesale channel as we continue to workalign inventory positions with our customerscustomers, and to ensureliquidate inventoriesaged arefashion aligned with demand. While our shipments to this channel were down in the First Quarter 2026, retail sales to the end consumer were flat to the First Quarter 2025.inventories.

Gross profit decreased $17.4$18.0 million to $53.4$83.3 million during the FirstSecond Quarter 2026, compared to $70.8$101.3 million during the FirstSecond Quarter 2025. Gross margin decreasedincreased 44040 basis points (“bps”) to 24.8%34.4% of Net sales in the FirstSecond Quarter 2026, compared to 29.2%34.0% of Net sales in the FirstSecond Quarter 2025. The decreaseincrease in gross margin was caused primarily by the impact of higher tariff costsrefunds onrecognized during the Second Quarter 2026 amounting to approximately $39 million, which was accounted for as a reduction of Cost of sales. Excluding the impact of these refunds, our productgross (360margin bps),decreased higher1,550 distributionbps, costsprimarily due to a one-time charge to exit our third party distribution facility (170 bps) and a higher penetration of markdown sales (590 bps), higher tariffs on our product (330 bps), increased store occupancy costs due to new store openings (260 bps), and dilutionsan increase in inventory reserves (140250 bps), partially offset by favorable product mix (150 bps) and a reduction in inventory reservescosts (80100 bps). Adjusted gross profit decreased $13.1$17.6 million to $57.6$83.7 million during the FirstSecond Quarter 2026, compared to $70.8$101.3 million during the FirstSecond Quarter 2025. Adjusted gross margin decreasedincreased 24060 bps to 26.8%34.6% of Net sales during the FirstSecond Quarter 2026, compared to 29.2%34.0% during the FirstSecond Quarter 2025.2025, inclusive of the impact of tariff refunds.

Gross profit is calculated as consolidated Net sales less Cost of goods soldsales (exclusive of depreciation and amortization). Gross margin is calculated as gross profit divided by consolidated netNet sales. Gross profit as a percentage of netNet sales is dependent upon a variety of factors, including changes in the relative sales mix among distribution channels, changes in the mix of products sold, the timing and level of promotional activities, changes in foreign currency exchange rates, and fluctuations in input costs. These factors, among others, may cause gross profit as a percentage of netNet sales to fluctuate from period to period.

Selling, general, and administrative expenses wereincreased $88.9$0.5 million to $90.1 million during the FirstSecond Quarter 2026, compared to $86.7$89.6 million during the FirstSecond Quarter 2025, and deleveraged 550710 bps to 41.3%37.2% of Net sales. The increase was primarily due to an increase in store expenses as we growopened 19 new stores, combined with the impact of unfavorable foreign currency exchange movements, partially offset by lower marketing expense as we continue to focus on rationalizing our fleet.spend, and lower payroll costs from our transformation efforts. Adjusted SG&A expenses were $87.4$88.3 million during the FirstSecond Quarter 2026, compared to $86.5$87.6 million during the FirstSecond Quarter 2025, and deleveraged 490710 bps to 40.6%36.5% of Net sales.

Depreciation and amortization was $6.7$6.3 million during the FirstSecond Quarter 2026, compared to $8.2$7.6 million during the FirstSecond Quarter 2025. The decrease was primarily driven by reduced depreciation of capitalized software.

Operating income (loss) was a loss wasof $(42.213.0) million during the FirstSecond Quarter 2026, compared to $(24.1)income of $4.1 million during the FirstSecond Quarter 2025 due to the factors described above, and deleveraged 960680 bps to (19.65.4)% of Net sales. Adjusted operating loss was $(36.110.9) million in the FirstSecond Quarter 2026, compared to $(24.0)Adjusted operating income of $6.1 million in the FirstSecond Quarter 2025, and deleveraged 690650 bps to (16.84.5)% of Net sales.

Related party interest expense was $2.1 million during the Second Quarter 2026 compared to $1.9 million during the First Quarter 2026 and the FirstSecond Quarter 2025.

OtherNet interest expense, netexpense was $7.7$18.3 million during the FirstSecond Quarter 2026, compared to $6.7$8.0 million during the FirstSecond Quarter 2025. The increase was due to the amortization of financing costs associated with the monetization of our tariff refund claims and income tax receivable claim,claim. partiallyExcluding offsetthe byimpact of these financing costs, net interest expense decreased $0.4 million due to lower average borrowings and interest rates on our debt facilities.

Provision (benefit) for income taxes was $1.3a benefit of $(0.3) million during the FirstSecond Quarter 20262026, andcompared to a provision of $1.5 million during the FirstSecond Quarter 2025. Our effective tax rate was (2.5)%a benefit of 1.1% and a provision of (4.137.1)% in the FirstSecond Quarter 2026 and FirstSecond Quarter 2025, respectively. The change in the effective tax rate was primarily due to a higher pretax loss and changes in forecasted earnings mix. We continue to adjust our valuation allowance based on ongoing operating results.

Net loss was $(53.231.0) million, or $(2.401.39) per diluted share, during the FirstSecond Quarter 2026, compared to $(34.05.4) million, or $(1.570.24) per diluted share, during the FirstSecond Quarter 2025, due to the factors described above. Adjusted net loss was $(44.318.2) million, or $(2.000.82) per diluted share, during the FirstSecond Quarter 2026, compared to $(32.83.4) million, or $(1.520.15) per diluted share, during the FirstSecond Quarter 2025.

The Children’s Place U.S. Net sales decreased $26.5$79.6 million, or 11.9%,16.1%, to $195.3$415.4 million during the First QuarterYear-To-Date 2026, compared to $221.8$495.0 million during the First QuarterYear-To-Date 2025, driven by a decrease in DTC sales due to lower traffic compared to the First Quarter 2025, as we work to stabilize our customer file.traffic. Our results were also impacted by the planned reduction in shipments infor our wholesale channel as we continue to workalign inventory positions with our customerscustomers, and to ensureliquidate inventoriesaged arefashion aligned with demand. While our shipments to this channel were down in the First Quarter 2026, retail sales to the end consumer were flat to the First Quarter 2025.inventories.

The Children’s Place International Net sales decreased $0.5$3.7 million, or 2.5%,8.1%, to $19.9$41.6 million during the First QuarterYear-To-Date 2026, compared to $20.4$45.2 million during theYear-To-Date First2025, Quarterdriven 2025.by a decrease in DTC sales due to lower traffic.

The Children’s Place U.S. Operating loss was $(34.041.7) million during the First QuarterYear-To-Date 2026, compared to $(19.713.4) million during the First QuarterYear-To-Date 2025, primarily due to lower net sales, as described above.

The Children’s Place International Operating loss was $(8.113.6) million during the First QuarterYear-To-Date 2026, compared to $(4.46.6) million during the First QuarterYear-To-Date 2025, primarily due to higher merchandise costs which negatively impacted our margins.

(2)Related to the over accrual of costs that were expected for legal settlements.

(3)Related to write-off of debt issuance costs associated with the partial prepayment of the InitialFirst Mithaq Term Loan pursuant to the completion of our rights offering in the Firstfirst Quarterquarter of 2025.

Our working capital needs typically follow a seasonal pattern, peaking during the third fiscal quarter based on seasonal inventory purchases. Our primary uses of cash are for working capital requirements, which consist primarily of inventory purchases, rent and marketing expenses, the payment of interest expense on our $350.0 million asset-based revolving credit facility (the “ABL Credit Facility”) with Wells Fargo Bank, National Association and our term loans,loan with SLR Credit Solutions (“SLR”), and the financing of capital projects.

During Fiscal 2024, we entered into an interest-free, unsecured and subordinated promissory note with Mithaq Capital SPC, a Cayman segregated portfolio company (“Mithaq”) for a $78.6 million term loan (the “InitialFirst Mithaq Term Loan”), and a separate unsecured and subordinated promissory note for a $90.0 million term loan (the “NewSecond Mithaq Term Loan”; and together with the InitialFirst Mithaq Term Loan, collectively, the “Initial Mithaq Term Loans”). As of February 6, 2025, $60.2 million under the InitialFirst Mithaq Term Loan was repaid pursuant to the completion of our rights offering on February 6, 2025 (“Rights Offering”), leaving $18.4 million outstanding under the InitialFirst Mithaq Term Loan. Pursuant to our refinancing transactions on December 16, 2025, the NewSecond Mithaq Term Loan was amended to allow us to defer our monthly payments upon written notice to Mithaq, and as an amendment consent fee, its principal amount was increased by $2.7 million to $92.7 million, leaving an aggregate of $111.1 million outstanding under the Initial Mithaq Term Loans as of MayAugust 2,1, 2026.

On December 16, 2025, we entered into a term loan agreement with SLR Credit Solutions (“SLR”) for a $100.0 million term loan (the “SLR Term Loan”). We used the net proceeds to partially pay down our borrowings under the ABL Credit Facility. The principal amount outstanding as of MayAugust 2,1, 2026 was $100.0 million.