The Children’s Place, Inc. (Nasdaq: PLCE) announced its first-quarter fiscal 2026 financial results on June 12, reporting lower sales and a wider net loss as weaker consumer demand, higher tariff-related costs and increased operating expenses weighed on performance.
Net sales for the quarter ended May 2, 2026, declined 11.1% to $215.2 million from $242.1 million in the comparable period last year. The company said the decrease was primarily driven by a 10.2% decline in direct-to-consumer (DTC) sales due to lower customer traffic as it continues efforts to stabilize its customer base.
Comparable retail sales in the company’s owned and operated DTC business fell 8.3% during the quarter. However, management noted that DTC sales trends improved sequentially from the fourth quarter of fiscal 2025 and showed a 460-basis-point improvement compared with the prior year trend.
Results were also affected by a planned reduction in wholesale shipments as the company worked with retail partners to better align inventory levels with consumer demand. While wholesale shipments declined during the quarter, retail sales to end consumers remained flat compared with the prior year.
Gross profit decreased to $53.4 million from $70.8 million a year earlier. Gross margin contracted 440 basis points to 24.8% from 29.2%.
According to the company, the decline in gross margin was primarily driven by higher tariff costs, which reduced margins by approximately 360 basis points, as well as increased distribution expenses related to a one-time charge associated with exiting a third-party distribution facility. A higher proportion of markdown sales and pricing dilutions also pressured margins. These factors were partially offset by favorable product mix and lower inventory reserves.
On an adjusted basis, gross profit totaled $57.6 million, compared with $70.8 million in the prior-year quarter, while adjusted gross margin declined to 26.8% from 29.2%.
Selling, general and administrative expenses increased to $88.9 million from $86.7 million a year earlier, primarily due to higher store-related expenses as the company expanded its store fleet. As a percentage of net sales, SG&A expenses rose to 41.3% from 35.8%.
Operating loss widened to $42.2 million, compared with a loss of $24.1 million in the first quarter of fiscal 2025. Adjusted operating loss increased to $36.1 million from $24.0 million in the prior-year period.
Net interest expense rose to $9.7 million from $8.6 million a year earlier. The increase was largely attributed to financing costs associated with the monetization of tariff refund claims and an income tax receivable claim, partially offset by lower average borrowings and reduced interest rates on debt facilities.
The company reported a net loss of $53.2 million, or $2.40 per diluted share, compared with a net loss of $34.0 million, or $1.57 per diluted share, in the corresponding quarter of fiscal 2025.
Adjusted net loss totaled $44.3 million, or $2.00 per diluted share, compared with an adjusted net loss of $32.8 million, or $1.52 per diluted share, in the prior-year period.
During the quarter, The Children’s Place opened one store and closed two stores, ending the period with 497 locations, compared with 495 stores a year earlier.
As of May 2, 2026, the company held $4.8 million in cash and cash equivalents. Available liquidity included $38.0 million under its revolving credit facility and an additional $40.0 million available through an unsecured commitment provided by Mithaq, bringing total liquidity to $82.8 million.
The company had $150.0 million outstanding under its revolving credit facility and reported operating cash outflows of $53.8 million during the quarter, compared with operating cash outflows of $43.0 million in the same period last year.
Inventory levels improved significantly during the quarter. Inventories totaled $326.4 million as of May 2, 2026, down from $422.2 million a year earlier. The company said the reduction reflected improved inventory management and efforts to better align inventory levels with anticipated demand while maintaining a healthier balance between fashion and basic merchandise.
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