Children's Place announces initiatives to lower operating costs

06 Feb '09

3 min read

The Children's Place Retail Stores Inc announced that its Board of Directors has completed its previously announced review of strategic alternatives. In addition, the Board approved a number of actions that are expected to result in annualized savings of approximately $20 million pre-tax beginning mid-2009.

"Our special committee conducted a comprehensive review resulting in several meaningful and significant actions which positively impacted The Children's Place business results during fiscal 2008. These actions included exiting the Disney Store North America business, increasing profitability through a workforce reduction, lowering inventory levels, and enhancing the Company's balance sheet and cash flow," commented Sally Frame Kasaks, Acting Chair of the Board and Lead Director.

"With the strategic review behind us, the Board is renewing and accelerating its search for a permanent CEO. We are very appreciative of the outstanding job Interim CEO Chuck Crovitz has done in leading the Company through this difficult period and we are grateful for his willingness to continue in this role until a new CEO has been named.

Kasaks concluded, "The Board will continue to evaluate the Company's business plans in order to maximize its long-term growth potential, while the management team turns its full attention to operating the day-to-day business in this difficult economic environment."

Relocation of e-commerce business: On January 21, 2009, the Company announced that it plans to relocate its rapidly-growing e-commerce business from the Secaucus, NJ headquarters to its Southeast Distribution Center in Fort Payne Alabama, in June 2009. This move will provide additional capacity to accommodate continued growth while lowering the overall cost of fulfillment. This relocation is expected to result in one-time severance costs of $0.9 million pre-tax, capital expenditures of $2.0 million, and annualized savings of approximately $1.8 million pre-tax beginning in the second half of 2009.

Company-wide cost control initiatives: The Company has identified approximately $20 million pre-tax in annualized savings which it expects to realize from pervasive cost-control initiatives to be implemented Company-wide during the first quarter of 2009, including spending reductions in store operations, distribution centers, shipping, travel, marketing, real estate and human resources. Management will provide additional detail on these initiatives during the Company's fourth quarter 2008 earnings conference call on March 19, 2009.

"The actions we are announcing today reflect our ongoing commitment to nurture growth opportunities, while tightly-managing costs and expenses during this difficult retail environment," commented Chuck Crovitz, Interim Chief Executive Officer. "Our e-commerce business has outgrown its current facility adjacent to our corporate headquarters. By moving online fulfillment to our Southeast distribution center, we are providing ample room for growth and expansion of this important business, while optimizing usage of our existing DC facilities and lowering fulfillment costs."

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