Dive Brief:
- The Children’s Place, Inc. CEO Jane Elfers left the company last month under a “mutual agreement” with the specialty retailer, according to a filing with the U.S. Securities and Exchange Commission and a corporate announcement. The board of directors has initiated a search for a permanent CEO.
- Upon Elfers’ departure on May 20, Muhammad Umair was appointed president and interim CEO. Umair joined the company’s board of directors in February alongside three others nominated by Mithaq Capital, which recently became the company’s majority shareholder. Since that time, Mithaq Capital has provided over $168 million in term loans to help preserve the struggling retailer’s liquidity.
- Elfers is set to receive $3.75 million as part of a separation agreement, while Umair will receive a $650,000 annual base salary, according to a regulatory filing. The company said it intends to fill Umair’s board position swiftly.
Dive Insight:
The leadership transition comes shortly after The Children’s Place announced its Q4 and full-year performance. For the full year, net sales fell 6.2% to $1.6 billion, down from about $1.7 billion a year prior. Comparable retail sales also fell 4.7% and the company posted an $83.8 million operating loss for the fiscal year ended Feb. 3.
The company thanked Elfers, who led the business since 2010, for her time at the company. From a low point of performance in 2015, Elfers led the company to a pre-pandemic turnaround. But following sales declines, the retailer in 2020 accelerated store closure plans. It planned to shutter 300 locations over 2020 and 2021.
“The Children’s Place and our portfolio of brands have a strong connection to our customers, and I look forward to leveraging the many opportunities ahead in the children’s apparel retail segment,” Umair said in a statement. “My focus will be to foster growth through innovation, deliver exceptional value to our customers and drive returns for shareholders.”
Umair’s prior professional leadership roles include serving as a senior adviser for Origin Funding Partners, a global trade finance fund. He also was a senior auditor at Ernst & Young and has over 17 years of experience in financial and investment management. He’ll lead a company with more than 500 stores in North America.
In addition to its namesake brand, The Children’s Place portfolio includes Gymboree, Sugar & Jade and PJ Place. The Children’s Place also sells through wholesale marketplaces and has distribution in 16 countries through six international franchise partners.
In a May 24 letter to shareholders, board chairman Turki AlRajhi, who is also chairman and CEO of Mithaq, outlines how he wants to reshape the company's capital allocation and operations. As part of the company’s go-forward strategy, AlRajhi outlined several focus areas. They include prioritizing repayment of the company’s debt.
“We do not want to leave [The Children’s Place] at the mercy and kindness of lenders who are not aligned with [The Children’s Place’s] shareholders,” AlRajhi said. In addition, AlRajhi said, The Children’s Place will work to enhance operating controls, improve operating efficiency, reduce bureaucracy and reshape the company culture with a focus on innovation.
Following board member visits to The Children’s Place headquarters, stores and the company’s Alabama-based distribution center, as well as meetings with members of its senior leadership, AlRajhi said he’s identified two issues that can likely change quickly.
One is possibly increasing the minimum order value for free shipping. Until February, when the company implemented a minimum free shipping order value of $20, The Children’s Place had offered free shipping with no minimum order, a situation that “was financially unsustainable, as it resulted in significant losses on low-value orders.” AlRajhi said management is “currently thoughtfully thinking through” a decision on further increasing the minimum purchase value for free shipping, which it says sits at $35 to $50 at many competitors. AlRajhi also said the company may look to expand and further automate its Alabama distribution center to cut costs and improve operational efficiency.
Finally, the board chairman said that going forward, the company does not plan to conduct any quarterly earnings calls or offer quarterly guidance for the market. “We want management to focus on long-sighted decisions and long-term value creation, not on short-sighted decisions and behaviors to meet or beat quarter-to-quarter earnings guidance,” AlRajhi said.
