The Children’s Place Retail Stores, Inc.

views updated May 11 2018

The Childrens Place Retail Stores, Inc.

915 Secaucus Road
Secaucus, New Jersey 07094-2409
U.S.A.
Telephone: (201) 558-2400
Toll Free: (877) 752-2387
Fax: (201) 227-0321
Web site: http://www.childrensplace.com

Public Company
Incorporated:
1969
Employees: 5,000 full-time; 16,400 part-time (2006)
Sales: $1.67 billion (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: PLCE
NAIC: 448130 Childrens and Infants Clothing Stores

The Childrens Place Retail Stores Inc. operates a chain of childrens clothing stores across much of the United States and in Canada. Its products, sold under The Childrens Place brand, are designed for children aged newborn to ten. In the competitive childrens retail market, the Childrens Place offers prices significantly lower than principal brand-name competitors. A pair of entrepreneurs started the company on the East Coast, and it gradually spread west and south. In 2004 the Childrens Place acquired the struggling chain of Disney Stores, taking over operations while paying a licensing fee to Disney. By the beginning of 2007 the company operated more than 850 Childrens Place stores and more than 325 Disney Stores throughout North America, with plans to expand steadily.

ENTREPRENEURIAL ORIGINS

The first Childrens Place store was opened by two 1965 graduates of Harvard Business School, David Pulver and Clinton Clark. Pulver and Clark both agreed that they did not want to go to work for big corporations, but it took them several years to decide what kind of business they would like to run. Some of the options they first considered were opening auto repair shops or marketing special meltable crayons. Eventually they focused on opening a childrens department store. Both men had children and thought they knew something of what children wanted, so they decided to put this expertise to work.

Pulver and Clark opened the Childrens Place in Hartford, Connecticut, in 1969. The store sold toys as well as clothing and accessories, a product mix described by Clark in a February 1, 1982, profile in Forbes as everything for everyone. This strategy was not particularly successful; many lines were unprofitable. Pulver and Clark spent three years adjusting the product mix and learning how to run the store before the Childrens Place made money. They chose to focus on medium-priced childrens sportswear, along with some name-brand kids clothing. Pulver and Clark expanded, opening more stores in the East. After ten years, the Childrens Place had blossomed into a chain of 34 stores. Revenues were growing at close to 50 percent annually, and profits were growing by one-third.

The Childrens Place had little direct competition at first. Its stores were primarily located in malls. Consumers could buy childrens clothing at mall anchor department stores such as J. C. Penney and Sears, but the Childrens Place was generally the only small mall shop selling childrens wear exclusively. The chain galloped along, nearly doubling to 65 stores by 1981. Sales were over $50 million. Pulver and Clark took the chain public in 1981, and they were apparently besieged by merger offers. The two founders were willing to sell the company, but they did not want to stay on and run it under a corporate boss.

In 1982, they sold the Childrens Place to Federated Department Stores. Federated was a large chain-store conglomerate with sales of around $6 billion. It ran such well-known department stores as Bloomingdales and I. Magnin. Pulver and Clarks deal with Federated called for them to train replacements to run the Childrens Place, so their association with the retail chain ended soon after the sale.

UPS AND DOWNS

The chains growth continued under new ownership. From 1982 to 1986, the Childrens Place added on average 20 stores a year, spreading mostly through malls across the Northeast and Midwest. Under Federated, however, the chain was no longer as profitable as it had been in its early years. The store sold a mix of brandname clothes and some private label, but its sales were hurt by discounters offering comparable goods at lower prices. A new chain, Kids R Us, an offshoot of the mass-market toy store chain Toys R Us, also provided new competition. In 1985, the Childrens Place lost money, and the company then stayed in the red for 1986 and 1987.

Federated made some changes to the chain, remodeling a few stores after a new prototype in 1984 and then progressively remodeling others for the more updated look. The parent company built a new warehouse to handle the Childrens Place goods, and hired new staff, anticipating growing the chain to 300 stores by 1990. However, the Childrens Place seemed to lose its uniqueness. It lost out to discounters, but it was not as upscale as some of its department-store competitors. It lacked guidance from Federated, a situation made worse in 1988, when the Federated conglomerate was bought by a Canadian company, Campeau Corporation. Already a small piece of a big firm, the Childrens Place was even further from the center of operations after the sale of Federated. The Childrens Place lost $12 million in 1988, and Campeau decided to sell it. It went on the block along with a sister chain it had started in 1986, the Accessory Place, another mall-based chain that sold accessories to girls and young women.

By 1988, the Childrens Place had grown to 161 stores. Campeau hoped to get bids of $75 million for the chain, in tandem with the Accessory Place, but no buyers were willing to shell out that much. Eventually the two chains together went for $28 million. The purchaser was an investor group led by Morris Dabah, the head of the apparel corporation Gitano Group. Dabahs investor group bought the two chains from Federated, then sold the Accessory Place the next day for $6 million. The chief executive position at the Childrens Place was then taken over by Ezra Dabah, who was also president of E. J. Gitano, Gitano Groups childrens division. He had a solid background in childrens merchandising, extensive contacts with manufacturers, and was a father of five himself.

COMPANY PERSPECTIVES

As a growing specialty retailer of clothing and accessories for kids, we provide our customers a high-quality, focused merchandise selection at prices that represent a substantial value relative to our competitors. Current fashion trends in a broad color palette are offered as coordinated outfits specifically designed for children.

NEW LEADERSHIP

Ezra Dabah was enthusiastic about running the Childrens Place. He knew the company had not been well managed under Federated, but he was sure the chain had great potential. It was still the only national childrens specialty chain to be found principally in malls. Its main competitor, Kids R Us, was primarily in strip malls or the kind of edge-of-town retail areas where big box stores were found. The mall locale of the Childrens Place chain gave it a unique identity. Moreover, Dabah believed that childrens apparel was a market poised for immense growth. Dabah quickly initiated plans to get the chain back on its feet. He opened two new prototype stores, planning to build other new ones on the same model. These had a bright, open floor plan with walls accented by floral wallpaper; a toddler play area; revamped fitting rooms, including one for disabled children; video monitors; and colorful posters and props. Unprofitable stores were shut down, layers of management cut, and the merchandise mix was reconsidered. Dabah preferred to go with an upscale image. Ninety percent of the clothing was branded, with labels such as Gloria Vanderbilt, Bugle Boy, OshKosh, and Gitano. By late 1989, Dabah was able to claim that the Childrens Place would turn a profit that year. Expenses were down, and inventory was turning over faster.

Dabah also announced that the chain would continue to grow. In an article in WWD for September 18, 1989, Dabah revealed plans to add 20 to 30 stores in 1990, and eventually bring the chain up to 400 to 500 stores. Direct competitors were considered the department stores that frequently anchored malls, such as J. C. Penney and Macys. Price was not to be the main draw at the Childrens Place. The big come-on, Dabah declared to WWD, will be the merchandise itself.

Nevertheless, the Childrens Place remained financially troubled. Between 1990 and 1992, the company lost $60 million. Store closings outnumbered openings, bringing the total number in the chain to only 90. The investor group that had bought the firm filed for Chapter 11 in November 1993, along with Ezra Dabah and three other members of his family. The Dabahs Gitano Group was not doing well, either. It filed for bankruptcy in 1994. The Childrens Place had trouble meeting its payments, and the company finally agreed in 1993 to an out-of-court settlement restructuring its debts. This action allowed the firm to remain in business. Three years later, the company was still not financially sound, and it brought in two outside firms to help it handle its debt: Saunders Karp & Megrue (SKM), which took a stake of over 30 percent in the Childrens Place, and Nomura Holding America, which took a smaller stake of around 9 percent. The Dabah family continued to hold the remaining stock.

By 1997, the company had changed its marketing thrust. Instead of offering high-priced brand-name merchandise, it sold good quality but value-priced childrens clothing under its own brand name, Childrens Place. This decision gave it a competitive edge against the many retailers it was up against in the childrens market. These newcomers included GapKids, babyGap, and Old Navy, all of which were offshoots of the Gap; Limited Too, a childrens version of the longstanding mall-based the Limited chain; and Gymboree, a nationwide chain of childrens clothing stores. The Childrens Place continued to vie for market share with J. C. Penney, Sears, and other mall department stores, as well as Kids R Us. The Childrens Place set the price of its private-label clothing at 20 to 30 percent below most of its mall-based competitors. Its Childrens Place brand was sold exclusively in its own stores. In 1997, the company vaunted its new, improved image to attract investors for an initial public offering (IPO). By then it had grown to include 130 stores. Sales in 1996 of $122 million had given the firm a slim $1.65 million in profit, but for 1997 the figures were better, with net income of over $30 million on sales of around $144 million.

GOING PUBLIC

The Childrens Place hoped to raise $70 million with its IPO. In fact it raised $50 million, which went to pay off debt. SKM, which had taken a stake in the company in 1996 to help turn its finances around, sold its holdings in the IPO. More than 40 percent of the stock remained in the hands of CEO Ezra Dabah, and the companys board in total held almost 80 percent. The publicly traded shares started out at $14, soon selling for over $16. However, unseasonably warm weather depressed fall sales, and a month after the September IPO, the Childrens Place announced that it would have lower than expected results for that quarter. The stock plunged, and shareholders sued.

KEY DATES

1969:
First Childrens Place store opened.
1982:
Founders sell chain to Federated Department Stores.
1988:
Money-losing chain sold to investor group led by Dabah family.
1993:
Firm restructured to handle debt.
1997:
Company sells shares to public.
2004:
Company acquires chain of Disney Stores.

A year later, however, the stock was performing well, and the company seemed back on track. Though the company faced stiff competition from GapKids, Gymboree, and others, its lower pricing set its stores apart. Dabahs long experience in childrens clothing gave him the necessary knowledge and connections to keep costs down. An analyst interviewed by Ylonda Gault in Crains New York Business explained, Most companies go to the factories and say, I want a pair of jeans for $5. Ezra negotiates every single element. He goes in and says, Ill pay this price for the zipper and use this kind of stitch. In the end, he comes out with good quality at a great price. In addition, the Childrens Place touted its color-coordinated clothing lines, which made it easy to mix and match items. The company also emphasized its blending of fashion with practicality, with an inventory boasting the latest trends as well as the basics. Analysts noted that the combination of the stores upscale look and value prices allowed them to succeed in every setting, from budget-conscious strip malls to tony suburban shopping centers.

The chain kept up its expansion during the late 1990s, moving west and south. In 1998 it had 180 stores, and it opened 84 more during 1999, including a number of successful street-front stores. By 2000, the chains growth seemed more assured than at any time in its recent past. Over the three years since the public offering, sales rose 44 percent, topping $400 million, and earnings also climbed by over 15 percent. With plans to reach 800 stores by 2004, the Childrens Place was described by Gault in a 1999 Crains New York Business article as the fastest-growing kids apparel retailer in the country.

NEW GROWTH AND CHALLENGES IN THE 21ST CENTURY

The Childrens Place continued its growth trajectory in the early 2000s, expanding throughout the United States and beyond the border, with its first stores in Canada opening in 2002. The company stumbled a bit in its sales during 2001 and 2002, however, a problem that some industry observers blamed on an overly broad assortment of styles. Early in 2001, the companys merchandising manager passed away, and the position was not filled for well over a year. During that time, according to Lisa Fickenscher of Crains New York Business, the companys strategy was allowed to drift. In 2002, Dabah hired Amy Hawk, a former vice-president of mens merchandising at Old Navy, to be the companys merchandising director, and Hawk immediately set to work simplifying the product lines at the Childrens Place stores. Also in 2002, the Childrens Place stores began undergoing dramatic remodelings, with color-coded areas creating a shop-within-a-shop feeling for each section of the store, divided by age and gender. The pared-down selection combined with the sleek new store designs contributed to an improved financial picture in 2003. By the end of that year, the company operated nearly 700 stores, and its net income had increased more than 300 percent from 2002.

By 2004, the Childrens Place occupied a strong position in the childrens retail market, and the company began to consider an expansion of a different kind. By midyear reports began to surface that the Childrens Place was in talks to acquire the struggling chain of Disney Stores in the United States and Canada. The acquisition was officially announced in late 2004, and the news was greeted with optimism by Wall Street and by individual investors. The deal involved a $100 million investment by the Childrens Place to remodel the Disney Stores. The long-term agreement stipulated that the Childrens Place would pay licensing fees to Disney, beginning in late 2006. In an article by Dawn S. Kissi in WWD, Dabah outlined his goals for the newly expanded company: together with the Disney Stores, the Childrens Place aimed to be the leading retail player in the newborn-to-age-10 category.

The Childrens Place faced considerable challenges with its new acquisition. The 313 Disney Stores had been losing money for Disney, which at one point had had more than 700 stores. Even after closing hundreds of unsuccessful stores, Disney still struggled to wring a profit from the chain. In spite of the challenges, both sides entered the deal with high hopes for its success. With its acquisition of the Disney Stores, the Childrens Place hoped to benefit from its expanded market position and to economize on combined operations for the two chains. Unlike Disney, the Childrens Place had extensive experience as a mall-based apparel chain, experience that could be applied to the Disney Stores. The Childrens Place hoped to rehabilitate the ailing chain and eventually open new stores. For the Walt Disney Companywhich continued operation of its store on Fifth Avenue in New York, the stores inside the theme parks, and the Disney Catalogthe deal meant that the company did not have to shut down the Disney Stores and would still earn licensing fees from the Childrens Place.

The Childrens Place acted quickly; by the end of fiscal year 2005, the first full year of the deal, the company had closed down the least promising Disney Stores, remodeled dozens of locations, and opened several new Disney Stores, including a number of discount outlets. The Childrens Place announced the goal of expanding the Disney chain to 600 stores during the first few years after the acquisition. During that period the Childrens Place also integrated the Disney chain into its information technology system, lowered manufacturing costs, and introduced new product lines. The companys revenues jumped from just under $800 million in fiscal year 2003 to $1.7 billion in 2005, though those figures do not reflect licensing fees paid to Disney, which began in late 2006. While the long-term health of the Disney acquisition remained unclear, the winning formula practiced by the Childrens Place quality apparel at value pricingput the chain into position for enduring success.

A. Woodward
Updated, Judy Galens

PRINCIPAL COMPETITORS

Gymboree Corporation; Babies R Us; GapKids.

FURTHER READING

All Dressed Up at Childrens Place, Business Week, May 21, 2001, p. 139.

Auerbach, Jonathan, Childrens Place Seeks Out-of-Court Settlement, Daily News Record, February 26, 1993, p. 10.

Campeaus Federated Sets $30 Million Sale of Childrens Place, Wall Street Journal, November 10, 1988, p. B12.

Chanko, Kenneth M., Gitano Makes Deal for Childrens Place, Discount Store News, January 23, 1989, p. 1.

Childrens Place: Hey, Good-Looking, Business Week, May 29, 2000, p. 190.

The Childrens Place Sizes Up New Sites, Shopping Center World, July 1998, p. 26.

Coloring Outside the Lines, Chain Store Age, December 15, 2002, p. 78.

Cuccio, Angela, The Childrens Place: Born Again, WWD, September 18, 1989, p. 4.

Denitto, Emily, Kids Apparel Retailer Survives El Nino as Stock Recovers Allure, Crains New York Business, July 13, 1998, p. 4.

Desjardins, Doug, Childrens Place May Return Value to Disney, DSN Retailing Today, November 8, 2004, p. 4.

Elstein, Aaron, Childrens Place: Adding Kid Stuff Plays Well, Crains New York Business, September 18, 2006, p. 17.

Fickenscher, Lisa, Stock Watch, Crains New York Business, December 16, 2002, p. 23.

Fitzgerald, Beth, Stocks Plunge at Childrens Place Apparel Stores, Knight-Ridder/Tribune Business News, October 15, 1997.

Forman, Ellen, Secret Memo Gives Details of $7.4M Loss at Childrens Place, Daily News Record, August 1, 1988, p. 3.

Gault, Ylonda, Third Times the Charm, Crains New York Business, May 3, 1999, p. 3.

Goldfield, Robert, Kids Clothing Chain to Open Local Stores, Business Journal-Portland, March 17, 2000, p. 3.

Kissi, Dawn S., Childrens Place Acquires Disney Stores, WWD, October 21, 2004, p. 12.

Moin, David, Childrens Place Is Growing Up, WWD, August 24, 1998, p. 18.

, Sophisticated Space for the Childrens Place, WWD, August 23, 2002, p. 14.

Reeves, Scott, Niches Can Get Crowded, Barrons, September 29, 1997, p. 39.

Retail Face Off, Retail Traffic, May 1, 2003.

Rohmann, Laura, Golf Is Boring, Anyway, Forbes, February 1, 1982, pp. 1045.

Ryan, Thomas J., Disney, Childrens Place, Childrens Business, August 1, 2004, p. 13.

Sale of Stores Sets Another Disney Change in Motion, Licensing Letter, November 1, 2004, p. 2.

Sikora, Martin, Disney Finds a Buyer for Its Toy Stores, Mergers & Acquisitions, December 1, 2004.

Wilson, Marianne, A Second Childhood, Chain Store Age Executive, October 1989, pp. 2123.

The Children’s Place Retail Stores, Inc.

views updated May 21 2018

The Childrens Place Retail Stores, Inc.

915 Secaucus Road
Secaucus, New Jersey 07094
U.S.A.
Telephone: (201) 558-2400
Fax: (201) 558-2841
Web site: http://www.childrensplace.com

Public Company
Incorporated:
1969
Employees: 3,700
Sales: $421.5 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: PLCE
NAIC: 44813 Childrens and Infants Clothing Stores

The Childrens Place Retail Stores Inc. operates a chain of childrens clothing stores across most of the United States. Its products are designed for children aged newborn to 12. It sells under its own The Childrens Place brand name. In the competitive childrens retail market, The Childrens Place offers prices significantly lower than principal brand name competitors. Most of the chains stores are in malls, with a mix of upscale and more down-market sites. A pair of entrepreneurs started the company on the east coast, and it gradually spread west and south. By the year 2000 The Childrens Place had close to 400 stores in 42 states, with plans to expand rapidly. In 1981, the founders sold it to the retail empire of Federated Department Stores. The company is now publicly owned, with about a third of the stock in the hands of CEO Ezra Dabah and his family.

An Entrepreneurial Venture in the 1970s

The first Childrens Place store was opened by two 1965 graduates of Harvard Business School, David Pulver and Clinton Clark. Pulver and Clark both agreed that they did not want to go to work for big corporations, but it took them several years to decide what kind of business they would like to run. Some of the options they first considered were opening auto repair shops or marketing special meltable crayons. Eventually they focused on opening a childrens department store. Both men had children and thought they knew something of what children wanted, so they decided to put this expertise to work. Pulver and Clark opened The Childrens Place in Hartford, Connecticut, in 1969. The store sold toys as well as clothing and accessories, a product mix described by Clark in a February 1, 1982 profile in Forbes as everything for everyone. This strategy was not particularly successful; many lines were unprofitable. Pulver and Clark spent three years adjusting the product mix and learning how to run the store before The Childrens Place made money. They chose to focus on medium-priced childrens sportswear, along with some name-brand kids clothing. Pulver and Clark expanded, opening more stores in the east. After ten years, The Childrens Place had blossomed into a chain of 34 stores. Revenues were growing at close to 50 percent annually, and profits were growing by a third.

The Childrens Place had little direct competition at first. Its stores were primarily located in malls. Consumers could buy childrens clothing at mall anchor department stores such as J.C. Penney and Sears, but The Childrens Place was generally the only small mall shop selling childrens wear exclusively. The chain galloped along, nearly doubling to 65 stores by 1981. Sales were over $50 million. Pulver and Clark took the chain public in 1981, and were apparently besieged by merger offers. The two founders were willing to sell the company, but they did not want to stay on and run it under a corporate boss. In 1982, they sold The Childrens Place to Federated Department Stores. Federated was a large chain store conglomerate with sales of around $6 billion. It ran such well-known department stores such as Bloomingdales and I. Magnin. Pulver and Clarks deal with Federated called for them to train replacements to run The Childrens Place, so their association with the retail chain ended soon after the sale.

Ups and Downs in the 1980s

The chains growth continued under new ownership. From 1982 to 1986, The Childrens Place added on average 20 stores a year, spreading mostly through malls across the northeast and midwest. But under Federated, the chain was no longer as profitable as it had been in its early years. The store sold a mix of brand-name clothes and some private label, but its sales were hurt by discounters offering comparable goods at cheaper prices. A new chain, Kids R Us, an offshoot of the mass-market toy store chain Toys R Us, also provided new competition. In 1985, The Childrens Place lost money, and then stayed in the red for 1986 and 1987.

Federated had made some changes to the chain, remodeling a few stores after a new prototype in 1984, and then progressively remodeling others for the more updated look. The parent company built a new warehouse to handle The Childrens Place goods, and hired new staff, anticipating growing the chain to 300 stores by 1990. However, The Childrens Place seemed to lose its uniqueness. It lost out to discounters, but it was not as upscale as some of its department store competitors. It lacked guidance from Federated, and this was made worse in 1988, when the Federated conglomerate was bought by a Canadian company, Campeau Corp. Already a small piece of a big firm, The Childrens Place was even farther from the center of operations after the sale of Federated. The Childrens Place lost $12 million in 1988, and Campeau decided to sell it. It went on the block along with a sister chain it had started in 1986, The Accessory Place, This was another mall-based chain, selling accessories to girls and young women.

By 1988, The Childrens Place had grown to 161 stores. Campeau hoped to get bids of $75 million for the chain, in tandem with The Accessory Place, but no buyers were willing to shell out that much. Eventually the two chains together went for $28 million. The purchaser was an investor group led by Morris Dabah, the head of the apparel corporation Gitano Group. Dabahs investor group bought the two chains from Federated, then sold The Accessory Place the next day for $6 million. The chief executive position at The Childrens Place was then taken over by Ezra Dabah, who was also president of E.J. Gitano, Gitano Groups childrens division. He had a solid background in childrens merchandising, extensive contacts with manufacturers, and was a father of five himself.

Under Ezra Dabah in the 1990s

Ezra Dabah was enthusiastic about running The Childrens Place. He knew the company had not been well managed under Federated, but he was sure the chain had great potential. It was still the only national childrens specialty chain to be found principally in malls. Its main competitor, Kids R Us, was primarily in strip malls or the kind of edge-of-town retail areas where big box stores were found. The mall locale of the Childrens Place chain gave it a unique identity. And Dabah believed that childrens apparel was a market poised for immense growth. Dabah quickly initiated plans to get the chain back on its feet. He opened two new prototype stores, planning to build other new ones on the same model. These had a bright, open floor plan with walls accented by floral wallpaper; a toddler play area; revamped fitting rooms, including one for handicapped children; video monitors; and colorful posters and props. Un-profitable stores were shut down, layers of management cut, and the merchandise mix was reconsidered. Dabah preferred to go with an upscale image. Ninety percent of the clothing was branded, with labels like Gloria Vanderbilt, Bugle Boy, OshKosh, and Gitano. By late 1989, Dabah was able to claim that The Childrens Place would turn a profit that year. Expenses were down, and inventory was turning over faster.

Dabah also announced that the chain would continue to grow. In an article in WWD for September 18, 1989, Dabah revealed plans to add 20 to 30 stores in 1990, and eventually bring the chain up to 400 to 500 stores. Direct competitors were considered the department stores that frequently anchored malls, such as J.C. Penney and Macys. Price was not to be the main draw at The Childrens Place. The big come-on, Dabah declared to WWD, will be the merchandise itself.

Nevertheless, The Childrens Place remained financially troubled. Between 1990 and 1992, the company lost $60 million. Store closings outnumbered openings, bringing the total number in the chain to only 90. The investor group that had bought the firm filed for Chapter 11 in November 1993, along with Ezra Dabah and three other members of his family. The Dabahs Gitano Group was not doing well, either. It filed for bankruptcy in 1994. The Childrens Place had trouble meeting its payments, and finally agreed in 1993 to an out-of-court settlement restructuring its debts. This allowed the firm to re-main in business. Three years later, the company was still not financially sound, and it brought in two outside firms to help it handle its debt. These were Saunders Karp & Megrue (SKM), which took a stake of over 30 percent in The Childrens Place, and Nomura Holding America, which took a smaller stake of around nine percent. The Dabah family continued to hold the remaining stock.

Company Perspectives:

At The Childrens Place, we are committed to creating a true lifestyle brand for kids. We are proud of what we have achieved and very excited about our future. Our success to date is due to our steadfast commitment to our core values: Quality that our customers have come to expect: Service on our customers terms; style that fits our customers needs; prices that wont strain our customers budgets.

By 1997, the company had changed its marketing thrust some-what. Instead of offering high-priced brand-name merchandise, it sold good quality but value-priced childrens clothing under its own brand name, Childrens Place. This gave it more of a competitive edge against the many retailers it was up against in the childrens market. These newcomers included Gap Kids, Baby Gap, and Old Navy, all offshoots of The Gap; Limited Too, a childrens version of the long-standing mall-based The Limited chain; and Gymboree, a nationwide chain of childrens clothing stores. The Childrens Place continued to vie for market share with J.C. Penney, Sears, and other mall department stores, as well as Kids R Us. The Childrens Place set the price of its private label clothing at 20 to 30 percent below most of its mall-based competitors. Its Childrens Place brand was sold exclusively in its own stores. In 1997, the company vaunted its new, improved image to attract investors for an initial public offering (IPO). By then it had grown to include 130 stores. Sales in 1996 of $122 million had given the firm a slim $1.65 million in profit, but for 1997 the figures were better, with net income of over $30 million on sales of around $144 million.

Public Company in the Late 1990s and After

The Childrens Place hoped to raise $70 million with its IPO. In fact it raised $50 million, which went to pay off debt. SKM, which had taken a stake in the company in 1996 to help turn its finances around, sold off its holdings in the IPO. More than 40 percent of the stock remained in the hands of CEO Ezra Dabah, and the companys board in total held almost 80 percent. The publicly traded shares started out at $14, and soon reached a high of over $16. But unseasonably warm weather depressed fall sales, and a month after the September IPO, The Childrens Place announced that it would have lower than expected results for that quarter. The stock plunged, and shareholders sued.

However, a year later, the stock was performing well, and the company seemed back on track. Though the company faced stiff competition from Gap Kids, Gymboree, and others, its lower pricing set its stores apart. The chain kept up its expansion, moving west and south. In 1998 it had 180 stores and looked forward to opening many more. Its stated goal was to have 800 stores by 2004. By 2000, the chains growth seemed more assured than at any time in its recent past. Over the three years since the public offering, sales rose 44 percent, topping $400 million, and earnings also climbed by over 15 percent. The Childrens Place opened 84 stores in 1999, and planned 100 more openings in 2000. Analysts in various publications agreed that The Childrens Place had at last found itself a unique niche. A retail analyst quoted in Crains New York Business (May 3, 1999) claimed Theres not another concept out there like them. The clothes offer great value, and theyre fashionable. Another industry expert quoted in Business Week (May 29, 2000) echoed this, declaring the chains stores have a real and unique niche. Ezra Dabah, quoted in the same article, crowed that We do well where our competitors cannot. The secret was the mix of fashion and low pricing. The Childrens Place could open stores in fancy upscale malls, where they fit in because of the bright look of the decor. But its stores did well too in more cost-conscious malls and retail strips, because the clothes were priced for value. Dabahs long experience in childrens clothing apparently allowed him to keep costs down. Another analyst interviewed in the Crains New York Business article mentioned above declared, Most companies go to the factories and say, I want a pair of jeans for $5. Ezra negotiates every single element. He goes in and says, Til pay this price for the zipper and use this kind of stitch. In the end, he comes out with good quality at a great price.

Good quality at a great price was almost a universal retailers dream. As long as Dabah could continue to manage this for The Childrens Place brand, prospects at the chain looked bright. Childrens clothing was expected to be a hot growth industry in the 2000s, as the baby boomlet ensured that children were a growing percentage of the population.

The chain planned to expand its number of stores, moving south into the Sunbelt and farther west as well. It also found more locations by increasing the number of stores within one city. It often clustered more stores near an existing location, or near its competitors stores. And when moving into Portland, Oregon, for example, it opened not one store but five within months of each other. With room to grow and at last a seemingly reliable retail formula, The Childrens Place looked for-ward to becoming an even bigger player within the childrens clothing market in the years to come.

Principal Competitors

Gymboree Corporation; J.C. Penney Company, Inc.; Kids R Us; Gap Kids.

Key Dates:

1969:
First Childrens Place store opened.
1982:
Founders sell chain to Federated Department Stores.
1988:
Money-losing chain sold to investor group led by Dabah family.
1993:
Firm restructured to handle debt.
1997:
Company sells shares to public.

Further Reading

Auerbach, Jonathan, Childrens Place Seeks Out-of-Court Settlement, Daily News Record, February 26, 1993, p. 10.

Campeaus Federated Sets $30 Million Sale of Childrens Place, Wall Street Journal, November 10, 1988, p. B12.

Chanko, Kenneth M., Gitano Makes Deal for Childrens Place, Discount Store News, January 23, 1989, p. 1.

Childrens Place: Hey, Good-Looking, Business Week, May 29, 2000, p. 190.

Cuccio, Angela, The Childrens Place: Born Again, WWD, September 18, 1989, p. 4.

Denitto, Emily, Kids Apparel Retailer Survives El Nino as Stock Recovers Allure, Crains New York Business, July 13, 1998, p. 4.

Fitzgerald, Beth, Stocks Plunge at Childrens Place Apparel Stores, Knight-Ridder/Tribune Business News, October 15, 1997.

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A. Woodward