Case Study | The Children’s Place: Pandemic pushes for store closures

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A Children's Place store

The Children’s Place, USA’s largest children’s wear retailer chain, decides to remain on track to shut 300 outlets by the end of fiscal 2021, which includes more than 100 stores that permanently shut in the first half of 2020.

It will further shut 122 stores this year to drop less than 25% of the retailer’s revenue gained from mall-based stores. However, The Children’s Place located in The Palisades Center will survive the same drop in revenue.

President and CEO of the retailer giant, Jane Elfers, stated e-commerce had shot up during the pandemic in the previous year. The retailer will, therefore, concentrate on online growth in the future. Elfers also noted that the pandemic accelerated the plan for a digital metamorphosis by the next five years.

Out of the 122 closures planned this year, 25 were allotted for the first quarter. The chain will have shut 300 stores in under 20 months, including this year. Before the pandemic, it was pulling shutters on 40 to 60 outlets per year.

So, towards the end of fiscal 2021, The Children’s Place will operate about 625 stores. Before the pandemic, in the previous year, the retail behemoth acquired the assets and intellectual property rights (IPR) of an insolvent rival, Gymboree, for about $76 million.

But e-commerce is where their hope still prevails.

Digital sales skyrocketed more than 37% in 2020, completing the year with digital penetration of 53% of net sales. In addition, last year, The Children’s Place added 1.9 million digital customers, switching over a million foot-in-store patrons to omnichannel consumers.

Amanda Lai, manager at McMillan Doolittle, a retail consultant, told CoStar News that The Children’s Place was concentrating on idealizing its chain of stores even before the pandemic.

A part of The Children’s Place sales was generated online than the retail department. According to eMarketer, last February, the accessories and apparel industry witnessed 29% of its sales from e-commerce before the pandemic. That then jumped to 37% in May during the pandemic. Although this is the case, it is still less than The Children’s Place 50% online revenue generation.

The Children’s Place negotiated successfully on terms regarding lease with the landlords amid the pandemic, and this aided the organization to store closures rapidly, avoiding financial instability.

In comparison, net sales dropped 7.8% to $472.9 million in the fourth quarter to that of the period a year ago. That was caused by the permanent and temporary closures and the negative effect of reduced operating hours in malls.

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