Struggling kids’ clothing chain admits to big problems | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Retail store closures are becoming a concerning trend worldwide, with many big and small retailers having no option but to reduce their physical footprints.

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The uncertain state of the global economy after the pandemic has left many shoppers more wary of spending, while retailers reel from the impact of declining sales.

In an effort to mitigate the continuous slowdowns and declines, many companies have opted to shut down locations and prioritize their online platforms, which tends to be a smaller investment.

Retailers close down stores amid softening in sales.

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The Children’s Place makes a wrong business move that it soon regrets

Since the pandemic, many The Children’s Place stores have been permanently closed, with the remaining ones transitioned from long-term to short-term leases.

These mass closures led to a decline in stores from 924 locations in 2020 to 495 in 2024, nearly halving the company’s physical footprint in only four years.

These shutdowns were not due to a lack of profits or underperformance, but rather a misjudgment — around 300 locations were profitable at the time of closure.

The Children’s Place claims that many first-time shoppers’ introduction to the brand has been while in-person shopping. Therefore, the reduction in physical stores severely impacted in-store traffic and first-time purchases, leading to fewer sources of revenue.

Reducing physical stores led the company to focus on its e-commerce sector, which has helped sustain sales, making up over 54% of total sales in 2024.

However, with growing competition and the rise of online shopping, these sales have become increasingly difficult to maintain, putting the company in a troublesome position.

The Children’s Place admits to its brick-and-mortar becoming an ‘orphan channel’

Although many factors contributed to the closures of multiple stores, the company admits that the brick-and-mortar sector of its business has been neglected for some time.

Besides minor maintenance, no significant investments have been made to revamp or enhance any of The Children’s Place’s physical stores over the last several years.

“I believe that the appearance and poor condition of TCP’s stores detract from the shopping experience of store customers and convey a single, unfortunate reality: our stores have become an orphan channel,” said The Children’s Place Executive Chairman Turki AlRajhi in an earnings report note.

Additionally, since acquiring Gymboree in April 2019, the company had made no effort to open a standalone store for the brand until last year.

The Children’s Place makes significant investments to revive its brick-and-mortar sector

The Children’s Place (PLCE) recently hired Philip Ende as head of real estate to stabilize its fleet of stores. It has also been making timely payments to landlords since November of last year to renegotiate soon-to-expire leases for a better chance of renewal.

The company claims to have already repaired relationships with landlords in only a few months and secured long-term leases for many profitable stores to keep their momentum. The Children’s Place also opened the first standalone Gymboree in November 2024.

“Time has come to rebuild the fleet and embark on a spree of opportunistically opening new stores. We plan to close the remaining few unprofitable stores, seek to improve low-contribution stores, protect our top-performing stores, and invest in improving and refreshing the fleet’s overall appearance,” said AlRajhi in the note.

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The Children’s Place plans to open 15 new stores across Gymboree and The Children’s Place brands by the end of 2025. The company is also exploring the idea of building side-by-side stores, with the first one expected to debut at Woodbury Common Premium Outlets in New York around mid-2025.

“The objective is to craft something that attracts, retains, and delights customers of these two distinct brands, addressing the needs of two different sets of customers,” said AlRajhi in the note.