Q2 2015 IR Presentation for the Website

7/23/2019 Q2 2015 IR Presentation for the Website

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Company Overview

September 2015


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Safe Harbor Statement

Forward Looking Statements

This presentation may contain certain forward-looking statements regarding future circumstances, including

statements relating to the Companys strategic initiatives and adjusted net income per diluted share. These

forward-looking statements are based upon the Company's current expectations and assumptions and aresubject to various risks and uncertainties that could cause actual results and performance to differ materially.

Some of these risks and uncertainties are described in the Company's filings with the Securities and Exchange

Commission, including in the Risk Factors section of its annual report on Form 10-K for the fiscal year ended

January 31, 2015. Included among the risks and uncertainties that could cause actual results and performance to

differ materially are the risk that the Company will be unsuccessful in gauging fashion trends and changing

consumer preferences, the risks resulting from the highly competitive nature of the Companys business and its

dependence on consumer spending patterns, which may be affected by the weakness in the economy thatcontinues to affect the Companys target customer, the risk that the Companys strategic initiatives to increase

sales and margin are delayed or do not result in anticipated improvements, the risk that the cost of raw

materials or energy prices will increase beyond current expectations or that the Company is unable to offset cost

increases through value engineering or price increases, and the uncertainty of weather patterns. Readers are

cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they

were made. The Company undertakes no obligation to release publicly any revisions to these forward-looking

statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence

of unanticipated events. The inclusion of any statement in this release (or on the above referenced call) does notconstitute an admission by the Company or any other person that the events or circumstances described in such

statement are material.


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Agenda

2

Company Overview

Operational and Financial Performance

Strategic Initiatives


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The Fundamentals

3

The largest childrens specialty apparel retailer in North America

Strong brand; well-positioned competitively

#1 awareness among childrens specialty retailers Known for fashion, outfitting, value and convenience Strong balance sheet and free cash flow


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17,734

20,145

2009 2013

# of US Stores (Retailers with Children's Departments)

Market Trends In Childrens Specialty Apparel

Over 2,400 Stores AddedKids Apparel Has Become More Competitive

Source: NDC, NPD and Company filings

4

SpecialtyRetailers

Retailers /Wholesalers

Mass

Discounters

While Birth Rates Have Declined Significantly

3,932

3,700

3,800

3,900

4,000

4,100

4,200

4,300

2008 2009 2010 2011 2012 2013

US

YearlyB

irths('000s)


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Childrens Place Market Share

Source: NPD U.S. Childrens Apparel Data (0-10 years)

Market share data from NPD Group, Company filings

Maintaining Leading U.S. Market Share In anIncreasingly Competitive Environment

Size of U.S. Childrens Apparel Market

5

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

2011 2012 2013 2014

Dollars (000s)

5.1% 5.1% 5.1%4.9%

2011 2012 2013 2014


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Agenda

6

Company Overview




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ChannelExpansion

We Are Making Significant Progress Towards Our Goal ofBecoming a Global Omni-Channel Children's Brand

Talent

7

Operational Excellence

ProductFocus

TransformingBusinessthrough

Technology

FleetOptimization

1 2 3 4


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Transforming Our Product Offering in Every Division andCategory

8

Focus on consistent product executionacross all divisions

Ensure in-stock positions on key item yearround basics

More frequent deliveries of newer fashionassortments to maintain currency ofinventory flows

Successfully developed a contemporarysourcing strategy to address significantchanges that were occurring globally

Consi st ent #1 Mar ket Shar e Among Chil dr ens Specia l t y Ret ai ler s Si nce 2010 Shows

Pr oduct Is St r ongly Resonat i ng Wit h Cust omers

2014

2009

29.4%

31.9%

19.8%

9.4%

4.7%

26.3%

11.7%

41.4%

17.4%

2.7%

Sourcing Migration to Emerging Market Opportunities

SE Asia India Sub-continent Greater China Greater Africa Americas

1


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Business Transformation Through Technology

9

We are in the third year of a five-year plan of a company-wide transformation of ourtechnology and systems

Our technology initiatives are strengthening our inventory management capabilities includingplanning, allocation and replenishment. Global sourcing, logistics and distribution systemshave and are being upgraded. We are intensely focused on our expanding our omni-channelcapabilities through upgrades to our digital and mobile platforms

In 2014 we successfully:

Launched core merchandising and pricing modules within our ERP(enterprise resourceplanning) system

Built a global sourcing portal Upgraded our US and Canadian websites and our mobile site

Launched a state of the art assortment planning tool which impacted our BTS 2015deliveries

In 2015 we:

Implemented state of the art inventory allocation and replenishment tools

Are building out technology to enable us to more rapidly expand our international andwholesale businesses in 2016 and beyond

Invest ments i n Syst ems ar e Enhancing Our Capab il i t ies and Opera t ing Perf ormance

2


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Business Transformation Through Technology (Continued)

10

Digital Initiatives

Acquisition Organic search enhancements (2015)

Email capture/ereceipt (2015)

Retention

New email service provider (2015)

Personalized content, products, offers & promotions (2015)

Engagement

Loyalty program enhancements (2015)

Online account creation and access to points and rewards

Implement Distributed Order Management system to enable cross-channel capabilities(2015)

2


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$119

$151

$176

$215

$246

$280

7%

9%

10%

12%

14%

16%

FY09 FY10 FY11 FY12 FY13 FY14

E-Commerce Revenue ($mm) % of Total Revenue

Global Growth Through Alternate Channels of Distribution

11

E-Commerce has grown at an 18.5%CAGR since 2009

16% of total sales in fiscal 2014 Launched a Canadian e-commerce site in

2012

60% CAGR since the launch

Launched an international franchisebusiness with one partner in 2012

Ended FY2014 with fiveinternational partners and 72franchise stores

Launched a wholesale business in 2012with one account

Ended FY2014 with eight wholesaleaccounts

Completely revamped our outletstrategy

Shifted from an outdatedclearance center model to asignificantly more profitable madefor outlet model

E-Commerce Revenue Growth

3


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Store Fleet Optimization in North America

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Fleet Facts

1,086 Stores in North America

Brand Performs Well Across Variety ofFormats

United States88%

Canada12%

PremiumMalls56%

Value Centers &Small Markets

Outlets12%

Street/Strip/Other8%

24%

4

Developed a new store prototype in 2010

with significantly better economics

Strategic decision to open off mall

locations based on favorable economics,

declining mall traffic and changing

consumer shopping patterns

Fleet optimization initiative targets 200

store closures through 2017, including 41

stores closed in 2013 and 35 closed in

2014

Seeing a transfer rate in excess of 20%

to nearby stores or to e-commerce

Results in improved comp sales and

profitability in e-commerce and the

neighboring stores


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Operational Excellence

13

Optimize global supply chain

Strategic sourcing; vendor consolidation; country migration Logistics and distribution

Company-wide expense management

Improving store operations and customer experience Professional, strategic staff support

Finance, Legal, Human Resources, Compliance/Regulatory

Strong base to support other

strategic initiativesStrong base to support other

strategic initiatives


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Agenda

14

Company Overview




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Long Term Operating Margin Expansion

15

Key Focus: Generate steady increases in operating margin

Slightly positive comp sales driven by merchandiseimprovements, fleet optimization, rapid e-commerce

growth and new system capabilities, partially offset by

reduced clearance sales due to improved inventory

management

Incremental revenue from international and wholesale

Revenue GrowthDrivers

Merch margin: New inventory management systems,supply chain optimization and outlet strategy

Gross margin: Fleet optimization and improved inventory

management

Operating margin: International and wholesale businesses

and outsized growth in e-commerce

MarginExpansion

Opportunity

Stringent focus on cost control

Leverage fixed expense

SG&A Flat-to-Slightly Leverage

As % of Sales


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Q2 Financial Results

16

Source: Company filings and press releases. Figures in millions of USD (except EPS). For the quarter ended August 1, 2015 and August 2, 2014.Note: Adj measures are non-GAAP and exclude transactions that are not indicative of the performance of the core business. A reconciliation of GAAP andnon-GAAP measures is provided in the Companys second quarter 2015 earnings release which is available at http://investor.childrensplace.com

Q2 2015/14

Income Statement Summary

Q2 15 Q214

Adj EPS% Chg

($0.33)+11%

($0.37)+12%

Net Sales% Chg

$366.5-4.7%

$384.6+0.6%

Adj Gross MarginLeverage/Deleverage

31.4%+40 bps

31.0%-200 bps

Adj SG&A % of SalesLeverage

29.6%+60 bps

30.2 %+190 bps

Adj Operating MarginLeverage

-2.4%+80 bps

-3.2%+10 bps


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Company Outlook Full Year 2015

17

Company Guidance as of 8/25/15

FY 2015 Guidance FY 2014 Actual

Adj EPS $3.35 to $3.45 $3.05

Comp Sales Approximately flat 0.4%

Adj Gross Margin Leverage 60 to 80 bps 35.3%

Adj SG&A % of Sales Leverage approx. 30 bps 26.3%

Adj Op Inc Leverage 60 to 70 bps 5.6%

Capital Expenditures $65 to $70 million $72 million

Ending Inventory N/A Decreased 8%


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Strong Balance Sheet and Cash Flow

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Source: Company filings and press releases.

Generated $188 million in operating cash flow over LTM Returned excess cash to shareholders through share repurchase

program and quarterly dividend over LTM.

LTM $ millions

Beginning Cash and Short-term Investments (Q2 2014) $200

LTM Cash Flow from Operations 188

LTM Capital Expenditures (62)

Capital Return (Share Repurchase Program/Dividends) (109)

Revolving Loan 3Other (15)

Ending Cash and Short Term Investments (Q2 2015) $205

S f l E i f O S H E bl d Si ifi


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Successful Execution of Our Strategy Has Enabled SignificantReturn of Capital to Shareholders

Prudent cash flow management hasallowed us to consistently reward

shareholders over the last 5 years We have purchased over $543 million

of our common stock since 2009

Our share repurchases over the last threeyears as a percentage of marketcapitalization is 19%, well above the peer

group median of 14% In fiscal 2014, we instituted a dividend for

the first time in our history

In the first fiscal quarter of 2015, weincreased the dividend by over 13%

Strong balance sheet provides flexibility

Consist ent Ret urn of Capi t al t o Shar eholders

Cumulative Capital Returned to Shareholders ($mm)

2009 2010 2011 2012 2013 2014

27.6 26.1 24.5 23.1 22.0 20.8

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Shares Outstanding (mm)

Cumulative Dividends Cumulative Share Repurchase

$12 $18$68

$159$250

$339

$405

$481

$543

2009 2010 2011 2012 2013 2014 YTD Q2

2015

$ 68

$159

$250

$339

$405

$493

$561


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Historical Income Statement Data (As Adjusted)

20

Source: Company filings and press releases. Figures in millions of USD (except EPS). For the years ended January 31, 2015, February 1, 2014 andFebruary 2, 2013 (53 Week Year). Note: Adj measures are non-GAAP and exclude transactions that are not indicative of the performance of the corebusiness. A reconciliation of GAAP and non-GAAP measures is provided in the Companys earnings releases which are available athttp://investor.childrensplace.com

FY14 FY13 FY12

Net Sales $1,761.3 $1,765.8 $1,809.5

Gross Profit

% of net sales

622.2

35.3%

658.4

37.3%

691.4

38.2%

SG&A

% of net sales

462.6

26.3%

483.2

27.4%

507.0

28.0%

Deprec & Amort

% of net sales

60.5

3.4%

64.8

3.7%

68.1

3.8%

Operating Income

% of net sales

99.1

5.6%

110.4

6.3%

115.3

6.4%

Income before Taxes

% of net sales

98.9

5.6%

110.7

6.3%

115.3

6.4%

Tax Provision

% of net sales

32.1

1.8%

36.3

2.1%

36.5

2.0%

Net Income

% of net sales

$66.9

3.8%

$74.4

4.2%

$78.8

4.4%

EPS $3.05 $3.26 $3.25


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Historical Balance Sheet Data (in millions of USD)

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FY14 FY13 FY12

Cash & Cash Equivalents $173.3 $174.0 $194.1

Short-term Investments 52.0 62.5 15.0

Accounts Receivable 31.9 26.0 18.5

Inventories 297.6 322.4 267.0

Other Current Assets 54.4 44.4 50.6

Total Current Assets 609.3 629.3 545.2

Property & Equipment,Net

310.3 312.1 330.1

Other Assets, Net 39.0 49.2 48.1

Total Assets $958.6 $990.6 $923.4

Total Current Liabilities $274.5 $271.3 $191.5

Other Liabilities 95.0 102.5 111.0

Total Liabilities 369.5 373.9 302.5

Stockholders Equity 589.1 616.8 620.9

Total Liabilities &

Stockholders Equity$958.6 $990.6 $923.4


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Historical Cash Flow Data

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Source: Company filings and press releases. Dollars in millions of USD.

FY14 FY13 FY12

Beginning Cash and Short-term

Investments$236 $209 $177

Cash Flow from Operations 161 173 205

Capital Expenditures (72) (73) (90)

Capital Return (Share Repurchase

Program/Dividends)(88) (66) (89)

Other (12) (7) 6

Ending Cash and Short Term

Investments$225 $236 $209


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Wrap-Up

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Strategic initiatives underway to drive growth

Strong balance sheet and cash flow Committed to delivering sustainable, profitable growth


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Q2 2015 IR Presentation for the Website

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