Childrens Place, Inc. Q2 FY2022 earnings call

• Q2 sales and profitability fell short of expectations due to competitor promotional activity and inflation-driven consumer slowdown. Fashion AUR missed projections, basics AUR met plans. A $6 million unplanned expense due to supply chain disruptions pressured margins. • Digital: Represented 47% of retail sales in Q2, with US e-commerce traffic up 7%. Projected to be 50% of 2022 retail sales and ~60% by end of 2024. Back-to-school campaign with Kevin Hart had strong impressions and engagement. Mobile app drives strong customer engagement with 76% of transactions on mobile devices. • Amazon: Business was outstanding with strong results since Prime Day, and Gymboree brand launched on Amazon in late July with encouraging early results. • Gymboree: Saw $0.18 increase in spend per customer in Q2, launched Gymboree Uniform product, and first holiday collection on July 28 which drove 3x increase in search terms year-over-year.

Digital represented 47% of retail sales in Q2, up from 45% in 2021 and 30% in 2019. US e-commerce traffic was up 7% during the quarter. Canada e-commerce traffic was down due to lapping temporary store closures last year. Basics AUR was a positive low teens as planned, while fashion AUR was down negative mid-single digits. Amazon business was outstanding in Q2 with strong results from inventory and marketing investments. Gymboree saw early positive reads on back-to-school product launches, including a $0.18 increase in spend per customer vs last year and launch of Gymboree Uniform product.

• Q3: Net sales expected to be approximately $500 million, adjusted operating income expected to be ~14% of net sales, adjusted earnings per diluted share anticipated to be ~$3.95. • Full year 2022: Net sales expected to be approximately $1.725 billion, e-commerce penetration projected to be 50% of total retail sales, adjusted operating income expected to be ~7.5% of net sales, adjusted earnings per diluted share anticipated to be ~$7. Inventories at end of Q4 2022 anticipated to moderate. Planning for a full year tax rate in the range of 23%-24%.

• Competitors' unexpected and meaningful increase in promotional activity put pressure on fashion AURs and margins. • Inflation-driven consumer slowdown affected retail sales projections. • Unplanned inbound supply chain disruptions, including East Coast port congestion, led to unplanned expenses and margin pressure. • Elevated and inbound freight transportation costs impacted gross margin. • Loss of Ethiopian AGOA trade benefits resulted in incremental duty.

Q: Jay Sole asked about AUR in context of Q2 and gross margin in normalized environment.

A: Jane Elfers discussed Q2 AUR miss due to competitor promotions and commodity product nature. Rob Helm added on components affecting gross margin like cotton costs, inbound transportation costs, occupancy costs, and e-commerce fulfillment.

Q: Jay Sole asked about Amazon business evolution.

A: Jane Elfers said Amazon business continues to evolve with strong results, increased plan for back half, and working closely to fill white space on their site.

Q: Dana Telsey asked about back-to-school to holiday learnings and traffic.

A: Jane Elfers said Sugar & Jade is small with learnings, store traffic down vs pre-pandemic, e-com traffic held up, and Christmas product launched earlier.

Q: Susan Anderson asked about promotions, competitor inventory, and supply chain risk.

A: Jane Elfers talked about derisking fashion AUR, competitor inventory not in kids leading to Q2 issues, and supply chain port situation improving with projections of normalcy.

Q: Kelly Crago asked about inventory composition.

A: Rob Helm said spring/summer units down 45%, inventory increases due to increased AUCs and higher costs, with small growth for strategic initiatives.

Q: Marni Shapiro asked about customer response to different product types.

A: Jane Elfers said customer is specific and mindful, basics and emotional product performing well, while knit categories are resistance categories needing weather change to perform better