Style shortfall
Kiddie couture crisis at The Children's Place
Good morning, trendy toddlers. This is your Stock Market Rundown for February 22nd, 2024. Thanks for tuning in once again. Let’s get going:
TODAY’S TOP STORY: TOT TAILOR TROUBLE
You may think the children’s clothing industry is all about cute jeans in size extra small, and adorable cardigans for fashionable six-year-olds. But in reality, the kids’ apparel biz is a brutal slaughterhouse of competition.
Gymboree, Babies R Us, Carter’s: all retailers who’ve either shuttered stores or been forced into bankruptcy.Â
The latest victim: The Children’s Place, a retailer of apparel for newborns to pre-teens with locations in malls across North America. Management has been on a cost-cutting tear, slashing locations from 1,200 a decade ago to 600 today, and laying off employees en masse.
What went wrong? Problem number one: e-commerce, which is now a third of the total market for children’s apparel. Mall retailers whose websites are about as advanced as MySpace in 2005 can’t compete with Amazon and Walmart.
Problem number two: Americans just aren’t making as many babies as they used to, with the US birth rate declining 23% since 2007.
Thanks to these headwinds, recent results at The Children’s Place have been grim, with sales missing targets, dwindling cash levels, and excess inventory. But there might be a light at the end of this Lego tunnel.
Last week, management issued a press release disclosing that a Saudi Arabia-based investment firm has acquired a majority stake and will help shore up the balance sheet. The company’s lenders must be relieved that, at least for now, they won’t have to throw a temper tantrum in bankruptcy court.
SO WHAT ELSE IS GOING ON?
First it was cocoa—now sugar prices are spiking too. Commodity experts are warning raw sugar prices could rise 20% this year, due to drought conditions in India. Will this lead to price inflation for bake-sale brownies?
Shake Shake beat expectations, bucking weak fast-food trends, and proving that crinkle-cut fries are recession-proof.
Want a higher interest rate on your savings account? How about a latte instead? Starbucks and Bank of America just launched a joint rewards program that will keep BofA cardholders caffeinated. What’s next, free Big Macs when my Wells Fargo account goes into overdraft?
Red Lobster is in financial distress due to its unlimited shrimp promotion spiraling out of control. Apparently, management underestimated just how much seafood the American eater could put away. Give a man a fish, and you feed him for a day; give him unlimited shrimp, and you may need to arrange some additional credit lines.
That’s what’s up for today, my friends; see you at the usual time tomorrow morning. Yours in capitalism, The Axe