Q4 2021 Children's Place Inc Earnings Call

March 9, 2022

Okay.

[music].

Good morning, and welcome to the children's place fourth quarter and fiscal full year 2021 earnings conference call.

On the call today are Jane Elfers, President and Chief Executive Officer and.

And Rob Hull, Chief Financial Officer.

At this time all participants are in a listen only mode.

After the prepared remarks, we will open the call up to your questions.

We ask that each of you limit yourself to one question. So that everyone will have an opportunity.

As a reminder, this call is being recorded.

The children's place issued its fourth quarter and fiscal full year 2021 earnings press release earlier this morning.

Copy of the release and presentation materials for today's call have been posted to the Investor Relations section of the company's website.

Before we begin I would like to remind everyone that any forward looking statements made today are subject to the safe Harbor statements found in this morning's press release as well as in the company's SEC filings, including the risk factors section of the company's annual report on Form 10-K for its most recent fiscal year.

These forward looking statements involve risks and uncertainties that could cause actual results to differ materially.

The company undertakes no obligation to publicly release any revisions to these forward looking statements to reflect events or circumstances. After the date hereof.

It is now my pleasure to turn the call over to Jane Elfers.

Yeah.

Thank you and good morning, everyone. We delivered another outstanding quarter with gross margin operating margin and EPS all at record levels since.

Since the onset of the pandemic, our accelerated structural reset to a digital first company has delivered impressive results we.

We delivered a 15, 1% adjusted operating margin in 2021.

We're at two 6% in 2019.

We delivered a 41, 6% gross margin.

660 basis point improvement versus 35% in 2019.

Our 2021 operating income was $289 million versus our full year 2019, adjusted operating income of $111 million.

$178 million increase.

We delivered a 2% net sales increase in 2021 versus 2019, despite having 256 or 28% fewer stores.

Our EPS was $13.40 in 2021 versus $5 36 in 2019.

I want to thank all of our associates for their hard work in delivering these industry leading results.

Particularly with all the challenges we faced in the last 24 months.

Starting with digital our digital business has always been our highest operating margin contributor due to its high U P. T low single digit return rates and lower overhead costs versus our stores channel.

And with the pandemic drove an acceleration of our digital business. We continued to gain additional leverage on fixed overhead costs and drive significantly higher digital margins.

Our digital sales represented an industry, leading 48% of our Q4 sales.

Versus 31% in Q4 2019.

As we target a 50% annual digital penetration for full year 2022.

Importantly, supporting our accelerated digital penetration our customer transfer rate further improved to an industry, leading 32% and full year 2021 from 30% ending full year 2020.

As our digital business continues to grow on both the top and bottom line, we are making significant investments in marketing and technology to continue to support this growth. We're focused on investing in brand awareness, which continues to drive customer acquisition through our digital marketing channel.

With respect to customer acquisition, we've leveraged our marketing tactics and focused our additional investment to achieve a 50 50 split between digital and store customer acquisition.

Which is in line with where our digital penetration is planned in the near term.

In fiscal 2021, we obtained a 16% increase in our new customer file.

And with customer acquisition more balanced between our channels, we are benefiting from the improved channel mix.

<unk> and significantly higher average spend and higher margins per customer.

As the shift to digital has accelerated over the past two years, we benefited by being able to better identify our customers and use that data to drive higher cost efficiency and marketing spend.

Entering 2022, we've established robust customer acquisition and retention targets by brand innate.

Enabled by our [noise] enabled by our customer segmentation data to deliver enhanced personalized content that resonates with each target audience in.

In addition, we've recently enabled a multi touch attribution tool to help us better understand the incremental the of our investment and allow us to shift our budget and supported the highest contributing marketing tactics.

A much more efficient and nimble manner than we were previously capable of.

The shift towards mobile and our mobile App continues to exceed our expectation during.

During Q4, we had our highest percentage ever of digital transactions come through a mobile device at over 73% of transactions and for the full year over 70% of our transactions were converted using a mobile device.

Our mobile App continues to drive strong customer acquisition and engagement with new mobile App users up 34% for full year 2021, and this is on top of the significant increases we saw during the pandemic in the first half of 2020.

And importantly, our basket sizes for customers transacting on our mobile app or over 10% higher than our non app mobile purchases.

With respect to the launch of after pay we're impressed with <unk> performance to date.

Not only do our transactions on after pay run 65% higher <unk> than the average of our non buy now pay later tender options.

After pay is already driving a high teens penetration of our digital acquisition.

After pay is bringing new digitally native mobile first customers to our brands, resulting in after pay already delivering a low double digit penetration of our total digital transactions in just the six month since launch.

As we highlighted in our Q3 investor deck, we partnered with after pay and the Kardashians on our Christmas family P. J campaign, which resulted in $2 1 billion impressions for our brand over the course of the campaign.

We continue to focus on leveraging after pays the ability to reach new millennial and Gen Z customers through our partnership.

With respect to our fleet optimization strategy, we continued to secure very favorable lease terms throughout Q4, allowing us to reduce our closures to 78 stores for full year 2021, bringing the total closures for full year, 2020 one to 256 store.

Ours versus our original target of 300 stores.

For full year 2022, we are targeting to close approximately 40 stores.

While we realized significant occupancy savings since the onset of the pandemic, we remain well positioned to continue to realize additional savings with over 75% of our stores, having a lease action within the next 24 months.

It's important to highlight that as we enter 2022, we're planning for approximately 50% of our retail sales to come from our stores with approximately 50% of our store sales coming from traditional mall and 50% coming from off mall.

With our digital business also planned at an industry, leading 50% of total retail sales are planned for 2022 targets approximately 75% of our retail sales coming from off mall store.

<unk> supporting our structural reset to a digital first retailer.

With respect to Gymboree, we received an overwhelmingly positive response to our holiday deliveries clear.

Clearly many families joined together to celebrate the holidays and chose to address their children in this unique brand.

We're excited about our strong Jim Murray momentum and we're looking forward to building on this momentum in 2022 and beyond.

On November 9th we launched our newest brand sugar and Jade targeted to the 8 billion dollar U S tween market.

We're thrilled to be able to offer the tween customer a dedicated digital only brands.

Based on the strength of our big girls business sugar and Jade as a natural extension of our core competency and adds to our total addressable market opportunity.

We currently have 4 million names in our file to whom we are actively marketing sugar and J M.

And as we anticipated we were able to capture significant learnings this past holiday from our initial sugar and Jade launch and armed with this information we are well positioned to grow this brand for holiday 2002.

With respect to wholesale we remain laser focused on growing our business with Amazon. They continue to experience very strong sell throughs on our product and we continue to significantly accelerate our investments with them and brand marketing.

We are projecting significant growth with Amazon for 2022 and beyond.

In closing, we have strong brands that offer considerable value and enjoy a very loyal following we delivered record breaking results in 2021 due to our accelerated structural reset to a digital first company that has taken place since the <unk>.

Start of the pandemic.

We plan to resume providing EPS guidance during our Q1 earnings call in May.

After we have a clear understanding of the topline impact of lapping the unprecedented stimulus released into the economy one year ago.

Looking ahead at 2022, we are facing significant top and bottom line headwinds, including decade high cotton prices.

Surging inflation with a particular focus on rapidly rising oil and gasoline prices.

As our core consumer is particularly impacted by these.

Lapping the stimulus from last year.

<unk> global freight disruption and rising transportation costs.

However, despite these many challenges we are confident that our accelerated structural reset to a digital first company.

Including our pricing and promotional reset.

Combined with our significantly enhanced data driven ability to maximize marketing.

And our demonstrated success is with respect to inventory management fleet optimization fulfillment initiatives and SG&A has reset the bar and positioned us to deliver double digit EPS and double digit operating margin as the new baseline for full year.

2022 and beyond.

And now I will turn it over to Rob.

Thank you Jamie and good morning, everyone. After I review, our Q4 results I will provide some additional remarks with respect to 2022.

In the fiscal fourth quarter, we delivered a record Q4, adjusted EPS of $3 in Tucson.

Net sales increased by $35 million or 7% to $508 million versus last years $473 million.

<unk> decreased by 1% versus 2019.

Our U S net sales increased by $29 million or 7% to $440 million versus last year's $411 million, while our Canadian net sales increased by $10 million or 29% to $47 million versus last year's $37 million.

Comparable retail sales were a positive 13% versus Q4 2020.

Our net sales were positively impacted by the strong customer response to our product assortment and our key holiday selling period of November and December and significant increases in AUR in both our stores and digital channels due to the strategic reset of our pricing and promotions.

Our net sales were negatively impacted by the impact of the surging omicron variants in the month of January which we estimate negatively impacted our sales by approximately $14 million for the quarter.

And the impact of permanent store closures, representing approximately $12 million for the quarter.

Consolidated digital sales increased 11% in Q4 versus 2020, representing 48% of our total sales.

Versus 2019 consolidated digital sales increased by 53% in Q4.

Store net sales were $249 million for the quarter.

Which represents approximately 76% of our Q4 2019 store in itself.

Having 256 or 28% fewer stores in Q4 2021 versus Q4 2019.

As well as a high single digit percentage reduction in operating hours versus 2019 as dictated by the mall landlords.

Our store traffic significantly improved versus Q4, 2020, driven by 25% higher comp traffic and the key holiday selling weeks in November December .

However store traffic remained below pre pandemic levels with U S store traffic down 28% for Q4, 2021 versus Q4, 2019, and Canada down 15%.

Traffic deteriorated in January as the Omnipod variant surged with store traffic down 34% in January versus January 2019.

Adjusted gross margin adjusted gross margin increased 776 basis points to a record 38, 2% of net sales compared to 34% of net sales in Q4 2020.

The gross margin increase was the result of significantly higher consolidated merchandise margins, resulting from double digit AUR increases in our digital and store channel due to the impact of our strategic pricing and promotion reset and stroke customer product acceptance.

And leverage of fixed expenses, resulting from the increase in net sales as well as strong expense leverage resulting from our focus on e-commerce fulfillment optimization, which virtually eliminated the amount of supplemental ship from store required to support our digital business in Q4, resulting in lower per order costs.

Occupancy expenses were higher in the quarter versus Q4 2020 due to the lapping the one time rent abatements of $13 million, we recognized in Q4 last year.

However, occupancy expenses were $13 million lower than Q4, 2021 versus Q4 2019.

The favorable lease negotiations and reductions in net occupancy expense for permanent store closures.

Supply chain challenges worsened in Q4, resulting in incremental inbound freight transportation costs, driven by higher levels of airfreight costs and higher container rates impacting Q4 gross margin by approximately 200 basis points.

Adjusted SG&A.

Adjusted SG&A was $119 million versus $103 million last year, and Deleveraged 172 basis points to 23, 4% of net sales compared to 21, 7% of net sales last year.

The deleverage was the result of higher marketing spend.

<unk> to support the launch of sugar, and Jade and higher incentive compensation accruals.

Adjusted depreciation and amortization was $14 million in the quarter.

Okay.

Adjusted operating income adjusted operating income for the quarter increased $35 million to $61 million or 12, 1% of sales.

Record Q4 results versus an adjusted operating income of 26 million last year, and leveraged 656 basis points compared to a five 5% of net sales last year.

Interest expense, our adjusted interest expense for the quarter was $1 9 million versus $4 1 million last year. The decrease in interest expense reflects the lower interest rates as a result of the refinancing of our credit facilities early in the quarter.

Lower average debt balance.

Tax rate, our adjusted tax rate was 26% due to higher incentive compensation accruals in 2021.

Moving onto the balance sheet, our cash and short term investments ended the quarter at $65 million.

We ended the quarter with $175 million outstanding on our revolving credit facility.

Inventories ended the quarter up 10% versus last year with over 26% of our inventory in transit.

Our inventory complexion is in good shape, and we have taken actions to mitigate the impact of the ongoing global supply chain disruption and elevated transit times, including receive pull ups and strategic pack and hold opportunities to mitigate late receipt.

Moving onto cash flow and liquidity.

We generated $66 million in cash from operations in Q4 versus $15 million last year.

Capital expenditures in Q4 were $7 million.

During the fourth quarter, we repurchased 507000 shares for $41 million, leaving the company with $257 million outstanding on our current authorization, which was increased by $250 million in the quarter.

For the full year of 2021, we've repurchased 1 million shares for $86 million.

We refinanced both our revolving credit facility and our term loan in the fourth quarter paying down our term loan facility by $29 million as part of the transaction.

Now I will provide an update on our store activity in the quarter.

We closed 31 locations in the fourth quarter, bringing full year 2021 closures to 78, and our two year total store closures to $2 56.

The 256 store closures or fewer than our original store closure target of 300 stores due to favorable lease negotiations.

Between the closure of these underperforming locations and the benefits of our favorable lease negotiations over the past two years, we have significantly improved the profitability of our stores, which stores delivering four wall margins of over 25% in 2021.

With over 75% of our store fleet coming up for lease action in the next 24 months, we continue to maintain meaningful financial flexibility and our lease portfolio.

These short term leases will continue to provide us with the flexibility to optimize our occupancy cost in our assortments.

We ended the quarter with 672 stores and total square footage of $3 2 million.

A decrease of 10% compared to Q4, 2021, and a decrease of 26% since the onset of the pandemic.

As gene mentioned, we're not planning on providing EPS guidance until our Q1 call in May.

Given our limited top line visibility in the near term due to the lapping unprecedented stimulus released as the economy, one year ago, but we want to provide you with our current thinking on 2022.

The accelerated structural reset to a digital first company we've accomplished since the start of the pandemic continues to benefit our operating margins.

And due to the structural changes we believe that despite the significant headwinds we are facing in 2022.

You will be able to continue to deliver EPS and operating margins well above pre pandemic levels.

Establishing establishing double digit EPS and double digit operating margin as our new baseline for full year 'twenty two and beyond.

Starting with Q1, we believe that the first quarter will be our toughest quarterly compare as we are up against significant top and bottom line headwinds.

We anticipate total Q1 net sales will be down mid single to high single digits versus last year due to the combination of lapping the unprecedented government stimulus released into our economy, one year ago today, which had its most pronounced impact on our Q1 net sales.

Uncertainties surrounding 40 year high inflation, particularly the volatility surrounding oil and gas prices and its impact on our customer the impact of the permanent store closures since Q1 last year, which contributed roughly $11 million in net sales in Q1 2021.

Late deliveries, resulting from the prolonged disruption in the global supply chain.

And the impact of the lingering omicron variant.

Our operating margins continued to benefit from the accelerated structural reset we made through our business since the onset of the pandemic and while we anticipate that we will deliver Q1 operating margins well above pre pandemic highs, we do not anticipate delivering double digit operating margin for Q1 due to lapping onetime rental payments of $8 million would be recognized.

I think Q1 2021 the.

The impact of higher inbound transportation costs than we experienced in the first half of last year, including airfreight costs to mitigate the current supply chain disruption, representing an approximate incremental $12 million in Q1 and the loss of the would go with trade preferences in Ethiopia, which was announced by the federal government on December 10.

And we will have a significant impact on our margins in 2022, and if not reinstated represents an approximate $3 million headwind for Q1.

While we are planning for lower sales in Q1 versus last year. These three items alone represent a 530 basis point gross margin impact from last year's sales.

These gross margin headwinds will be partially offset by lower occupancy expenses and ecommerce fulfillment cost savings.

SG&A is planned to be in the range of $112 million, which is higher than last year due to our incremental investments in brand marketing and the impact of lapping the temporary store closures in Canada last year.

Adjusted depreciation and amortization is planned to be in the range of $14 million, we expect our tax rate to be in the range of 26%.

Moving on to the balance of 2022, starting with the top line. We believe that the topline headwinds we are facing will be mitigated throughout the year by strategic actions. We are focused on delivering in 2022. So we're planning for a full year of 2022 consolidated net sales to be up approximately 1% versus 2021.

Topline headwinds for 2022 include lapping the impact of the unprecedented stipulate a stimulus in 2021, including the impact from the child tax credits in the back half of the year, the uncertainties surrounding inflation, particularly the oil and gas spikes.

The impact of our permanent store closures in the past 12 months, which contributed roughly $40 million in net sales in 2021 <unk>.

The impact of late deliveries, resulting from the prolonged disruption in the global supply chain, which we've been managing since the onset of the pandemic through the pull up of deliveries additional carrier and vessel options and the use of airfreight where necessary.

And our record setting back to school selling season last year, driven by pent up demand and the returns are in person learning and further supported by the rollout of the enhanced child tax credits.

Strategic actions planned to offset these topline headwinds include.

We are planning for digital sales to grow in fiscal 2022, and we are projecting that digital sales will represent an industry, leading approximately 50% of our total consolidated net sales for fiscal 2022 with only 25% of our total retail sales coming from traditional brick and mortar malls.

We are taking pricing actions to offset raw material cost increases, which will benefit us on both the top and bottom line.

We're building on strong sales momentum from gymboree, making meaningful progress towards the sales opportunity of $140 million, we estimated when we acquired the brand.

We are making significant marketing investments with Amazon and are planning for accelerated growth in 2022 on top of the significant gains we made in 2021.

Our early positive results from our investments in top of funnel and brand awareness marketing are very encouraging and we intend to build on these initiatives in 2022.

And lastly, the incremental sales opportunity from a recent sugar and Jade Walsh.

With respect to quarterly topline cadence for the year, what we're planning for lower net sales in Q1, as we lap the impact of stimulus payments last year, we anticipate that Q2 sales will be higher than last year, because the year over year comparisons against the impact of stimulus rooms last year becomes less pronounced.

For the back half of 2022, we anticipate to return to a more balanced sales split between the third and fourth quarters.

We anticipate that Q3 net sales will be lower than last year due to our record setting back to school season last year and rollout of the enhanced child tax credits and we anticipate that our Q4 net sales will be higher than 2021, as we lap the impact of the only contemplates and deliver organic sales growth from the strategic actions I just outlined.

Moving onto the bottom line.

Starting with the gross margin, while we expect that our 2022 and beyond gross margins will continue to significantly exceed pre pandemic highs. We anticipate our full year 2022 gross margin will be down approximately 200 to 300 basis points lower than our full year 2021 results.

We are planning for gross margins to be lower in the first half of 2022 versus the back half largely driven by the Q1 headwinds I just outlined.

Hiring inbound transportation costs will continue to impact gross margin throughout the balance of fiscal 2022, resulting from the continued disruption in the global supply chain. We anticipate that these increased costs, particularly expedited airfreight costs will impact us to a greater degree in the first half of the year versus the second half.

For the full year, we are planning for a high single digit increase through our Cogs due to elevating cotton prices, which we are planning to mitigate with a corresponding high single digit increase in AUR.

However, at this point based on record levels of inflation, particularly surging oil prices, we do not yet have visibility on the full year 2022, AUC. So we believe it's prudent to wait until we have more clarity on how inflation may further impact our agencies before we commit to mitigating any further AUC increases with further AUR and crew.

He says.

And the full year of 2022 loss of Golar trade preferences in Ethiopia is significant and is projected at $50 million.

We are planning to partially offset these gross margin headwinds through higher realized pricing supported by our increased investment in top of funnel and brand awareness marketing, which we anticipate will continue to reduce promotions and markdowns.

Lower occupancy costs in fiscal 2022 versus 2021 due to the impact of our permanent store closures as well as the benefits of favorable lease negotiations, which will more than mitigate the impact of the onetime abatements of $12 million, we recognized in fiscal 2021 .

We continue to work on significant fulfillment optimization initiatives across our global supply chain and in our distribution centers.

And intend to build on the optimizations, we already have in place to further reduce our fulfillment cost per order for 2022.

Moving on to SG&A.

We're planning for a full year SG&A to be slightly higher than in 2021.

First we are reinvesting some of the cost efficiencies and benefits from our fleet optimization program.

The incremental investments in brand marketing.

In addition, we are planning for wage increases in our stores use increases will be partially offset by lower incentive compensation accruals in 2022.

We continue to see benefits from our fleet optimization program and accelerated store closures on the depreciation and amortization line and are planning for depreciation and amortization to be lower in 2022 and 2021.

We are planning for significantly lower interest expense in 2022, resulting from the favorable interest rates, we secured as part of the refinancing of our revolving credit facility and term loan in the fourth quarter as well as the $29 million decrease in our term loan.

We expect our full year tax rate to be in the range of 26%.

Given our accelerated digital transformation and the structural reset to our business, we expect to generate significantly higher levels of operating cash flow for the full year 'twenty two than we did pre pandemic and projected deliver operating cash flows in the range of $250 million for 2022.

Based on the historical seasonality of our business, we expect to generate a significant portion of these cash flows in the back half of next year.

These strong operating cash flows combined with a much lower store count and the strategic decision to accelerate our digital transformation pre pandemic, putting that investment behind US will result in significant levels of free cash flow for 2022 and beyond.

These significant levels of free cash flow will provide us with the opportunity to continue to reinvest in our business and provide us with the opportunity to continue to return significant capital to our shareholders in 2022.

We are planning for capital expenditures in the range of $55 million.

Fiscal year 2022, with a large majority allocated to digital and supply chain and fulfillment initiatives.

At this point, we will open the call to your questions.

At this time, if you would like to ask a question. Please press star one now on your telephone keypad to withdraw yourself from the queue. You May press the pound key once again to ask a question star one now on your telephone keypad.

We'll take a question from Dana Telsey of Telsey Group. Your line is open.

Good morning, everyone. Thank you for giving me that information hi, Thank you for giving all the information and the framework for 2022.

Do you think about this upcoming year the brand marketing.

What should we be watching for is there a difference in the cadence of the year of what Youre looking at in the first half.

Dashing thing was very impactful in the fourth quarter, any new things like that plant and on the AUC that still.

Uncertain, given all the cotton costs at all whether it's Jim Murray, whether it's the new sugar and Jade does it impact one business more than another and is there any difference in price increase that youre planning to take thank you.

Sure I think on the AUC it impacts across you know were a big user of cotton and all three brands.

We've taken obviously sugar and Jade is new but we've taken pricing increases throughout the past year and TCP and then Jim Barry and as Rob outlined on the call.

Our planning on mitigating the full impact of the <unk> increases with AUR increases in 2022, So I would say that there really isn't one brand that sticks out.

From a marketing strategy point of view I think thats, a little bit more of a complicated answer I think we really have a big lever in marketing we've done a lot of work on personalization over the last several years, but in the last I'd say 18 months.

Last year and a half we've really been able to move to a much more strategic.

Marketing lens on our business, we've gotten some significant outside help on segmenting, our file and really understanding who our customer is and so I think we really think about marketing from four pillars. If you will.

The first one is really customer centric marketing and like I said, we had an outside partner come in their name as Merkel, who really helped us there and what they hope that really do is take audience profiles, they defined exactly who our customers are.

Consumer demographics, psychographics, attitudinal and behavioral data all across multiple platforms.

The touch points and really helped US journey map and then create customer plans for acquisition retention and reactivation by channel and brand based on this journey maps and then we align our specific marketing tactics against those journey maps. So that is a really big change for us and a really important change for us is to be able to get to that level.

With our customer on the profiles and the journey mapping and then I think really the second pillar, it's probably brand building. So you know, we then go and create 360 degree campaigns.

<unk> are different products throughout our three brands and throughout all our customer touch points, and then reinvest that kind of an all point to the journey, but we really are emphasizing and Rob mentioned it on the call that top of funnel awareness media and then we really to your point about the kardashians are doubling down on our efforts with influencers and celebrities to really sure.

Jeff brand perception.

From a more promotional and to build awareness.

The brand and really the values of the brand and ultimately monetize those learnings obviously and then there's the other.

They're big change for Us this year, which is really marketing mix optimization and again, we had an outside or come in and help us with this.

So I had mentioned in my remarks, we have a what.

What we call a multi touch attribution tool and that really is going to help us spend our dollars where they count. So we're strategically shifting our mix to more.

More top of funnel and more brand awareness and acquisition tactics and what does multi attribution tool fancy name, but what it does is it enables us to measure and optimize and forecast the different marketing investments and then implement like a statistical look back.

Really like a look back model to identify incrementally of our marketing spend and really makes us much more nimble and able to move that spend around much better to where our customer really finding us and then all of those three really lead obviously to the fourth which is the best in class digital experience in that.

So all the things you've been working on site enhancements.

Additional marketing channels focused on customer acquisition, and personalization and a new technology.

And then clearly the focus on mobile and building out the App experience. So we're really excited about about the marketing.

Strategy, we have going forward, we've seen some great early results and think that'll be a powerful lever in 'twenty two.

Perfect and just one other quick follow ups as you think about your sales opportunity. Obviously last year, we had stimulus, but we also had you a share gainer from competitors that have gone away.

Any way to unpack that opportunity go forward Jane anything different youre seeing.

Nancy <unk> out there in terms of your share opportunity.

Well I think when you look at 2021.

Non accounting sugar and Jade because we're waiting for the kind of tween information on that and certainly we just get retail information as everyone else does so you can't really double count wholesale. So this doesn't have anything to do with the growth in the Amazon business, It's really.

The market share data is based on retail business, we were able to hold our market share flat in 2021, and we were one of the very few to do so as we had kind of foreshadowed over the year, we knew that the quote unquote essential retailers would be giving up some share this year, which they did as the rest of the world was allowed to open.

Back up we were the only kid pure kids' player that was able to hold share in 2021, and I think Dan and when you think about us being able to hold share in 2021 with all the issues, we are up against with Covid.

And the fact that we picked up 472 basis points in <unk>.

Margin versus 2021, and 660 basis points versus 2019, I think it kind of gives us confidence that our pricing reset is sticky and has staying power. So I think those statistics are pretty powerful.

We will take our next question from Jim Chartier of <unk> Crespi Hardt.

Good morning, Thanks for taking my questions.

Hey, Jim can you just talk about who you are and can you talk about the promotional environment. What you saw in fourth quarter Amendment kind of how are you planning for 'twenty.

<unk> 22, and then for first quarter, how impactful is the return of Easter dressing business and first quarter after not really happened that business for a couple of years. Thanks.

Sure Yeah, I think that from what we see in our competitor base everything is really kind of benign very rational I think people are still having some issues getting product in and so I think that we're going to see continue to see irrational promotional environment I think we are firm believers.

We can get more for our product and I think some of our competitors feel the same way. So I think everyone's at least currently on the same page as to holding on to these price increases and <unk>.

Getting discipline around inventory management, so I see the promotional environment.

Relatively calm.

From a I know you didn't ask this but you know the Easter dress that Christmas dress up business was strong and that should bode well for having a much stronger Easter dressy business. This year than we did last year, but I will remind you and we've said this many times before we are pretty much a student of the of the Easter business in kids.

Easter is not the greatest date for us a $34 17, this year and as we said a lot of time, we don't love a late Easter.

And the reason why is.

With a late March or in early April Easter you get mom to come in in March whether the weather is favorable or not she has to shop for Easter and not only does she by Easter dress up but she starts to look at what's available to stock up for spring at the same time and then when the weather changes what's it usually does at some point in April you get a second chance to have mom back in the quarter.

So that really the perfect timing for US late March or early early April with a late April unless you get a weather change in March there is really no strong impetus for mom to come out in March and shall wait until April . So when we really think about it and Rob talked about Q1, which we think is going to be our toughest compare when you look at.

The fact that we're up against such a tremendous amount of stimulus from last year and we have a later Easter.

We really believe that that's going to combine together to you now.

Rob said produce our toughest compare but from a product point of view and a positioning point of view and an inventory point of view.

We feel good that we'll do well with our dressy product one mom comes out.

Yeah.

Our next question is from Jay sole of UBS.

Great. Thank you so much.

You know, Rob if you could sort of explain two things one could you give us an idea of the incremental benefits of sales in 2022 from gymboree sugar and Jade and Amazon.

And then maybe could you clarify on gross margin you said gross margin down 200, 300 bps for the year lowering the first half with second half did you mean that in terms of the year over year change will be.

Lower in Q1 versus Q2 or the overall level of gross margin will be lower in Q1 versus Q2, I'm sorry, the first half versus second half. Thank you.

Sure from a gross margin perspective.

I called out 200 to 300 basis points down for the year versus 2021.

The overall decline in Q1, and Q2 will be more pronounced than the declines in Q3, and Q4 and we expect a moderation in gross margin as we get to the back half of your own.

The year over year comparison of the fruit.

I talked about this quarter.

Sugar and J&J Marine Amazon perspective, we didn't call out amounts in terms of sales increases, but they are included within our 1%.

Increase of consolidated net sales for the year.

We continue to be excited about the gymboree brand in the long term opportunity for $140 million.

Sugar and Jay It is early days.

It's a big addressable market for us in terms of $8 billion in between market.

And Amazon is Amazon. So we're excited about that opportunity and where we see significant growth in 2022 over the significant growth we saw in 2021.

We'll move next to Paul <unk> of Citi. Your line is open.

Hey, Thanks, Jim.

I'm curious about your view on the growth in the children's apparel market for F. 'twenty two in units and dollars.

Would you expect to grow our market share.

The year ahead.

Just curious if that's something that you set as a goal.

And how much of that sales growth in F. 'twenty, two do you assume as units versus pricing.

Paul I can answer your question from a units perspective, we were up this year versus last year and we also had significant double digit gains in EUR as we pivot to an e-commerce business and decidedly higher digital penetration, we're more focused on order value.

And our order value was also up significant double digits.

The increases in the order value really provides a tremendous leverage on our fulfillment costs on our E com business and has driven our highest operating margin channel even that much higher we expect continued benefits for next year as we continue to optimize the fulfillment cost structure.

And we will take our final question from Susan Anderson of B Riley.

Hi, good morning, nice job on the quarter. Thanks for all the details.

I'm just curious based on your.

Top line guide for the first quarter I guess does that entail or are you currently comping in line with the guide are you assuming that sounds kind of fall off in March and April as you cycle. Those tough compares and then it looks like based on the guide for the full year, you're expecting sales to stabilize in the back half. So I'm, assuming you guys fill the channel.

Tax credit wasn't as big of a benefit as the stimulus in March last year.

Yes, Susan we did not obviously the child tax credit helped us and I think that's why Rob said, we expect Q3 to be lower this year than last year because of that pent up demand with return to in person learning and the child tax credit and we expect to see a more balanced Q3 to Q4.

In response to your initial question. Obviously January was a really tough month for US we had a great November and December and.

As Rob detailed when omicron hit we really took a dive in sales and traffic we saw a nice rebound in February we were up mid single digits comp through the end of February but as we know February is a small month and it wasn't really up against stimulus. So we do expect a significant drop off in the month of March as we anniversary the stimulus which was.

About exactly one year ago today, So March and April really make up the bulk of the quarter and that's where we're going to see the drop we think.

This does conclude our question and answer session as well as our conference call for this morning. Thank you for joining US today. If you have further questions. Please call Investor Relations at area Code 2015582400 extension 14500.

You may now disconnect your lines and have a wonderful day.

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Good morning, and welcome to the children's place fourth quarter and fiscal full year 2021 earnings conference call.

On the call today are Jane Elfers, President and Chief Executive Officer.

Rob Hull Chief Financial Officer.

At this time all participants are in a listen only mode.

After the prepared remarks, we will open the call up to your questions.

I ask that each of you limit yourself to one question. So that everyone will have an opportunity.

As a reminder, this call is being recorded.

The children's place issued its fourth quarter and fiscal full year 2021 earnings press release earlier this morning.

A copy of the release and presentation materials for today's call have been posted to the Investor Relations section of the company's website.

Before we begin I would like to remind everyone that any forward looking statements made today are subject to the safe Harbor statements found in this morning's press release as well as in the Companys SEC filings, including the risk factors section of the company's annual report on Form 10-K for its most recent fiscal year.

These forward looking statements involve risks and uncertainties that could cause actual results to differ materially.

The company undertakes no obligation to publicly release any revisions to these forward looking statements to reflect events or circumstances. After the date hereof.

It is now my pleasure to turn the call over to Jane Elfers.

Thank you and good morning, everyone. We delivered another outstanding quarter with gross margin operating margin and EPS all at record levels since.

Since the onset of the pandemic, our accelerated structural reset to a digital first company has delivered impressive results we.

We delivered a 15, 1% adjusted operating margin in 2021.

We're at two 6% in 2019.

We delivered a 41, 6% gross margin a 660 basis point improvement versus 35% in 2019.

Our 2021 operating income was $289 million.

Our full year 2019, adjusted operating income of $111 million.

$178 million increase.

We delivered a 2% net sales increase in 2021 versus 2019, despite having 256 or 28% fewer stores.

And our EPS was $13.40 in 2021.

It is $5 36 in 2019.

I want to thank all of our associates for their hard work in delivering these industry leading results, particularly.

Particularly with all the challenges we faced in the last 24 months.

Starting with digital our digital business has always been our highest operating margin contributor due to its high <unk> low single digit return rates and lower overhead costs versus our stores channel.

And with the pandemic drove an acceleration of our digital business.

We continue to gain additional leverage on fixed overhead costs and drive significantly higher digital margins.

Our digital sales represented an industry, leading 48% of our Q4 sales.

Versus 31% in Q4 2019.

As we target a 50% annual digital penetration for full year 2022.

Importantly, supporting our accelerated digital penetration our customer transfer rate further improved to an industry, leading 32% and full year 2021 from 30% ending full year 2020.

With respect to customer acquisition, we've leveraged our marketing tactic and focused our additional investments to achieve a 50 50 split between digital and store customer acquisition.

Which is in line with where our digital penetration is planned in the near term.

In fiscal 2021, we obtained a 16% increase in our new customer file.

With customer acquisition more balanced between our channels.

We are benefiting from the improved channel mix, resulting in significantly higher average spend and higher margins per customer.

As the shift to digital has accelerated over the past two years, we benefited by being able to better identify our customers and use that data to drive higher cost efficiency and marketing spend.

Entering 2022, we've established robust customer acquisition and retention targets by brand.

Enabled by our enabled by our customer segmentation data to deliver enhanced personalized content that resonates with each target audience and.

The shift towards mobile and our mobile App continues to exceed our expectations.

And importantly, our basket sizes for customers transacting on our mobile app or over 10% higher than our non app mobile purchases.

With respect to the launch of after pay we're impressed with <unk> performance to date.

Not only do our transactions on after pay run 65% higher <unk> than the average of our non buy now pay later tender option.

After pay is already driving a high teens penetration of our digital acquisition.

We continue to focus on leveraging after <unk> ability to reach new millennial and Gen Z customers through our partnership.

With respect to our fleet optimization strategy, we continue to secure very favorable lease terms throughout Q4, allowing us to reduce our closures to 78 stores for full year 2021, bringing the total closures for full year, 2020 one to 256 store.

Ours versus our original target of 300 stores.

For full year 2022, we are targeting to close approximately 40 stores.

It is important to highlight that as we enter 2022, we're planning for approximately 50% of our retail sales to come from our stores with approximately 50% of our store sales coming from traditional mall and 50% coming from off mall.

With our digital business also planned at an industry, leading 50% of total retail sales are planned for 2022 targets approximately 75% of our retail sales coming from off mall.

Strongly supporting our structural reset to a digital first retailer.

With respect to Gymboree, we received an overwhelmingly positive response to our holiday deliveries.

Many families joined together to celebrate the holidays and chose to address their children in this unique brand.

We're excited about our strong Jim Murray momentum and we're looking forward to building on this momentum in 2022 and beyond.

On November 9th we launched our newest brand sugar and Jade targeted to the $8 billion U S tween market.

We're thrilled to be able to offer the tween customer a dedicated digital only brands.

Based on the strength of our big growth business sugar and Jade as a natural extension of our core competency and adds to our total addressable market opportunity.

We currently have 4 million names in our file to whom we are actively marketing sugar and Jay.

And as we anticipated we were able to capture significant learnings this past holiday from our initial sugar and Jade launch.

And armed with this information, we're well positioned to grow this brand for holiday 2002.

We are projecting significant growth with Amazon for 2022 and beyond.

In closing, we have strong brands that offer considerable value and enjoy a very loyal following we.

We delivered record breaking results in 2021 due to our accelerated structural reset to a digital first company that has taken place since the start of the pandemic.

We plan to resume providing EPS guidance during our Q1 earnings call on May.

After we have a clear understanding of the topline impact of lapping the unprecedented stimulus released into the economy one year ago.

Looking ahead at 2022, we are facing significant top and bottom line headwinds, including decade high cotton prices.

Surging inflation with a particular focus on rapidly rising oil and gasoline prices.

As our core consumer is particularly impacted by these.

Lapping the stimulus from last year.

<unk> global freight disruption and rising transportation costs.

However, despite these many challenges we are confident that our accelerated structural reset to a digital first company.

Including our pricing and promotional reset.

Combined with our significantly enhanced data driven ability to maximize marketing.

And our demonstrated successes with respect to inventory management fleet optimization fulfillment initiatives and SG&A has reset the bar and positioned us to deliver double digit EPS and double digit operating margin as the new baseline for full year.

2022 and beyond.

And now I will turn it over to Rob.

Thank you Jim and good morning, everyone. After I review, our Q4 results I will provide some additional remarks with respect to 2022.

In the fiscal fourth quarter, we delivered a record Q4, adjusted EPS of $3 <unk>.

Net sales increased by $35 million or 7% to $508 million versus last years $473 million.

<unk> decreased by 1% versus 2019.

Comparable retail sales were a positive 13% versus Q4 2020.

Our net sales were positively impacted by the strong customer response to our product assortment and our key holiday selling period in November and December and significant increases in AUR in both our stores and digital channels due to the strategic reset of our pricing and promotions.

And the impact of permanent store closures, representing approximately $12 million for the quarter.

Consolidated digital sales increased 11% in Q4 versus 2020, representing 48% of our total sales.

Versus 2019 consolidated digital sales increased by 53% in Q4.

Store net sales were $249 million for the quarter.

Which represents approximately 76% of our Q4 2019 store in itself.

Having 256 or 28% fewer stores in Q4, 2021 versus Q4 2019, as well as a high single digit percentage reduction in operating hours versus 2019 as dictated by the mall landlords.

Our store traffic significantly improved versus Q4, 2020, driven by 25% higher comp traffic and the key holiday selling weeks in November December .

However store traffic remained below pre pandemic levels with U S store traffic down 28% for Q4, 2021 versus Q4, 2019, and Canada down 15%.

Traffic deteriorated in January as the Omnicare ovarian surged with store traffic down 34% in January versus January 2019.

Adjusted gross margin adjusted gross margin increased 776 basis points to a record 38, 2% of net sales compared to 34% of net sales in Q4 2020.

Occupancy expenses were higher in the quarter versus Q4 2020 due to the lapping the one time rent abatements of $13 million, we recognized in Q4 last year.

However, occupancy expenses were $13 million lower than Q4, 2021 versus Q4 2019.

The favorable lease negotiations and reductions in net occupancy expense for permanent store closures.

Adjusted SG&A.

Adjusted SG&A was $119 million versus $103 million last year, and Deleveraged 172 basis points to 23, 4% of net sales compared to 21, 7% of net sales last year.

The deleverage was the result of higher marketing spend including to support the launch of sugar and Jade and higher incentive compensation accruals.

Adjusted depreciation and amortization was $14 million in the quarter.

Adjusted operating income adjusted operating income for the quarter increased $35 million to $61 million or.

Were 12, 1% of sales a record Q4 results versus an adjusted operating income of 26 million last year, and leveraged 656 basis points compared to a five 5% of net sales last year.

Tax rate, our adjusted tax rate was 26% due to higher incentive compensation accruals in 2021.

Moving onto the balance sheet, our cash and short term investments ended the quarter at $65 million.

We ended the quarter with $175 million outstanding on our revolving credit facility.

Inventories ended the quarter up 10% versus last year with over 26% of our inventory in transit.

Our inventory complexion is in good shape, and we have taken actions to mitigate the impact of the ongoing global supply chain disruption and elevated transit times, including receipt pull ups and strategic pack and hold opportunities to mitigate late receipts.

Moving onto cash flow and liquidity, we generated $66 million in cash from operations in Q4 versus $15 million last year.

Capital expenditures in Q4 were $7 million.

For the full year of 2021, we've repurchased 1 million shares for $86 million.

We refinanced both our revolving credit facility and our term loan in the fourth quarter paying down our term loan facility by $29 million as part of the transaction.

Now I will provide an update on our store activity in the quarter.

We closed 31 locations in the fourth quarter, bringing full year 2021 closures to 78.

And our two year total store closures to $2 56.

The 256 store closures or fewer than our original store closure target of 300 stores due to favorable lease negotiations.

With over 75% of our store fleet coming up for lease action in the next 24 months, we continue to maintain meaningful financial flexibility and our lease portfolio.

These short term leases will continue to provide us with the flexibility to optimize our occupancy cost in our assortments.

We ended the quarter with 672 stores and total square footage of $3 2 million a decrease of 10% compared to Q4 2021.

A decrease of 26% since the onset of the pandemic.

As gene mentioned, we're not planning on providing EPS guidance until our Q1 call in May.

Given our limited top line visibility in the near term due to the lapping unprecedented stimulus released as the economy, one year ago, but we want to provide you with our current thinking on 2022.

The accelerated structural reset to a digital first company we've accomplished since the start of the pandemic continues to benefit our operating margin.

And due to these structural changes we believe that despite the significant headwinds we are facing in 2022.

We will be able to continue to deliver EPS and operating margins well above pre pandemic levels.

Establishing establishing double digit EPS and double digit operating margin as our new baseline for full year 'twenty two and beyond.

Starting with Q1, we believe that the first quarter will be our toughest quarterly compare as we are up against significant top and bottom line headwinds.

Uncertainties surrounding 40 year high in inflation, particularly the volatility surrounding oil and gas prices and its impact on our customer the.

The impact of the permanent store closures since Q1 last year, which contributed roughly $11 million in net sales in Q1 2021.

Late deliveries, resulting from the prolonged disruption in the global supply chain.

And the impact of the lingering omicron variant.

Our operating margins continued to benefit from the accelerated structural reset we made through our business since the onset of the pandemic and while we anticipate that we will deliver a Q1 operating margins well above pre pandemic highs, we do not anticipate delivering double digit operating margin for Q1 due to lapping onetime rental payments of $8 million we reckon.

I think Q1 2021.

Year over year, which was announced by the federal government on December 28, and we will have a significant impact on our margins in 2022, and if not reinstated represents an approximate $3 million headwind for Q1.

While we are planning for lower sales in Q1 versus last year. These three items alone represent a 530 basis point gross margin impact from last year's sales.

These gross margin headwinds will be partially offset by lower occupancy expenses and ecommerce fulfillment cost savings.

Adjusted depreciation and amortization is planned to be in the range of $14 million, we expect our tax rate to be in the range of 26%.

So we're planning for our full year 2022, consolidated net sales to be up approximately 1% versus 2021.

Topline headwinds for 2022 include lapping the impact of the unprecedented stimulus stimulus in 2021, including the impact from the child tax credits in the back half of the year the uncertainties.

Surrounding inflation, particularly the oil and gas lakes <unk>.

The impact of our permanent store closures in the past 12 months, which contributed roughly $40 million in net sales in 2021, the impact of late deliveries, resulting from the prolonged disruption in the global supply chain, which we've been managing since the onset of the pandemic through the pull up of deliveries additional carrier and vessel options and the use of airfreight where necessary.

And our record setting back to school selling season last year, driven by pent up demand and the returns are in person learning and further supported by the rollout of the enhanced child tax credits.

The strategic actions planned to offset these top line headwinds include.

We are planning for digital sales to grow in fiscal 2022, and we're projecting that digital sales will represent an industry, leading approximately 50% of our total consolidated net sales for fiscal 2022 with only 25% of our total retail sales coming from traditional brick and mortar malls.

We are taking pricing actions to offset raw material cost increases, which will benefit us on both the top and bottom line.

We're building on strong sales momentum from gymboree, making meaningful progress towards the sales opportunity of $140 million, we estimated when we acquired the brand.

We are making significant marketing investments with Amazon and are planning for accelerated growth in 2022 on top of the significant gains we made in 2021.

Our early positive results from our investments in top of funnel and brand awareness marketing are very encouraging and we intend to build on these initiatives in 2022.

And lastly, the incremental sales opportunity from a recent sugar and Jade Walsh.

With respect to quarterly top line cadence for the year, what we're planning for lower net sales in Q1, as we lap the impact of stimulus payments last year, we anticipate that Q2 sales will be higher than last year, because the year over year comparisons against the impact of stimulus than it was last year becomes less pronounced.

For the back half of 2022, we anticipate to return to a more balanced sales split between the third and fourth quarters.

We anticipate that Q3 net sales will be lower than last year due to our record setting back to school season last year and rollout of the enhanced child tax credits and we anticipate that our Q4 net sales will be higher than 2021, as we lap the impact of the only contemplate and deliver organic sales growth from the strategic actions I just outlined.

Moving on to the bottom line.

Starting with the gross margin, while we expected our 2022 and beyond gross margins will continue to significantly exceed pre pandemic highs. We anticipate our full year 2022 gross margin will be down approximately 200 to 300 basis points lower than our full year 2021 results.

We are planning for gross margins to be lower in the first half of 2022 versus the back half largely driven by the Q1 headwinds I just outlined.

Hiring inbound transportation costs will continue to impact gross margin throughout the balance of fiscal 2022, resulting from the continued disruption in the global supply chain.

We anticipate that these increased costs, particularly expedited airfreight costs will impact us to a greater degree in the first half of the year versus the second half.

For the full year, we are planning for a high single digit increase through our Cogs due to elevated cotton prices, which we are planning to mitigate with a corresponding high single digit increase in EUR.

However, at this point based on record levels of inflation, particularly surging oil prices, we do not yet have visibility on the full year 2022, AUC. So we believe it's prudent to wait until we have more clarity on how inflation may further impact our ECS before we commit some mitigating any further AUC increases with further AUR and crew.

Yes.

And the full year of 2022 loss of Golar trade preferences in Ethiopia is significant and is projected at a $15 million.

We continue to work on significant fulfillment optimization initiatives across our global supply chain and in our distribution centers.

And intend to build on the optimizations, we already have in place to further reduce our fulfillment cost per order for 2022.

Moving on to SG&A.

Planning for full year SG&A to be slightly higher than in 2021.

First we are reinvesting some of the cost efficiencies and benefits from our fleet optimization program.

Incremental investments in brand marketing.

In addition, we are planning for wage increases in our stores use increases will be partially offset by lower incentive compensation accruals in 2022.

We are planning for a significantly lower interest expense in 2022, resulting from the favorable interest rates, we secured as part of the refinancing of our revolving credit facility and term loan in the fourth quarter as well as the $29 million decrease in our term loan.

We expect our full year tax rate to be in the range of 26%.

Based on the historical seasonality of our business, we expect to generate a significant portion of these cash flows in the back half of next year.

We have significant levels of free cash flow will provide us with the opportunity to continue to reinvest in our business and provide us with the opportunity to continue to return significant capital to our shareholders in 2022.

We are planning for capital expenditures in the range of $55 million.

Fiscal year 2022, with a large majority allocated to digital and supply chain fulfillment initiatives.

At this point, we will open the call to your questions.

We'll take a question from Dana Telsey of Telsey Group. Your line is open.

Good morning, everyone. Thank you for giving me all the information.

For giving all the information and the framework for 2022.

Think about this upcoming year the brand marketing what should we be watching for is there a difference in the cadence of the year of what Youre looking at in the first half I mean, the Kardashian thing was very impactful in the fourth quarter any new things like that plant and on the AUC that still.

Uncertain, given all the cotton komsomol, whether its gymboree with its the new sugar and Jade does it impact one gives us more than another and is there any difference in price increase that youre planning to take thank you.

Sure I think on the <unk>.

You see it impact across you know were a big user of cotton and all three brands.

We've taken obviously sugar and Jade is new but we've taken pricing increases throughout the past year, and TCP and Jim Barry and as Rob outlined on the call.

Our planning on mitigating the full impact of the <unk> increases with AUR increases in 2022, So I would say that there really isn't one brand that sticks out.

From a marketing strategy point of view.

I think thats, a little bit more of a complicated answer I think we really have a big lever and marketing we've done a lot of work on personalization over the last several years, but in the last I'd say 18 months.

Last year and a half we've really been able to move to a much more strategic.

First one is really customer centric marketing and like I said, we had an outside partner come in their name as Merkel, who really helped us there and what they helped US really do is take audience profiles, they defined exactly who our customers are.

Ted Ted consumer demographics, psychographics, attitudinal behavioral data all across multiple platforms and all of it.

Touch points and really helped US journey map and then create customer plans for acquisition retention and reactivation by channel and brand based on this journey maps and then we align our specific marketing tactics against those journey maps. So that is a really big change for us and a really important change for us is to be able to get to that level with.

Our customer on the profiles and the journey mapping and then I think really the second pillar, it's probably brand building. So we then go and create 360 degree campaigns.

Tell our different product story throughout our three brands and throughout all our customer touch points, and then reinvest that kind of an all points of the journey, but we really are emphasizing and Rob mentioned it on the call that top of funnel awareness media and then we really to your point about the kardashians are doubling down on our efforts with influencers and celebrities to really share.

<unk> brand perception, you know away from more promotional and to build awareness.

Around the brand and really the values of the brand and ultimately monetize those learnings obviously and then the other big change for US This year, which is really marketing mix optimization and again, we had an outside or come in and help us with this.

So I've mentioned in my remarks, we have a what.

What we call a multi touch attribution tool and that really is going to help us spend our dollars where they count. So we're strategically shifting our mix to more top of funnel and more brand awareness and acquisition tactics and what Thats multi attribution tool fancy name, but what it does is it enables us to measure and optimize.

<unk> forecast the different marketing investments and then implement like a statistical look back.

Really like a look back model to identify incremental ROI of our marketing spend and really makes us much more nimble and able to move that spend around much better to where our customer really finding us and then all of those three really lead obviously to the fourth which is the best in class digital experience in that.

So all the things that <unk> been working on site enhancements.

Additional marketing channel focused on customer acquisition personalization new technology.

And then clearly the focus on mobile and filling out the app experience. So we're really excited about about the marketing.

The strategy, we have going forward, we've seen some great early results and think that will be a powerful lever in 'twenty two.

Good afternoon, just one other quick follow ups as you think about your sales opportunity. Obviously last year, we had stimulus, but we also had your share gainer from competitors that have gone away.

Any way to unpack that opportunity go forward Jane anything different youre seeing in the <unk>.

Landscape out there in terms of your share opportunity.

Well I think when you look at 2021.

Non accounting sugar and Jade because we're waiting for the kind of clean information on that and certainly we just get retail information as everyone else does so you can't really double count wholesale. So this doesn't have anything to do with the growth in the Amazon business, It's really.

The market share data is based on retail business, we were able to hold our market share flat in 2021, and we were one of the very few to do so as we had kind of foreshadowed over the year, we knew that would be quote unquote essential retailers would be giving up some share this year, which they did as the rest of the world was allowed to open.

And the fact that we picked up 4500 72 basis points in gross margin versus 2021, and 660 basis points versus 2019, I think it kind of gives us confidence that our pricing reset is sticky and has staying power. So I think those statistics are pretty powerful.

We will take our next question from Jim Chartier of <unk> Crespi Hardt.

Good morning, Thanks for taking my questions.

Hey, Jim can you just talk about Hey, Jerry can you talk about the promotional environment. What you saw in fourth quarter, and then kind of how are you planning for 'twenty.

<unk> 22, and then for first quarter, how impactful is the return of Easter dressing business and first quarter after not really happened that business for a couple of years. Thanks.

Sure Yeah, I think that from what we see in our competitor base everything is really kind of benign very rational I think people are still having some issues getting product in and so I think that we're going to see continue to see a rational promotional environment I think we are firm believers.

We can get more for our product and I think some of our competitors feel the same way. So I think everyone's at least currently on the same page as to holding on to these price increases and <unk>.

Getting discipline around inventory management, so I see the promotional environment.

Relatively calm.

From a I know you didn't ask this but the Easter dress that Christmas dress up business was strong and that should bode well for having a much stronger Easter dressy business. This year than we did last year, but I will remind you and we've said this many times before we are pretty much a student of the of the Easter business in kids.

Easter is not the greatest date for US a third for 17 this year and as we've said a lot of time, we don't love a late Easter.

And the reason why is.

With a late March or in early April Easter you get mom to come in in March whether the whether it's favorable or not she has to shop for Easter and not only does she by Easter dress up but she starts to look at what's available to stock up for spring at the same time and then when the weather changes, which it usually does at some point in April you get a second chance to have mom back in the quarter.

The fact that we're up against such a tremendous amount of stimulus from last year and we have a later Easter.

We really believe that that's going to combine together to.

Rob said produce our toughest compare but from a product point of view and a positioning point of view and an inventory point of view.

We feel good that we'll do well with our dressy product one mom comes out.

Yeah.

Our next question is from Jay sole of UBS.

Great. Thank you so much.

You know, Rob if you could sort of explain two things one could you give us an idea of the incremental benefits of sales in 2022 from gymboree sugar and JD Amazon.

Lower in Q1 versus Q2 or the overall level of gross margin will be lower in Q1 versus Q2, I'm sorry, the first half versus second half. Thank you.

Sure from a gross margin perspective.

I called out 200 to 300 basis points down for the year versus 2021.

The overall decline in Q1, and Q2 will be more pronounced than the declines in Q3, and Q4 and we expect a moderation in gross margin as we get to the back half of your own.

The year over year comparison of the fruit that I talked about this quarter.

Sugar and <unk> Amazon perspective, we didn't call out amounts in terms of sales increases, but they are included within our 1%.

Increase of consolidated net sales for the year.

We continue to be excited about the gymboree brand in the long term opportunity for $140 million.

Sugar and Jade is early days.

It's a big addressable market for us in terms of $8 billion in between market.

And Amazon is Amazon. So we're excited about that opportunity, where we see significant growth in 2022 over the significant growth we saw in 2021.

We'll move next to Paul <unk> of Citi. Your line is open.

Hey, Thanks, Jim.

I'm curious about your view on the growth in the children's apparel market for F. 'twenty two in units and dollars.

Would you expect to grow our market share.

The year ahead.

Just curious if that's something that you set as a goal.

And how much of that sales growth in F. 'twenty, two do you assume as units versus pricing.

Paul I can answer your question from a units perspective, we were up this year versus last year and we also had significant double digit gains in AUR as we pivot to an e-commerce business and decidedly higher digital penetration, we're more focused on order value.

And our order value was also up significant double digits.

And we will take our final question from Susan Anderson of B Riley.

Hi, good morning, nice job on the quarter. Thanks for all the details.

I'm just curious based on your.

Top line guide for the first quarter I guess does that entail or are you currently comping in line with the guide are you assuming that sounds kind of falloff in March and April as you cycle. Those tough compares and then it looks like based on the guide for the full year, you're expecting sales to stabilize in the back half. So I'm, assuming you guys fill the channel.

Tax credit wasn't as big of a benefit as a stimulus in March last year.

In response to your initial question. Obviously January was a really tough month for US we had a great November and December and.

About exactly one year ago today, So March and April really make up the bulk of the quarter and that's where we're going to see the drop we think.

You may now disconnect your lines and have a wonderful day.

Q4 2021 Children's Place Inc Earnings Call

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