The Children's Place Announces Preliminary Unaudited Results for the Fourth Quarter 2022 - Seite 3

• Macro-Economic Environment - The macro-economic environment in the fourth quarter proved to be far more challenging for our core customers than originally expected, resulting in lower sales than projected and the need for increased promotions as the Company worked to drive sales and reduce seasonal inventory levels. 
• Inventory Optimization - In early December, in light of the challenging macro-economic environment, the Company made several forward-looking strategic decisions regarding the level and composition of its inventory, which negatively impacted short-term margins but reduced higher cost, end of season merchandise, putting us in a much healthier inventory position as we enter 2023. These strategic actions included the acceleration of inventory turns that enabled the Company to liquidate units with higher built-in input and other supply chain costs. In addition, other decisions were made as the quarter progressed and at quarter-end that contributed to gross margin deterioration, including the write down of non-go-forward inventory and a sizable charitable donation of inventory to our philanthropic partners at Delivering Good. 
• Transactional and Support Costs – The Company incurred higher levels of fulfillment expenses due to unplanned increases in both units shipped and split shipments, which resulted in deleveraging of fulfillment and shipping expenses.  The Company also experienced an increase in selling, general and administrative expenses in an effort to drive sales and due to inflationary pressures, which hindered the ability to reduce expenses as much as originally planned. 
  

Certain of the Company’s preliminary unaudited results are reported in this press release on an adjusted, non-GAAP basis. Adjusted earnings (loss) per diluted share and adjusted operating income (loss) are non-GAAP measures, and are not intended to replace GAAP financial information, and may be different from non-GAAP measures reported by other companies. The Company believes the income and expense items excluded as non-GAAP adjustments are not reflective of the performance of its core business, and that providing this supplemental disclosure to investors will facilitate comparisons of the past and present performance of its core business.