write short case study

9B15M062

THE CHILDREN’S PLACE, INC.: CHALLENGES IN A POST-RANA PLAZA WORLD1 Ram Subramanian wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com. Copyright © 2015, Richard Ivey School of Business Foundation Version: 2015-06-10

On Friday, April 11, 2014, a group of four dozen labour activists joined 20-year-old Aklima Khanam, a Bangladeshi woman who had worked at a garment factory in the Rana Plaza building in Dhaka that had collapsed on April 24, 2013 killing 1,138 workers and injuring 2,500 others. Khanam herself was trapped under a piece of machinery for over 12 hours before she was rescued. The team gathered outside the Secaucus, New Jersey headquarters of The Children’s Place (TCP), North America’s largest pure play specialty retailer of children’s apparel to protest what they felt were inadequate compensation paid by TCP to the victims of the Rana Plaza disaster. TCP had joined with several U.S.-based retailers including Walmart and Gap to set up a $40 million fund for the victims, but the team protesting outside the company’s headquarters claimed that to date it had contributed only $500,000 to the fund rather than the $8 million that the protesters estimated its contribution should be. One of the protesters stated, “If they do not do the right thing, we will not go away. We will not stop.”2 Jane T. Elfers, TCP’s president and chief executive officer (CEO), gave instructions to the security staff at the building to persuade the protesters to leave and issued a statement that said:

As a founding member of the Alliance for Bangladesh Worker Safety, we are making a large and long-term commitment to improve safety conditions for Bangladeshi garment workers. The Alliance has committed nearly $50 million to a worker safety fund and has made $100 million in affordable capital available for safety upgrades at factories. We are committed to staying in Bangladesh and to helping improve factory safety in a swift, measurable and sustainable manner over the long term.3

The protests had strong implications for TCP’s strategy since the company was well into the process of moving from a “clearance centre” model where they carried national brands to a “made for outlet” model that featured TCP-branded, company-designed apparel that necessitated doing business directly with contract garment factories such as the ones located in the Rana Plaza building. The new model mandated that the company develop its own supply chain, thus exposing it to adverse labour conditions and worker safety in the developing countries that accounted for much of the global apparel supply. Regardless of TCP’s stance toward the Rana Plaza protesters, the manufacture of apparel in developing countries was likely to be under greater scrutiny by watchdog groups. This would have a significant impact on the company’s new strategy of emphasizing its own brand. TCP had to decide on its response going forward.

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Page 2 9B15M062 THE APPAREL INDUSTRY4 The U.S. apparel (and footwear) industry accounted for $366 billion in 2012, an increase from 2011’s $350 billion. The U.S. Bureau of Economic Analysis estimated that the per capita expenditure in 2012 was $1,162. While the value of retail apparel sold had increased in the United States, the country’s share of the industry’s manufacturing had declined markedly since the mid-1990s. According to the U.S. Department of Labor, in December 1994, the industry employed 853,800 in manufacturing, while that number was only 148,100 in December 2012, an annual decline of 9.3 per cent. The decline was attributed both to the labour cost advantage that countries in Asia, Latin America, Africa and the Caribbean enjoyed and to increased quotas, reduced import tariffs and an increase in free trade and preferential trade agreements. China’s share of the apparel import market in the United States was 37.8 per cent in 2012. As contract manufacturers in Mexico and the Caribbean sought to win an increasing share of business from U.S. companies by emphasizing quick turnaround time and lower shipping costs, China’s factories maintained their share by employing highly skilled labourers with the ability to produce complex garments. In addition, the Chinese government gave tax rebates to apparel manufacturers, thereby providing them with additional funds for reinvestment. While African nations sought to parlay their low labour costs to enter the apparel manufacturing market, low levels of technical expertise and literacy, coupled with underdeveloped infrastructure and insufficient capital, held them back. Bangladesh was the second largest producer (after China) of contract apparel. The industry accounted for about 20 per cent of the country’s gross domestic product (GDP) and 80 per cent of all export earnings and employed four million people. The industry was earmarked as the principal driver of the country’s GDP and was expected to double its 2010 levels by 2015 and triple them by 2020. Till 2013, Bangladesh paid a garment worker $38 per month, the lowest in the world. Following worker protests, the wages were increased to $68 per month in December 2013. The Global Apparel Supply Chain The global apparel industry supply chain consisted of five discrete stages and straddled several countries. Textile companies sourced both man-made and natural fibers from a variety of suppliers and produced fabrics that were dyed and printed. Garment manufacturers bought fabric in volume and engaged in the production of mass quantities of apparel. Garment manufacturers (the majority of whom were located in low-wage countries) designed, cut, sewed and ironed apparel upon receiving orders from buyers. For garment manufacturers, three costs were important: material, industrial laundry and labour. A CNN report indicated that for a denim shirt that cost $13.22 to produce in the United States, the materials cost was $5.00, industrial laundry was $0.75 and labour was $7.47. In contrast, the cost breakdown for the same garment when made in Bangladesh (for a total cost of $3.72) was $3.30 for material, $0.20 for industrial laundry and $0.22 for labour.5 Garment manufacturers were either prime contractors who transacted directly with buyers or subcontractors who worked for prime contractors. Some contractors transacted with buyers directly for a part of their business and also acted as subcontractors for other contractors. Brand name apparel companies placed orders with garment manufacturers and supplied apparel to department store chains, specialty stores and outlet channels. They typically dealt only with prime contractors. A number of overseas buying houses supplied department stores, specialty stores and mass merchandise and discount chains, while trading companies met the needs of outlet stores and Internet and mail order retailers. The increased consolidation at the retail level coupled with a move toward “fast fashion” (where the time between display at fashion shows and availability in the retail channel was minimized), exemplified by companies such as H&M, Zara and Uniqlo, led to the “emergence of buyer- led supply chains producing textiles and garments in ever accelerating design, production and distribution cycles.”6 Fast fashion put enormous pressure on garment manufacturers who had to combine mass

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Page 3 9B15M062 production with increasingly short lead times amid what an observer called a “race to the bottom” in terms of prices.7 A retail expert commented on the effects of fast fashion:

Tension is rising in the apparel industry, as retailers push garment makers for faster turnaround on smaller orders . . . The old model — where retailers placed orders six to nine months in advance and suppliers ramped up factories to produce high volumes cheaply — has been thrown out the window . . . To lower the risk of a fashion miss, more retailers and apparel companies are pressing their suppliers to crank out a small order quickly — allowing them to test styles in stores — and then fill re-order requests even faster, a tactic known as chasing . . .8

Exhibit 1 shows the various activities in the global apparel supply chain. The U.S. Market9 The U.S. apparel market was made up of two tiers: companies such as Nike, V.F. Corp., Ralph Lauren and PVH Corp. made national brands that accounted for 18 per cent of wholesale apparel sales. Eighty- two per cent of all apparel sales consisted of small brands (typically sold regionally or only involving specific niche categories) and private label brands. Women’s apparel was the largest segment in this industry, followed by men’s apparel. The retail children’s apparel market was estimated to be between $19 billion and $25 billion in 2013, of which specialty and mass merchandise stores accounted for 31 per cent each, followed by national chains and department stores. TCP competed with specialty children’s retailers such as Gymboree, which operated 633 stores in the United States, as well as with companies such as the pure play apparel retailer The Gap, which also carried children’s apparel, and national chains such as JC Penney, Kohl’s, Target and Walmart. While Gymboree and The Gap sold private label apparel, the others principally carried national brands with a small private label line. The specialty retail children’s apparel industry was highly concentrated with the top four players accounting for about 65 per cent of the market. The industry was consolidating as exemplified by the 2005 acquisition of OshKosh B’Gosh by Carter’s.10 TCP, Carter’s and Gymboree were the top three players. The children’s apparel segment was expected to grow annually by 1.8 per cent to 2017. THE RANA PLAZA DISASTER As the second largest producer of contract apparel, Bangladesh had 5,600 readymade garment factories (RMGs), with each employing an average of 1,500 to 2,000 workers, mainly women. In contrast, Indonesia, which was seen as a key challenger to Bangladesh, had 2,450 RMGs, while Vietnam had 2,000 and Cambodia 260.11 According to observers, apparel “has been instrumental in reducing Bangladesh’s poverty by a third since the 1990s.”12 Since the Bangladesh garment manufacturing cluster operated across a relatively small geographical area, it yielded transportation cost advantage and also facilitated closely coordinated subcontracting. In addition, Bangladesh, unlike China, India and Sri Lanka, enjoyed duty-free access to the European Union. The Rana Plaza building was situated in Savar district on the outskirts of Dhaka, the capital of Bangladesh. Built in 2004, it was designed to be a four-storey manufacturing building with two additional floors of office space at the top. Later reports indicated that it was built using substandard materials and violating several building codes. Its foundation rested on a filled-in pond. Given the country’s intermittent power supply, factory owners housed several generators on its roof.13

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Page 4 9B15M062 The five garment factories in the Rana Plaza building were all subcontractors. Given the opacity of the supply chain at the contract manufacturer level, they did not advertise the retailers for whom they worked. On April 24, 2013, a day after an engineer had declared the building unsafe, the factory owners mandated that employees report for work lest the factories fall behind deadlines for product delivery. Minutes after the workers reported for the morning shift, when the generators were turned on to power production, the building collapsed, killing hundreds and injuring many.14 This was the deadliest garment accident in history in terms of the numbers killed and injured. Initially, the retail chains that sourced apparel from Bangladesh distanced themselves from the tragedy by insisting that they did not do business with Rana Plaza manufacturers. However, as pressure mounted from human rights groups across the world, the retailing world split into two groups in terms of response. The Bangladesh Accord for Fire and Building Safety (generally referred to as the “Accord”) was made up of leading European companies (and 14 U.S. companies) such as H&M, Carrefour and Mango, while the Alliance for Bangladesh Worker Safety (referred to as the “Alliance”) was primarily North American and included well-known retailers such as Walmart, Gap, Target and TCP. While both the Accord and the Alliance had agreements in place where members contributed money toward compensation for the Rana Plaza victims and for factory inspections, there were wide disagreements regarding the efficacy of the approach each took. While the Alliance (dominated by U.S. companies) insisted that their side had performed more inspections, the Accord (dominated by European companies) claimed that their inspections were more rigorous. Many human rights organizations, including 15 major U.S. universities, regarded the efforts of the Accord as being better than that of the Alliance. Universities such as Duke, Columbia and New York University mandated that licensees that produced goods with their logos join the Accord.15 The head of the Alliance summed up the challenges of improving conditions in Bangladesh:

The Rana Plaza collapse changed everything. However, solving the problem of factory safety in Bangladesh is a very heavy lift. Bangladesh has a history of corruption, of political turbulence. It’s a place where these businesses (the ones that were a part of the Alliance), instead of walking away, decided to do what is not typical of business. Most businesses spend most of their time to buy down risk. These businesses decided to take on risk. The question is, how do you do this in a way that makes material change quickly?16

THE CHILDREN’S PLACE Background17 Founded in 1969 as a single store in Hartford, Connecticut by two graduates of the Harvard Business School, the company grew to 61 stores in 1981 when the founders took the company public. Federated Department Stores (Federated), which also owned Bloomingdale’s, acquired the company in 1982. At first, TCP grew rapidly under the new ownership, but it faced new competitors in the form of specialty retailers such as Kids R Us as well as product expansion into children’s apparel by mall-based retailers such as JC Penney and Sears. After losing money for several years, Federated itself was acquired by Campeau Corp. (Campeau), a Canadian company, in 1988. Campeau put TCP on the block soon after, and the Gitano Group, an apparel company, purchased it. The Gitano Group took TCP public in 1997, listing the firm on the NASDAQ stock exchange under the ticker symbol “PLCE.” The $50 million raised in the initial public offering (IPO) was used to pay off accumulated debt and also to buy out an investor who had teamed up with the Gitano Group to buy TCP from Campeau. On December 11, 2009, the company announced that Elfers, the CEO of Lord & Taylor, the apparel retailer, would join TCP as its CEO in January 2010 and also become a member of the company’s Board of Directors. Headquartered in Secaucus, New Jersey, TCP reported revenues of $1.766 billion in fiscal 2013 (versus $1.809 billion in

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Page 5 9B15M062 2012) and a net income of $53.026 million ($63.243 million in 2012). The company had 1,113 retail stores in the United States, Canada and Puerto Rico (62 per cent were mall-based), an online store and 54 franchised international locations. The average net sales per store was $1,354 in 2013 compared to $1,393 in 2012. Of the 16,500 total employee count, 12,500 were part time or seasonal employees. The company sold apparel to the newborn to girls and boys up to age 12. THE CHILDREN’S PLACE18 Business Processes When CEO Elfers developed TCP’s growth strategy in 2013, she indicated that the company’s top priorities would be store optimization, international expansion and improved supply chain management.19 She identified its “typical customer as a woman having two children and an annual household income of $70,000.” She saw an opportunity in what the company called “value centres,” towns with populations of 100,000 to 250,000 that were centred around strip malls that were regarded as destination shopping centers.20 While the company’s customers came from all ethnic categories, most were value-conscious Hispanic, Asian and African-American shoppers.21 Given the adverse trend in sales per store (see Exhibit 2), Elfers indicated that the company would close 125 underperforming stores by 2016 and open new stores in value centres. Thirty-five of the 54 international stores were in the Middle East (the company regarded Canada as part of its U.S. operations given the North America Free Trade Agreement). TCP saw the Middle East and the Commonwealth of Independent States region (countries formed after the break- up of the Soviet Union) as ripe for additional growth. The company announced that it had partnered with Arvind Lifestyle Brands Limited (part of the Lalbhai group, the world’s largest denim manufacturers) to open 50 stores in India by August 2015. The company’s supply chain challenges included rationalizing the number of contract manufacturers it dealt with as well as streamlining the process to reduce the concept-to-store time. Merchandising and Marketing 51 per cent of TCP’s revenues came from apparel sales to the five- to 10-year-old segment, 30 per cent from the newborn to four-year-old segment and the rest from footwear and accessories sales. TCP sought to provide a complete range of products over four merchandise seasons — spring, summer, back-to- school and holiday. Facing intense competition in the apparel market from department stores and specialty retailers, TCP had initiated a strategy of shifting from carrying a large proportion of third-party brands and a small private label portion to focusing almost exclusively on private label. The shift in strategy was to combat lower margins due to price-based competition for the same brands. While the “made for outlet” strategy (as opposed to the “clearance centre” strategy) was initiated in fiscal 2012, it began to gather steam in late fiscal 2013 when the company set itself the goal of 80 per cent private label merchandise.22 Products were sold under three brand names — “The Children’s Place,” “Place” and “Baby Place.” Given the competition in the children’s apparel market from players such as Target and Walmart at the low end and from The Gap, Gymboree and Carter’s at the moderate to high end, TCP positioned itself as a value-priced player. As an example, in late 2014, a zippered boy’s outer jacket was priced at $52.46 at Gymboree, $17.97 at Walmart, and at $29.95 at TCP.23 TCP stores carried a complete set of coordinated outfits and accessories for the various target segments and used strong visual presentations to lengthen the shopper’s in-store visit. In addition, the company used a variety of customer relationship management (CRM) techniques such as loyalty programs (additional discounts when specific purchasing thresholds were reached) and a store credit card (around five million accounts at the end of fiscal 2013) to create and sustain brand loyalty. A move to increased use of digital platforms for

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Page 6 9B15M062 advertising in fiscal 2013 resulted in a savings in overall marketing expenses of $3.3 million. The third and fourth quarters accounted for approximately 55 per cent of annual revenues, while the second quarter (April to July) typically accounted for around 21 per cent of revenues and an overall net loss from operations. While luxury brands had a 7.5 times markup (i.e., the retail price was 7.5 times the cost), TCP’s markup averaged 3.5 times. Elfers reiterated the importance of the product for TCP’s success as:

Product will always be our number one priority. We continue to significantly differentiate and upgrade the look of our merchandise, which has resonated well with our customers. In addition to apparel, we offer a full line of accessories and footwear so busy moms can quickly and easily put together head-to-toe outfits that look great and are affordable.24

The design team visited trade shows, examined competitors’ offerings and studied trends to develop new apparel designs. Designs were matched to seasonal needs, and prior performance of each department (boys, girls, babies, accessories) was carefully studied. The design and merchandise teams collaborated closely together throughout the sketch and sample review processes before finalizing the product requirements for the upcoming period. A season’s product mix consisted of both fashion items that reflected current trends as well as core items that had long-lasting designs. While apparel companies such as Spain’s Zara built a competitive advantage on what was termed “fast fashion,” where the design-to- market period was considerably short (Zara’s was reported to be 15 days), Elfers spoke about where TCP stood in this regard:

Our customer is looking for great fashion and color. Children’s fashion tends to lag the teen and adult market so we have a little more time to monitor and pick up on the successful trends in the teen market and translate them for our children’s line. We are providing greater differentiation between big and little kids, and we are introducing more fashionable basics. Our cycle from design to in-store is over six months. Going forward, we are looking to decrease the lead time for some categories, such as denim and graphic tees. We are also implementing localization strategies, so that stores receive product that is most appropriate to their region, from both a demographic and seasonality standpoint, when they need it.25

Operations TCP did not own or operate any manufacturing facilities. As was the norm in the industry, its operations team worked with approximately 100 independent contract manufacturers primarily from various Asian countries who sourced raw materials from global markets and manufactured garments according to TCP’s designs. TCP interacted directly with contract manufacturers (in fiscal 2013, only 6 per cent of the merchandise was bought through buying agents) via sourcing offices in Hong Kong and Shanghai in China, Gurgaon in India and Dhaka in Bangladesh. In 2013, TCP sourced approximately 36 per cent of total merchandise from China, 24 per cent from Bangladesh, 11 per cent from Vietnam, 8 per cent from Cambodia and the rest from a number of other countries, none of which accounted for more than 6 per cent. In addition to conducting regular training programs and seminars and being subject to both internal and third-party monitoring programs, TCP’s vendors had to abide by a Vendor Code of Conduct that covered areas such as child labour, involuntary or forced labour, slavery and human trafficking and health and safety. A company-owned warehouse in Alabama stored and distributed products for U.S. stores, while a facility in Ontario supported stores in both Canada and Puerto Rico. An independent provider in Asia warehoused merchandise for all franchised stores in international markets.

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Page 7 9B15M062 TCP operated four types of stores, each of which had its own design and colour and layout esthetics. Of these, Technicolour and Apple-Maple were the traditional formats. Technicolour stores were approximately 4,900 square feet and used distinct colours to create shop identity. In fiscal 2013, approximately 24 per cent of the stores were of this kind. The Apple-Maple stores featured light wood for floors, fixtures and trim and had a more open layout than the Technicolour kind. They averaged 4,200 square and in fiscal 2013, approximately 23 per cent of the stores were of this concept. Given the relatively high cost of the Technicolour stores, TCP moved to the Tech 2 concept as its store of the future. Tech 2 combined the open layout of Apple-Maple stores with the colour combination of the Technicolour store and were 35 per cent less expensive than Technicolour stores. Forty-one per cent of the stores in fiscal 2013 were of this kind. The fourth type was the larger (approximately 7,100 square feet) Outlet concept (12 per cent of the store count in fiscal 2013), which carried an assortment of store overflow items at lower prices. Each store had a store management team and 10 part-time sales employees with more hired during the holiday season. A district manager supervised nine to 16 stores and a regional manager’s responsibility ranged between seven to 10 district managers. TCP’s U.S. operations, which included Canada and Puerto Rico, had eight regions, managed by three vice-presidents. Finances Exhibit 3 provides a summary of TCP’s finances. The company indicated that while the second quarter was usually a loss-making quarter, the third quarter, which coincided with the Fall back-to-school time frame, was its most profitable (it accounted for nearly 81 per cent of fiscal 2013’s profits), followed by the first quarter (whose time frame was parallel to the Spring back-to-school buying). While the fourth quarter generated a lot of sales revenue (due to Christmas shopping), profitability was affected by significant price competition. In reporting fiscal 2013 results that saw a decline in revenues, Elfers commented:

Our business has been adversely affected by the weakness in the U.S. and Canadian economic environments. Factors such as high unemployment levels, a highly promotional retail environment and lower consumer retail traffic and a series of storms and below freezing temperatures brought on by the polar vortex at the end of Fiscal 2013 have negatively affected our business.26

COMPANY’S RESPONSE TO RANA PLAZA Soon after the Rana Plaza tragedy, TCP insisted that it was not involved: “Although a garment factory inside Rana Plaza produced apparel for us, none of our apparel was in production there at the time of this terrible tragedy.”27 However, a New York Times investigation revealed that the New Wave factory in the building had made more than 120,000 pounds of clothing for TCP that had been shipped to the retailer in 21 lots. A two-ton shipment had arrived in the United States on April 5, 2013.28 In the aftermath of this revelation, TCP joined the Alliance and pledged to contribute money for the fund.29 THE DECISION REVISITED For TCP, as was the case with a number of retailers, Bangladesh was an important location to source apparel. It not only accounted for nearly one-quarter of the company’s product, but it also allowed TCP to

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Page 8 9B15M062 reduce the risk of depending entirely on China. Capacity as well as competency concerns made countries in other locations less appealing. Even with a significant increase in wages in the garment industry, Bangladesh was still extremely cost competitive and facilitated TCP’s ability to compete on costs in the highly competitive children’s apparel industry. Bangladesh’s minimum wage was a fraction of that for countries such as Mexico and many of the Caribbean nations, while it was on par with that of several African nations.30 TCP was clearly aware that the global apparel supply chain would not be the same after the Rana Plaza tragedy. Closer scrutiny by the media and by humanitarian groups was more likely. Student groups were becoming vociferous in demanding that companies not participate in a race to the bottom. The Rana Plaza tragedy had occurred just after TCP had embarked on a rapid transition to a private label model that necessitated its direct involvement with the supply chain. It was clear that TCP was at a crossroads. Top management team had to steer the company in the right direction.

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Page 9 9B15M062

EXHIBIT 1: GLOBAL APPAREL SUPPLY CHAIN

Source: Adapted from Maximilian Martin, “Creating Sustainable Value Chains,” www.impacteconomy.com/papers/IE_PRIMER_DECEMBER2013_EN.pdf, accessed September 20, 2014.

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Page 10 9B15M062

EXHIBIT 2: THE CHILDREN’S PLACE, INC.

Revenue Breakdown per Store

Year Average Net Sales Per Store ($) Average Net Sales Per Square Foot ($) 2013 1,354 285 2012 1,393 300 2011 1,492 299 2010 1,587 318 2009 1,634 332

Segment Results

2013 2012 2011 Revenues ($) U.S. 1.528 billion 1.558 billion 1.490 billion International 238 million 252 million 226 million Operating Income ($) U.S. 60.27 million 68.35 million 76.53 million International 16.02 million 21.37 million 28.91 million Gross Margins (%) U.S. 36.5 37.5 37.2 International 41.0 42.6 46.8

U.S. includes the United States, Canada and Puerto Rico. Source: The Children’s Place, Inc. 2013 10-K, http://phx.corporate-ir.net/phoenix.zhtml?c=120577&p=irol-irhome, accessed September 24, 2014.

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Page 11 9B15M062

EXHIBIT 3: THE CHILDREN’S PLACE, INC. FINANCIAL STATEMENTS (IN SUMMARY FORM) Income Statement ($ 000’s, fiscal year)

2013 2012 2011 2010 2009 Net sales 1,765,789 1,809,486 1,715,862 1,673,999 1,643,587 Cost of Sales 1,110,268 1,118,046 1,056,213 1,013,878 991,393 Gross Profit 655,521 691,440 659,649 660,121 652,194 Selling, General and Admn. Expenses 485,653 510,918 477,425 456,558 456,338 Operating Income 76,283 89,715 105,443 129,210 122,209 Net Income 53,026 63,243 74,345 79,760 83,735

Balance Sheet ($ 000’s, as of the last date of the fiscal year)

2013 2012 2011 Current Assets 629,320 545,235 488,928 Total Assets 990,360 923,410 866,252 Current Liabilities 271,349 191,506 131,555 Total Liabilities 373,852 302,461 241,283 Stockholders’ Equity 616,778 620,949 624,969 Total Liabilities and Stockholders’ Equity 990,360 923,410 866,252

Cash Flow Statement ($ 000’s, fiscal year)

2013 2012 2011 Net cash provided by operating activities 173,470 205,042 156,103 Net cash used in investing activities (119,700) (105,220) (77,659) Net cash used in financing activities (64,140) (82,257) (85,028) Cash at end of period 173,997 194,128 176,655

Numbers don’t balance due to omission of certain items. Stock Performance (in $)

2008 2009 2010 2011 2012 2013 PLCE 100.00 169.06 224.72 266.08 263.32 280.01 NASDAQ Total Return Index 100.00 145.97 185.00 198.45 228.70 298.60 NASDAQ Retail Index 100.00 148.40 185.00 224.09 265.09 292.48

Assumes $100 invested on the first day of fiscal 2008 in each of PLCE, the NASDAQ Total Return Index, and the NASDAQ Retail Index. Source: The Children’s Place, Inc. 2013 and 2012 10-Ks. Both 10-Ks http://phx.corporate-ir.net/phoenix.zhtml?c=120577&p =irol-reportsannual, accessed September 20, 2014.

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Page 12 9B15M062 ENDNOTES 1 This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives presented in this case are not necessarily those of The Children’s Place or any of its employees. 2 Joan Verdon, “Victim of Bangladesh Factory Collapse in Demonstration at Secaucus Retailer,” www.northjersey.com/news/business/victim-of-bangladesh-factory-collapse-in-demonstration-at-secaucus-retailer-1.918094, accessed September 14, 2014. 3 Ibid. 4 This section was based on the following sources: “Standard & Poor’s Industry Surveys: Apparel & Footwear: Retailers & Brands,” Standard & Poor’s, May 2013, New York; and Maximilian Martin, “Creating Sustainable Apparel Value Chains: A Primer on Industry Transformation,” www.impacteconomy.com/papers/IE_PRIMER_DECEMBER2013_EN.pdf, accessed September 15, 2014. 5 “How Much Does It Cost to Make a Denim Shirt in Bangladesh versus the U.S.?” www.cnn.com/2013/05/02/world/asia/bangladesh-us-tshirt/index.html, accessed September 15, 2014. 6 Martin, op. cit. 7 Ibid. 8 Quoted in Marty Lariviere, “Balancing Responsiveness and Commitment in Supply Chains,” http://operationsroom.wordpress.com/2010/07/26/balancing-responsiveness-and-commitment-in-supply-chains/, accessed September 15, 2014. 9 This section was based on “Standard & Poor’s Industry Surveys: Apparel & Footwear: Retailers & Brands,” op. cit. 10 Carter’s Inc., Investor Overview, http://ir.carters.com/phoenix.zhtml?c=135392&p=irol-IRHome, accessed September 15, 2014. 11 Martin, op. cit. 12 Ibid. 13 M. McClearn, “The Uncomfortable Truth about Bangladesh,” Canadian Business, July 15, 2013, pp. 48–50, www.canadianbusiness.com/global-report/global-report-loblaw-and-the-uncomfortable-truth-about-bangladesh/, accessed September 15, 2014. 14 Ibid. 15 Steven Greenhouse and Elizabeth A. Harris, “Battling for a Safer Bangladesh,” New York Times, April 21, 2014, www.nytimes.com/2014/04/22/business/international/battling-for-a-safer-bangladesh.html?_r=0, accessed September 16, 2014. 16 Ibid. 17 Funding Universe, “The Children’s Place Retail Stores, Inc. History,” www.fundinguniverse.com/company-histories/the- children-s-place-retail-stores-inc-history/, accessed September 20, 2014. 18 This section is based on The Children’s Place, 2013 10-K, http://phx.corporate-ir.net/phoenix.zhtml?c=120577&p=irol- irhome, accessed September 24, 2014. 19 Ibid. 20 Robin Lewis, “Q&A with Jane Elfers, CEO of The Children’s Place,” The Robin Report, April 13, 2011, http://therobinreport.com/qa-with-jane-elfers/, accessed September 24, 2014. 21 The Children’s Place, 2013 10-K, op. cit. 22 Ibid. 23 Case writer’s online research from www.gymboree.com, www.walmart.com, and www.tcp.com, accessed September 24, 2014. 24 The Children’s Place, 2013 10-K, op. cit. 25 Lewis, op. cit. 26 The Children’s Place, 2013 10-K, op. cit. 27 Steven Greenhouse, “Retailers Split on Contrition after Collapse of Factories,” www.nytimes.com/2013/05/01/world/asia/retailers-split-on-bangladesh-factory-collapse.html, accessed September 26, 2014. 28 Ibid. 29 www.bangladeshworkersafety.org/about/members, accessed September 14, 2014. 30 Martin, op. cit.

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