SEC Filing | The Children's Place

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fifty-three weeks ended February 3, 2001

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ________________to ________________

Commission file number 0-23071

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THE CHILDREN'S PLACE RETAIL STORES, INC.

(Exact name of registrant as specified in its charter)

Delaware 31-1241495
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)

915 Secaucus Road
Secaucus, New Jersey 07094
(Address of Principal Executive Offices) (Zip Code)

(201) 558-2400
(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock.

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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes |X| No |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|

The aggregate market value of voting stock held by non-affiliates was
$258,093,504 at the close of business on April 1, 2001.

Indicate the number of outstanding shares of each of the issuer's classes
of common stock, as of the latest practicable date: Common Stock, par value
$0.10 per share, outstanding at April 1, 2001: 26,189,209 shares.

Documents Incorporated by Reference: None.

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THE CHILDREN'S PLACE RETAIL STORES, INC.

ANNUAL REPORT ON FORM 10-K
FOR THE FIFTY-THREE WEEKS ENDED FEBRUARY 3, 2001
TABLE OF CONTENTS

PAGE
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PART I
1. Business ...................................................... 1
2. Properties .................................................... 10
3. Legal Proceedings ............................................. 10
4. Submissions of Matters to a Vote of Security Holders .......... 10

PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters ..................................................... 11
6. Selected Financial Data ....................................... 12
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ....................................... 14
7A. Quantitative and Qualitative Disclosures about Market Risk .... 18
8. Financial Statements and Supplementary Data ................... 19
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures ....................................... 19

PART III
10. Directors and Executive Officers of the Registrant ............ 20
11. Executive Compensation ........................................ 22
12. Security Ownership of Certain Beneficial Owners and Management 27
13. Certain Relationships and Related Party Transactions .......... 29

PART IV
14. Exhibits, Financial Statements and Reports on Form 8-K ........ 30

PART I

ITEM 1. - BUSINESS

This Annual Report on Form 10-K contains forward-looking statements within
the meaning of federal securities laws which are intended to be covered by the
safe harbors created thereby. Those statements include, but may not be limited
to, the discussions of the Company's operating and growth strategy. Investors
are cautioned that all forward-looking statements involve risks and
uncertainties including, without limitation, those set forth under the caption
"Risk Factors." Although the Company believes that the assumptions underlying
the forward-looking statements contained herein are reasonable, any of the
assumptions could prove to be inaccurate, and therefore, there can be no
assurance that the forward-looking statements included in this Annual Report on
Form 10-K will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives and plans of the Company will be achieved.
The Company undertakes no obligation to publicly release any revisions to any
forward-looking statements contained herein to reflect events and circumstances
occurring after the date hereof or to reflect the occurrence of unanticipated
events.

The following discussion should be read in conjunction with the Company's
audited financial statements and notes thereto included elsewhere in this Annual
Report on Form 10-K.

Overview

The Children's Place Retail Stores, Inc. is a growing specialty retailer
of apparel and accessories for children from newborn to twelve years of age. We
design, source and market our products under our proprietary "The Children's
Place" brand name for sale exclusively in our stores and on our website. Our
merchandising objective is to provide our customers with high-quality,
fashionable products at prices that represent substantial value relative to our
competitors. We seek to position our stores in areas of high pedestrian traffic
and design them to be very accessible, inviting and easy-to-shop. As of April 1,
2001, we operated 431 stores in 43 states, located primarily in regional
shopping malls.

We provide high-quality products that appeal to customers from a broad
range of socioeconomic and demographic profiles. We believe that the combination
of our distinctive approach to merchandising, the inherent value we offer our
customers and the growing strength of our proprietary brand generates this broad
appeal. Our designers interpret current fashion trends and combine them with a
broad color palette to develop a selection of coordinated outfits specifically
designed for children. We believe that our updated merchandise styling,
coordinated, high-quality products and consistent value pricing have created
name recognition and customer loyalty for "The Children's Place" brand.

Over the last several years, we have been aggressively opening new stores
to capitalize on our business strengths and our strong store economics. During
fiscal 1998, fiscal 1999 and fiscal 2000, we opened 54, 84 and 108 new stores,
respectively and closed one store in fiscal 2000. Our comparable store sales
have increased for each of the past five fiscal years. This has contributed to
our overall growth and yielded an increase in our net sales per gross square
foot from $335 in fiscal 1996 to $403 in fiscal 2000. Our net sales have
increased at a compound annual growth rate of approximately 32% from $143.8
million in fiscal 1996 to $587.4 million in fiscal 2000. Over that same period
of time, our operating income margin has increased from 8.9% to 12.1%. During
fiscal 2001, we plan to continue our aggressive expansion program and expect to
open approximately 120 stores.

Our broad merchandise appeal and value pricing strategy results in a
highly portable store concept which can operate profitably in a wide variety of
geographic and demographic regions. In fiscal 2000, our new stores that were
operating for their first full fiscal year generated a cash-on-cash return on
investment of approximately 83%. We believe that we have the opportunity to
significantly increase our domestic store base. Our goal is to make "The
Children's Place" the first name in the minds of consumers when they think of
children's apparel.

We believe that the following strengths have contributed to our success
and provide us with a competitive advantage:

Merchandising Strategy. Our merchandising strategy is built on offering a
fashionable collection of interchangeable outfits and accessories to create a
coordinated look distinctive to The Children's Place. We offer a focused
assortment of styles in a variety of colors and patterns, with the aim of
consistently creating a fresh, youthful feel that we believe distinguishes "The
Children's Place" brand. We divide the year into quarterly merchandising
seasons: spring, summer, back-to-school and holiday. To continually generate
freshness in our stores, we typically introduce a new merchandise line each
month. Each season's line is built around a central color palette which includes
a stylish assortment of coordinated fashion basic apparel with complementary
accessories designed to encourage multiple item purchases and wardrobe building.

Value Strategy. We offer high-quality clothing and accessories under "The
Children's Place" brand name at prices generally 20% to 30% below most of our
direct mall-based competitors. We employ this consistent value pricing strategy
across our entire merchandise offering, which we believe has enabled us to build
a broad and loyal base of customers. To generate increased customer traffic and
heightened excitement among our customers, we periodically run promotions on
select seasonal merchandise for a limited time.

Strong Brand Image. We believe that we have built a strong brand image for
"The Children's Place" by (1) offering high-quality products, (2) providing a
distinctive collection of coordinated and interchangeable outfits and
accessories, (3) maintaining a consistent merchandise presentation and an
easy-to-shop store layout, (4) emphasizing our fresh and youthful image in our
marketing visuals and (5) selling our merchandise exclusively in our 431 stores
and on our website. We believe these factors foster consumer loyalty to "The
Children's Place" brand name. In our continuing efforts to enhance the appeal
and recognition of our brand name, we continue to emphasize our logo
merchandise. Our logo merchandise bears our "Place," "Place Sport," "P," "Place
Jeans" and other "Place" logos.

Low-Cost Sourcing. We control the design, sourcing and presentation of our
products, all of which are marketed under our proprietary brand name. We believe
that this control is essential in assuring the consistency and quality of our
merchandise and brand image, as well as in our ability to deliver value to our
customers. We have established close, long-standing and mutually beneficial
relationships with numerous manufacturers, buying agents and trading companies.
Through these relationships and our extensive knowledge of manufacturing costs,
we are able to maintain strong gross margin levels while offering our customers
high-quality products at value prices. We further believe that our integrated
merchandise approach, from in-house design to in-store presentation, enables us
to identify and respond to market trends, uphold rigorous product quality
standards, manage the cost of our merchandise and strengthen our brand name. We
believe our Hong Kong office also enhances our ability to capitalize on new
sourcing and supplier opportunities, increases our control over product quality
and enables us to respond to changing merchandise trends more effectively and
efficiently.

Experienced Management Team. Our management team is led by Ezra Dabah who
guides the management of The Children's Place using his broad apparel
merchandising and buying expertise, which includes approximately 17 years in the
children's segment of the market. In addition, the other members of our
management team have an average of 18 years of retail or apparel industry
experience and an average of 12 years with The Children's Place.

Strong Store Economics. During fiscal 2001, we intend to continue our
aggressive store opening campaign and plan to open approximately 120 stores. Our
store opening campaign capitalizes on our competitive advantages and strong
store economics. In fiscal 2000, our new stores that were operating for their
first full fiscal year generated a cash-on-cash return on investment of
approximately 83%.

Merchandising

Our merchandising strategy is built on offering a collection of
interchangeable outfits and accessories to create a coordinated look distinctive
to The Children's Place. We offer a focused assortment of styles in a variety of
colors and patterns, with the aim of consistently creating a fresh, youthful
look that we believe distinguishes "The Children's Place" brand. We divide the
year into quarterly merchandising seasons and within each season we introduce a
new merchandise line each month.

To execute our merchandising strategy, we rely on the coordinated efforts
of our merchandise management, trend, design and planning teams. These teams, in
conjunction with senior management, review our prior season results to determine
the silhouettes and number of styles that we will offer in upcoming seasons.
Merchandise management selects specific silhouettes for production from the
assortment of designs that are created by the design and trend teams. Then,
based upon detail specifications including production quantities determined by
merchandise management and planning, the sourcing and procurement team arranges
for the manufacture of the selected styles.

Our trend and design teams analyze and interpret current and emerging
fashion trends, translating them into a broad selection of children's clothing
and accessories in an array of fashionable colors and patterns that are
appropriate for upcoming seasons. Work on each of our seasonal lines begins
approximately one year before the season, with the gathering of market
intelligence on fashion trends. This process involves extensive European and
domestic market research, the purchase of samples, media, trade shows, fashion
magazines, the services of fashion and color forecast organizations and analysis
of prior season performance. After the trend team presents the fashion themes
for a coming season, the designers translate those themes into an assortment of
fashion and basic designs that seek to reflect the fresh and youthful image of
"The Children's Place" brand. These interpretations include variations in fabric
and other materials, product color, decoration and age-appropriate silhouette.
Potential items are designed using computer aided design technology, giving us
the opportunity to consider a wide range of style and fashion options. In
addition, our Hong Kong office coordinates the production of prototype samples
which enable our merchandising teams to ensure that our merchandise will
properly reflect our design concepts.

The merchandise management team creates a detailed purchasing plan for the
season covering each department, category and key items, based on historical and
current selling trends. The production process takes approximately six months
from order confirmation to receipt of merchandise at our distribution facility.
The planning team monitors current and future inventory levels on a weekly basis
and analyzes sales patterns to predict future demand for various categories. We
regularly monitor sales of each style and color and maintain some flexibility to
adjust merchandise on order for future seasons or to accelerate delivery of
merchandise. The merchandise allocation team is responsible for planning and
allocating merchandise to each store based on sales volume levels and other
factors.

Sourcing and Procurement

We combine management's extensive sourcing experience with a cost-based
buying strategy in order to control costs. Management believes it has a thorough
understanding of the economics of apparel manufacturing, including costs of
materials and components. This knowledge enables us to determine the most
cost-effective country and manufacturer from which to source each item and
obtain low prices. Relying on our supplier relationships and management's
knowledge of manufacturing costs, we believe we have been able to arrange for
the manufacture of high-quality products at low cost.

Our sourcing team makes on-site visits to our independent agents and
various manufacturers to negotiate product costs, finalize technical
specifications of each product and confirm delivery of merchandise manufactured
to our specifications. Our apparel is produced to our specifications by more
than 150 independent manufacturers located primarily in Asia. To support our
growing inventory needs and to control merchandise costs, we continue to pursue
global sourcing opportunities and consider product cost and quality, reliability
of the manufacturer, service and product lead times, among other factors.

We have no exclusive or long-term contracts with our manufacturers and
typically transact business on an item-by-item basis under purchase orders at
freight on board cost in U.S. dollars. We are parties to agency agreements with
commissioned independent agents to oversee production, assist in sourcing and
pre-production approval, quality inspection and ensuring timely delivery of
merchandise. We purchase approximately 20% of our products from a commissioned
independent agent in Taiwan and approximately 15% of our products from a
commissioned independent agent in Turkey. We also purchase approximately 30% of
our merchandise through a Hong Kong-based trading company. This trading company
is responsible for most of our procurements from manufacturers located in Hong
Kong, Cambodia, China, the Philippines, Myanmar and Macau. Although they are not
contractually obligated to do so, the Hong Kong-based trading company, and our
commissioned independent agents in Taiwan and Turkey each have exclusive
arrangements with The Children's Place. We have developed long-term, continuous
relationships with key individual manufacturers and material suppliers which
have yielded numerous benefits, including quality control and low costs, and
have afforded us flexible working arrangements and a steady flow of merchandise
supply. In addition, we believe our Hong Kong office enables us to obtain more
favorable material and manufacturing costs and more quickly identify and act on
new sourcing and supplier opportunities. Our Hong Kong office also enables us to
foster stronger relationships with our suppliers, manufacturers, agents and
trading companies in the Far East.

Together with our agents and key suppliers, we employ tracking systems
that enables us to anticipate potential delivery delays in our orders and take
action to mitigate the impact of any delays. By using these systems together
with our purchase order and advanced shipping notification systems, we and our
independent agents actively monitor the status of each purchase order from order
confirmation to merchandise receipt. We experience occasional shipment delays,
but no such delay has had a material adverse effect on our business.

To ensure quality and promote consumer confidence in our products, we
augment our manufacturers' testing requirements with our own, in-house quality
assurance laboratory to test and evaluate fabric, trimming materials and
pre-production samples against a comprehensive range of physical performance
standards before production begins. The quality control personnel of our
independent agents and trading company visit the various manufacturing
facilities to monitor and improve the quality control and production process.
These efforts are augmented by our director of quality control and the quality
assurance staff in our Hong Kong office. With this focus on pre-production
quality approval, we are generally able to detect and correct quality-related
problems before bulk production begins. We do not accept our finished apparel
products until each purchase order receives formal certification of compliance
from our agents' or appointed third party inspectors. Our Hong Kong office has
enhanced our quality control by enabling us to monitor component and
manufacturing quality at close range and address related problems at an early
stage.

Company Stores

Existing Stores. As of April 1, 2001, we operated 431 stores in 43 states.
Most of our stores are clustered in and around major metropolitan areas. Our
stores are concentrated in major regional malls, with the exception of 31 outlet
stores and 45 street and strip center stores. The following table sets forth the
number of stores in each state as of April 1, 2001:

# OF
STATE STORES
- ----- ------

Alabama ................................................................ 3
Arizona ................................................................ 1
Arkansas ............................................................... 1
California ............................................................. 18
Colorado ............................................................... 7
Connecticut ............................................................ 10
Delaware ............................................................... 3
Florida ................................................................ 24
Georgia ................................................................ 14
Illinois ............................................................... 28
Indiana ................................................................ 8
Iowa ................................................................... 5
Kansas ................................................................. 4
Kentucky ............................................................... 4
Louisiana .............................................................. 5
Maine .................................................................. 4
Maryland ............................................................... 13
Massachusetts .......................................................... 19
Michigan ............................................................... 17
Minnesota .............................................................. 10
Mississippi ............................................................ 2
Missouri ............................................................... 10
Nebraska ............................................................... 3
New Hampshire .......................................................... 4
New Jersey ............................................................. 28
New York ............................................................... 58
Nevada ................................................................. 1
North Carolina ......................................................... 13
Ohio ................................................................... 18
Oklahoma ............................................................... 1
Oregon ................................................................. 4
Pennsylvania ........................................................... 25
Rhode Island ........................................................... 1
South Carolina ......................................................... 5
South Dakota ........................................................... 1
Tennessee .............................................................. 11
Texas .................................................................. 17
Utah ................................................................... 5
Vermont ................................................................ 1
Virginia ............................................................... 15
Washington ............................................................. 3
West Virginia .......................................................... 1
Wisconsin .............................................................. 6

Store Environment. Our prototype store is approximately 4,200 square feet
and features a design that incorporates light wood floors, fixtures and trim.
The store is brightly lit, featuring floor-to-ceiling glass windows that allow
our colorful fashions to attract customers from the outside. A customized grid
system throughout the store's upper perimeter displays featured merchandise,
marketing photographs and promotions. Each line is merchandised as a collection
of coordinated fashion and key items, with matching accessories. We continually
refine our merchandise presentation strategy to improve the shopping experience
of our customers. We believe that our merchandise presentation effectively
displays "The Children's Place" distinctive look and creates a visually
attractive selling environment that maximizes customer convenience and
encourages the purchase of multiple items.

To achieve uniform merchandise presentation and to maximize sales of
coordinated items, store management is provided monthly with detailed visual
floorsets that specify merchandise placement. Standardization of store design,
merchandise presentation and window displays also promotes effective usage and
productivity of selling space and maximizes customer convenience in merchandise
selection. By seeking a uniform appearance in store design and merchandise
presentation, we believe that we are able to maintain and enhance "The
Children's Place" brand image.

Our outlet stores generally measure in excess of 5,000 square feet and
represent approximately 7% of our store base. Our outlet stores are generally
located in outlet centers and are strategically placed within each market to
liquidate markdown merchandise from our other stores. Our street and strip
center locations represent approximately 10% of our store base and provide
substantial opportunities for further penetration in established markets.

Store Operations. Our store operations are directed by our Vice President
of Store Operations, regional and district managers. Individual stores are
managed by a store manager and up to three co-managers depending on sales volume
and employs approximately 10 part-time sales associates. We hire additional
part-time associates based on seasonal needs.

Regional and district managers spend a majority of their work week on
store selling floors, providing direction, motivation, training and support to
store personnel. Store managers are responsible for achieving planned store
sales goals, staff scheduling, training and supervising customer service, store
presentation standards, payroll productivity and inventory shrink. To maximize
selling productivity, we engage in an ongoing process of training management and
sales associates in the areas of customer service, selling skills, merchandise
presentation, procedures and controls, utilizing visual aids, training manuals
and training workshops.

In order to motivate our regional, district and store managers, we offer
an incentive compensation plan. Under the plan, managers of our stores who meet
planned monthly goals for sales, payroll productivity and inventory shrink are
awarded a bonus based upon the amount by which their respective stores exceed
such targets. District and regional managers receive bonuses based upon the
incentive compensation awarded to their stores.

Store Expansion Program

Over the last several years, we have been aggressively opening new stores
to capitalize on our business strengths and strong store economics. In the last
three fiscal years we increased our number of stores from 155 to 400, opening
54, 84 and 108 stores in fiscal 1998, fiscal 1999 and fiscal 2000, respectively
and closing one store in fiscal 2000. We intend to continue our store expansion
program and currently plan to open approximately 120 stores in fiscal 2001.

In fiscal 2000, new stores for which fiscal 2000 was their first full year
of operations had average net sales of approximately $1.5 million. The average
investment for these stores, including capital expenditures (net of landlord
contribution), initial inventory (net of merchandise payables) and pre-opening
was approximately $432,000. In fiscal 2000, store level operating cash flow for
these stores was approximately $359,000, yielding a cash on cash return on
investment of approximately 83%.

Our expansion strategy focuses primarily on mall-based locations. The
regional malls which we target generally have at least three department stores
or other anchor tenants and various specialty retailers, as well as several
entertainment features (such as restaurants, a food court and/or movie
theaters). We conduct on-site visits and analyses of potential store sites,
taking into account the performance of other specialty retail tenants, the
anchor stores and other stores, the size, type and average sales per square foot
of the mall and the demographics of the surrounding area. Our most important
considerations in evaluating a store location within a mall are placement of the
store relative to mall traffic patterns and proximity to other children's
retailers. In addition, we continuously evaluate opportunities to add stores in
other types of locations, including street locations and strip and outlet
centers.

Electronic Commerce

During fiscal 2000, our on-line store represented less than 1% of our
overall sales. In January 2001, we temporarily closed our online store and
anticipate re-opening it in May 2001. We plan to improve operational efficiency
and reduce costs by bringing our e-commerce operations and fulfillment services
in-house. We also plan to improve the design and layout of our on-line store to
create a more user friendly shopping experience. We recorded a $0.7 million
non-cash charge in the fourth quarter of fiscal 2000 to write-off intangible
assets that are not part of our future e-commerce strategy.

Marketing

Advertising and Promotion. We strive to enhance our reputation and image
in the marketplace and build recognition and equity in "The Children's Place"
brand name by advertising our image, product and value message through in-store
marketing and direct mail. In fiscal 2000, we increased our direct mail
marketing efforts. These mailings were designed to increase sales, promote brand
loyalty and create customer excitement. In addition, our direct marketing
efforts were supplemented by advertising our image, product and value messages
through in-store photographs, signage and product displays.

Private Label Credit Card. We view our private label credit card as an
important marketing and communication tool. Pursuant to a merchant services
agreement, private label credit cards are issued to our customers for use
exclusively at our stores and credit is extended to such customers on a
non-recourse basis to The Children's Place. Sales on the private label credit
card accounted for approximately 14% of our fiscal 2000 net sales, which
increased from 11% of fiscal 1999 net sales. We believe that our private label
credit card promotes affinity and loyalty among those customers who use the card
and facilitates communication with such customers through delivery of coupons
and promotional materials. Our average dollar sale to customers using "The
Children's Place" card has been substantially higher than our overall average
dollar sale.

Management Information Systems

Our management information systems consist of a full range of financial,
merchandising, logistics, and product procurement systems that run on a
combination of legacy and proprietary software packages. These systems operate
on a multi-platform environment which includes an IBM mainframe computer and
several mid-range computers. We view technology as an important tool in
efficiently supporting our rapid growth and maintaining a competitive industry
position.

We are committed to utilizing technology to further enhance our
competitive position. During fiscal 2001, we plan to commence implementation of
various financial, merchandising and store systems. We continually explore
opportunities in which technology can provide a competitive advantage.

Logistics

We currently support our stores with a 204,000 square foot distribution
center and corporate headquarters facility located in Secaucus, New Jersey. Our
distribution center utilizes an automated warehouse management system, which
employs radio frequency technology and an automated conveyor system.

To support our distribution and warehouse needs in the western portions of
the United States, we entered into a seven year lease with options for an
approximately 250,000 square foot distribution center in Ontario, California.
Annual rent under this lease is approximately $1.2 million. We plan to utilize
this facility by the summer of 2001. We expect to make a cash outlay of
approximately $8 million to install an automated warehouse management system and
other facility improvements. Approximately $5 million of this cash outlay was
made in fiscal 2000 with the remainder planned for fiscal 2001. We expect that
this distribution center, along with our existing New Jersey facility, should be
able to support over 1,000 stores.

In addition, we entered into a six year lease with an option for an
approximately 72,500 square foot facility located near our headquarters in
Secaucus, New Jersey. We plan to use this facility for e-commerce fulfullment,
distribution to local stores and ancillary offices to support our growing
business. Annual rent under this lease is approximately $0.7 million per year.
We expect to spend approximately $1 million during the first half of fiscal 2001
to renovate this facility.

Competition

The children's apparel retail business is highly competitive. We compete
in substantially all of our markets with GapKids, babyGap and Old Navy (each of
which is a division of The Gap, Inc.), The Gymboree Corporation, Too, Inc., J.C.
Penney Company, Inc., Sears, Roebuck and Co. and other department stores that
sell children's apparel and accessories, as well as certain discount stores such
as Wal-Mart Stores, Inc., Kmart Corporation, Target Corporation and Kids "R" Us
(a division of Toys "R" Us, Inc.). We also compete with a wide variety of
specialty stores, other national and regional retail chains, catalog companies
and internet retailers. One or more of our competitors are present in
substantially all of the malls in which we have stores.

We believe that the principal factors of competition in our marketplace
are perceived value, price, quality, merchandise assortment, brand name
recognition, customer service, and a friendly store environment. We believe that
we have been able to effectively compete in the children's apparel industry
because of our reputation in the marketplace and consistent merchandise offering
of high-quality, coordinated basic and fashion outfits for children at
consistent value prices, sold in a friendly environment.

Trademarks and Service Marks

"The Children's Place," "Baby Place," "Place," "The Place," "TCP" and
certain other marks have been registered as trademarks and/or service marks with
the United States Patent and Trademark Office. The registration of the
trademarks and the service marks may be renewed to extend the original
registration period indefinitely, provided the marks are still in use. We intend
to continue to use and protect our trademarks and service marks and maintain
their registrations. We are taking steps to register our trademarks in certain
foreign countries. We believe our trademarks and service marks have received
broad recognition and are of significant value to our business.

Employees

As of April 1, 2001, we had approximately 2,393 full-time employees, of
whom approximately 551 are based at our distribution center and corporate
headquarters, and approximately 5,425 part-time employees. None of our employees
are covered by a collective bargaining agreement. We believe our relations with
our employees are good.

Risk Factors

Investors in the Company should consider the following risk factors as
well as the other information contained herein.

Inability to Sustain Aggressive Growth Strategy

Our net sales have grown significantly during the past several years,
primarily as a result of the opening of new stores and, to a lesser extent, due
to increases in our comparable store sales. We intend to continue to pursue an
aggressive growth strategy for the foreseeable future, and our future operating
results will depend largely upon our ability to open and operate new stores
successfully and to manage a larger business profitably. We anticipate opening
approximately 120 stores during fiscal 2001.

We are subject to a variety of business risks generally associated with
rapidly growing companies. Our ability to open and operate new stores
successfully depends on many factors, including, among others, the availability
of suitable store locations, the ability to negotiate acceptable lease terms,
the ability to timely complete necessary construction, the ability to
successfully integrate new stores into our existing operations, the ability to
hire and train store personnel and the ability to recognize and respond to
regional and climate-related differences in our customer preferences.

We cannot assure you that we will be able to continue to achieve our
planned expansion on a timely and profitable basis or that we will be able to
achieve results similar to those achieved in existing locations in prior
periods. In addition, as our business grows, we anticipate that we will not be
able to sustain the current annual growth rate of our store base of
approximately 37%. Operating margins may also be adversely affected during
periods in which we have incurred expenses in anticipation of new store
openings. We do not expect that we will be able to sustain the cash-on-cash
return we experienced in fiscal 2000 of 83% for stores that were operating for
their first full fiscal year. Furthermore, we need to continually evaluate the
adequacy of our store management and our management information and distribution
systems to manage our planned expansion. Any failure to successfully and
profitably execute our expansion plans could have a material adverse effect on
our business.

We expect to spend approximately $60 million in fiscal 2001 on capital
expenditures. We believe that cash generated from operations and funds available
under our working capital facility will be sufficient to fund our capital and
other cash flow requirements for at least the next 12 months. However, it is
possible that as we continue to grow we may be required to seek additional funds
for our capital and other cash flow needs, and we cannot assure you that we will
be able to obtain such funds.

Sensitivity to Economic, Regional and Other Business Conditions

Our business is sensitive to customers' spending patterns which, in turn,
are subject to prevailing regional and national economic conditions such as
interest rates, taxation, consumer confidence and recession. We are, and will
continue to be, susceptible to changes in regional economic conditions, weather
conditions, demographic and population characteristics, consumer preferences and
other regional factors. We are also dependent upon the continued popularity of
malls as shopping destinations and the ability of mall anchor tenants and other
attractions to generate customer traffic in the malls where our stores are
located. Any economic or other conditions decreasing the retail demand for
apparel or the level of mall traffic could have a material adverse effect on our
business.

Potential Disruptions in Receiving and Distribution

Our merchandise is shipped directly from manufacturers through freight
consolidators to our distribution center in Secaucus, New Jersey. Our operating
results depend in large part on the orderly operation of our receiving and
distribution process, which depends on manufacturers' adherence to shipping
schedules and our effective management of our distribution facility. During the
summer of fiscal 2001, we plan to open a distribution center in Ontario,
California to support merchandise distribution for our stores in the western
half of the United States. We cannot assure you that we have anticipated, or
will be able to anticipate, all of the changing demands which our expanding
operations will impose on our receiving and distribution systems. We also cannot
assure you that we will not experience start-up delays or other difficulties
with our West Coast distribution center. Furthermore, it is possible that events
beyond our control, such as a strike or other disruption affecting the parcel
service that delivers substantially all of our merchandise to our stores, could
result in delays in delivery of merchandise to our stores. Any such event could
have a material adverse effect on our business.

Need to Anticipate and Respond to Merchandise Trends

Our continued success will depend in part on our ability to anticipate and
respond to fashion trends and consumer preferences. Our design, manufacturing
and distribution process generally takes up to one year, during which time
fashion trends and consumer preferences may change. Failure to anticipate,
identify or respond to future fashion trends, may adversely affect customer
acceptance of our products or require substantial markdowns, which could have a
material adverse effect on our business. In addition, certain public school
districts in various markets in which we have stores are increasingly requiring
that their grade school students wear uniforms, which may have a material
adverse effect on our business.

Reliance on Information Systems

We rely on various information systems to manage our operations and
regularly make investments to upgrade, enhance or replace such systems. Any
delays or difficulties in transitioning to these or other new systems, or in
integrating these systems with our current systems, or any other disruptions
affecting our information systems, could have a material adverse effect on our
business.

Dependence on Unaffiliated Manufacturers and Independent Agents

We do not own or operate any manufacturing facilities and therefore are
dependent upon independent third parties for the manufacture of all of our
products. Our products are currently manufactured to our specifications,
pursuant to purchase orders, by more than 150 independent manufacturers located
primarily in Asia. We have no exclusive or long-term contracts with our
manufacturers and compete with other companies for manufacturing facilities. In
addition, we have no formal written agreement with the Hong Kong-based trading
company through which we purchase approximately 30% of our products. We also
purchase approximately 20% of our products from a single agent in Taiwan and
approximately 15% of our products from a single agent in Turkey, which have
exclusive arrangements with us. Although we believe that we have established
close relationships with our principal manufacturers and independent agents, the
inability to maintain such relationships or to find additional sources to cover
future growth could have a material adverse effect on our business.

Risks of Using Foreign Manufacturers; Possible Adverse Impact of Unaffiliated
Manufacturers' Failure to Comply with Acceptable Labor Practices

Our business is subject to the risks generally associated with purchasing
from foreign countries. Some of these risks are foreign governmental
regulations, political instability, currency and exchange risks, quotas on the
amounts and types of merchandise which may be imported into the United States
from other countries, disruptions or delays in shipments and changes in economic
conditions in countries in which our manufacturing sources are located. We
cannot predict the effect that such factors will have on our business
arrangements with foreign manufacturing sources. If any of these factors
rendered the conduct of business in a particular country undesirable or
impractical, or if our current foreign manufacturing sources ceased doing
business with us for any reason, our business could be materially adversely
affected. Our business is also subject to the risks associated with changes in
U.S. legislation and regulations relating to imported apparel products,
including quotas, duties, taxes and other charges or restrictions on imported
apparel. We cannot predict whether such changes or other charges or restrictions
will be imposed upon the importation of our products in the future, or the
effect any such event would have on our business.

We require our independent manufacturers to operate in compliance with
applicable laws and regulations and our internal requirements. While our
purchasing guidelines promote ethical business practices, we do not control
these manufacturers or their labor practices. The violation of labor or other
laws by one of the independent manufacturers we use or the divergence of an
independent manufacturer's labor practices from those generally accepted as
ethical in the United States could have a material adverse effect on our
business.

Effect of Fluctuations in Quarterly Results and Seasonality on Income

As is the case with many apparel retailers, we experience seasonal
fluctuations in our net sales and net income. Our net sales and net income are
generally weakest during the first two fiscal quarters, and are lower during the
second fiscal quarter than during the first fiscal quarter. For example, in
fiscal 2000, 22%, 19%, 28% and 31% of our net sales for stores open for the full
fiscal year occurred in the first, second, third and fourth quarters,
respectively. In the past, we have experienced second quarter losses and expect
to experience a second quarter loss in fiscal 2001 and it is possible that we
will experience second quarter losses in future periods. Our first quarter
results are heavily dependent upon sales during the period leading up to the
Easter holiday and weak sales during this period could have a material adverse
effect on our business. Our third quarter results are heavily dependent upon
back-to-school sales and our fourth quarter results are heavily dependent upon
sales during the holiday season. Weak sales during either of these periods could
have a material adverse effect on our business.

Our quarterly results of operations may also fluctuate significantly from
quarter to quarter as a result of a variety of other factors, including the
timing of new store openings and related pre-opening and other start-up costs,
net sales contributed by new stores, increases or decreases in comparable store
sales, weather conditions, shifts in the timing of certain holidays, changes in
our merchandise mix and overall economic conditions. Any failure by us to meet
our business plans for, in particular, the third and fourth quarter of any
fiscal year would have a material adverse effect on our earnings, which in all
likelihood would not be offset by satisfactory results achieved in other
quarters of the same fiscal year. In addition, because our expense levels are
based in part on expectations of future sales levels, a shortfall in expected
sales could result in a disproportionate decrease in our net income.

Changes in Comparable Store Sales Results from Period to Period

Numerous factors affect our comparable store sales results including,
among others, weather conditions, fashion trends, merchandise assortment, the
retail sales environment, economic conditions and our success in executing our
business strategy. Our quarterly comparable store sales results have fluctuated
significantly in the past and we anticipate that our quarterly comparable store
sales will continue to fluctuate in the future. In addition, we do not expect
our comparable store sales to continue to increase at rates similar to those
experienced in the last three years. Moreover, comparable store sales for any
particular period may decrease in the future. Comparable store sales results are
often followed closely by the investment community and significant fluctuations
in such results may affect the price of our Common Stock. Any such variations in
our comparable store sales results could have a material adverse effect on our
business and on the market price of our Common Stock.

Risk of Geographic Expansion

Most of our stores are located in the eastern half of the United States,
with only 95 stores, representing 22% of our stores, in operation west of the
Mississippi River as of April 1, 2001. As we implement our growth strategy in
fiscal 2001, we will increase our susceptibility to differences in demographic
and population characteristics, regional economic conditions, climate and other
weather-related conditions, consumer preferences and other geographical factors.
We cannot assure you that, as we expand into new regions, we will be able to
achieve results comparable to those we have achieved in prior periods in regions
where we already conduct business.

Foreign Currency Fluctuations

We conduct our business in U.S. dollars. However, because we purchase
substantially all of our products overseas, the cost of these products may be
affected by changes in the values of the relevant currencies. To date, we have
not considered it necessary to hedge against foreign currency fluctuations.
Although foreign currency fluctuations have had no material adverse effect on
our business in the past, we cannot predict whether such fluctuations will have
such an effect in the future.

Dependence on Key Personnel

The leadership of Ezra Dabah, our Chairman of the Board and Chief
Executive Officer, has been instrumental in our success. The loss of the
services of Mr. Dabah could have a material adverse effect on our business. We
have entered into an employment agreement with Mr. Dabah, but we cannot assure
you that we will be able to retain his services. In addition, several senior
officers resigned and were not replaced during fiscal 2000. Furthermore, other
members of management have substantial experience and expertise in our business
and have made significant contributions to its growth and success. The loss of
services of one or more of these individuals, or the inability to attract
additional qualified managers or other personnel as we grow, could have a
material adverse effect on our business. We are not protected by any key-man or
similar life insurance for any of our executive officers.

Competition

Control by Certain Stockholders

As of April 1, 2001, Ezra Dabah and certain members of his family
beneficially own 8,428,658 shares of our Common Stock, constituting
approximately 32.0% of the outstanding Common Stock. Two funds managed by
Saunders Karp & Megrue, L.P. ("SKM"), The SK Equity Fund, L.P. and SK Investment
Fund, L.P. (collectively, the "SK Funds"), own 6,704,053 shares or approximately
25.6% of the outstanding Common Stock. Under a stockholders agreement, the SK
Funds and certain other stockholders, who own in the aggregate a majority of the
outstanding Common Stock, have agreed to vote for the election of two nominees
of the SK Funds and three nominees of Ezra Dabah to our Board of Directors in
any election of directors. As a result, the SK Funds and Ezra Dabah are, and
will continue to be, able to control the election of our directors. In addition,
if the SK Funds and Mr. Dabah were to vote together, they would be able to
determine the outcome of any matter submitted to a vote of our stockholders for
approval.

Uncertainty of Net Operating Loss Carryforwards

We utilized $8.6 million, $38.4 million and $1.6 million of our net
operating loss carryforwards ("NOLs") to offset taxable income that we earned in
our 1997, 1998 and 1999 taxable years, respectively. As the amount and
availability of these NOLs are subject to review by the Internal Revenue
Service, we cannot assure you that the NOLs will not be reduced or their use
limited as the result of an audit of our tax returns. If the amount of these
NOLs were reduced or their availability limited, we could be liable for
additional taxes with respect to our 1997 through 1999 taxable years. Any such
reduction or restriction could have a material adverse effect on our business.

Stock Price Volatility

Our Common Stock, which is quoted on the Nasdaq National Market, has
experienced and is likely to experience in the future significant price and
volume fluctuations which could adversely affect the market price of the Common
Stock without regard to our operating performance. In addition, we believe that
factors such as quarterly fluctuations in our financial results, our comparable
store sales results,

announcements by other apparel retailers, the overall economy and the condition
of the financial markets could cause the price of our Common Stock to fluctuate
substantially.

Anti-Takeover Provisions of Applicable Delaware Law and Our Certificate of
Incorporation and ByLaws

Certain provisions of our Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") and Amended and Restated
ByLaws (the "ByLaws") may have anti-takeover effects and may discourage, delay
or prevent a takeover attempt that a stockholder might consider in its best
interest. These provisions, among other things, (1) classify our Board of
Directors into three classes, each of which will serve for different three year
periods, (2) provide that only the Chairman of the Board of Directors may call
special meetings of the stockholders, (3) provide that a director may be removed
by stockholders only for cause by a vote of the holders of more than two-thirds
of the shares entitled to vote, (4) provide that all vacancies on our Board of
Directors, including any vacancies resulting from an increase in the number of
directors, may be filled by a majority of the remaining directors, even if the
number is less than a quorum, (5) establish certain advance notice procedures
for nominations of candidates for election as directors and for stockholder
proposals to be considered at stockholders' meetings, and (6) require a vote of
the holders of more than two-thirds of the shares entitled to vote in order to
amend the foregoing provisions and certain other provisions of the Certificate
of Incorporation and ByLaws. In addition, the Board of Directors, without
further action of the stockholders, is permitted to issue and fix the terms of
preferred stock which may have rights senior to those of the Common Stock.
Moreover, we are subject to the provisions of Section 203 of the Delaware
General Corporation Law, as amended (the "DGCL"), which would require a
two-thirds vote of stockholders for any business combination (such as a merger
or sales of all or substantially all of our assets) between The Children's Place
and an "interested stockholder," unless such transaction is approved by a
majority of the disinterested directors or meets certain other requirements. In
certain circumstances, the existence of these provisions which inhibit or
discourage takeover attempts could reduce the market value of our Common Stock.

ITEM 2. - PROPERTIES

We currently support our stores with a 204,000 square foot distribution
center and corporate headquarters facility in Secaucus, New Jersey. To support
our growing distribution and warehouse needs in the western portion of the
United States, we entered into a seven year lease with options for an
approximately 250,000 square foot distribution center in Ontario, California.
Annual rent under this lease is approximately $1.2 million. We plan to utilize
this facility by the summer of 2001. We expect to make a cash outlay of
approximately $8 million to install an automated warehouse management system and
other facility improvements. Approximately $5 million of this cash outlay was
made in fiscal 2000 with the remainder planned for fiscal 2001. We expect that
this distribution center, along with our existing New Jersey facility, should be
able to support over 1,000 stores.

In addition, we entered into a six year lease with an option period for an
approximately 72,500 square foot facility located near our headquarters in
Secaucus, New Jersey. We plan to use this facility for e-commerce fulfillment,
distribution to local stores and ancillary offices to support our growing
business. Annual rent under this lease is approximately $0.7 million per year.
We expect to spend approximately $1 million during the first half of fiscal 2001
to renovate this facility.

All of our existing store locations are leased by us, with lease terms
expiring between 2001 and 2014 and with an average unexpired lease term of 7.7
years. The leases for most of our existing stores are for terms of ten years and
provide for contingent rent based upon a percentage of sales in excess of
specific minimums. Leases for future stores will likely include similar
contingent rent provisions.

ITEM 3. - LEGAL PROCEEDINGS

We are involved in various legal proceedings arising in the normal course
of our business. In the opinion of management, any ultimate liability arising
out of such proceedings will not have a material adverse effect on our business.

ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Common Stock is listed on the Nasdaq National Market under the symbol
"PLCE." The following table sets forth the range of high and low closing sales
prices on the Nasdaq National Market of our Common Stock for the calendar
periods indicated.

High Low
---- ---
1998
First Quarter .................................... $ 9.06 $ 5.06
Second Quarter ................................... 11.38 8.13
Third Quarter .................................... 11.00 8.06
Fourth Quarter ................................... 25.13 9.13

1999
First Quarter .................................... 33.25 23.56
Second Quarter ................................... 48.63 27.38
Third Quarter .................................... 52.56 25.63
Fourth Quarter ................................... 32.00 13.69

2000
First Quarter .................................... 23.75 10.38
Second Quarter ................................... 28.19 15.50
Third Quarter .................................... 35.50 20.75
Fourth Quarter ................................... 28.75 14.94

On March 30, 2001, the last reported sale price of our Common Stock was
$24.00 per share. As of April 1, 2001, there were approximately 4,500 holders of
record of our Common Stock.

We have never paid dividends on our Common Stock and do not anticipate
paying dividends on our Common Stock in the foreseeable future. Our Board of
Directors presently intends to retain any future earnings of The Children's
Place to finance our operations and the expansion of our business. Our working
capital facility prohibits any payment of dividends. Any determination in the
future to pay dividends will depend upon our earnings, financial condition, cash
requirements, future prospects, covenants in our working capital facility and
any future debt instruments and such other factors as the Board of Directors
deems appropriate at the time.

ITEM 6. - SELECTED FINANCIAL DATA

The following table sets forth certain historical financial and operating
data for The Children's Place. The selected historical financial data is
qualified by reference to, and should be read in conjunction with Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and the financial statements and notes thereto included elsewhere in
this report. Certain prior fiscal year balances set forth below have been
reclassified to conform to fiscal 2000 presentation.

Fiscal Year Ended (1)
---------------------
February 3, January 29, January 30, January 31, February 1,
2001 2000 1999 1998 1997
-------- -------- -------- --------- ---------

Statement of Operations Data
(in thousands, except per share data):
Net sales ................................................ $587,385 $421,496 $283,853 $ 192,557 $ 143,838
Cost of sales ............................................ 339,042 241,188 166,449 123,556 90,071
-------- -------- -------- --------- ---------
Gross profit ............................................. 248,343 180,308 117,404 69,001 53,767
Selling, general and administrative expenses ............. 150,693 105,137 70,313 46,451 35,966
Pre-opening costs ........................................ 5,456 3,485 3,030 2,127 982
Depreciation and amortization ............................ 20,880 13,849 8,607 5,958 4,017
-------- -------- -------- --------- ---------

Operating income ......................................... 71,314 57,837 35,454 14,465 12,802
Interest expense, net .................................... 997 346 324 2,647 2,884
Other expense, net ....................................... 166 54 110 139 396
-------- -------- -------- --------- ---------

Income before income taxes and
extraordinary loss ..................................... 70,151 57,437 35,020 11,679 9,522
Provision (benefit) for income taxes (2) ................. 27,461 22,388 14,358 4,695 (20,919)
-------- -------- -------- --------- ---------

Income before extraordinary loss ......................... 42,690 35,049 20,662 6,984 30,441
Extraordinary loss (3) ................................... 0 0 0 1,743 0
-------- -------- -------- --------- ---------

Net income ............................................... $ 42,690 $ 35,049 $ 20,662 $ 5,241 $ 30,441
======== ======== ======== ========= =========

Diluted income per common share before extraordinary loss $ 1.60 $ 1.32 $ 0.80 $ 0.29
-------- -------- -------- ---------

Extraordinary loss per common share ...................... 0.00 0.00 0.00 (0.07)
-------- -------- -------- ---------

Diluted net income per common share (4) .................. $ 1.60 $ 1.32 $ 0.80 $ 0.22
======== ======== ======== =========

Diluted weighted average common shares outstanding (4) ... 26,668 26,648 25,909 24,358
Selected Operating Data:
Number of stores open at end of period ................... 400 293 209 155 108
Comparable store sales increase (5) (6) .............. 4% 15% 14% 2% 9%
Average net sales per store (in thousands) (6) (7) ....... $ 1,651 $ 1,656 $ 1,569 $ 1,487 $ 1,479
Average square footage per store (8) ..................... 4,170 4,140 4,055 4,123 4,284
Average net sales per gross square foot (6) (9) .......... $ 403 $ 414 $ 382 $ 350 $ 335

February 3, January 29, January 30, January 31, February 1,
2001 2000 1999 1998 1997
-------- -------- -------- --------- ---------

Balance Sheet Data (in thousands):
Working capital .......................................... $ 40,944 $ 27,340 $ 35,531 $ 20,238 $ 11,951
Total assets ............................................. 231,696 170,959 110,761 79,353 64,479
Long-term debt ........................................... 0 0 2 26 20,504
Stockholders' equity ..................................... 166,667 120,066 80,607 58,467 27,298

(footnotes on following page)

- -----------

(1) All references to our fiscal years refer to the 52- or 53-week year ended
on the Saturday nearest to January 31 of the following year. For example,
references to fiscal 2000 mean the fiscal year ended February 3, 2001.
Fiscal 2000 was a 53-week year.

(2) The provision (benefit) for income taxes for fiscal 1996 reflected the
reversal of a valuation allowance of $20.9 million on a net deferred tax
asset.

(3) The extraordinary loss in fiscal 1997 represented the write-off of
unamortized deferred financing costs and unamortized debt discount as a
result of the repayment of long-term debt in conjunction with our initial
public offering in September 1997.

(4) Diluted net income per common share is calculated by dividing net income
by the diluted weighted average common shares and common share equivalents
outstanding. The weighted average common shares outstanding and common
share equivalents used in computing diluted net income per common share
for fiscal 1997 are based on the number of common shares and common share
equivalents as if our recapitalization at the time of our initial public
offering had occurred on the first day of fiscal 1997. During and prior to
the fiscal year ended February 1, 1997, our Common Stock was not publicly
traded and due to significant changes in our capital structure resulting
from a private placement of our Common Stock in July 1996, earnings per
share for that year is not presented due to a lack of comparability.

(5) We define comparable store sales as net sales from stores that have been
open for more than 14 full months and that have not been substantially
remodeled during that time.

(6) For purposes of determining the comparable store sales increase, average
net sales per store and average net sales per gross square foot, fiscal
2000 results were recalculated based on a 52-week year.

(7) Average net sales per store represents net sales from stores open
throughout the full period divided by the number of such stores.

(8) Average square footage per store represents the square footage of stores
open on the last day of the period divided by the number of such stores.

(9) Average net sales per gross square foot represents net sales from stores
open throughout the full period divided by the gross square footage of
such stores.

ITEM 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our audited
financial statements and notes thereto included as Item 14. The following
discussion contains forward-looking statements that reflect our plans, estimates
and beliefs. Our actual results could differ materially from those discussed in
the forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and elsewhere
in this report, particularly in "Risk Factors."

Overview

The Children's Place Retail Stores, Inc. is a specialty retailer of
apparel and accessories for children from newborn to twelve years of age. As of
April 1, 2001, we operated 431 stores in 43 states, located primarily in
regional shopping malls. Over the last several years, we have been aggressively
opening new stores to capitalize on our business strengths and strong store
economics. During fiscal 1998, fiscal 1999 and fiscal 2000, we opened a total of
54, 84 and 108 new stores, respectively and closed one store in fiscal 2000. We
intend to continue our expansion program and currently plan to open
approximately 120 stores in fiscal 2001.

Our net sales have grown significantly during the past several years,
primarily as a result of new store openings and, to a lesser extent, increases
in comparable store sales. We reported comparable store sales growth over prior
years of 14%, 15% and 4% during fiscal 1998, fiscal 1999 and fiscal 2000,
respectively. We believe that these increases were primarily the result of
successful merchandising and operational programs, together with well-positioned
store real estate. We do not expect our comparable store sales to continue to
increase at rates similar to those experienced over the last three years. During
the first nine weeks of fiscal 2001, we experienced negative comparable store
sales of 7%. Sales were unfavorably impacted primarily by a difficult economic
environment along with unfavorable weather conditions.

During fiscal 2001, we plan to focus our efforts on the opening of
approximately 120 stores, the start-up of our new West Coast distribution
facility, the implementation of certain management information system
initiatives, and the re-opening of our e-commerce website, as well as an ongoing
assessment of our administrative infrastructure to support our growing business.

To support our growing distribution and warehouse needs in the western
portions of the United States, we have leased an approximately 250,000 square
foot distribution center in Ontario, California. We expect to make a cash outlay
of approximately $8 million to install an automated warehouse management system
and other facility improvements. We plan to begin to utilize this facility
during the summer of 2001. In addition, we also leased an approximately 72,500
square foot facility located near our headquarters in Secaucus, New Jersey. We
plan to use this facility for e-commerce fulfillment, distribution to local
stores and ancillary offices to support our growing business. We expect to make
a cash outlay of approximately $1 million to renovate this facility.

During fiscal 2001, we expect to make a cash outlay of approximately $9
million on management information system initiatives. These initiatives include
various financial, merchandising and store systems planned to enhance the speed
and quality of management information within the Company.

Results of Operations

The following table sets forth, for the periods indicated, selected income
statement data expressed as a percentage of net sales:

Fiscal Year Ended
--------------------------------------
February 3, January 29, January 30,
2001 2000 1999
----------- ----------- -----------

Net sales ....................................... 100.0% 100.0% 100.0%
Cost of sales ................................... 57.7 57.2 58.6
------ ------ ------

Gross profit .................................... 42.3 42.8 41.4
Selling, general and administrative expenses .... 25.7 25.0 24.8
Pre-opening costs ............................... 0.9 0.8 1.1
Depreciation and amortization ................... 3.6 3.3 3.0
------ ------ ------

Operating income ................................ 12.1 13.7 12.5
Interest expense, net ........................... 0.2 0.1 0.1
Other expense, net .............................. -- -- 0.1
------ ------ ------

Income before income taxes and extraordinary loss 11.9 13.6 12.3
Provision for income taxes ...................... 4.7 5.3 5.0
------ ------ ------

Net income .................................. 7.2% 8.3% 7.3%
====== ====== ======

Number of stores, end of period ................. 400 293 209

Year Ended February 3, 2001 Compared to Year Ended January 29, 2000

Net sales increased by $165.9 million or 39% to $587.4 million during
fiscal 2000 from $421.5 million during fiscal 1999. Net sales for the 108 new
stores opened, as well as other stores that did not qualify as comparable
stores, contributed $142.9 million of the sales increase. Comparable store
sales, restated to reflect a comparable 52-week period, increased 4% and
contributed approximately $14.2 million of the increase in net sales. Comparable
store sales increased 15% in fiscal 1999. Sales for our folding "Yaak" scooter,
which was a trend item introduced in our stores in the third quarter of fiscal
2000, represented $16.1 million, or approximately 3% of net sales. In addition,
fiscal 2000 was a 53-week year, with the extra week contributing $8.8 million to
fiscal 2000 net sales.

Gross profit increased $68.0 million to $248.3 million during fiscal 2000
from $180.3 million in fiscal 1999. As a percentage of net sales, gross profit
decreased to 42.3% during fiscal 2000 from 42.8% during fiscal 1999. The
decrease in gross profit, as a percentage of net sales, was principally due to
higher markdowns, increased distribution and store occupancy costs, offset
partially by higher initial markups achieved through effective product sourcing
and the leveraging of our design, production and buying costs. Our increased
distribution costs were attributable to the distribution of merchandise ordered
from our e-commerce website and higher freight costs to ship product from our
New Jersey distribution center to an increased number of stores in the western
portions of the United States. These costs were partially offset by the
leveraging of payroll costs to operate our distribution center. Our increased
store occupancy costs resulted from our new stores that have not been open long
enough to leverage their rent through an established sales base.

Selling, general and administrative expenses increased $45.6 million to
$150.7 million in fiscal 2000 from $105.1 million in fiscal 1999. As a
percentage of net sales, selling, general and administrative expenses increased
to 25.7% of net sales during fiscal 2000 from 25.0% of net sales during fiscal
1999. During fiscal 2000, as a percentage of net sales, selling, general and
administrative expenses were unfavorably impacted by higher store payroll wage
rates, the settlement of executive severance agreements, the write-off of $0.7
million of intangible assets that were not part of our future e-commerce
strategy, and increased marketing costs, partially offset by the leveraging of
corporate administrative expenses.

During fiscal 2000, pre-opening costs were $5.5 million, or 0.9% of net
sales, as compared to $3.5 million, or 0.8% of net sales during fiscal 1999. The
increase in pre-opening costs reflects the opening of 108 stores in fiscal 2000,
as compared to 84 stores in fiscal 1999. During fiscal 2000, we incurred higher
pre-opening expenses due to increased marketing costs to introduce The
Children's Place brand in new markets, as well as increased travel and freight
costs to open our first stores on the west coast of the United States.

Depreciation and amortization amounted to $20.9 million, or 3.6% of net
sales, during fiscal 2000, as compared to $13.8 million, or 3.3% of net sales
during fiscal 1999. The increase in depreciation and amortization primarily was
a result of increases in our store base. In addition, we recorded a full year of
depreciation on our distribution center and corporate headquarters facility and
e-commerce assets during fiscal 2000. During fiscal 1999, depreciation commenced
on our distribution center and corporate headquarters during the third quarter
of 1999 and amortization of our e-commerce assets commenced in the fourth
quarter of 1999. These increases, as a percentage of net sales, were partially
offset by the leveraging of depreciation and amortization over a higher sales
base and by accelerated depreciation

taken in fiscal 1999 in conjunction with store re-fixturings and renovations.

Interest expense, net, for fiscal 2000 was $1.0 million, or 0.2% of net
sales, as compared to $0.3 million, or 0.1% of net sales, during fiscal 1999.
The increase in interest expense, net, is due to increased borrowings under our
working capital facility during fiscal 2000 to support our store growth.

Our provision for income taxes in fiscal 2000 was $27.5 million, as
compared to a provision for income taxes of $22.4 million during fiscal 1999.
The increase in our provision for income taxes during fiscal 2000 is due to our
increased profitability. Our effective tax rate was 39.1% and 39.0% for fiscal
2000 and fiscal 1999, respectively.

Fiscal 2000 net income increased to $42.7 million from $35.0 million in
fiscal 1999.

Year Ended January 29, 2000 Compared to Year Ended January 30, 1999

Net sales increased by $137.6 million, or 48%, to $421.5 million during
fiscal 1999 from $283.9 million during fiscal 1998. Net sales for the 84 new
stores opened, as well as other stores that did not qualify as comparable
stores, contributed $99.0 million of the sales increase. As of January 29, 2000,
The Children's Place operated 293 stores in 34 states primarily located in
regional shopping malls. Our comparable store sales increased 15% and
contributed $38.6 million to the net sales increase during fiscal 1999.
Comparable store sales increased 14% during fiscal 1998. Our fiscal 1999
comparable store sales increase was experienced across all major merchandise
departments.

Gross profit increased by $62.9 million to $180.3 million during fiscal
1999 from $117.4 million in fiscal 1998. As a percentage of net sales, gross
profit increased to 42.8% during fiscal 1999 from 41.4% during fiscal 1998. The
increase in gross profit, as a percentage of net sales, was principally due to
higher initial markups achieved through effective product sourcing and the
leveraging of store occupancy costs over a higher sales base, partially offset
by higher markdowns, higher distribution costs and costs incurred by our new
Hong Kong office. Our higher distribution costs can be attributed to the
implementation of our new warehouse system and increased freight costs, due to
the increased number of stores in operation west of the Mississippi River.

Selling, general and administrative expenses increased $34.8 million to
$105.1 million during fiscal 1999 from $70.3 million during fiscal 1998. As a
percentage of net sales, selling, general and administrative expenses increased
to 25.0% of net sales during fiscal 1999 from 24.8% of net sales during fiscal
1998. During fiscal 1999, selling, general and administrative expenses were
unfavorably impacted by start-up costs and marketing expenses associated with
the launch of our e-commerce website, www.childrensplace.com during the fourth
quarter of fiscal 1999, and increased marketing expenses. The increase in
selling, general and administrative expenses, as a percentage of net sales, were
partially offset by the leveraging of store and administrative expenses over a
higher sales base.

During fiscal 1999, pre-opening costs were $3.5 million, or 0.8% of net
sales, as compared to $3.0 million, or 1.1% of net sales, during fiscal 1998.
The increase in pre-opening costs in fiscal 1999 reflected the opening of 84
stores, as compared to 54 stores during fiscal 1998, partially offset by the
timing of expenses incurred during fiscal 1998 for approximately 26 stores which
were opened during the first quarter of fiscal 1999.

Depreciation and amortization amounted to $13.8 million, or 3.3% of net
sales, during fiscal 1999 as compared to $8.6 million, or 3.0% of net sales,
during fiscal 1998. The increase in depreciation and amortization primarily was
a result of increases in our store base, accelerated depreciation taken in
conjunction with store re-fixturings and renovations and the commencement of
depreciation for our new distribution center and corporate headquarters facility
in the third quarter of fiscal 1999. These increases, as a percentage of net
sales, were partially offset by the leveraging of depreciation and amortization
expense over a higher sales base.

Our provision for income taxes during fiscal 1999 was $22.4 million, as
compared to a provision for income taxes of $14.4 million during fiscal 1998.
The increase in our provision for income taxes during fiscal 1999 is due to our
increased profitability. Our effective tax rate for fiscal 1999 was 39.0% as
compared to an effective tax rate of 41.0% for fiscal 1998. The decrease in our
effective tax rate in fiscal 1999 is attributable to our Hong Kong subsidiary
and other state tax savings. During fiscal 1999, we utilized the remaining $1.6
million of our NOLs. We paid for the remainder of our fiscal 1999 tax provision
in cash. During fiscal 1998, the majority of our tax provision was not paid in
cash due to utilization of our NOLs.

Fiscal 1999 net income increased to $35.0 million from $20.7 million in
fiscal 1998.

Liquidity and Capital Resources

Debt Service/Liquidity

During fiscal 2000, our primary uses of cash were financing new store
openings and providing for working capital, which primarily represented the
purchase of inventory. Our working capital needs follow a seasonal pattern,
peaking during the second and third quarters when inventory is purchased for the
back-to-school and holiday merchandise lines. During fiscal 2000, we also
utilized cash to equip and furnish our new West Coast distribution center. We
were able to meet our cash needs principally by using cash flow from operations
and borrowings under our working capital facility. As of February 3, 2001, we
had no long-term debt obligations.

We currently have a working capital facility that provides for borrowings
up to $75 million (including a sublimit for letters of credit of $60 million).
Foothill Capital Corporation acts as our agent bank for a syndicated group of
lenders on this facility. This working capital facility also contains provisions
to increase borrowings up to $100 million (including a sublimit for letters of
credit of $80 million), subject to sufficient collateralization and the
syndication of the incremental line of borrowing. The amount that can be
borrowed under our working capital facility depends upon our levels of inventory
and accounts receivable. Amounts outstanding under the facility bear interest at
a floating rate equal to the prime rate or, at our option, a LIBOR Rate plus a
pre-determined spread. The LIBOR spread is 1.25% to 2.50%, depending upon our
financial performance from time to time. Borrowings under the facility mature in
July 2003 and provide for one year automatic renewal options. The working
capital facility contains certain financial covenants including among others,
the maintenance of minimum levels of earnings and current ratios and imposes
certain limitations on our annual capital expenditures, as well as the
prohibition on the payment of dividends. Credit extended under the working
capital facility is secured by a first priority interest in our present and
future assets, as well as the assets of our subsidiaries. We were in compliance
with all of the financial covenants under our working capital facility as of
February 3, 2001.

As of February 3, 2001 and January 29, 2000, there were $3.3 million and
$6.5 million in borrowings under our working capital facility, respectively. In
addition, as of February 3, 2001 and January 29, 2000, we had outstanding $13.8
million and $16.0 million, respectively, in letters of credit under our working
capital facility. Availability under the working capital facility as of February
3, 2001 and January 29, 2000 was $47.5 million and $21.4 million, respectively.
The interest rates charged under the working capital facility were 8.50% per
annum as of February 3, 2001 and January 29, 2000.

Cash Flows/Capital Expenditures

Cash flows provided by operating activities were $59.7 million, $34.7
million and $35.0 million in fiscal 2000, fiscal 1999 and fiscal 1998,
respectively. In fiscal 2000, cash flows from operating activities increased as
a result of an increase in operating earnings and increases in current
liabilities, partially offset by increased inventory to support our new store
growth. In fiscal 1999, cash flows from operating activities decreased as a
result of cash payment of our tax liabilities, increased inventory to support
our new store growth and earlier receipt of spring 2000 merchandise due to Year
2000 concerns, partially offset by increased operational earnings and increases
in our current liabilities.

Cash flows used in investing activities were $53.1 million, $58.2 million
and $19.8 million in fiscal 2000, fiscal 1999 and fiscal 1998, respectively.
Cash flows used in investing activities relate primarily to store openings and
remodelings. In fiscal 2000, fiscal 1999 and fiscal 1998, we opened 108, 84 and
54 stores while remodeling 14, 11 and 3 stores, respectively. During fiscal
2000, cash flows used in investing activities represented capital expenditures
of approximately $44 million for store openings and remodelings and
approximately $5 million to equip and furnish our new West Coast distribution
center. The remainder of fiscal 2000 capital expenditures were used for other
capital projects. During fiscal 1999, cash flows used in investing activities
represented capital expenditures of approximately $36 million for store
openings, remodelings and re-fixturings and approximately $13 million to
renovate and furnish our Secaucus distribution center and corporate headquarters
facility. The remainder of fiscal 1999 capital expenditures were used on our new
warehouse management system, our new point-of-sale ("POS") system and other
capital projects.

Cash flows used by financing activities were $0.7 million in fiscal 2000.
During fiscal 1999 and fiscal 1998, cash flows provided by financing activities
were $9.3 million and $0.4 million, respectively. In fiscal 2000, cash flows
used in financing activities reflected the net repayment of borrowings under our
working capital facility offset partially by funds received from the exercise of
employee stock options and employee stock purchases. In fiscal 1999, cash flows
provided by financing activities reflected net borrowings under our working
capital facility and funds received from the exercise of employee stock options
and employee stock purchases.

In a typical new store, capital expenditures (net of landlord
contribution), initial inventory (net of merchandise payables) and pre-opening
costs approximate $0.4 million. We anticipate that total capital expenditures
will approximate $60 million in fiscal 2001. These expenditures will relate
primarily to the opening of approximately 120 stores, store remodelings, the
completion of our new West Coast distribution center and auxillary Secaucus
facility, hardware and software to support our MIS initiatives, ongoing store
maintenance programs and ongoing administrative office and warehouse equipment
needs. We plan to fund these capital expenditures primarily with cash flow from
operations.

We believe that cash generated from operations and funds available under
our working capital facility will be sufficient to fund our capital and other
cash flow requirements for at least the next 12 months. In addition, as we
continue our store expansion program we will consider additional sources of
financing to fund our long-term growth.

Our ability to meet our capital requirements will depend on our ability to
generate cash from operations and successfully implement our store expansion
plans.

Quarterly Results and Seasonality

Our quarterly results of operations have fluctuated and are expected to
continue to fluctuate materially depending on a variety of factors, including
the timing of new store openings and related pre-opening and other startup
costs, net sales contributed by new stores, increases or decreases in comparable
store sales, weather conditions, shifts in timing of certain holidays, changes
in our merchandise mix and overall economic conditions.

Our business is also subject to seasonal influences, with heavier
concentrations of sales during the back-to-school and holiday seasons. As is the
case with many retailers of apparel and related merchandise, we typically
experience lower net sales and net income during the first two fiscal quarters,
and net sales and net income are lower during the second fiscal quarter than
during the first fiscal quarter. Our first quarter results are heavily dependent
upon sales during the period leading up to the Easter holiday. Our third quarter
results are heavily dependent upon back-to-school sales and our fourth quarter
results are heavily dependent upon sales during the holiday season. We have
experienced second quarter losses in the past and expect to experience a second
quarter loss in fiscal 2001. Because of these fluctuations in net sales and net
income (loss), the results of operations of any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal year or any
future quarter.

The following table sets forth certain statement of operations data and
operating data for each of our last eight fiscal quarters. The quarterly
statement of operations data and selected operating data set forth below were
derived from our unaudited financial statements and reflect, in our opinion, all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the results of operations for these fiscal quarters.

Fiscal 2000
----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(in thousands, except for store data)

Net sales ......................... $130,181 $107,764 $165,885 $183,555
Operating income .................. 15,528 2,938 28,054 24,794
Comparable store sales increase ... 5% 7% 5% 1%
Stores open at end of period ...... 335 371 392 400

Fiscal 1999
----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(in thousands, except for store data)

Net sales ......................... $ 92,621 $ 73,920 $119,442 $135,513
Operating income .................. 12,232 2,284 21,713 21,608
Comparable store sales increase ... 32% 19% 15% 5%
Stores open at end of period ...... 239 261 282 293

ITEM 7A. -QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 14.

ITEM 9. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None.

PART III

ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table lists certain information about the current executive
officers and directors of The Children's Place:

NAME AGE POSITION
- ---- --- --------
Ezra Dabah........... 47 Chairman of the Board of Directors and Chief
Executive Officer
Mario A. Ciampi...... 40 Senior Vice President, Store Development and
Logistics
Seth L. Udasin....... 44 Vice President, Finance, Chief Financial Officer
and Treasurer
Steven Balasiano..... 38 Vice President, General Counsel and Corporate
Secretary
Jodi Barone.......... 44 Vice President, Marketing
Edward DeMartino..... 49 Vice President, Management Information Systems
Nina L. Miner........ 51 Vice President, Design and Trend Development
Mark L. Rose......... 35 Vice President, Manufacturing
Susan F. Schiller.... 40 Vice President, Store Operations
Diane M. Timbanard... 55 Vice President, General Merchandise Manager
Stanley Silverstein.. 76 Director
John F. Megrue....... 42 Director
David J. Oddi........ 31 Director
Sally Frame Kasaks... 56 Director

Ezra Dabah has been Chairman of the Board and a Director since 1989 and
Chief Executive Officer since 1991. Mr. Dabah has more than 25 years of apparel
merchandising and buying experience. From 1972 to 1993, Mr. Dabah was a director
and an executive officer of The Gitano Group, Inc. and its affiliates
(collectively, "Gitano"), a company of which Mr. Dabah and certain members of
his family were principal stockholders and which became a public company in
1988. From 1973 until 1983, Mr. Dabah was in charge of product design,
merchandising and procurement for Gitano. In 1983, Mr. Dabah founded and became
President of a children's apparel importing and manufacturing division for
Gitano which later became an incorporated subsidiary, Eva Joia Incorporated,
("E.J. Gitano"). Mr. Dabah is Stanley Silverstein's son-in-law and Nina Miner's
brother-in-law.

Mario A. Ciampi has been Senior Vice President, Store Development and
Logistics since July 2000 and prior to that served as Vice President, Store
Development since joining The Children's Place in June 1996. Prior to joining
The Children's Place, Mr. Ciampi was a principal of a private consulting firm,
specializing in retail and real estate restructuring, from 1991 to 1996, in
which capacity he was retained as an outside consultant on the Company's real
estate activities since 1991. Since February 2001, Mr. Ciampi also sits on the
Board of Directors for the Rag Shops, Inc.

Seth L. Udasin has been Vice President, Finance since 1994 and Chief
Financial Officer and Treasurer since 1996. Since joining The Children's Place
in 1983, Mr. Udasin has held various other positions, including Controller from
1988 to 1994.

Steven Balasiano has been Vice President and General Counsel since joining
The Children's Place in December 1995 and Corporate Secretary since January
1996. Prior to joining The Children's Place, Mr. Balasiano practiced law in the
New York offices of the national law firms of Stroock & Stroock & Lavan LLP from
1992 to 1995 and Kelley Drye & Warren from 1987 to 1992.

Jodi Barone has been Vice President, Marketing since October 1999 and
prior to that served as Director, Marketing since 1993. Since joining The
Children's Place in 1992, Ms. Barone has also held the position of Marketing
Manager.

Edward DeMartino has been Vice President, Management Information Systems
since 1991. Mr. DeMartino began his career with The Children's Place in 1981 as
a System Development Project Manager and was subsequently promoted to Director
MIS in 1989.

Nina L. Miner has been Vice President, Design and Trend Development since
January 2001, prior to which time she was Vice President, Trend Development
since August 1998. Prior to August 1998, Ms. Miner was Vice President, Design
and Product Development since joining The Children's Place in 1990. Before
joining The Children's Place, Ms. Miner held various management positions at
E.J. Gitano. Ms. Miner is Stanley Silverstein's daughter and Ezra Dabah's
sister-in-law.

Mark L. Rose has been Vice President, Manufacturing since 1992. Mr. Rose
joined The Children's Place in 1990 and was promoted to Senior Product Buyer
that year. Prior to joining The Children's Place, Mr. Rose held various
positions at Macy's.

Susan F. Schiller has been Vice President, Store Operations since 1994.
Ms. Schiller began her career with The Children's Place as an Assistant Store
Manager in 1985 and subsequently served in various positions, including Director
of Store Communications from 1991 to 1993 and Director of Store Operations from
1993 to 1994.

Diane M. Timbanard has been Vice President, General Merchandise Manager
since January 2001, prior to which time she was Vice President, Design and
Product Development since August 1998. Prior to August 1998, Ms. Timbanard
served as Vice President, Merchandising Manager since joining The Children's
Place in 1991. Prior to joining The Children's Place, Ms. Timbanard held various
merchandising and management positions, including Vice President of
Merchandising for Macy's.

Stanley Silverstein has been a Director of the Company since July 1996.
Mr. Silverstein also serves as Chairman of the Board of Directors of Nina
Footwear, a company he founded with his brother in 1952. Mr. Silverstein is the
father of Nina Miner, Vice President, Design and Trend Development, and Ezra
Dabah's father-in-law.

John F. Megrue has been a Director of The Children's Place since July
1996. Since 1992, Mr. Megrue has been a Partner of Saunders Karp & Megrue
Partners, L.L.C. (or its predecessor), which serves as the general partner of
SKM Partners, L.P., which serves as the general partner of the SK Funds and SKM.
From 1989 to 1992, Mr. Megrue was a Vice President and Principal at Patricof &
Co. and prior thereto he served as a Vice President at C.M. Diker Associates.
Mr. Megrue also serves as Vice Chairman of the Board and Director of Dollar Tree
Stores, Inc. and Chairman of the Board and Director of Hibbett Sporting Goods,
Inc.

David J. Oddi has been a Director of The Children's Place since April
1997. Mr. Oddi joined SKM as an Associate in 1994 and is currently a Partner of
Saunders Karp & Megrue Partners, L.L.C., which serves as the general partner of
SKM Partners, L.P., which serves as the general partner of the SK Funds and SKM.
Prior to joining SKM, Mr. Oddi served in the Leveraged Finance Group at Salomon
Brothers Inc.

Sally Frame Kasaks has been a Director of The Children's Place since May
2000. Since 1997, Ms. Kasaks has served as a business consultant to a number of
retailers through ISTA Incorporated. Previously, she held the following
executive positions at major specialty retailers: Chairman and Chief Executive
Officer of Ann Taylor Stores, Inc., from February 1992 to August 1996; President
and Chief Executive Officer of Abercrombie and Fitch, a division of The Limited,
Inc., from February 1989 to February 1992; and Chairman and Chief Executive
Officer of The Talbots, Inc., a division of General Mills Co., from November
1985 to September 1988. Ms. Kasaks also sits on the Board of Directors of the
following retailers: Pacific Sunwear of California, Inc.; The White House, Inc.;
Tuesday Morning, Inc.; and Cortefeil, S.A.

Our Board of Directors is comprised of three classes, each of which serves
for three years, with one class being elected each year. The terms of Mr. Oddi
and Mr. Silverstein will expire at the 2001 Annual Meeting of Stockholders. The
terms of Mr. Dabah and Mr. Megrue will expire at the 2002 Annual Meeting of
Stockholders. The term of Ms. Frame Kasaks will expire at the 2003 Annual
Meeting of Stockholders.

For a description of our stockholders agreement providing for certain
voting arrangements relating to the selection of directors, see Item 12 -
Security Ownership of Certain Beneficial Owners and Management.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, and persons who own
more than 10% of the Company's common stock to file reports of ownership and
changes in ownership with the Securities Exchange Commission and Nasdaq Stock
Market. Officers, directors and greater than ten-percent stockholders are
required by Securities and Exchange Commission regulations to furnish the
Company with copies of all such reports they file.

Based solely on a review of the copies of such reports furnished to the
Company, or written representations that no Form 5 was required, the Company
believes that all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were complied with
through April 1, 2001.

ITEM 11. - EXECUTIVE COMPENSATION

Summary of Executive Compensation

The following table summarizes the compensation for fiscal 2000, fiscal
1999 and fiscal 1998 for the Company's Chief Executive Officer and each of its
most highly compensated executive officers:

SUMMARY COMPENSATION TABLE

- ------------------------------------------------------------------------------------------------------------------------------------
Annual Long-Term All Other
Compensation (1) Compensation Compensation
----------------------- --------------------- ---------------
Name and Principal Position Fiscal Salary Bonus Securities Underlying
Year ($) ($) Options (#) ($)
- ------------------------------------------------------------------------------------------------------------------------------------

Ezra Dabah ................................... 2000 $645,371 $312,500 0 $ 24,250(2)
Chairman of the Board and Chief ............ 1999 556,721 287,500 0 24,000(2)
Executive Officer ........................ 1998 538,850 551,500 0 24,000(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Clark Hinkley(3) ............................. 2000 446,346 136,500 0 469,250(5)
Executive Vice President, Merchandising .... 1999 418,833 129,000 25,000(4) 4,000(6)
1998 406,233 240,000 200,000(4) 0
- ----------------------------------------------------------------------------------------------------------------------------------
Diane M. Timbanard(7) ........................ 2000 300,765 73,750 10,000(8) 4,250(6)
Vice President, General Merchandise ........ 1999 270,379 70,000 12,000(9) 4,000(6)
Manager .................................. 1998 253,075 131,250 25,000(10) 4,000(6)
- ----------------------------------------------------------------------------------------------------------------------------------
Michael J. Zahn(11) .......................... 2000 273,077 68,750 12,000(12) 100,000(13)
Vice President, General Merchandise ........ 1999 263,141 41,667 15,000(12) 0
Manager .................................. 1998 84,615 41,667 50,000(12) 0
- ----------------------------------------------------------------------------------------------------------------------------------
Mario A. Ciampi(14) .......................... 2000 272,783 90,000 40,000(15) 4,250(6)
Senior Vice President, Store Development ... 1999 203,463 105,000 20,000(9) 4,000(6)
Logistics ................................ 1998 183,077 96,250 15,000(16) 4,000(6)
- ----------------------------------------------------------------------------------------------------------------------------------
Nina L. Miner(17) ............................ 2000 252,761 62,816 12,000(8) 3,662(6)
Vice President, Design and Trend ........... 1999 219,029 117,832 12,000(9) 4,000(6)
Development .................................. 1998 210,751 112,476 10,000(16) 3,929(6)
- ----------------------------------------------------------------------------------------------------------------------------------
Mark L. Rose ................................. 2000 242,011 58,250 22,000(18) 4,250(6)
Vice President, Manufacturing .............. 1999 208,111 53,750 12,000(9) 4,000(6)
1998 195,768 101,250 10,000(16) 4,000(6)
- ----------------------------------------------------------------------------------------------------------------------------------

(1) For fiscal 2000 and fiscal 1999, bonuses were earned and paid in the
respective fiscal year. Fiscal 1998 includes bonuses earned in such fiscal
year, portions of which were paid in the following fiscal year. Other
annual compensation did not exceed $50,000 or 10% of the total salary and
bonus for any of the named executive officers.

(2) Reflects the value of (i) insurance premiums of $20,000 paid by the
Company with respect to life insurance for the benefit of Mr. Dabah, and
(ii) Company matching contributions of $4,250, $4,000 and $4,000,
respectively in fiscal 2000, fiscal 1999 and fiscal 1998 under The
Children's Place 401(k) Savings and Investment Plan.

(3) Mr. Hinkley resigned from The Company effective January 4, 2001. On
January 4, 2001, the Company and Mr. Hinkley entered into a severance
agreement and release memorializing Mr. Hinkley's resignation from the
Company. In accordance with the agreement, Mr. Hinkley is entitled to
receive (i) $465,000 less legally required payroll deductions and
deductions for health insurance in twelve monthly installments; and (ii)
health insurance coverage until December 31, 2001. Mr. Hinkley waived any
claim to unvested options and any other compensation or bonus. The
agreement also provided, among other things, that Mr. Hinkley would not
engage or be engaged in a competing business for a period of two years
following termination of employment.

(4) In accordance with Mr. Hinkley's severance agreement, Mr. Hinkley waived
any claim to 20,000 options that were scheduled to vest from his 1999
grant and 80,000 options that were scheduled to vest from his 1998 grant.

(5) Reflects the value of (i) $465,000 accrued by the Company in accordance
with Mr. Hinkley's severance agreement and release and (ii) Company
matching contributions of $4,250 under The Children's Place 401(k) Savings
and Investment Plan.

(6) Amounts shown consist of the Company's matching contributions under The
Children's Place 401(k) Savings and Investment Plan.

(7) On or about April 15, 2000, the Company made a $400,000 loan to Ms.
Timbanard. The loan bore interest at the prime rate quoted by Chase
Manhattan Bank and was secured by Ms. Timbanard's principal residence.
This loan and accrued interest was repaid by Ms. Timbanard in September,
2000.

(8) Each of the options granted becomes exercisable at the rate of 20% on or
after September 18, 2001 and 20% on or after the first, second, third and
fourth anniversaries of September 18, 2001.

(9) Each of the options granted becomes exercisable at the rate of 20% on or
after September 18, 2000 and 20% on or after the first, second, third and
fourth anniversaries of September 18, 2000.

(10) Ms. Timbanard's 1998 option grant became exercisable at the rate of 15,000
shares on or after November 1, 1998 with an additional 5,000 shares
exercisable on or after June 28, 1999 and the remaining 5,000 shares
exercisable on or after June 28, 2000.

(11) Mr. Zahn resigned from the Company effective January 4, 2001. On January
4, 2001, the Company and Mr. Zahn entered into a severance agreement and
release memorializing Mr. Zahn's resignation from the Company. In
accordance with the agreement, Mr. Zahn is entitled to receive (i)
$100,000 less legally required payroll deductions and deductions for
health insurance in four monthly installments and (ii) health insurance
coverage until April 30, 2001. Mr. Zahn waived any claim to unvested
options and any other compensation or bonus.

(12) In accordance with Mr. Zahn's severance agreement, Mr. Zahn forfeited any
claim to the 12,000 options from his 2000 grant, 12,000 options that were
scheduled to vest from his 1999 grant and 30,000 options that were
scheduled to vest from his 1998 grant.

(13) Reflects the value of $100,000 accrued by the Company in accordance with
Mr. Zahn's severance agreement and release.

(14) On or about April 15, 2000, the Company made a $250,000 loan to Mr.
Ciampi. The loan bore interest at the prime rate quoted by Chase Manhattan
Bank and was secured by Mr. Ciampi's principal residence. This loan and
accrued interest was repaid by Mr. Ciampi in September, 2000.

(15) Of the options granted in fiscal 2000, (i) 25,000 options granted become
exercisable at the rate of 20% on or after July 31, 2001 and 20% on or
after the first, second, third and fourth anniversaries of July 31, 2001,
and (ii) 15,000 options granted become exercisable at the rate of 20% on
or after September 18, 2001 and 20% on or after the first, second, third
and fourth anniversaries of September 18, 2001.

(16) Each of the options granted becomes exercisable at the rate of 20% on or
after September 18, 1999 and 20% on or after the first, second, third and
fourth anniversaries of September 18, 1999.

(17) On or about April 15, 2000, the Company made a $500,000 loan to Ms. Miner.
This loan matures on April 15, 2002, bears interest at the prime rate
quoted by Chase Manhattan Bank and is secured by Ms. Miner's principal
residence. As of February 3, 2001, the principle balance and accrued
interest remaining on this loan was approximately $503,000.

(18) Of the options granted in fiscal 2000, (i) 4,000 options granted become
exercisable at the rate of 20% on or after September 18, 2000 and 20% on
or after the first, second, third and fourth anniversaries of September
18, 2000, and (ii) 18,000 options granted become exercisable at the rate
of 20% on or after September 18, 2001 and 20% on or after the first,
second, third and fourth anniversaries of September 18, 2001.

Stock Options

The following table sets forth certain information concerning options
granted during fiscal 2000 to Diane Timbanard, Mario Ciampi, Nina Miner and Mark
Rose. In conjunction with his severance agreement, Michael Zahn waived any claim
to unvested options granted in fiscal 2000. No options were granted during
fiscal 2000 to the other executive officers named in the Summary Compensation
Table.

OPTIONS GRANTED IN LAST FISCAL YEAR

- ------------------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Number of Price Appreciation for
Securities Option Term (5)
Underlying % of Total Exercise Expiration -----------------------
Name Options Granted Granted in Fiscal 2000 Price (4) Date 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------------

Diane M. Timbanard ...... 10,000(1) 1.81% $ 19.03 11/07/10 $119,699 $303,229
Mario A. Ciampi ......... 25,000(2) 4.53% 20.313 7/10/10 319,361 809,323
Mario A. Ciampi ......... 15,000(1) 2.72% 19.03 11/07/10 179,549 454,982
Nina L. Miner ........... 12,000(1) 2.17% 19.03 11/07/10 143,639 363,986
Mark L. Rose ............ 4,000(3) 0.72% 22.094 4/27/10 55,579 140,847
Mark L. Rose ............ 18,000(1) 3.26% 19.03 11/07/10 215,458 545,979
- ------------------------------------------------------------------------------------------------------------------------------------

(1) This option grant becomes exercisable at the rate of 20% on or after
September 18, 2001 and 20% on or after each of the first, second, third
and fourth anniversaries of September 18, 2001.

(2) This option grant becomes exercisable at the rate of 20% on or after July
31, 2001 and 20% on or after each of the first, second, third and fourth
anniversaries of July 31, 2001.

(3) This option becomes exercisable at the rate of 20% on or after September
18, 2000 and 20% on or after each of the first, second, third and fourth
anniversaries of September 18, 2000.

(4) The exercise price was fixed at the date of the grant and was equal to the
fair market value per share of Common Stock on such date in accordance
with the 1997 Stock Option Plan.

(5) In accordance with the rules of the Securities and Exchange Commission,
the amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10% compounded annually from the date the respective options were
granted to their expiration date and do not reflect the Company's
estimates or projections of future Common Stock prices. The gains shown
are net of the option exercise price, but do not include deductions for
taxes or other expenses associated with the exercise. Actual gains, if
any, on stock option exercises will depend on the future performance of
the Common Stock, the option holders' continued employment though the
option period, and the date on which the options are exercised.

The following table sets forth certain information with respect to stock
options exercised by the named executive officers during fiscal 2000, including
the aggregate value of gains on the date of the exercise. In addition, the table
sets forth the number of shares covered by stock options as of fiscal year end,
and the value of "in-the-money" stock options, which represents the positive
spread between the exercise price of a stock option and the year-end market
price of the shares subject to such option at fiscal year end. None of the named
executives hold stock appreciation rights (SARs).

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

- ------------------------------------------------------------------------------------------------------------------------------------
Value of Unexercised
Shares Number of Securities In-the-Money Options
Acquired Underlying Unexercised at 2/03/01 (1)
on Value Options at 2/03/01 -----------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------

Ezra Dabah ..................... 0 $ 0 79,728 19,932 $ 750,480 $187,620
- ------------------------------------------------------------------------------------------------------------------------------------
Clark Hinkley .................. 83,496 937,925 14,500 0 210,632 0
- ------------------------------------------------------------------------------------------------------------------------------------
Diane M. Timbanard ............. 44,920 996,939 2,400 19,600 21,301 143,035
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Zahn ................ 8,000 122,750 7,000 0 26,626 0
- ------------------------------------------------------------------------------------------------------------------------------------
Mario A. Ciampi ................ 39,888 528,614 15,000 70,000 179,945 530,898
- ------------------------------------------------------------------------------------------------------------------------------------
Nina L. Miner .................. 0 0 36,280 27,600 742,977 244,979
- ------------------------------------------------------------------------------------------------------------------------------------
Mark L. Rose ................... 10,000 224,793 86,600 36,800 1,841,327 288,378
- ------------------------------------------------------------------------------------------------------------------------------------

(1) The market value of the Company's stock at the close of business on
February 2, 2001 was $24.813.

Employment Agreement - Ezra Dabah

Mr. Dabah's employment agreement (the "Dabah Agreement") provides that he
will serve as Chairman and Chief Executive Officer of the Company from June 27,
1996 for successive three year periods, subject to termination in accordance
with the termination provisions of the Dabah Agreement. Mr. Dabah's current
salary is $680,000, subject to annual review. Mr. Dabah is also entitled to
receive a semi-annual bonus in an amount equal to the product of (x) 50% of his
semi-annual base salary multiplied by (y) a pre-determined bonus percentage
fixed by the Board of Directors for any stated six-month period of not less than
20% nor more than 200%, based on the Company's performance during such six-month
period. The Dabah Agreement also provides for certain insurance and other
benefits to be maintained and paid by the Company.

The Dabah Agreement provides that if Mr. Dabah's employment is terminated
by the Company without cause or for disability, or by Mr. Dabah for good reason
or following a change in control (as each such term is defined in the Dabah
Agreement), the Company will be required to pay Mr. Dabah three times his base
salary then in effect, which amount will be payable within 30 days following his
termination. Mr. Dabah also will be entitled to receive any accrued but unpaid
bonus compensation and all outstanding stock options under the Company's stock
option plans will immediately vest. If Mr. Dabah's employment is terminated for
any of the above reasons, the Company also will be required, with certain
exceptions, to continue to maintain life insurance, medical benefits and other
benefits for Mr. Dabah for three years. The Dabah Agreement also provides that
Mr. Dabah will not, with certain exceptions, engage or be engaged in a competing
business for a period of five years following termination of his employment.

Other Employment Agreements

The Company has also entered into employment agreements with certain of
its other executive officers which provide for the payment of severance equal to
the officer's salary for a period of six to nine months following any
termination without cause.

Report of Compensation Committee on Executive Compensation

Compensation Policy

The Company's employee compensation policy in general is to offer a
package including a competitive salary, an incentive bonus based upon
performance goals, competitive benefits, including a participatory 401(k)
Savings and Investment Plan, and an efficient workplace environment. The Company
also encourages broad-based employee ownership of the Company's Common Stock by
granting stock options to employees at many levels within the Company and
through the Employee Stock Purchase Plan.

The Compensation Committee of the Board of Directors reviews and approves
individual officer salaries, bonus plan and financial performance goals, and
stock option grants. The Compensation Committee also reviews guidelines for
compensation, bonus, and stock option grants for non-officer employees.

Key personnel of the Company are paid salaries in line with their
responsibilities. These salaries are structured to be competitive with salaries
paid by a peer group consisting of similar companies in the retail apparel
industry. Executives participate in the Company's Management Incentive Program,
which offers cash incentives based on the Company's performance. Under the
Company's 1996 and 1997 Stock Option Plans, and at the discretion of the Board
of Directors, the Company also grants executive officers stock options. The
Company's performance and return on equity are of vital importance to the
executive officers due to these equity holdings and cash incentives. Salaries
for executive officers are adjusted based on individual job performance and the
Company's performance and, in certain cases, changes in the individual's
responsibilities.

Compensation of Chief Executive Officer

The Compensation Committee reviews and approves the compensation of Ezra
Dabah, the Company's Chief Executive Officer. Pursuant to Mr. Dabah's Employment
Agreement and based on the Company's performance in the preceding fiscal year,
Mr. Dabah's base salary for the fiscal year ended February 3, 2001 was $645,371,
an increase of 15.9% from the prior year. In addition, Mr. Dabah is entitled to
receive a bonus based on the Company's earnings. Mr. Dabah's performance bonus
for the fiscal year ended February 3, 2001 was $312,500.

Deductibility of Compensation

Section 162(m) of the Internal Revenue Code imposes a limitation on the
deductibility of nonperformance-based compensation in excess of $1 million paid
to executive officers. The Compensation Committee believes that the Company will
be able to continue to manage its executive compensation program to preserve
federal income tax deductions.

Submitted by the Compensation Committee
Ezra Dabah John F. Megrue Sally Frame Kasaks

Compensation Committee Interlocks and Insider Participation

Members of the Compensation Committee for the fiscal year ended February
3, 2001 were Mr. Dabah, Mr. Megrue and Ms. Frame Kasaks. Mr. Dabah is the Chief
Executive Officer and Chairman of the Board of Directors of the Company, and has
entered into certain related transactions with the Company as disclosed below.
Mr. Megrue is a general partner of SKM Partners, L.P., which serves as the
general partner of SKM, which has entered into an advisory agreement with the
Company, as disclosed below.

Performance Graph

The following graph compares the cumulative stockholder return on the
Company's common stock with the return on the Total Return Index for the Nasdaq
Stock Market (US) and the Nasdaq Retail Trade Stocks. The graph assumes that
$100 was invested on the date of the Company's initial public offering,
September 18, 1997.

[GRAPHIC OMITTED]

ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides information at April 1, 2001, with respect to
ownership of Common Stock by (i) each beneficial owner of five percent or more
of the Company's Common Stock known to the Company, (ii) each director of the
Company, (iii) each of the Company's five most highly compensated executive
officers in fiscal 2000 who are serving as executive officers as of February 3,
2001 and (iv) all directors and executive officers as a group. For the purpose
of computing the percentage of the shares of Common Stock owned by each person
or group listed in this table, any shares not outstanding which are subject to
options or warrants exercisable within 60 days after April 1, 2001 have been
deemed to be outstanding and owned by such person or group, but have not been
deemed to be outstanding for the purpose of computing the percentage of the
shares of Common Stock owned by any other person. Except as indicated in the
footnotes to this table, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.

Shares
Beneficially Percent
Name and Address of Beneficial Owner Owned of Class
- ------------------------------------ ------------ --------
The SK Equity Fund, L.P.(1)(2) .................... 6,704,053 25.6%
SK Investment Fund, L.P.(1)(2) .................... 6,704,053 25.6%
John F. Megrue(1)(2)(3) ........................... 6,721,053 25.7%
Allan W. Karp(1)(2)(4) ............................ 6,707,653 25.6%
Thomas A. Saunders III(1)(2) ...................... 6,704,053 25.6%
David J. Oddi(1)(5) ............................... 5,500 *
Ezra Dabah(6)(7) .................................. 7,432,358 28.3%
Stanley Silverstein(6)(8) ......................... 5,053,880 19.3%
Sally Frame Kasaks(6)(9) .......................... 0 0%
Diane M. Timbanard(6)(10) ......................... 62,160 *
Mario Ciampi(6)(11) ............................... 100,640 *
Nina Miner(6)(12) ................................. 232,300 *
Mark Rose(6)(13) .................................. 104,600 *
All Directors and Executive Officers as a Group
(14 persons)(14) .................................. 15,839,409 59.6%

- ----------
* Less than 1%

(1) The address of this person is Two Greenwich Plaza, Suite 100, Greenwich CT
06830.

(2) Includes (i) 6,608,268 shares owned by The SK Equity Fund, L.P. and (ii)
95,785 shares owned by SK Investment Fund, L.P. SKM Partners, L.P. is the
general partner of each of the SK Funds. Messrs. Karp, Megrue and Saunders
are partners of Saunders Karp & Megrue, L.L.C., which is the general
partner of SKM Partners, L.P., and therefore may be deemed to have
beneficial ownership of the shares shown as being owned by the SK Funds.
Messrs. Karp, Megrue and Saunders disclaim beneficial ownership of such
shares, except to the extent that any of them has a limited partnership
interest in SK Investment Fund, L.P.

(3) Includes 17,000 shares purchased by Mr. Megrue.

(4) Includes 2,000 shares purchased by Mr. Karp and 1,600 shares bought for
the benefit of Mr. Karp's children and as to which Mr. Karp disclaims
beneficial ownership.

(5) Includes 5,500 shares purchased by Mr. Oddi and does not include shares
owned by The SK Equity Fund, L.P. or SK Investment Fund, L.P. Mr. Oddi is
a partner of Saunders Karp & Megrue, L.L.C., which is the general partner
of SKM Partners L.P., which serves as the general partner of the SKM Funds
and SKM and has a limited partnership interest in SK Investment Fund, L.P.

(6) The address of this person is c/o The Children's Place Retail Stores,
Inc., 915 Secaucus Road, Secaucus, New Jersey 07094.

(7) Includes (i) 4,359,880 shares held by trusts or custodial accounts for the
benefit of Mr. Dabah's children and certain other family members, of which
Mr. Dabah or his wife is a trustee or custodian and as to which Mr. Dabah
or his wife, as the case may be, has voting control, and as to which
shares Mr. Dabah disclaims beneficial ownership, (ii) 2,841,850 shares
held by Mr. Dabah, (iii) 37,600 shares held by Mr. Dabah's wife, (iv)
112,500 shares held in trust for Mrs. Dabah, (v) 800 shares held by Mr.
Dabah's daughter, and (vi) 79,728 shares subject to options exercisable
within 60 days after April 1, 2001. Does not include (i) 551,000

shares beneficially owned by Stanley Silverstein, Mr. Dabah's
father-in-law, (ii) 7,000 shares held in Mr. Silverstein's profit sharing
account, (iii) 210,000 shares beneficially owned by Raine Silverstein, Mr.
Dabah's mother-in-law (iv) 19,932 shares subject to options not yet vested
held by Mr. Dabah, (v) 79,520 shares owned by Ms. Miner, Mr. Dabah's
sister-in-law, (vi) 112,500 shares held in trust for Ms. Miner, (vii)
4,000 shares held by Ms. Miner's husband, and (viii) 36,280 shares
issuable to Ms. Miner upon exercise of outstanding stock options
exercisable within 60 days of April 1, 2001.

(8) Includes (i) 4,285,880 shares held by trusts for the benefit of Mr.
Silverstein's children and grandchildren, of which Mr. Silverstein's wife
is a trustee, and as to which Mrs. Silverstein has voting control, and as
to which shares Mr. Silverstein disclaims beneficial ownership, (ii)
551,000 shares held by Mr. Silverstein, (iii) 7,000 shares held in Mr.
Silverstein's profit sharing account and (iv) 210,000 shares held by Mr.
Silverstein's wife. Does not include (i) 2,841,850 shares beneficially
owned by Ezra Dabah, Mr. Silverstein's son-in-law, (ii) 37,600 shares
beneficially owned by Mrs. Dabah, Mr. Silverstein's daughter, (iii)
112,500 shares held in trust for Mrs. Dabah, (iv) 800 shares owned by Mr.
Silverstein's granddaughter (v) 79,728 shares issuable to Mr. Dabah upon
exercise of outstanding stock options exercisable within 60 days of April
1, 2001, (vi) 79,520 shares owned by Ms. Miner, Mr. Silverstein's
daughter, (vii) 112,500 shares held in trust for Ms. Miner, (viii) 4,000
shares held by Ms. Miner's husband, and (ix) 36,280 shares issuable to Ms.
Miner upon exercise of outstanding stock options exercisable within 60
days of April 1, 2001.

(9) Does not include 15,000 shares subject to options not yet vested.

(10) Includes (i) 59,760 shares held by Ms. Timbanard and (ii) 2,400 shares
issuable upon exercise of outstanding stock options exercisable within 60
days of April 1, 2001. Does not include 19,600 shares subject to options
not yet vested.

(11) Includes (i) 85,640 shares held by Mr. Ciampi and (ii) 15,000 shares
issuable upon exercise of outstanding stock options exercisable within 60
days of April 1, 2001. Does not include 70,000 shares subject to options
not yet vested.

(12) Includes (i) 79,520 shares held by Ms. Miner, (ii) 112,500 shares held in
trust for Ms. Miner, (iii) 4,000 shares held by Ms. Miner's husband, as to
which Ms. Miner disclaims beneficial ownership and (iv) 36,280 shares
issuable upon exercise of outstanding stock options exercisable within 60
days of April 1, 2001. Does not include 27,600 shares subject to options
not yet vested.

(13) Includes (i) 18,000 shares held by Mr. Rose, (ii) 86,600 shares issuable
upon exercise of outstanding stock options exercisable within 60 days of
April 1, 2001. Does not include 36,800 shares subject to options not yet
vested.

(14) Reflects shares issuable upon exercise of stock options exercisable within
60 days of April 1, 2001.

As of April 1, 2001, Ezra Dabah and certain members of his family
beneficially own 8,428,658 shares of the Company's Common Stock, constituting
approximately 32.0% of the outstanding Common Stock. The SK Funds own 6,704,053
shares or approximately 25.6% of the outstanding Common Stock. Pursuant to the
Amended Stockholders Agreement described below, Ezra Dabah, the SK Funds and
certain other stockholders, who own in the aggregate a majority of the
outstanding Common Stock, have agreed to vote for the election of two nominees
of the SK Funds and three nominees of Ezra Dabah to the Company's Board of
Directors. As a result, the SK Funds and Ezra Dabah are able to control the
election of the Company's directors. In addition, if the SK Funds and Mr. Dabah
were to vote together, they would be able to determine the outcome of any matter
submitted to a vote of the Company's stockholders for approval.

Stockholders Agreement

The Children's Place and certain of its stockholders, who currently own in
the aggregate a majority of the Common Stock, are parties to a Stockholders
Agreement (the "Stockholders Agreement"). The Stockholders Agreement places
certain limitations upon the transfer in privately negotiated transactions of
shares of Common Stock beneficially owned by Ezra Dabah and the SK Funds. In
addition, the Stockholders Agreement provides that (i) so long as Ezra Dabah,
together with members of his family, beneficially owns shares representing at
least 25% of the shares of Common Stock owned by such parties on the date of the
Stockholders Agreement, the stockholders party to the Stockholders Agreement
will be obligated to vote all shares as to which they have voting rights in a
manner such that the Board will at all times include three directors nominated
by Ezra Dabah and (ii) so long as the SK Funds beneficially own shares
representing at least 25% of the shares of Common Stock owned by such parties on
the date of the Stockholders Agreement, the stockholders party to the
Stockholders Agreement will be obligated to vote all shares as to which they
have voting rights in a manner such that the Board will at all times include two
directors nominated by the SK Funds. Should the number of directors comprising
the Board of Directors be increased, nominees for the remaining director
positions will be designated by the Company's Board of Directors. Pursuant to
the Stockholders Agreement, Ezra Dabah and Stanley Silverstein were designated
as director nominees by Mr. Dabah and were elected to the Board, and John Megrue
and David Oddi were designated as director nominees by the SK Funds and were
elected to the Board.

The Stockholders Agreement provides that the Company will not, without the
affirmative vote of at least one director nominated by the SK Funds, engage in
specified types of transactions with certain of its affiliates (not including
the SK Funds), take action to amend its Bylaws or Certificate of Incorporation
or increase or decrease the size of the entire Board of Directors. The
Stockholders Agreement also provides that certain specified types of corporate
transactions and major corporate actions will require the approval of at least
two-thirds of the members of the Board of Directors.

Under the terms of the Stockholders Agreement, the rights of any party
thereunder will terminate at the time that such party's Common Stock constitutes
less than 25% of the shares of Common Stock owned by such party on the date of
the Stockholders Agreement. All the provisions of the Stockholders Agreement
will terminate when no party to the Stockholders Agreement beneficially owns
shares representing at least 25% of the outstanding Common Stock owned by such
party on the date of the Stockholders Agreement.

ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

SKM Financial Advisory Services

In 1996, the Company entered into a management agreement with SKM which
provides for the payment of an annual fee of $150,000, payable quarterly in
advance, in exchange for certain financial advisory services. This management
agreement remains in effect until SKM or any of its affiliates' total ownership
of the Company's Common Stock is less than 10% on a fully diluted basis.
Pursuant to the management agreement, the Company incurred fees and expenses of
approximately $150,000, $151,000 and $151,000 during fiscal 2000, fiscal 1999
and fiscal 1998, respectively.

Stockholders Agreement

For a description of our stockholders agreement, see Item 12 - Security
Ownership of Certain Beneficial Owners and Management.

Merchandise for Re-Sale

During fiscal 1998, the Company purchased approximately $290,000 in bath
products from HBA Technologies, LLC. Haim Dabah, Ezra Dabah's brother, is the
majority owner of HBA Technologies, LLC.

During fiscal 1999, the Company purchased approximately $565,000 in
footwear from Nina Footwear Corporation. Stanley Silverstein, a member of the
Company's Board of Directors and Ezra Dabah's father-in-law, owns Nina Footwear
Corporation with his brother.

Loans to Executive Officers

In addition to the loans made to Ms. Timbanard, Mr. Ciampi and Ms. Miner,
as described above, on or about April 15, 2000, the Company made loans to four
other officers in amounts ranging from $200,000 to $300,000. The aggregate
amount of these loans, including Ms. Timbanard, Mr. Ciampi and Ms. Miner totaled
$2.2 million. The loans matured on April 15, 2001 and bore interest at the prime
rate as quoted by Chase Manhattan Bank. The loans were secured by the principal
residences of these executive officers. As of February 3, 2001, approximately
$749,000 was outstanding on these loans, including accrued interest. In April
2001, the Company extended the term of one outstanding executive loan to April
15, 2002. As of April 30, 2001, this loan had a balance and accrued interest
outstanding totaling approximately $513,000.

PART IV

ITEM 14. - EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K

(a) (1) Financial Statements

The following documents are filed as part of this report:

Report of Independent Public Accountants
Consolidated Balance Sheets as of February 3, 2001 and January 29, 2000
Consolidated Statements of Income for each of the three fiscal years
ended February 3, 2001
Consolidated Statements of Changes in Stockholders' Equity for the
three fiscal years ended February 3, 2001
Consolidated Statements of Cash Flows for the three fiscal years
ended February 3, 2001
Notes to Consolidated Financial Statements

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED
FEBRUARY 3, 2001, JANUARY 29, 2000 AND JANUARY 30, 1999

THE CHILDREN'S PLACE RETAIL STORES, INC.

Page:
-----

Report of Independent Public Accountants .................................. 32

Consolidated Balance Sheets ............................................... 33

Consolidated Statements of Income ......................................... 34

Consolidated Statements of Changes in Stockholders' Equity ................ 35

Consolidated Statements of Cash Flows ..................................... 36

Notes to Consolidated Financial Statements ................................ 37

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of
The Children's Place Retail Stores, Inc.:

We have audited the accompanying consolidated balance sheets of The
Children's Place Retail Stores, Inc. (a Delaware corporation) and subsidiaries
(the "Company") as of February 3, 2001 and January 29, 2000, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three fiscal years in the period ended February 3, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Children's Place Retail
Stores, Inc. and subsidiaries as of February 3, 2001 and January 29, 2000, and
the results of their operations and their cash flows for each of the three
fiscal years in the period ended February 3, 2001, in conformity with accounting
principles generally accepted in the United States.

Arthur Andersen LLP

New York, New York
March 1, 2001

THE CHILDREN'S PLACE RETAIL STORES, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)

February 3, January 29,
2001 2000
--------- ---------

ASSETS
Current assets:
Cash and cash equivalents .............................. $ 8,141 $ 2,204
Accounts receivable .................................... 9,118 5,112
Inventories ............................................ 68,105 56,021
Prepaid expenses and other current assets .............. 11,054 8,527
Deferred income taxes .................................. 2,555 1,720
--------- ---------
Total current assets ................................... 98,973 73,584

Property and equipment:
Leasehold improvements ................................. 78,589 61,235
Store fixtures and equipment ........................... 73,763 50,804
Construction in progress ............................... 13,445 3,009
--------- ---------
165,797 115,048

Less accumulated depreciation and amortization ......... (43,822) (27,374)
--------- ---------
Property and equipment, net .......................... 121,975 87,674
Deferred income taxes ..................................... 4,166 5,051
Other assets .............................................. 6,582 4,650
--------- ---------
Total assets ........................................... $ 231,696 $ 170,959
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Revolving credit facility .............................. $ 3,324 $ 6,507
Accounts payable ....................................... 28,366 20,216
Taxes payable .......................................... 2,656 3,495
Accrued expenses, interest and other current liabilities 23,683 16,026
--------- ---------
Total current liabilities ............................ 58,029 46,244
Other long-term liabilities ............................... 7,000 4,649
--------- ---------
Total liabilities ...................................... 65,029 50,893
--------- ---------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common stock, $0.10 par value ............................. 2,610 2,570
Preferred stock, $1.00 par value .......................... 0 0
Additional paid-in capital ................................ 92,252 88,376
Cumulative translation adjustments .................... (12) (7)
Accumulated earnings .................................. 71,817 29,127
--------- ---------
Total stockholders' equity ............................. 166,667 120,066
--------- ---------
Total liabilities and stockholders' equity ............. $ 231,696 $ 170,959
========= =========

The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.

THE CHILDREN'S PLACE RETAIL STORES, INC.

CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)

Fiscal Year Ended
-------------------------------------
February 3, January 29, January 30,
2001 2000 1999
-------- -------- --------

Net sales ........................................ $587,385 $421,496 $283,853
Cost of sales .................................... 339,042 241,188 166,449
-------- -------- --------

Gross profit ..................................... 248,343 180,308 117,404
Selling, general and administrative expenses ..... 150,693 105,137 70,313
Pre-opening costs ................................ 5,456 3,485 3,030
Depreciation and amortization .................... 20,880 13,849 8,607
-------- -------- --------

Operating income ................................. 71,314 57,837 35,454
Interest expense, net ............................ 997 346 324
Other expense, net ............................... 166 54 110
-------- -------- --------

Income before income taxes ....................... 70,151 57,437 35,020
Provision for income taxes ....................... 27,461 22,388 14,358
-------- -------- --------

Net income ....................................... $ 42,690 $ 35,049 $ 20,662
======== ======== ========

Basic net income per common share ................ $ 1.65 $ 1.38 $ 0.83
======== ======== ========

Basic weighted average common shares outstanding . 25,847 25,382 24,788

Diluted net income per common share .............. $ 1.60 $ 1.32 $ 0.80
======== ======== ========

Diluted weighted average common shares outstanding 26,668 26,648 25,909

The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.

THE CHILDREN'S PLACE RETAIL STORES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED, JANUARY 30, 1999,
JANUARY 29, 2000 AND FEBRUARY 3, 2001
(In thousands)

Common Stock Additional Accumulated Cumulative Total Compre-
----------------- Paid-In (Deficit) Translation Stockholders' hensive
Shares Amount Capital Earnings Adjustment Equity Income
------ ------- ------- -------- --------- --------- --------

BALANCE, January 31, 1998 .................... 24,622 $ 2,462 $82,589 $(26,584) $ -- $ 58,467
Exercise of stock options and
employee stock purchases .................. 351 35 1,443 -- -- 1,478
Net income ................................... -- -- -- 20,662 -- 20,662 $ 20,662
--------
Comprehensive income ......................... -- -- -- -- -- -- $ 20,662
------ ------- ------- -------- --------- --------- --------

BALANCE, January 30, 1999 .................... 24,973 2,497 84,032 (5,922) -- 80,607
Exercise of stock options and
employee stock purchases .................. 725 73 2,834 -- -- 2,907
Tax benefit of stock option
exercises ................................. -- -- 1,510 -- -- 1,510
Change in cumulative
translation adjustment .................... -- -- -- -- (7) (7) $ (7)
Net income ................................... -- -- -- 35,049 -- 35,049 35,049
--------
Comprehensive income ......................... -- -- -- -- -- -- $ 35,042
------ ------- ------- -------- --------- --------- ========

BALANCE, January 29, 2000..................... 25,698 2,570 88,376 29,127 (7) 120,066
Exercise of stock options and
employee stock purchases .................. 397 40 2,585 -- -- 2,625
Tax benefit of stock option
exercises ................................. -- -- 1,291 -- -- 1,291
Change in cumulative
translation adjustment .................... -- -- -- -- (5) (5) $ (5)
Net income ................................... -- -- -- 42,690 -- 42,690 42,690
--------
Comprehensive income ......................... -- -- -- -- -- -- $ 42,685
------ ------- ------- -------- --------- --------- ========

BALANCE, February 3, 2001 .................... 26,095 $ 2,610 $92,252 $ 71,817 $ (12) $ 166,667
====== ======= ======= ======== ========= =========

The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.

THE CHILDREN'S PLACE RETAIL STORES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Fiscal Year Ended
---------------------------------------
February 3, January 29, January 30,
2001 2000 1999
--------- --------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................. $ 42,690 $ 35,049 $ 20,662
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................ 20,880 13,849 8,607
Deferred financing fee amortization ...................... 57 35 25
Loss on disposals of property and equipment .............. 1,124 346 803
Deferred taxes ........................................... 1,886 2,726 11,959
Changes in operating assets and liabilities:
Accounts receivable ................................... (4,006) (2,370) (838)
Inventories ........................................... (12,084) (20,682) (15,005)
Prepaid expenses and other current assets ............. (2,527) (2,905) (1,010)
Other assets .......................................... (2,667) (4,194) (519)
Accounts payable ......................................... 8,150 6,871 3,874
Accrued expenses, interest and other ..................... 6,239 5,948 6,401
--------- --------- ---------
Total adjustments .................................. 17,052 (376) 14,297
--------- --------- ---------

Net cash provided by operating activities ................... 59,742 34,673 34,959
--------- --------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment purchases ......................... (53,120) (58,181) (19,841)
--------- --------- ---------
Net cash used in investing activities .................... (53,120) (58,181) (19,841)
--------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility .................. 613,623 305,845 143,155
Repayments under revolving credit facility .................. (616,806) (299,338) (144,244)
Payment of obligations under capital leases ................. 0 (2) (24)
Exercise of stock options and employee stock purchases ...... 2,625 2,907 1,478
Deferred financing costs .................................... (122) (63) 0
--------- --------- ---------
Net cash (used by) provided by financing activities ......... (680) 9,349 365
--------- --------- ---------

Effect of exchange rate change on cash ...................... (5) (7) (0)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 5,937 (14,166) 15,483
Cash and cash equivalents, beginning of period .............. 2,204 16,370 887
--------- --------- ---------

Cash and cash equivalents, end of period .................... $ 8,141 $ 2,204 $ 16,370
========= ========= =========

OTHER CASH FLOW INFORMATION:
Cash paid during the year for interest ...................... $ 1,983 $ 676 $ 439
Cash paid during the year for income taxes .................. 25,907 17,065 2,085

The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.

THE CHILDREN'S PLACE RETAIL STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Children's Place Retail Stores, Inc., ("the Company,") is a specialty
retailer of apparel and accessories for children from newborn to twelve years of
age. The Company designs, sources and markets its products under "The Children's
Place" brand name for sale exclusively in its stores. As of February 3, 2001,
the Company operated 400 stores in 43 states, located primarily in regional
shopping malls. The Company also has an office in Hong Kong which enables the
Company to capitalize on new sourcing opportunities, respond to changing
merchandise trends and ensure product quality assurance.

Fiscal Year

The Company's fiscal year is a 52-week or 53-week period ending on the
Saturday nearest to January 31. The results for fiscal 2000, fiscal 1999 and
fiscal 1998 represent the 53-week period ended February 3, 2001, the 52-week
period ended January 29, 2000 and the 52-week period ended January 30, 1999,
respectively.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and amounts of revenues and expenses reported during the
period. Actual results could differ from the estimates made by and assumptions
used by management.

Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.

Reclassifications

Certain prior year balances have been reclassified to conform to current
year presentation.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

Inventories

Inventories, which consist primarily of finished goods, are stated at the
lower of average cost or market, calculated using the retail inventory method.

Revenue Recognition

The Company recognizes revenue when its customers take possession of the
merchandise. An appropriate reserve for estimated sales returns is recorded and
is reflected in accrued expenses in the accompanying consolidated balance
sheets. The Company's policy with respect to gift cards is to record revenue as
the gift cards are redeemed for merchandise. Prior to their redemption, gift
cards are recorded as a liability.

During the fourth quarter of fiscal 2000, the Company applied the
provisions of the Emerging Issues Task Force 00-10, "Shipping and Handling Fees
and Costs," ("EITF 00-10"), which requires that all amounts billed to customers
for shipping and handling, be classified as revenue and the costs incurred for
such shipping and handling, be classified as costs of goods sold. Prior to the
application of EITF 00-10, the Company recorded the amounts billed to its
e-commerce customers for shipping and handling netted against its cost of goods
sold. The impact of this reclassification increased net sales by approximately
$428,000 in fiscal 2000, $0 in fiscal 1999 and $0 in fiscal 1998.

Cost of Sales

In addition to the cost of inventory sold, the Company includes its
buying, distribution and occupancy expenses in its cost of sales.

THE CHILDREN'S PLACE RETAIL STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

Property and Equipment

Property and equipment are stated at cost, except for store fixtures and
equipment under capital leases which are recorded at the present value of the
future lease payments as of lease inception. Property and equipment is
depreciated on a straight-line basis based upon their estimated useful lives,
which range from three to ten years. Amortization of property and equipment
under capital leases and leasehold improvements is computed on a straight-line
basis over the term of the lease or the estimated useful life, whichever is
shorter.

During fiscal 1999, the Company adopted Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"). In accordance with SOP 98-1, internal use software
and other related costs are capitalized. External direct costs of materials,
consulting services and payroll costs of employees working solely on the
application development stage of the project are also capitalized in accordance
with SOP 98-1. These capitalized costs are amortized up to seven years
commencing with when the system is placed in service. Training and travel costs
related to systems implementations are expensed as incurred. The Company
capitalized approximately $788,000 and $798,000 in software costs in fiscal 2000
and fiscal 1999, respectively.

Deferred Financing Costs

The Company capitalizes costs directly associated with acquiring
third-party financing. Deferred financing costs are included in other assets and
are amortized over the term of the indebtedness. As of February 3, 2001,
unamortized deferred financing costs represent the cost of acquiring the
Company's working capital facility and were approximately $259,000, net of
accumulated amortization of $130,000.

Accounting for Impairment of Long-Lived Assets

The Company continually evaluates the carrying value and the economic
useful lives of its long-lived assets based on the Company's operating
performance and the expected undiscounted future net cash flows and adjusts the
carrying value of assets which may not be recoverable. The Company does not
believe that any impairment exists as of February 3, 2001 in the recoverability
of its long-lived assets.

Pre-opening Costs

Store pre-opening costs, which consist primarily of payroll, supply and
marketing expenses, are expensed as incurred.

Advertising Costs

The Company expenses the cost of advertising when the advertising is first
run or displayed. Included in selling, general and administrative expenses for
fiscal 2000, fiscal 1999 and fiscal 1998 are advertising costs of approximately
$12,943,000, $9,218,000 and $3,526,000, respectively.

Income Taxes

The Company computes income taxes using the liability method. This
standard requires recognition of deferred tax assets and liabilities, measured
by enacted rates, attributable to temporary differences between financial
statement and income tax basis of assets and liabilities. Temporary differences
result primarily from accelerated depreciation and amortization for tax purposes
and various accruals and reserves being deductible for future tax periods.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Values of Financial Instruments," ("SFAS 107") requires entities to
disclose the fair value of financial instruments, both assets and liabilities,
recognized and not recognized in the balance sheets, for which it is practicable
to estimate fair value. For purposes of this disclosure, the fair value of a
financial instrument is the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. Fair value is based on quoted market prices for the same or
similar financial instruments.

As cash and cash equivalents, accounts receivable and payable, and certain
other short-term financial instruments are all short-term in nature, their
carrying amount approximates fair value.

THE CHILDREN'S PLACE RETAIL STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

Accounting for Stock Based Compensation

The Company accounts for its 1996 Stock Option Plan (the "1996 Plan"), its
1997 Stock Option Plan (the "1997 Plan") and its Employee Stock Purchase Plan
(the "ESPP") under the provisions of Accounting Principles Bulletin No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). Refer to Note 8. - Stock
Option and Purchase Plans for pro forma disclosures required by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123").

Net Income per Common Share

The Company reports its earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share," ("SFAS 128"),
which requires the presentation of both basic and diluted earnings per share on
the statements of income.

In accordance with SFAS 128, the following table reconciles income and
share amounts utilized to calculate basic and diluted net income per common
share:

For the Fiscal Year Ended
-------------------------------------------
February 3, January 29, January 30,
2001 2000 1999
----------- ----------- -----------

Net income (in thousands) ............ $ 42,690 $ 35,049 $ 20,662
=========== =========== ===========

Basic weighted average common shares . 25,846,517 25,381,694 24,787,698
Dilutive effect of stock options ..... 821,828 1,266,416 1,120,901
----------- ----------- -----------

Diluted weighted average common shares 26,668,345 26,648,110 25,908,599
=========== =========== ===========

Antidilutive options ................. 356,740 112,075 223,807

Antidilutive options consist of the weighted average of stock options for
the respective periods ended February 3, 2001, January 29, 2000 and January 30,
1999 that had an exercise price greater than the average market price during the
period. Such options are therefore excluded from the computation of diluted
shares.

Derivative Instruments

In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133), subsequently amended by SFAS
No. 137 and SFAS No. 138. SFAS No. 133, as amended, establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value.
Changes in the derivative's fair value should be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement or other comprehensive income
and requires that a company must formally document, designate and assess the
effectiveness of transactions that qualify as hedging.

SFAS No. 133, as amended, is effective for all fiscal quarters of all
fiscal years beginning after June 15, 2000 (February 4, 2001 for the Company)
and cannot be applied retroactively. The Company does not feel that the adoption
of SFAS No. 133, as amended, will have a material effect on the Company's
consolidated financial statements.

THE CHILDREN'S PLACE RETAIL STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

Foreign Currency Translation

The Company has determined that the local currency of its Hong Kong
subsidiary is the functional currency. In accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation," the assets and
liabilities denominated in foreign currency are translated into U.S. dollars at
the current rate of exchange existing at period-end and revenues and expenses
are translated at average monthly exchange rates. Related translation
adjustments are reported as a separate component of stockholders' equity. The
effect of exchange rate changes on cash is insignificant.

2. SHORT-TERM BORROWINGS

The Foothill Credit Facility

The Company has a working capital facility (the "Foothill Credit
Facility") with Foothill Capital Corporation ("Foothill Capital"). During fiscal
2000, the Foothill Credit Facility was amended and restated to provide for up to
$75 million in borrowings which included a sublimit of up to $60 million in
letters of credit. Foothill Capital acts as our agent bank for a syndicated
group of lenders on this facility. This working capital facility also contains
provisions to increase borrowings up to $100 million (including a sublimit for
letters of credit of $80 million), subject to sufficient collateralization and
the syndication of the incremental line of borrowing. The amount that can be
borrowed under the working capital facility depends on the Company's levels of
inventory and accounts receivable. As of January 29, 2000, the Foothill Credit
Facility provided for up to $50 million in borrowings which included a sublimit
of up to $40 million in letters of credit.

The Foothill Credit Facility expires in July 2003 and provides for one
year automatic renewal options. The Company had $3.3 million and $ 6.5 million
outstanding under the Foothill Credit Facility as of February 3, 2001 and
January 29, 2000, respectively. Letters of credit outstanding as of February 3,
2001 and January 29, 2000 were $13.8 million and $16.0 million, respectively.
Availability as of February 3, 2001 and January 29, 2000 was $47.5 million and
$21.4 million, respectively.

The Foothill Credit Facility also contains certain financial covenants,
including, among others, the maintenance of minimum levels of earnings and
current ratios and imposes certain limitations on the Company's annual capital
expenditures, as defined in the Foothill Credit Facility, as well as a
prohibition on the payment of dividends. As of February 3, 2001, the Company was
in compliance with all of its covenants under the Foothill Credit Facility.
Noncompliance with these covenants could result in additional fees or could
affect the availability of the facility.

Amounts outstanding under the Foothill Credit Facility bear interest at a
floating rate equal to the prime rate or, at the Company's option, a LIBOR Rate
plus a pre-determined spread. The LIBOR spread is 1.25% to 2.50% depending on
the Company's financial performance from time to time. The interest rate charged
under the Foothill Credit Facility was 8.50% as of February 3, 2001 and January
29, 2000. In addition, the Company was also required to pay an anniversary fee
of $93,750, $37,500 and $75,000 during fiscal 2000, fiscal 1999 and fiscal 1998,
respectively.

Borrowing activity under the Foothill Credit Facility was as follows
(dollars in thousands):

For the Fiscal Year Ended
-------------------------
February 3, January 29,
2001 2000
------- -------

Weighted average balances outstanding .......... $16,574 $ 8,720
Weighted average interest rate ................. 8.47% 7.73%
Maximum balance outstanding .................... $32,345 $24,185

THE CHILDREN'S PLACE RETAIL STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. ACCRUED EXPENSES, INTEREST AND OTHER CURRENT LIABILITIES

Accrued expenses, interest and other current liabilities is comprised of
the following (dollars in thousands):

February 3, January 29,
2001 2000
------- -------

Accrued salaries and benefits .................... $ 5,628 $ 3,710
Accrued real estate expenses ..................... 2,690 2,588
Customer liabilities ............................. 3,290 2,189
Taxes payable .................................... 2,030 1,004
Severance ........................................ 954 0
Asset accruals ................................... 3,710 1,331
Other accrued expenses ........................... 5,381 5,204
------- -------

Accrued expenses, interest and other
current liabilities ........................ $23,683 $16,026
======= =======

4. COMMITMENTS AND CONTINGENCIES

The Company leases all of its stores and distribution facilities, and
certain office equipment, store fixtures and automobiles, under leases expiring
at various dates through 2014. Certain leases include options to renew. The
leases require fixed minimum annual rental payments plus, under the terms of
certain leases, additional payments for taxes, other expenses and additional
rent based upon sales.

Rent expense is as follows (dollars in thousands):

For the Fiscal Year Ended
-------------------------------------
February 3, January 29, January 30,
2001 2000 1999
----------- ----------- -----------
Store and distribution facilities rent:
Minimum rentals .................... $47,314 $32,633 $23,022
Additional rent based upon sales ... 848 646 351
------- ------- -------

Total rent expense ................. $48,162 $33,279 $23,373
======= ======= =======

Future minimum annual lease payments under the Company's operating leases
at February 3, 2001, are as follows (dollars in thousands):

Operating
Leases
---------
Fiscal year
2001 .............................................................. $ 60,774
2002 .............................................................. 64,210
2003 .............................................................. 63,120
2004 .............................................................. 62,716
2005 .............................................................. 62,249
Thereafter ........................................................ 235,232
--------
Total minimum lease payments ...................................... $548,301
========

5. LITIGATION

The Company is involved in various legal proceedings arising in the normal
course of its business. In the opinion of management, any ultimate liability
arising out of such proceedings, will not have a material adverse effect on the
Company's financial position or results of operations.

THE CHILDREN'S PLACE RETAIL STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. INCOME TAXES

Components of the Company's provision for income taxes consisted of the
following (dollars in thousands):

Fiscal Year Ended
-------------------------------------
February 3, January 29, January 30,
2001 2000 1999
----------- ----------- -----------

Current -
Federal ....................................... $ 21,477 $ 14,900 $ 799
Foreign ....................................... 694 533 0
State ......................................... 4,278 3,500 1,600
Deferred -
Federal ....................................... 311 2,574 10,209
State ......................................... 701 881 1,750
-------- -------- --------
Provision for income taxes .................... $ 27,461 $ 22,388 $ 14,358
======== ======== ========

A reconciliation between the calculated tax provision on income based on
the statutory rates in effect and the effective tax rate follows (dollars in
thousands):

Fiscal Year Ended
-------------------------------------
February 3, January 29, January 30,
2001 2000 1999
----------- ----------- -----------

Calculated income tax provision .................. $ 24,553 $ 20,103 $ 12,257
State income taxes, net of federal benefit ....... 3,236 2,848 2,101
Foreign tax ...................................... (733) (563) 0
Nondeductible expenses ........................... 16 0 (160)
Other ............................................ 389 0 160
-------- -------- --------
Tax provision as shown on the statements of income $ 27,461 $ 22,388 $ 14,358
======== ======== ========

Deferred income taxes reflect the impact of temporary differences between
amounts of assets and liabilities for financial reporting purposes as measured
by tax laws. As of February 3, 2001, there are accumulated unremitted earnings
from the Company's Hong Kong subsidiary on which deferred taxes have not been
provided as the undistributed earnings of the foreign subsidiary are
indefinitely reinvested.

Temporary differences which give rise to deferred tax assets and
liabilities are as follows (dollars in thousands):

February 3, January 29,
2001 2000
----------- -----------
Current -
Uniform inventory capitalization .............. $ 2,002 $1,254
Inventory ..................................... 732 411
Expenses not currently deductible ............. (179) 55
------- ------
Total current .............................. 2,555 1,720
------- ------

Noncurrent -
Depreciation .................................. 1,682 3,392
Deferred rent ................................. 2,484 1,659
------- ------
Total noncurrent ........................... 4,166 5,051
------- ------
Total deferred tax asset ................... $ 6,721 $6,771
======= ======

THE CHILDREN'S PLACE RETAIL STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. STOCKHOLDERS' EQUITY

The Company's stockholders' equity is comprised of the following:

February 3, January 29,
2001 2000
----------- -----------
Common stock:
Authorized number of shares, $0.10 par value .... 100,000,000 100,000,000
Issued and outstanding number of shares ......... 26,095,296 25,698,120
Preferred stock:
Authorized number of shares, $1.00 par value .... 1,000,000 1,000,000
Issued and outstanding number of shares ......... 0 0

8. STOCK OPTION AND PURCHASE PLANS

Stock Option Plans

The Company accounts for its stock option plans in accordance with the
provisions of SFAS 123. Accordingly, no compensation expense has been recognized
for stock-based compensation, since the options granted were at prices that
equaled or exceeded their estimated fair market value at the date of grant. If
compensation expense for the Company's stock options issued in fiscal 2000,
fiscal 1999 and fiscal 1998 had been determined based on the fair value method
of accounting, the Company's net income would have been reduced to the pro forma
amounts indicated below for the three fiscal years in the period ended February
3, 2001:

Fiscal Year Ended
---------------------------------------------
February 3, January 29, January 30,
2001 2000 1999
----------- ----------- -----------

Net income -
As reported ......................... $42,690,000 $35,049,000 $20,662,000
Pro forma ........................... $39,644,000 $33,111,000 $19,042,000
Pro forma diluted net income per share -
As reported ......................... $ 1.60 $ 1.32 $ 0.80
Pro forma ........................... $ 1.49 $ 1.24 $ 0.73

The fair value of issued stock options were estimated on the date of grant
using the Black-Scholes option pricing model, incorporating the following
assumptions:

February 3, January 29, January 30,
2001 2000 1999
---------------- ---------------- ---------------

Dividend yield.............................. 0% 0% 0%
Volatility factor........................... 60.00% 57.00% 45.00%
Weighted average risk-free interest rate.... 6.21% 5.89% 5.17%
Expected life of options................... 5 years 5 years 5 years
Weighted average fair value on grant date... $18.63 per share $13.22 per share $3.52 per share

THE CHILDREN'S PLACE RETAIL STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. STOCK OPTION AND PURCHASE PLANS (continued)

The Company has two stock option plans: the 1996 Plan and the 1997 Plan.
The 1996 Plan authorized the granting of incentive stock options with respect to
1,743,240 shares of Common Stock. The 1997 Plan was authorized and amended to
grant options with respect to 2,500,000 shares of Common Stock. As of February
3, 2001, there were 57,300 shares available for grant under the 1996 Plan and
860,880 shares available for grant under the 1997 Plan.

Both the 1996 Plan and the 1997 Plan are administered by the Board of
Directors. Options granted under the 1996 Plan and the 1997 Plan have exercise
prices established by the Board of Directors provided that the exercise price of
incentive stock options may not be less than the fair market value of the
underlying shares at the date of grant. The 1996 Plan and the 1997 Plan also
contain certain provisions that require the exercise price of incentive stock
options granted to stockholders owning greater than 10% of the Company be at
least 110% of the fair market value of the underlying shares. Unless otherwise
specified by the Board of Directors, options vest at 20% a year over a five year
period. The options canceled and re-granted during fiscal 1998 will vest in
accordance with their original vesting schedule.

Changes in common shares under option for the three fiscal years in the
period ended February 3, 2001 are summarized below:

February 3, 2001 January 29, 2000 January 30, 1999
------------------------------ ------------------------------ -----------------------------
Weighted Average Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
---------- -------------- -------- ---------------- ------- ---------------

Beginning of year .............. 1,965,856 $ 12.21 2,185,706 $ 6.43 1,981,120 $ 5.82
Granted ........................ 552,150 18.55 561,700 24.13 931,500 (1) 9.66
Exercised ...................... (371,474) 5.86 (713,560) 3.70 (339,294) 3.41
Canceled ....................... (245,800) 11.44 (67,990) 14.70 (387,620)(1) 13.73
---------- ---------- ---------- ---------- ---------- ----------
End of year .................... 1,900,732 $ 15.41 1,965,856 $ 12.21 2,185,706 $ 6.43
========== ========== ========== ========== ========== ==========
Exercisable at end of year ..... 768,800 $ 10.01 600,186 $ 7.83 793,378 $ 4.85

- ----------
(1) Includes 363,700 options that were canceled and re-granted on March 26,
1998. The canceled shares had an exercise price of $14.00 and were
re-granted at the average market price on March 27, 1998 of $8.70 per
share.

The following table summarizes information regarding options outstanding
at February 3, 2001:

Options Outstanding Options Exercisable
- ------------------------------------------------------------------------------------- ------------------------------------
Weighted Average Remaining
Exercise Outstanding at Contractual Weighted Average Exercisable at Weighted Average
Prices February 3, 2001 Life Exercise Price February 3, 2001 Exercise Price
- -------------- ---------------- -------------------------- ---------------- ---------------- --------------

$2.68 - 2.68 314,868 5.4 $ 2.68 314,868 $ 2.68
$7.31 - 9.75 361,570 7.2 9.16 194,450 8.97
$11.84 - 16.81 690,444 8.4 15.85 183,902 15.29
$18.63 - 27.13 344,200 9.3 21.04 35,650 23.70
$29.69 - 41.47 189,650 8.3 36.65 39,930 36.38
- ------------- --------- --- ------ ------- ------
$2.68 - 41.47 1,900,732 7.8 $15.41 768,800 $10.01
============= ========= === ====== ======= ======

Stock Purchase Plans

The Company's ESPP, is authorized to issue up to 360,000 shares of Common
Stock for employee purchase through payroll deductions at 85% of fair market
value. All employees of the Company, who have completed at least 90 days of
employment and attained 21 years of age, are eligible to participate, except for
employees who own Common Stock or options on such common stock which represents
5% or more of the Company. During fiscal 2000, fiscal 1999 and fiscal 1998,
there were 25,702 shares, 11,659 shares and 11,504 shares issued under the ESPP.

THE CHILDREN'S PLACE RETAIL STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. SAVINGS AND INVESTMENT PLAN

The Company has adopted The Children's Place 401(k) Savings and Investment
Plan (the "401(k) Plan"), which qualifies under Section 401(k) of the Internal
Revenue Code of 1986, as amended. The 401(k) Plan is a defined contribution plan
established to provide retirement benefits for all employees who have completed
one year of service with the Company and attained 21 years of age.

The 401(k) Plan is employee funded up to an elective annual deferral and
also provides an option for the Company to contribute to the 401(k) Plan at the
discretion of the 401(k) Plan's trustees. During fiscal 2000, fiscal 1999 and
fiscal 1998, the Company matched the lesser of 50% of the participant's
contribution or 2.5% of the participant's compensation. During fiscal 2000,
fiscal 1999 and fiscal 1998, the Company's matching contributions to the 401(k)
Plan were approximately $605,000, $367,000 and $300,000, respectively.

10. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table summarizes the quarterly financial data for the
periods indicated (dollars in thousands, except for per share amounts):

Fiscal Year Ended February 3, 2001
----------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------

Net sales............................... $130,181 $107,764 $165,885 $183,555
Gross profit............................ 56,858 40,530 72,601 78,354
Net income ............................. 9,374 1,516 16,845 14,955
Basic net income per common share....... $0.36 $0.06 $0.65 $0.58
Diluted net income per common share..... $0.36 $0.06 $0.63 $0.55

Fiscal Year Ended January 29, 2000
----------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------

Net sales............................... $92,621 $73,920 $119,442 $135,513
Gross profit............................ 39,323 26,797 54,507 59,681
Net income ............................. 7,383 1,402 12,734 13,530
Basic net income per common share....... $0.29 $0.06 $0.50 $0.53
Diluted net income per common share..... $0.28 $0.05 $0.48 $0.51

11. RELATED PARTY TRANSACTIONS

SKM Financial Advisory Services

THE CHILDREN'S PLACE RETAIL STORES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. RELATED PARTY TRANSACTIONS (continued)

Stockholders Agreement

The Company and certain of its stockholders, who as of February 3, 2001
own in the aggregate a majority of the Common Stock, are parties to a
Stockholders Agreement (the "Stockholders Agreement"). The Stockholders
Agreement places certain limitations upon the transfer, in privately negotiated
transactions, of shares of Common Stock beneficially owned by Ezra Dabah,
Stanley Silver and the SK Funds. In addition, the Stockholders Agreement
provides that (1) so long as Ezra Dabah, together with members of his family,
beneficially owns shares representing at least 25% of the shares of Common Stock
owned by such parties on the date of the Stockholders Agreement, the
stockholders party to the Stockholders Agreement will be obligated to vote all
shares as to which they have voting rights in a manner such that the Board of
Directors will at all times include three directors nominated by Ezra Dabah and
(2) so long as the SK Funds beneficially own shares representing at least 25% of
the shares of Common Stock owned by such parties on the date of the Stockholders
Agreement, the stockholders party to the Stockholders Agreement will be
obligated to vote all shares as to which they have voting rights in a manner
such that the Board of Directors will at all times include two directors
nominated by the SK Funds. Should the number of directors comprising the Board
of Directors be increased, nominees for the remaining director positions will be
designated by the Board of Directors.

The Stockholders Agreement provides that so long as the SK Funds
beneficially own shares representing at least 25% of the outstanding Common
Stock, will not, without the affirmative vote of at least one director nominated
by the SK Funds, engage in specified types of transactions with certain of our
affiliates (not including the SK Funds), take action to amend the ByLaws or
Certificate of Incorporation or increase or decrease the size of the entire
Board of Directors. The Stockholders Agreement also provides that certain
specified types of corporate transactions and major corporate actions will
require the approval of at least two-thirds of the members of the Board of
Directors.

Merchandise for Re-Sale

During fiscal 1998, the Company purchased approximately $290,000 in bath
products from HBA Technologies, LLC. Haim Dabah, Ezra Dabah's brother, is the
majority owner of HBA Technologies, LLC.

Executive Officers

On or about April 15, 2000, the Company made loans to seven executive
officers ranging from $200,000 to $500,000. The aggregate amount of these loans
totaled $2.2 million. The loans mature on or about April 15, 2001 and bear
interest at the prime rate as quoted by Chase Manhattan Bank. The loans are
secured by the principal residence of these executive officers. As of February
3, 2001, approximately $749,000 was outstanding on these loans, including
accrued interest.

12. SUBSEQUENT EVENT (UNAUDITED)

Executive Officers

In April 2001, the Company extended the term on one executive loan to
April 15, 2002. As of April 30, 2001, this loan had a balance and accrued
interest outstanding totaling approximately $513,000.

(a) (2) Financial Statement Schedules

Financial statement schedules have been omitted because they are not
required or are not applicable.

(a)(3) Exhibits

3.1* Amended and Restated Certificate of Incorporation of the
Company.

3.2* Amended and Restated ByLaws of the Company.

4.1* Form of Certificate for Common Stock of the Company.

9.1* Amended and Restated Stockholders Agreement, dated as of
September 18, 1997.

10.1* 1996 Stock Option Plan of The Children's Place Retail Stores,
Inc.

10.2* 1997 Stock Option Plan of The Children's Place Retail Stores,
Inc.

10.3* The Children's Place Retail Stores, Inc. 401(k) Plan.

10.4* Form of The Children's Place Retail Stores, Inc. Employee Stock
Purchase Plan.

10.5* The Children's Place Retail Stores, Inc. Management Incentive
Plan.

10.8* Employment Agreement dated as of June 27, 1996 between the
Company and Ezra Dabah.

10.10* Form of Indemnification Agreement between the Company and the
members of its Board of Directors.

10.12* Form of Amended and Restated Registration Rights Agreement,
dated as of September 18, 1997.

10.13* Letter Agreement as to employment, dated January 18, 1991,
between the Company and Diane M. Timbanard.

10.14* Letter Agreement as to severance pay, dated January 22, 1991,
between the Company and Diane M. Timbanard.

10.17* Buying Agency Agreement dated September 17, 1996 between the
Company and KS Best International.

10.18* Advisory Agreement dated June 28, 1996 between the Company and
Saunders Karp & Megrue, L.P.

10.19** Service Agreement, between the Company and AST StockPlan, Inc.,
dated June 8, 1998.

10.20*** Lease for a distribution center and corporate headquarters
facility between the Company and Hartz Mountain Associates,
dated June 30, 1998.

10.21*** Software Purchase and license agreement between the Company and
Trimax Inc. dated August 14, 1998.

10.22**** Amendment to a lease for a distribution center and corporate
headquarters facility between the Company and Hartz Mountain
Associates, dated November 20, 1998.

10.23+ Second Amended and Restated Loan and Security Agreement between
the Company and Foothill Capital Corporation, dated July 5,
2000.

10.24@ Amended and Restated Merchant Services Agreement between the
Company and Hurley State Bank, dated as of July 1, 2000.

10.25@ Lease Agreement between the Company and Haven Gateway LLC, dated
as of August 17, 2000.

10.26@ Lease Agreement between the Company and Hartz Mountain
Associates, dated as of October 31, 2000.

21.1 Subsidiaries of the Company

23.1 Consent of Independent Public Accountants

* Incorporated by reference to the registrant's Registration Statement on
Form S-1 (No. 333-31535). Exhibit numbers are identical to the exhibit
numbers incorporated by reference to such registration statement.

** Incorporated by reference to the registrant's quarterly report on Form
10-Q for the period ended May 2, 1998. Exhibit 10.19 was filed previously
as Exhibit 10.1 in such quarterly report.

*** Incorporated by reference to the registrant's quarterly report on Form
10-Q for the period ended August 1, 1998. Exhibit 10.20 was filed
previously as Exhibit 10.2 and Exhibit 10.21 was filed previously as
Exhibit 10.3 in such quarterly report.

**** Incorporated by reference to registrant's quarterly report on Form 10-Q
for the period ended October 31, 1998. Exhibit 10.22 was filed previously
as Exhibit 10.5 in such quarterly report.

+ Incorporated by reference to registrant's quarterly report on Form 10-Q
for the period ended July 29, 2000. Exhibit 10.23 was filed previously as
Exhibit 10.1 in such quarterly report.

@ Incorporated by reference to registrant's quarterly report on Form 10-Q
for the period ended October 28, 2000. Exhibit 10.24 was filed previously
as Exhibit 10.2 in such quarterly report, Exhibit 10.25 was filed
previously as Exhibit 10.3 in such quarterly report and Exhibit 10.26 was
filed previously as Exhibit 10.4 in such quarterly report.

(b) Reports on Form 8-K

No reports were filed.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

THE CHILDREN'S PLACE RETAIL STORES, INC.
By:

/s/ Ezra Dabah
-------------------------
Ezra Dabah
Chairman of the Board and
Chief Executive Officer
May 2, 2001

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Ezra Dabah Chairman of the Board of Directors and Chief Executive Officer May 2, 2001
- ------------------------------ (Principal Executive Officer)
Ezra Dabah

/s/ Seth L. Udasin Vice President and Chief Financial Officer (Principal Financial May 2, 2001
- ------------------------------ and Accounting Officer)
Seth L. Udasin

/s/ Stanley Silverstein Director May 2, 2001
- ------------------------------
Stanley Silverstein

/s/ John Megrue Director May 2, 2001
- ------------------------------
John Megrue

/s/ David J. Oddi Director May 2, 2001
- ------------------------------
David J. Oddi

/s/ Sally Frame Kasaks Director May 2, 2001
- ------------------------------
Sally Frame Kasaks



                                  EXHIBIT 21.1
                    THE CHILDREN'S PLACE RETAIL STORES, INC.

                           SUBSIDIARIES OF THE COMPANY

The Children's Place Retail Stores, Inc. has the following wholly owned
subsidiaries:

      TCPIP, Inc. (formerly known as TCPIP Holding Company, Inc.), a Delaware
      Corporation.

      The Children's Place (Hong Kong) Limited, a Hong Kong Corporation.

      thechildrensplace.com, inc.

      The Children's Place (Australia) Pty.Ltd.


                                  EXHIBIT 23.1
                    THE CHILDREN'S PLACE RETAIL STORES, INC.

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our
report dated March 1, 2001 included in this Annual Report on Form 10-K of The
Children's Place Retail Stores, Inc. into the Company's previously filed
Registration Statement on Form S-8 (File Number 333-47065).

ARTHUR ANDERSEN LLP

New York, New York
May 2, 2001