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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 FORM 10-Q

(Mark One)

☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 29, 2022

or

☐						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

 THE CHILDREN’S PLACE, INC.

(Exact name of registrant as specified in its charter)

Delaware						31-1241495
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification Number)
500 Plaza Drive
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:

Title of each class:			Trading Symbol:			Name of each exchange on which registered:
Common Stock, $0.10 par value			PLCE			Nasdaq Global Select Market

___________________________________________ 

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 whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

x

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: Common Stock, par value $0.10 per share, outstanding at November 25, 2022: 12,227,788.

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES 

QUARTERLY REPORT ON FORM 10-Q 

FOR THE PERIOD ENDED OCTOBER 29, 2022

 

TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION						PAGE
Item 1.			Financial Statements.
			Consolidated Balance Sheets as of October 29, 2022, January 29, 2022, and October 30, 2021			1
			Consolidated Statements of Operations for the thirteen weeks and thirty-nine weeks ended October 29, 2022 and October 30, 2021			2
			Consolidated Statements of Comprehensive Income for the thirteen weeks and thirty-nine weeks ended October 29, 2022 and October 30, 2021			3
			Consolidated Statements of Changes in Stockholders’ Equity for the thirteen weeks and thirty-nine weeks ended October 29, 2022 and October 30, 2021			4
			Consolidated Statements of Cash Flows for the thirty-nine weeks ended October 29, 2022 and October 30, 2021			6
			Notes to Consolidated Financial Statements			8
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations.			19
Item 3.			Quantitative and Qualitative Disclosures About Market Risk.			27
Item 4.			Controls and Procedures.			28
PART II — OTHER INFORMATION
Item 1.			Legal Proceedings.			29
Item 1A.			Risk Factors.			29
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds.			29
Item 6.			Exhibits.			30

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Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS.

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

			October 29, 2022						January 29, 2022						October 30, 2021
			(unaudited)												(unaudited)
			(in thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents			$	19,244					$	54,787					$	67,062
Accounts receivable			48,820						21,863						38,758
Inventories			548,719						428,813						441,817
Prepaid expenses and other current assets			48,012						76,075						59,628
Total current assets			664,795						581,538						607,265
Long-term assets:
Property and equipment, net			154,975						155,006						159,243
Right-of-use assets			160,041						194,653						209,430
Tradenames, net			71,091						71,692						71,892
Deferred income taxes			20,916						23,109						27,801
Other assets			12,799						11,462						12,735
Total assets			$	1,084,617					$	1,037,460					$	1,088,366
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Revolving loan			$	265,000					$	175,318					$	174,384
Current portion of long-term debt			—						—						28,270
Accounts payable			221,432						183,758						173,055
Current portion of operating lease liabilities			77,070						91,097						94,122
Income taxes payable			506						10,984						10,701
Accrued expenses and other current liabilities			119,660						130,669						143,866
Total current liabilities			683,668						591,826						624,398
Long-term liabilities:
Long-term debt			49,735						49,685						48,892
Long-term portion of operating lease liabilities			104,073						134,761						154,325
Income taxes payable			18,925						14,939						14,939
Other tax liabilities			2,347						8,689						6,285
Other long-term liabilities			13,693						12,088						17,279
Total liabilities			872,441						811,988						866,118
Commitments and contingencies (see Note 7)
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000 shares authorized, 0 shares issued and outstanding			—						—						—
Common stock, $0.10 par value, 100,000 shares authorized; 12,662, 13,964, and 14,468 issued; 12,597, 13,903, and 14,408 outstanding			1,266						1,396						1,447
Additional paid-in capital			148,546						160,348						164,010
Treasury stock, at cost (65, 61, and 60 shares)			(3,661)						(3,443)						(3,373)
Deferred compensation			3,661						3,443						3,373
Accumulated other comprehensive loss			(17,011)						(14,186)						(12,962)
Retained earnings			79,375						77,914						69,753
Total stockholders’ equity			212,176						225,472						222,248
Total liabilities and stockholders’ equity			$	1,084,617					$	1,037,460					$	1,088,366

See accompanying notes to these consolidated financial statements.

1

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

			Thirteen Weeks Ended												Thirty-nine Weeks Ended
			October 29, 2022						October 30, 2021						October 29, 2022						October 30, 2021
			(in thousands, except earnings per common share)
Net sales			$	509,120					$	558,225					$	1,252,355					$	1,407,561
Cost of sales (exclusive of depreciation and amortization)			332,189						313,394						817,915						806,663
Gross profit			176,931						244,831						434,440						600,898
Selling, general, and administrative expenses			106,631						115,563						330,480						337,921
Depreciation and amortization			12,463						14,204						39,320						44,157
Asset impairment charges			—						1,254						1,379						1,254
Operating income			57,837						113,810						63,261						217,566
Interest expense			(3,810)						(3,963)						(8,123)						(13,077)
Interest income			24						4						43						11
Income before provision for income taxes			54,051						109,851						55,181						204,500
Provision for income taxes			11,196						30,983						5,794						56,332
Net income			$	42,855					$	78,868					$	49,387					$	148,168
Earnings per common share
Basic			$	3.28					$	5.38					$	3.72					$	10.08
Diluted			$	3.26					$	5.30					$	3.68					$	9.89
Weighted average common shares outstanding
Basic			13,064						14,668						13,277						14,706
Diluted			13,162						14,873						13,409						14,979

 

See accompanying notes to these consolidated financial statements.

2

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

			Thirteen Weeks Ended												Thirty-nine Weeks Ended
			October 29, 2022						October 30, 2021						October 29, 2022						October 30, 2021
			(in thousands)
Net income			$	42,855					$	78,868					$	49,387					$	148,168
Other comprehensive income (loss):
Foreign currency translation adjustment			(2,397)						323						(2,825)						854
Total comprehensive income			$	40,458					$	79,191					$	46,562					$	149,022

 

See accompanying notes to these consolidated financial statements.

3

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Thirteen Weeks Ended October 29, 2022
																																				Accumulated
																		Additional																		Other																		Total
						Common Stock												Paid-In						Deferred						Retained						Comprehensive						Treasury Stock												Stockholders’
(in thousands)						Shares						Amount						Capital						Compensation						Earnings						Loss						Shares						Amount						Equity
Balance, July 30, 2022						13,087						$	1,309					$	151,954					$	3,587					$	45,532					$	(14,614)					(64)						$	(3,587)					$	184,181
Vesting of stock awards						9						1						(1)																																				—
Stock-based compensation expense																		5,221																																				5,221
Purchase and retirement of common stock						(434)						(44)						(8,628)												(9,012)																								(17,684)
Other comprehensive loss																																				(2,397)																		(2,397)
Deferral of common stock into deferred compensation plan																								74																		(1)						(74)						—
Net income																														42,855																								42,855
Balance, October 29, 2022						12,662						$	1,266					$	148,546					$	3,661					$	79,375					$	(17,011)					(65)						$	(3,661)					$	212,176

Thirty-nine Weeks Ended October 29, 2022
																																				Accumulated
																		Additional																		Other																		Total
						Common Stock												Paid-In						Deferred						Retained						Comprehensive						Treasury Stock												Stockholders’
(in thousands)						Shares						Amount						Capital						Compensation						Earnings						Loss						Shares						Amount						Equity
Balance, January 29, 2022						13,964						$	1,396					$	160,348					$	3,443					$	77,914					$	(14,186)					(61)						$	(3,443)					$	225,472
Vesting of stock awards						279						28						(28)																																				—
Stock-based compensation expense																		19,055																																				19,055
Purchase and retirement of common stock						(1,581)						(158)						(30,829)												(47,926)																								(78,913)
Other comprehensive loss																																				(2,825)																		(2,825)
Deferral of common stock into deferred compensation plan																								218																		(4)						(218)						—
Net income																														49,387																								49,387
Balance, October 29, 2022						12,662						$	1,266					$	148,546					$	3,661					$	79,375					$	(17,011)					(65)						$	(3,661)					$	212,176

See accompanying notes to these consolidated financial statements.

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)

(Unaudited)

Thirteen Weeks Ended October 30, 2021
																																				Accumulated
																		Additional																		Other																		Total
						Common Stock												Paid-In						Deferred						Retained						Comprehensive						Treasury Stock												Stockholders’
(in thousands)						Shares						Amount						Capital						Compensation						Earnings						Loss						Shares						Amount						Equity
Balance, July 31, 2021						14,831						$	1,483					$	164,290					$	3,304					$	15,697					$	(13,285)					(59)						$	(3,304)					$	168,185
Vesting of stock awards						9						1						(1)																																				—
Stock-based compensation expense																		6,594																																				6,594
Purchase and retirement of common stock						(372)						(37)						(6,873)												(24,812)																								(31,722)
Other comprehensive income																																				323																		323
Deferral of common stock into deferred compensation plan																								69																		(1)						(69)						—
Net income																														78,868																								78,868
Balance, October 30, 2021						14,468						$	1,447					$	164,010					$	3,373					$	69,753					$	(12,962)					(60)						$	(3,373)					$	222,248

Thirty-nine Weeks Ended October 30, 2021
																																				Accumulated
																		Additional												Retained						Other																		Total
						Common Stock												Paid-In						Deferred						Earnings						Comprehensive						Treasury Stock												Stockholders’
(in thousands)						Shares						Amount						Capital						Compensation						(Deficit)						Loss						Shares						Amount						Equity
Balance, January 30, 2021						14,641						$	1,464					$	148,519					$	3,165					$	(42,790)					$	(13,816)					(57)						$	(3,165)					$	93,377
Vesting of stock awards						345						35						(35)																																				—
Stock-based compensation expense																		25,036																																				25,036
Purchase and retirement of common stock						(518)						(52)						(9,510)												(35,625)																								(45,187)
Other comprehensive income																																				854																		854
Deferral of common stock into deferred compensation plan																								208																		(3)						(208)						—
Net income																														148,168																								148,168
Balance, October 30, 2021						14,468						$	1,447					$	164,010					$	3,373					$	69,753					$	(12,962)					(60)						$	(3,373)					$	222,248

See accompanying notes to these consolidated financial statements.

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

			Thirty-nine Weeks Ended
			October 29, 2022						October 30, 2021
			(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	49,387					$	148,168
Reconciliation of net income to net cash provided by (used in) operating activities:
Non-cash portion of operating lease expense			65,046						76,418
Depreciation and amortization			39,320						44,157
Non-cash stock-based compensation expense			19,055						25,036
Deferred income tax provision			2,186						17,974
Asset impairment charges			1,379						1,254
Other non-cash items, net			58						1,101
Changes in operating assets and liabilities:
Inventories			(123,012)						(55,183)
Accounts receivable and other assets			(28,427)						(2,121)
Prepaid expenses and other current assets			1,680						(4,995)
Income taxes payable, net of prepayments			18,896						6,437
Accounts payable and other current liabilities			11,764						(47,980)
Lease liabilities			(75,767)						(142,574)
Other long-term liabilities			1,470						(244)
Net cash provided by (used in) operating activities			(16,965)						67,448
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(31,193)						(22,000)
Change in deferred compensation plan			(421)						48
Net cash used in investing activities			(31,614)						(21,952)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility			555,383						557,034
Repayments under revolving credit facility			(465,701)						(552,429)
Repayment of term loan			—						(1,000)
Purchase and retirement of common stock, including shares surrendered for tax withholdings and transaction costs			(75,672)						(45,187)
Payment of debt issuance costs			—						(366)
Net cash provided by (used in) financing activities			14,010						(41,948)
Effect of exchange rate changes on cash and cash equivalents			(974)						(34)
Net increase (decrease) in cash and cash equivalents			(35,543)						3,514
Cash and cash equivalents, beginning of period			54,787						63,548
Cash and cash equivalents, end of period			$	19,244					$	67,062

 

See accompanying notes to these consolidated financial statements.

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

 

			Thirty-nine Weeks Ended
			October 29, 2022						October 30, 2021
			(in thousands)
OTHER CASH FLOW INFORMATION:
Net cash paid (received) for income taxes			$	(15,680)					$	31,718
Cash paid for interest			7,545						11,870
Increase (decrease) in accrued capital expenditures			7,795						(135)

 

See accompanying notes to these consolidated financial statements.

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.BASIS OF PRESENTATION

Description of Business

The Children’s Place, Inc. and subsidiaries (collectively, the “Company”) is the largest pure-play children’s specialty apparel retailer in North America. The Company provides apparel, footwear, accessories, and other items for children and ‘tweens.’ The Company designs, contracts to manufacture, sells at retail and wholesale, and licenses to sell trend right, high-quality merchandise predominantly at value prices, primarily under the Company’s proprietary “The Children’s Place”, “Place”, “Baby Place”, “Gymboree”, “Sugar & Jade”, and “PJ Place” brand names.

The Company classifies its business into two segments: The Children’s Place U.S. and The Children’s Place International. Included in The Children’s Place U.S. segment are the Company’s U.S. and Puerto Rico-based stores and revenue from its U.S.-based wholesale business. Included in The Children’s Place International segment are its Canadian-based stores, revenue from the Company’s Canadian-based wholesale business, as well as revenue from international franchisees. Each segment includes an e-commerce business located at www.childrensplace.com, www.gymboree.com, www.sugarandjade.com, and www.pjplace.com.

Terms that are commonly used in the notes to the Company’s consolidated financial statements are defined as follows:

•Third Quarter 2022 — The thirteen weeks ended October 29, 2022

•Third Quarter 2021 — The thirteen weeks ended October 30, 2021

•First Quarter 2022 — The thirteen weeks ended April 30, 2022

•Year-To-Date 2022 — The thirty-nine weeks ended October 29, 2022

•Year-To-Date 2021 — The thirty-nine weeks ended October 30, 2021

•Fiscal 2022 – The fifty-two weeks ending January 28, 2023

•Fiscal 2021 – The fifty-two weeks ended January 29, 2022

•SEC — U.S. Securities and Exchange Commission

•U.S. GAAP — Generally Accepted Accounting Principles in the United States

•FASB — Financial Accounting Standards Board

•FASB ASC — FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP, except that rules and interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC registrants

Basis of Presentation

The unaudited consolidated financial statements and accompanying notes to consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated. As of October 29, 2022, January 29, 2022, and October 30, 2021, the Company did not have any investments in unconsolidated affiliates. FASB ASC 810—Consolidation is considered when determining whether an entity is subject to consolidation.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of October 29, 2022 and October 30, 2021, the results of its consolidated operations, consolidated comprehensive income, and consolidated changes in stockholders’ equity for the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021, and consolidated cash flows for the thirty-nine weeks ended October 29, 2022 and October 30, 2021. The consolidated balance sheet as of January 29, 2022 was derived from audited financial statements. Due to the seasonal nature of the Company’s business, the results of operations for the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021 are not necessarily indicative of operating results for a full fiscal year. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Fiscal Year

The Company’s fiscal year is a fifty-two week or fifty-three week period ending on the Saturday on or nearest to January 31.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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 assumptions used and estimates made by management, which could have a material impact on the Company’s financial position or results of operations. Critical accounting estimates inherent in the preparation of the consolidated financial statements include impairment of long-lived assets, income taxes, stock-based compensation, and inventory valuation.

Recent Accounting Standards Updates

There are no pending accounting standards updates that are currently expected to have a material impact on the Company.

2. REVENUES

Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The following table presents the Company’s revenues disaggregated by geography:    

                                                            

			Thirteen Weeks Ended												Thirty-nine Weeks Ended
			October 29, 2022						October 30, 2021						October 29, 2022						October 30, 2021
			(in thousands)
Net sales:
South			$	183,536					$	194,081					$	466,276					$	524,449
Northeast			108,404						129,308						255,913						309,284
West			61,101						80,103						163,644						202,180
Midwest			62,337						71,482						145,168						180,375
International and other (1)			93,742						83,251						221,354						191,273
Total net sales			$	509,120					$	558,225					$	1,252,355					$	1,407,561

____________________________________________

(1)Includes retail and e-commerce sales in Canada and Puerto Rico, wholesale and franchisee sales, and certain amounts earned under the Company’s private label credit card program.

The Company recognizes revenue, including shipping and handling fees billed to customers, upon purchase at the Company’s retail stores or when received by the customer if the product was purchased via e-commerce, net of coupon redemptions and anticipated sales returns. The Company deferred sales of $8.9 million, $3.6 million, and $8.8 million within Accrued expenses and other current liabilities as of October 29, 2022, January 29, 2022, and October 30, 2021, respectively, based upon estimated time of delivery, at which point control passes to the customer. Sales tax collected from customers is excluded from revenue.

For the sale of goods with a right of return, the Company recognizes revenue for the consideration it expects to be entitled to and calculates an allowance for estimated sales returns based upon the Company’s sales return experience. Adjustments to the allowance for estimated sales returns in subsequent periods have not been material based on historical data, thereby reducing the uncertainty inherent in such estimates. The allowance for estimated sales returns, which is recorded in Accrued expenses and other current liabilities, was $2.2 million, $1.0 million, and $2.9 million as of October 29, 2022, January 29, 2022, and October 30, 2021, respectively.

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The Company’s private label credit card is issued to customers for use exclusively at The Children’s Place stores and online at www.childrensplace.com, www.gymboree.com, www.sugarandjade.com, and www.pjplace.com, and credit is extended to such customers by a third-party financial institution on a non-recourse basis to the Company. The private label credit card includes multiple performance obligations for the Company, including marketing and promoting the program on behalf of the bank and the operation of the loyalty rewards program. Included in the agreement with the third-party financial institution was an upfront bonus paid to the Company. The upfront bonus is recognized as revenue and allocated between brand and reward obligations. As the license of the Company’s brand is the predominant item in the performance obligation, the amount allocated to the brand obligation is recognized on a straight-line basis over the initial term. The amount allocated to the reward obligation is recognized on a point-in-time basis as redemptions under the loyalty program occur.

In measuring revenue and determining the consideration the Company is entitled to as part of a contract with a customer, the Company takes into account the related elements of variable consideration, such as additional bonuses, including profit-sharing, over the life of the private label credit card program. Similar to the upfront bonus, the usage-based royalties and bonuses are recognized as revenue and allocated between the brand and reward obligations. The amount allocated to the brand obligation is recognized on a straight-line basis over the initial term. The amount allocated to the reward obligation is recognized on a point-in-time basis as redemptions under the loyalty program occur. In addition, the annual profit-sharing amount is estimated and recognized quarterly within an annual period when earned. The additional bonuses are amortized over the contract term based on anticipated progress against future targets and level of risk associated with achieving the targets.

The Company has a points-based customer loyalty program in which customers earn points based on purchases and other promotional activities. These points can be redeemed for coupons to discount future purchases. A contract liability is estimated based on the standalone selling price of benefits earned by customers through the program and the related redemption experience under the program. The value of each point earned is recorded as deferred revenue and is included within Accrued expenses and other current liabilities. The total contract liabilities related to this program were $2.0 million, $5.0 million, and $6.0 million as of October 29, 2022, January 29, 2022, and October 30, 2021, respectively.

The Company’s policy with respect to gift cards is to record revenue as and when the gift cards are redeemed for merchandise. The Company recognizes gift card breakage income in proportion to the pattern of rights exercised by the customer when the Company expects to be entitled to breakage and the Company determines that it does not have a legal obligation to remit the value of the unredeemed gift card to the relevant jurisdiction as unclaimed or abandoned property. Gift card breakage is recorded within Net sales. Prior to their redemption, gift cards are recorded as a liability within Accrued expenses and other current liabilities. The liability is estimated based on expected breakage that considers historical patterns of redemption. The gift card liability balance as of October 29, 2022, January 29, 2022, and October 30, 2021 was $11.2 million, $12.1 million, and $12.4 million, respectively. During Year-To-Date 2022, the Company recognized Net sales of $4.5 million related to the gift card liability balance that existed at January 29, 2022.

The Company has an international program of territorial agreements with franchisees. The Company generates revenues from the franchisees from the sale of product and, in certain cases, sales royalties. The Company records net sales and cost of goods sold on the sale of product to franchisees when the franchisee takes ownership of the product. The Company records net sales for royalties when the applicable franchisee sells the product to their customers. Under certain agreements, the Company receives a fee from each franchisee for exclusive territorial rights and based on the opening of new stores. The Company records these territorial fees as deferred revenue and amortizes the fee into net sales over the life of the territorial agreement.

3. INTANGIBLE ASSETS

The Company’s intangible assets were as follows:

												October 29, 2022
						Useful Life						Gross Amount						Accumulated Amortization						Net Amount
												(in thousands)
Gymboree tradename (1)						Indefinite						$	69,953					$	—					$	69,953
Crazy 8 tradename (1)						5 years						4,000						(2,862)						1,138
Customer databases (2)						3 years						3,000						(3,000)						—
Total intangibles												$	76,953					$	(5,862)					$	71,091

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

												January 29, 2022
						Useful Life						Gross Amount						Accumulated Amortization						Net Amount
												(in thousands)
Gymboree tradename (1)						Indefinite						$	69,953					$	—					$	69,953
Crazy 8 tradename (1)						5 years						4,000						(2,261)						1,739
Customer databases (2)						3 years						3,000						(2,827)						173
Total intangibles												$	76,953					$	(5,088)					$	71,865

												October 30, 2021
						Useful Life						Gross Amount						Accumulated Amortization						Net Amount
												(in thousands)
Gymboree tradename (1)						Indefinite						$	69,953					$	—					$	69,953
Crazy 8 tradename (1)						5 years						4,000						(2,061)						1,939
Customer databases (2)						3 years						3,000						(2,578)						422
Total intangibles												$	76,953					$	(4,639)					$	72,314

____________________________________________

(1)Included within Tradenames, net on the Consolidated Balance Sheets.

(2)Included within Other assets on the Consolidated Balance Sheets.

4. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

									October 29, 2022						January 29, 2022						October 30, 2021
									(in thousands)
Property and equipment:
Land and land improvements									$	3,403					$	3,403					$	3,403
Building and improvements									36,187						36,045						36,045
Material handling equipment									69,897