Gymboree could bring in big bucks when it relaunches under new owner The Children’s Place next spring.
“Management is excited for the Spring 2020 relaunch of Gymboree, which offers higher [average unit retail] and higher-margin product that is focused on ‘bow-to-toe’ outfitting,” Susan Anderson, analyst at B. Riley FBR, said at the 5th Annual B. Riley FBR Consumer and Media Conference at The Sofitel Hotel in Manhattan, where executives from The Children’s Place spoke Wednesday.
Per a B. Riley Best Ideas report, Anderson said that executives at The Children’s Place believe it “should be able to recapture $140 million in Gymboree sales, which we believe could also prove conservative.”
Anderson, who has a “Buy” rating on shares of The Children’s Place, said her team’s retail checks indicate that children’s retailer is showing “rational promotions,” and that management has “built in more than enough cushion” to take into account possible higher inventories.
Gymboree filed its second Chapter 11 petition in as many years in January, closing 800 stores. The bankruptcy, which ended in a liquidation, also saw the shuttering of more than 800 Gymboree doors. The Children’s Place acquired the brand and intellectual property assets in April for $76 million. It didn’t acquire any stores or inventory. It wasn’t immediately clear whether The Children’s Place plans to relaunch within Children’s Place stores or convert Children’s Place doors to the Gymboree nameplate.
Prior to the bankruptcy and acquisition, the two children’s retailers were former foes. And when the two retailers were jockeying for market share, about 70 percent of their shopping mall doors saw an overlap.
Gymboree was saddled with too much debt stemming from a 2010 leveraged buyout for $1.8 billion when it was acquired by Bain Capital. That deal also saw the opening of about 1,300 doors, which stretched its balance sheet past its breaking point and culminated in its first bankruptcy filing in 2017. Gymboree, still over-leveraged, said in December 2018 that it would close unprofitable doors and find a buyer.
The fourth quarter timing sets Children’s Place up well, Anderson said, because it will cycle the year-ago liquidation of Gymboree stores. Children’s Place executives, during a fourth-quarter conference call in 2018 when they announced the company’s acquisition of Gymboree, said they saw an opportunity to capture $600 million in market share that Gymboree exited when its doors closed for good.