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It sounded like big news for The Children's Place Retail Stores, Inc.: a 47-percent jump in sales for the month of September 2003, along with a 30-percent rise in same-store sales. But further scrutiny of the numbers showed the real reason for the company's sudden uptick. The year before, same-store sales for the month had plunged by 30 percent. The reason? Poor demand planning and a non-performing supply chain.
In the space of a year, The Children's Place had gotten its act together. And things have been looking up for the specialty retailer ever since. Net sales for fiscal 2003, ending Jan. 31, 2004, were up 19 percent, to $797.9m. Same-store sales rose 4 percent, versus a 16-percent drop in the previous year. And in February of this year, same-store sales were up 22 percent.
Children's Place executives and outside observers credit higher-quality merchandise and lower prices for much of the rise. But an enhanced supply chain was also a factor. In recent months, the retailer has been stuck with a lot less unwanted product. And shipments have been getting to the stores on schedule. All this at a time of feverish expansion in the number of retail outlets.
Headquartered in Secaucus, N.J., The Children's Place sells apparel and accessories for children from newborn to 10 years old. As of Jan. 31, it had 691 stores, including 649 in the U.S. and 42 in Canada. The company added 126 stores in fiscal 2002 alone, another 50 or so last year, and continues to expand its network at the rate of around 30 percent a year. Most stores are located in major regional malls, although something less than a quarter can be found in strip malls, outlet centers and street locations.
The competition is tough. Direct rivals include the much bigger Gap Inc., with its Gap Kids, baby Gap and Old Navy units; Gymboree Corp.; and, until recently, the Kids "R" Us division of Toys "R" Us, which announced plans to shut down the under-performing chain late last year. But The Children's Place doesn't just vie with these boutique retailers, which stress quality, atmosphere and personal attention. In addition to traditional department stores such as Sears, Roebuck & Co. and J.C. Penney Co., it must compete on price and selection with that merchandising colossus, Wal-Mart Stores Inc., and other big-box retailers.
So far, the company seems to be managing this difficult balancing act. And it has done so with just two distribution centers in the U.S., and one in Canada. The key is a focus on sophisticated material handling equipment, a state-of-the-art warehouse management system, and cross-docking to minimize expensive inventories.
As a distinct brand, The Children's Place traces its roots to the mid-1980s. But it wasn't until 1990 that the present owner bought the company from retailing giant Federated Department Stores Inc.--whose more familiar names include Macy's and Bloomingdale's--and took it private. At that point, The Children's Place launched a new strategy of selling private-label merchandise, much of it sourced in Southeast Asia. Today, the retailer buys product from more than 30 countries, according to Bob Scatko, senior director of IT logistics.
The Secaucus D.C. was established in mid-1999, and for nearly two years was the only one to support the company's fast- growing network of stores. (At the time, the company had around 300 outlets.) With some 150,000 square feet of warehousing space, the facility was highly sophisticated from day one. It featured a pick-to-light system, three automated receiving doors, nearly a dozen automated shipping doors, and 18 secondary product-sortation lanes for items to be palletized and placed in inventory locations.
"From a retailer's perspective, it was one of the more heavily automated facilities," says David Landau, director of retail solutions for Atlanta-based Manhattan Associates Inc., which provided the warehouse management system (WMS) for The Children's Place.
Srinivas Pai, Manhattan's senior manager of project services, says the vendor's relationship with the company dates back to 1998, before the opening of the Secaucus D.C. "They were one of our first retail customers," he says.
The Secaucus implementation required Manhattan to customize its product in order to mesh with the facility's high level of automation. Specifically, the WMS had to tie into the pick-to-light system, mechanized sorters and extensive cross-docking operation, Pai says. Other "tweaks," according to Scatko, included adjusting to the customer's practice of source-labeling cases for ease of use in conveyor systems, and various processes related to quality assurance.
|"It has improved efficiency on the operational side. And it's provided management insight into what's going on, on a daily basis."|
- Bob Scatko of The Children's Place
|The Children's Place at a Glance|
|The company: a specialty retailer of apparel and accessories for children, ages newborn to 10.|
Number of stores: 691 as of Jan. 31, 2004, including 649 in the U.S. and 42 in Canada.
Headquarters: Secaucus, N.J.
Top executives: Ezra Dabah, chairman and chief executive officer; Neal Goldberg, president
Financial results: For fiscal year 2003 (ending Jan. 31, 2004), net sales of $797.9m, up from $671.4m in the prior year; net income of $23m, up from $8.9m; increase in same-store sales of 4 percent, versus a 16-percent decline in previous year.
Employees: approximately 10,200
Supply chain: Three physical distribution centers in Secaucus, N.J.; Ontario, Calif. and Mississauga, Ont., in addition to a direct-to-consumer pipeline generated by sales over its web site. Most product is sourced in Southeast Asia, entering the U.S. through the Port of Long Beach, Calif.
Warehouse management system: Manhattan Associates, Inc.
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