Children’s Place (NASDAQ: PLCE) stock price has imploded as it crashed by more than 87% from its highest point in October 2018 and is hovering near its lowest point since 2020. It has crashed by almost 10% in the past month.

Children’s Place, a leading omnichannel retailer for children and baby items, has come under pressure in the past few years. The most recent unaudited quarterly results showed that its net sales will be between $454 million and $456 million in Q4. Its previous guidance was between $460M and $465M.

The company has been facing numerous challenges in the past few years as competition in the industry has risen. Many families are using popular platforms like Amazon, Etsy, and other specialised companies to buy their children’s items.

It is also having liquidity problems as it ended the quarter with just $13 million in cash and $32 million in revolving credit. It is now working with its investors, including Centerview Partners to raise additional capital.

Further, like other retailers, it went through a period of high inventories as it emerged from the COVID-19 pandemic. Its inventory levels have recently dropped to about 20%.

Most investors believe that Children’s Place stock price has more downside in the near term. For one, the company’s short interest has jumped to 46% as the number of shares sold short has risen to over 2.07 million.

Short interest refers to the number of shares that have been sold short by investors. This means that these short sellers have benefited more than investors. For example, investors who spent $10,000 in Children’s Place in 2018 received 64 shares. Today, these shares are worth just $1,230.

Children’s Place will likely go through challenges as it has substantial debt. Its total debt has jumped to more than $551 million. It paid $85 million in maturities in 2023 and faces another $40 million this year.

PLCE chart by TradingView

Turning to the weekly chart, we see that the PLCE stock price crashed to a low of $8.75 last week. That was an important level since it was the lowest point in March 2020. The shares have moved below all moving averages, signaling that bears are in control. It has moved below the Ichimoku cloud indicator.

Therefore, the path of the least resistance for the stock is downwards, with the next level to watch being this month’s low of $8.75. A break below that level will likely see it crash to the next psychological point at $5.

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