The Children's Place may have misled investors about its future revenue prospects by failing to properly disclose the troubles it was having maintaing its exclusive marketing arrangement with Disney.

Theis is a securities fraud class action lawsuit against The Children's Place Retail Stores, Inc. and certain of its officers and directors.

Children's Place, through its subsidiaries, operates as a specialty retailer of merchandise for children from newborn to ten years of age. Children's Place designs, contracts to manufacture, and sells apparel and accessories, and other children's-oriented merchandise under The Children's Place and Disney Store brand names.

The class action complaint alleges that Children's Place issued materially false and misleading statements that misrepresented and failed to disclose:

(i) that Children's Place was experiencing difficulties meeting certain deadlines for the remodeling and maintenance of its Disney stores and Disney was not satisfied with Children's Place's performance under their agreement;

(ii) that, as a result of Children's Place's performance issues, the company's exclusive ability to contract, manufacture, source, offer and sell merchandise featuring Disney-branded characters, past, present and future was at risk of being materially altered and/or lost completely;

and (iii) as a result of the foregoing, Children's Place lacked a reasonable basis for their positive statements about the Children's Place, its prospects and revenue growth.

On August 23, 2007, Children's Place announced, among other things, its preliminary fiscal 2007 second quarter financial results, Children's Place's revised earnings guidance and an update regarding its license agreement with the Walt Disney Company. Specifically, Children's Place revealed that it will no longer have an exclusive license agreement with Disney and that certain executives violated Children's Place policies and procedures with regard to Children's Place's stock option granting process.

In response to this announcement, shares of the Children's Place's common stock fell $5.59 per share, or 17%, to close at $27.43 per share, on heavy trading volume.