Founded in 1865, Carter's, Inc. has established itself as the largest branded marketer of young children's apparel in North America. With iconic brands like Carters, OshKosh BGosh, and Skip Hop under its umbrella, the company has navigated the ever-changing retail landscape, adapting to the needs of families with young children.
Company Overview
Carters, the company's flagship brand, has been recognized and trusted by consumers for its high-quality apparel and accessories for children from newborn to size 14. Acquired in 2005, OshKosh BGosh is another well-known brand that focuses on playwear for toddlers and young children. The companys 2017 acquisition of Skip Hop, a leading young children's lifestyle brand, has further strengthened its portfolio. In the early 2000s, Carter's underwent a significant turnaround effort to revitalize the Carter's brand, which involved closing underperforming stores, improving product quality and design, and investing in marketing. This strategic move helped set the stage for the company's future growth and success.
Throughout its long history, Carter's has built a multichannel, global business model that includes retail stores, e-commerce, and wholesale distribution capabilities, enabling it to reach a broad range of consumers around the world. The company has continued to expand its brand portfolio, with the launch of the Little Planet brand in 2021, further solidifying its position in the young children's apparel market.
As of September 28, 2024, Carter's operated 1,040 company-owned retail stores in North America, eCommerce websites, approximately 19,350 wholesale locations in North America, as well as international wholesale accounts and licensees who operate in over 1,100 locations outside of North America in over 90 countries. The company's brands include Carter's, OshKosh B'gosh, Skip Hop, Child of Mine, Just One You, Simple Joys, and Little Planet.
Financials
Over the years, Carter's has demonstrated its ability to weather various economic conditions. In 2020, the company weathered the challenges posed by the COVID-19 pandemic, reporting net income of $109.72 million and operating cash flow of $588.49 million. Despite the disruptions, Carter's managed to maintain its strong financial position, with a debt-to-equity ratio of 0.63 and a current ratio of 2.46 as of the end of 2020.
In 2021, the company continued its resilient performance, reporting net income of $339.75 million and operating cash flow of $268.26 million. The company's balance sheet remained healthy, with a debt-to-equity ratio of 0.58 and a current ratio of 2.65 as of the end of 2021.
However, the challenging macroeconomic environment in 2022, marked by persistent inflationary pressures and declining consumer confidence, has impacted Carter's financial results. For the fiscal year ended December 30, 2023, the company reported net income of $232.50 million and operating cash flow of $529.13 million. The company's balance sheet remained strong, with a debt-to-equity ratio of 0.60 and a current ratio of 2.21 as of the end of 2023. The company also reported free cash flow of $469.27 million for the 2023 fiscal year.
Liquidity
In the third quarter of 2024, Carter's reported consolidated net sales of $758.5 million, a 4.2% decrease compared to the prior-year period. The company's U.S. Retail segment experienced a 6% decline in sales, while the U.S. Wholesale and International segments saw sales remain comparable to the prior-year period and decline 9%, respectively. Adjusted earnings per share for the quarter were $1.64, down 11% year-over-year.
For the most recent quarter ended September 28, 2024, Carter's reported revenue of $758.46 million, net income of $58.32 million, operating cash flow of -$80.37 million, and free cash flow of -$95.69 million. The year-over-year revenue growth for this quarter was -4.2%.
As of September 28, 2024, the company had no outstanding borrowings under its secured revolving credit facility, exclusive of $5.70 million of outstanding letters of credit. The credit facility provides for an aggregate credit line of $850 million. The company's quick ratio as of December 31, 2023, was 0.96.
Recent Performance and Future Outlook
Despite the challenges, Carter's has remained focused on executing its growth strategies, which include elevating the style and value of its product offerings, improving its marketing capabilities, and leveraging its unparalleled multi-channel market presence. The company's investments in pricing and brand marketing in the third quarter of 2024 have helped to improve customer acquisition and retention, as evidenced by the positive trends in the company's U.S. Retail segment.
Looking ahead, Carter's guidance for the full-year 2024 includes net sales in the range of $2.785 billion to $2.825 billion and adjusted operating income in the range of $240 million to $260 million. The company has raised its expected adjusted EPS to $4.70 to $5.15, up from their previous guidance, due to a lower effective tax rate and lower net interest expense.
For the fourth quarter of 2024, Carter's is guiding for net sales in the range of $800 million to $840 million. In their U.S. retail segment, the company is planning for total sales to be down in the high single-digits to down low double digits, with a comparable sales decline of 9% to 12%. In their U.S. wholesale segment, Carter's is planning for sales to be up in the mid-single digits to high single digits compared to last year. For their international segment, the company is planning fourth quarter sales to be down in the mid to high-single digit range. Carter's is planning adjusted operating income in the range of $70 million to $90 million and adjusted EPS in the range of $1.32 to $1.72 for the fourth quarter.
In terms of geographic markets, the company's operations in Canada and Mexico are expected to contribute over 80% of its international sales in fiscal 2024. Carter's is forecasting high single-digit growth in Mexico this year, but a high single-digit decrease in sales in Canada.
Despite the near-term challenges, Carter's strong brand recognition, diversified product portfolio, and multi-channel distribution capabilities continue to position the company for long-term growth. As the company navigates the dynamic market environment, investors will be closely monitoring its ability to execute its strategic initiatives and maintain its position as the leading branded marketer of young children's apparel in North America.