On July 26, 2024, Carter's Inc (CRI, Financial) released its 8-K filing for the second quarter of fiscal 2024. Carter's Inc, a leading marketer of apparel for babies and children, reported mixed results with earnings per share (EPS) surpassing analyst estimates, while revenue fell short.
Company Overview
Carter's Inc makes apparel for babies and children under brand names including Carter's and OshKosh B'gosh. It sells its products through a multi-channel business model, which includes retail stores, eCommerce, and wholesale sales channels, as well as retail omnichannel capabilities in the United States and Canada, which enables it to reach a broad range of consumers around the world. The company operates in three segments: U.S. Retail, U.S. Wholesale, and International. The majority of Carter's sales are in the U.S. and through Carter's brand. The company predominantly sources products through contract manufacturers in Asia. It has multiple distribution centers in the U.S., in addition to distribution centers in Canada and Asia that serve international customers.
Performance and Challenges
For the second quarter of fiscal 2024, Carter's Inc reported net sales of $564 million, a 6% decrease from $600 million in Q2 2023. This decline was attributed to macroeconomic factors such as inflation, elevated interest rates, higher consumer debt levels, and declining consumer confidence, which negatively affected demand.
Despite these challenges, the company achieved a diluted EPS of $0.76, surpassing the analyst estimate of $0.47. This was an improvement from $0.64 in the same quarter last year. The operating margin also increased to 7.0% from 6.3% in Q2 2023, reflecting lower inbound freight and product costs.
Financial Achievements
Carter's Inc's financial achievements in Q2 2024 include:
- Operating income increased by 5% to $39.5 million, compared to $37.6 million in Q2 2023.
- Net income rose to $27.6 million from $23.9 million in the same period last year.
- Distributed $54 million to shareholders through dividends and share repurchases.
These achievements are significant as they demonstrate the company's ability to maintain profitability and return capital to shareholders despite a challenging economic environment.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Net Sales | $564 million | $600 million |
| Operating Income | $39.5 million | $37.6 million |
| Net Income | $27.6 million | $23.9 million |
| Diluted EPS | $0.76 | $0.64 |
Analysis and Commentary
Despite a decline in net sales, Carter's Inc managed to improve its profitability metrics, which is a positive sign for value investors. The company's ability to control costs and improve margins amidst a highly promotional market indicates strong operational efficiency.
“We achieved our second quarter sales and earnings objectives,” said Michael D. Casey, Chairman and Chief Executive Officer. “Despite a highly promotional market, we achieved a record gross profit margin which reflects the strength of our product offerings, and lower inbound freight and product costs.”
Outlook
Looking ahead, Carter's Inc has adjusted its full-year fiscal 2024 outlook, projecting net sales between $2.785 billion and $2.825 billion, and adjusted diluted EPS between $4.60 and $5.05. The company plans to focus on elevating the style and value of its product offerings, deepening customer relationships, and leveraging its multi-channel market presence to extend the reach of its brands.
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Explore the complete 8-K earnings release (here) from Carter's Inc for further details.
