Carter’s net sales rise 4.4 percent in Q2

Carter’s second quarter net sales increased 26.7 million dollars, or 4.4 percent to 639.5 million dollars, reflecting growth in the company’s US Carter’s and OshKosh retail businesses as well as in its international segment. Changes in foreign currency exchange rates during the quarter negatively impacted consolidated net sales by 2.5 million dollars or 0.4 percent. On a constant currency basis, consolidated net sales increased 4.8 percent.

“We achieved our sales and earnings objectives in the second quarter,” said Michael D. Casey, Chairman and Chief Executive Officer, adding, “Our sales growth was driven by higher demand in our retail and international businesses. We are expecting good growth in the balance of the year, and have revised our previous forecasts to reflect the current outlook for our wholesale and international businesses.”

Consolidated second quarter results

Operating income in the second quarter increased 1.3 million dollars or 2.1 percent to 63.2 million dollars, compared to 62 million in the second quarter of fiscal 2015. Operating margin decreased approximately 20 basis points to 9.9 percent compared to 10.1 percent in the second quarter of fiscal 2015. Adjusted operating income decreased 1.4 million dollars or 2.1 percent to 64 million dollars.

Net income increased 0.1 million dollars or 0.3 percent to 36.2 million dollars, or 0.71 dollar per diluted share, compared to 36.1 million dollars or 0.68 dollar per diluted share, in the second quarter of fiscal 2015. Adjusted net income decreased 2.1 million dollars or 5.4 percent to 36.7 million dollars. Adjusted earnings per diluted share decreased 1.7 percent to 0.72 dollar compared to 0.73 dollar in the second quarter of fiscal 2015.

Review of the first half of results

Net sales increased 66 million dollars or 5.1 percent to 1.36 billion dollars. Changes in foreign currency exchange rates negatively impacted consolidated net sales by 7 million dollars or 0.5 percent. On a constant currency basis, consolidated net sales increased 5.6 percent.

Operating income increased 9.8 million dollars or 6.7 percent to 156.3 million dollars compared to 146.5 million dollars in the first half of fiscal 2015. Operating margin increased approximately 20 basis points to 11.5 percent. Adjusted operating income increased 5.3 million dollars or 3.5 percent to 158 million dollars. Net income increased 4.3 million dollars or 5 percent to 90.2 million dollars or 1.75 dollars per diluted share. Adjusted net income increased 0.8 million dollars or 0.8 percent to 91.3 million dollars compared to 90.5 million dollars in the first half of fiscal 2015. Adjusted earnings per diluted share increased 3.9 percent to 1.77 dollars compared to 1.70 dollars in the first half of fiscal 2015.

Business segment analysis

During the second quarter and first half of fiscal 2016, the company believes that Carter’s and OshKosh retail comparable sales were negatively affected by lower demand from international consumers shopping in its US stores and on its website.

Carter’s retail segment sales increased 26.9 million dollars or 10.9 percent, to 273.8 million dollars in the second quarter. Carter’s retail comparable sales increased 4.4 percent, comprised of ecommerce comparable sales growth of 17.4 percent and a stores comparable sales increase of 1.4 percent. The company opened 15 Carter’s stores and closed one store in the United States.

In the first half, Carter’s retail segment sales increased 41.4 million dollars or 8.2 percent to 546.2 million dollars. Carter’s retail comparable sales increased 2.1 percent comprised of ecommerce comparable sales growth of 16.3 percent, partially offset by a stores comparable sales decline of 1.4 percent. In the first half, the company opened 31 Carter’s stores and closed one store in the United States. The company operated 624 Carter’s stores in the United States as of July 2, 2016.

Second quarter Carter’s wholesale segment net sales decreased 2.8 percent and 1 percent in the first half. OshKosh retail segment net sales increased 5.5 million dollars or 7.5 percent in the second quarter. Comparable sales declined 1.3 oercent comprised of a stores comparable sales decline of 5.8 percent partially offset by ecommerce comparable sales growth of 17.6 percent. The company opened 12 OshKosh stores in the United States and closed one store.

In the first half, OshKosh retail segment net sales increased 14.2 million dollars or 9.7 percent to 160.7 million dollars. OshKosh retail comparable sales increased 0.7 percent comprised of ecommerce comparable sales growth of 18.8 percent partially offset by a stores comparable sales decline of 3.8 percent. The company opened 23 OshKosh stores in the United States and closed two stores. The company operated 262 OshKosh stores in the United States as of July 2, 2016.

OshKosh wholesale segment net sales decreased 4.9 million dollars or 34.4 percent to 9.4 million dollars. In the first half, OshKosh wholesale segment net sales decreased 9.1 million dollars or 29.8 percent to 21.3 million dollars. Second quarter international segment net sales increased 5.3 million dollars or 8 percent to 71.6 million dollars driven by growth in the company’s retail businesses in Canada and new eCommerce sales in China, partially offset by a decline in sales to international wholesale customers outside Canada and unfavorable foreign currency exchange rates. In the first half, net sales increased 14.6 million dollars or 10.8 percent to 149.5 million dollars.

Dividend and outlook for 2016

During the second quarter, the company paid a cash dividend of 0.33 dollar per share totaling 16.6 million dollars. In the first half, the company paid cash dividends of 0.66 dollar per share totaling 33.7 million dollars.

For the third quarter, the company projects net sales will increase approximately 6 percent to 7 percent and adjusted diluted earnings per share will increase approximately 6 percent to 10 percent. For fiscal 2016, the company now projects net sales will increase approximately 5 percent to 6 percent compared to fiscal 2015 and adjusted diluted earnings per share will increase approximately 10 percent.

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