Carter's posts 1.2 percent rise in Q1 net sales

Carter’s first quarter net sales increased 8.7 million dollars or 1.2 percent to 732.8 million dollars, reflecting growth in the company’s domestic retail and wholesale sales, which was partially offset by a decline in International sales.

“We achieved our sales and earnings objectives in the first quarter,” said Michael D. Casey, Chairman and Chief Executive Officer of Carter’s in a media statement, adding, “Stronger than planned demand in our wholesale and ecommerce businesses helped to offset the effects of delayed tax refunds to families with young children and a later Easter holiday.”

Skip Hop contributes 10.4mn dollars

The company said, Skip Hop, a lifestyle brand for families with young children acquired by the company in February 2017, contributed 10.4 million dollars to consolidated net sales in the first quarter of fiscal 2017 and changes in foreign currency exchange rates in the first quarter favourably affected consolidated net sales by 1.4 million dollars or 0.2 percent. On a constant currency basis, consolidated net sales increased 1 percent.

Operating income decreased 14.4 million dollars or 15.5 percent to 78.6 million dollars compared to 93 million dollars in the first quarter of fiscal 2016. Operating margin decreased 210 basis points to 10.7 percent compared to 12.8 percent last year. Adjusted operating income decreased 13.9 million dollars or 14.8 percent to 80.1 million dollars compared to 94 million dollars in the same quarter of fiscal 2016. Adjusted operating margin decreased 210 basis points to 10.9 percent compared to 13 percent.

Net income decreased 7.3 million dollars or 13.6 percent to 46.7 million dollars or 0.95 dollar per diluted share, compared to 54 million dollars or 1.04 dollars per diluted share, in the first quarter of fiscal 2016. Adjusted net income decreased 7 million dollars or 12.8 percent to 47.6 million dollars. Adjusted earnings per diluted share decreased 7.8 percent to 0.97 dollar, compared to 1.05 dollars in the first quarter of fiscal 2016.

Segment-wise performance in the first quarter

At the beginning of fiscal 2017, the company combined Carter’s retail and OshKosh retail into a single US retail operating segment and Carter’s wholesale and OshKosh wholesale into a single US wholesale operating segment.

The US retail segment sales increased 9.7 million dollars or 2.7 percent to 363.8 million dollars, while comparable sales decreased 3.5 percent comprised of a stores comparable sales decline of 10.4 percent, partially offset by ecommerce comparable sales growth of 19.9 percent. Skip Hop contributed 0.4 million dollars to segment net sales in the first quarter of fiscal 2017.

In the first quarter, the company opened 15 stores and closed five stores in the United States. As of the end of the first quarter, the company operated 802 retail stores in the United States, comprised of 622 stand-alone and 180 dual-branded locations.

US wholesale segment net sales increased 0.5 million dollars or 0.2 percent to 292.6 million dollars, reflecting the benefit of the Skip Hop acquisition offset by a decrease in demand for Carter’s and OshKosh products. Skip Hop contributed 6.8 million dollars to segment net sales in the quarter.

International segment net sales decreased 1.5 million dollars or 1.9 percent to 76.4 million dollars, reflecting decreased wholesale demand, partially offset by growth in retail sales in Canada, increased ecommerce sales in China, and the benefit of the Skip Hop acquisition. Skip Hop contributed 3.3 million dollars to segment net sales in the first quarter of fiscal 2017.

Changes in foreign currency exchange rates favourably affected international segment net sales by 1.4 million dollars or 1.8 percent. On a constant currency basis, international segment net sales declined 3.7 percent.

For the quarter, Canada retail comparable sales decreased 8 percent, comprised of a stores comparable sales decline of 11.7 percent, partially offset by ecommerce comparable sales growth of 40.1 percent. The company closed one store in Canada during the quarter and as of the end of the first quarter, Carter’s operated 163 retail stores in Canada.

Projects sales increase between 4 to 6 percent in FY17

For fiscal 2017, the company projects net sales to increase approximately 4 percent to 6 percent over fiscal 2016 and adjusted earnings per diluted share to increase approximately 8 percent to 10 percent compared to adjusted earnings per diluted share of 5.14 dollars in fiscal 2016.

For the second quarter of fiscal 2017, the company projects net sales to increase approximately 6percent to 8 percent and adjusted earnings per diluted share to be approximately 0.65 dollar to 0.70 dollar compared to 0.72 dollar in the second quarter of fiscal 2016. This projection contemplates net sales growth in all segments and increased spending to support the company’s long-term growth strategies compared to the prior-year period.

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