Carter’s projects persistent inflationary pressures to impact holiday sales
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Carter’s, Inc. net sales decreased 72 million dollars or 8.1 percent to 818.6 million dollars, driven by declines in the company’s U.S. retail, international and U.S. wholesale sales of 12.3 percent, 6.7 percent and 1.9 percent, respectively.
Commenting on the third quarter results, Michael D. Casey, chairman and CEO said: “Historic and persistent inflation has continued to weigh on demand for our brands, and is adversely affecting many families raising young children.”
“The early indications suggest that holiday shopping may not be as robust as last year. Accordingly, we have widened the range of our sales and earnings forecasts for the fourth quarter and year to reflect current market conditions,” Casey added.
Highlights of Carters' Q3 performance
The company said in a release that U.S. retail comparable net sales declined 11 percent. Operating income decreased 32.4 million dollars to 91.6 million dollars, while operating margin was 11.2 percent compared to 13.9 percent in the prior-year period. Adjusted operating income decreased 32.3 million dollars to 91.6 million dollars and adjusted operating margin was 11.2 percent compared to 13.9 percent in the prior year period.
Net income for the quarter reached 65 million dollars or 1.67 dollars per diluted share, compared to 85 million dollars or 1.93 dollars per diluted share, in the third quarter of fiscal 2021. Adjusted net income was 65 million dollars compared to 84.9 million dollars in the third quarter of fiscal 2021, while adjusted earnings per diluted share was 1.67 dollars compared to 1.93 dollars in the prior-year quarter.
Review of Carters’ performance over the first three quarters of FY22
Net sales decreased 123.7 million dollars or 5.1 percent to 2.30 billion dollars, driven by a decline in the company’s U.S. retail segment, partially offset by growth in its U.S. wholesale and international segments. U.S. retail net sales declined 11 percent.
The performance reflected inflationary pressures driving lower consumer demand and the comparison to the prior year period, which benefited from significant and unprecedented government stimulus payments made to consumers in response to the pandemic, and a lower store count related to the closure of low-margin stores in 2021.
U.S. retail comparable net sales declined 9 percent, while U.S. wholesale and international net sales increased by 1.3 percent and 2.6 percent, respectively.
Operating margin for the period was 11.7 percent compared to 14.8 percent in the prior year period and adjusted operating income decreased 93.3 million dollars to 269.6 million dollars compared to 362.9 million dollars in the first three quarters of fiscal 2021. Adjusted operating margin was 11.7 percent compared to 15 percent in the prior year period.
Net income was 169.9 million dollars or 4.26 dollars per diluted share, compared to 242.8 million dollars or 5.51 dollars per diluted share, in the first three quarters of fiscal 2021. Adjusted net income was 185 million dollars compared to 245.6 million dollars in the first three quarters of fiscal 2021. Adjusted earnings per diluted share was 4.64 dollars compared to 5.58 dollars in the first three quarters of fiscal 2021.
Carters’ Q4 and FY22 outlook reflect inflationary pressures
The company added that the outlook for the fourth quarter of fiscal 2022 reflects continued challenging macroeconomic environment; U.S. retail comparable sales decline of approximately 10 percent to 15 percent; lower U.S. wholesale sales, reflecting risk of lower demand and supply chain delays; and lower international sales, driven largely by lower demand in Canada and lower wholesale demand.
For the fourth quarter of fiscal 2022, the company projects net sales of approximately 845 million dollars to 885 million dollars; adjusted operating income of approximately 85 million dollars to 115 million dollars and adjusted diluted earnings per share of approximately 1.40 dollars to 2 dollars compared to 2.31 dollars in the fourth quarter of fiscal 2021.
For fiscal year 2022, the company projects net sales of approximately 3.145 billion dollars to 3.185 billion dollars; adjusted operating income of approximately 355 million dollars to 385 million dollars compared to 500.8 million dollars in fiscal 2021; and adjusted diluted earnings per share of approximately 6.05 dollars to 6.65 dollars, compared to 7.87 dollars in fiscal 2021.