Carter’s Q3 net sales rise 6.1 percent

Carter’s third quarter net sales increased 51.6 million dollars or 6.1percent, to 901.4 million dollars, reflecting growth in the company’s US Carter’s and OshKosh retail businesses, Carter’s wholesale business, and international segment. The company said, changes in foreign currency exchange rates favourably affected consolidated net sales by 0.3 million dollars or 0.1percent. On a constant currency basis, consolidated net sales increased 6percent.

“In the third quarter, we achieved a record level of sales and earnings with sales growth in all channels of distribution,” said Michael D. Casey, Chairman and CEO, adding, “Our performance in the quarter reflects significant growth in online sales and higher demand from international customers. Given the current trends in our business, we expect to achieve our growth objectives this year and 28th consecutive year of sales growth.”

Highlights of the third quarter results

Operating income increased 0.7 million dollars or 0.5 percent to 130.9 million dollars, compared to 130.2 million dollars in the third quarter of fiscal 2015. Adjusted operating income increased 0.2 million dollars or 0.2 percent to 131.4 million dollars. Net income increased 1.5 million dollars or 1.9 percent to 80.8 million dollars or 1.60 dollars per diluted share. Adjusted net income increased 1.2 million dollars or 1.5 percent to 81.1 million dollars. Adjusted earnings per diluted share increased 6.2 percent to 1.61 dollars.

Net sales increased 117.6 million dollars or 5.5 percent to 2.26 billion dollars, reflecting growth in the company’s US Carter’s and OshKosh retail businesses, Carter’s wholesale business, and international segment. Changes in foreign currency exchange rates negatively affected consolidated net sales in the first three quarters by 6.7 million dollars or 0.3 percent. On a constant currency basis, consolidated net sales increased 5.8 percent.

Operating income increased 3.8 percent to 287.1 million dollars and adjusted operating income increased 1.9 percent. Net income increased 5.8 million dollars or 3.5 percent to 171 million dollars or 3.34 dollars per diluted share. Adjusted net income increased 2 million dollars or 1.2 percent to 172.4 million dollars. Adjusted earnings per diluted share increased 4.7 percent to 3.37 dollars.

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, which the Company believes was influenced by the strength of the US dollar relative to other currencies. However, the company believes these effects were less pronounced in the third quarter as its US retail business experienced improvement in demand from international consumers.

Review of Carter’s retail and wholesale segment sales

Carter’s third quarter retail segment sales increased 19.8 million dollars or 6.7 percent and retail comparable sales increased 2.1 percent, comprised of ecommerce comparable sales growth of 25.2 percent, partially offset by a stores comparable sales decrease of 4.1 percent. In the third quarter, the company opened 13 Carter’s stores and closed one store in the United States.

Retail segment sales for the three quarters increased 61.2 million dollars or 7.7 percent to 860.9 million dollars. Carter’s retail comparable sales increased 2.1 percent, comprised of ecommerce comparable sales growth of 19.7 percent, partially offset by a stores comparable sales decline of 2.4 percent. In the first three quarters, the company opened 44 Carter’s stores and closed two stores in the United States. The Company operated 636 Carter’s stores in the United States as of October 1, 2016.

Carter’s third quarter, wholesale segment net sales increased 12.7 million dollars or 3.7 percent to 356.3 million dollars. In the first three quarters, wholesale segment net sales increased 17.5 million dollars or 2.1 percent to 842.1 million dollars.

OshKosh retail and wholesale segment results

OshKosh retail segment net sales increased 8.7 million dollars or 8.9 percent, to 107 million dollars in the third quarter. Retail comparable sales increased 4.1 percent, comprised of ecommerce comparable sales growth of 34.8 percent, partially offset by a stores comparable sales decline of 3 percent. In the third quarter, the company opened seven OshKosh stores in the United States and closed two stores.

In the first three quarters, OshKosh retail segment net sales increased 22.9 million dollars or 9.4 percent to 267.7 million dollars and comparable sales increased 2.1 percent, comprised of ecommerce comparable sales growth of 24.9 percent, partially offset by a stores comparable sales decline of 3.5 percent. In the first three quarters, the company opened 30 OshKosh stores in the United States and closed four stores. The company operated 267 OshKosh stores in the United States as of October 1, 2016.

OshKosh wholesale segment net sales decreased 1.3 million dollars or 7 percent in the third quarter to 17.5 million dollars. In the first three quarters, wholesale segment net sales decreased 10.4 million dollars or 21.1 percent to 38.8 million dollars.

International segment net sales increased 11.8 million dollars or 12.5 percent, to 106 million dollars, driven by growth in the company’s retail businesses in Canada, increased wholesale demand in international markets, and ecommerce sales in China. Changes in foreign currency exchange rates favourably affected international segment net sales by 0.3 million dollars or 0.3 percent. On a constant currency basis, international segment net sales increased 12.2 percent. For the third quarter, Canada retail comparable sales increased 1.6 percent, comprised of ecommerce comparable sales growth of 37.2 percent, partially offset by a stores comparable sales decline of 0.5 percent. In the third quarter, the company opened six stores in Canada.

International segment net sales in the first three quarters increased 26.3 million dollars or 11.5 percent to 255.5 million dollars, principally driven by growth in the company’s retail businesses in Canada, new ecommerce sales in China, and increased wholesale demand in international markets, partially offset by unfavourable foreign currency exchange rates. Canada retail comparable sales increased 7.2 percent comprised of stores comparable sales growth of 5.4 percent and ecommerce comparable sales growth of 37.3 percent. The company opened nine stores in Canada during these quarters. The company operated 156 stores in Canada as of October 1, 2016.

2016 business outlook reflects growth

For the fourth quarter, the company projects net sales will increase approximately 5 percent to 6 percent compared to the fourth quarter of fiscal 2015 and adjusted diluted earnings per share in the range of 1.65 dollars to 1.70 dollars (growth of approximately 18 percent to 21 percent) compared to adjusted diluted earnings per share of 1.40 dollars in the fourth quarter of fiscal 2015.

For fiscal 2016, the company continues to project net sales growth of approximately 5 percent to 6 percent and now projects adjusted diluted earnings per share will increase approximately 9 percent to 10 percent.

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