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Carter’s Q2 net sales increase 6.7 percent, raises outlook

By Prachi Singh

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Carter’s for its second quarter fiscal 2015 reported consolidated net sales increased 38.7 million dollars, or 6.7 percent, to 612.8 million dollars, reflecting growth in all business segments. Changes in foreign currency exchange rates as compared to the second quarter of fiscal 2014 negatively impacted consolidated net sales in the second quarter of fiscal 2015 by 5.6 million dollars, or 1 percent. On a constant currency basis, consolidated net sales increased 7.7 percent in the second quarter of fiscal 2015.

“We continued to see strong demand for our brands in the second quarter with sales growth in all of our business segments,” said Michael D. Casey, Chairman and Chief Executive Officer, adding, “We’re encouraged by our consumers’ response to our new fall marketing and product offerings. Given our progress in the first half, and outlook for the balance of the year, we are raising our earnings forecast for fiscal 2015.”

Changes in foreign currency exchange rates in the first half of fiscal 2015 as compared to the first half of fiscal 2014 negatively impacted consolidated net sales in the first half of fiscal 2015 by 11.1 million dollars, or 0.9 percent. On a constant currency basis, consolidated net sales increased 6.8 percent in the first half of fiscal 2015. Operating income increased 37.6 million dollars, or 34.5 percent, to 146.5 million dollars, compared to 108.9 million dollars in the first half of fiscal 2014. Operating margin increased 240 basis points to 11.3 percent, compared to 8.9 percent in the first half of fiscal 2014. Adjusted operating income increased 23.8 million dollars, or 18.4 percent, to 152.7 million dollars. Adjusted operating increased 130 basis points to 11.8 percent.

Carter’s retail segment sales increased 13.3 million dollars, or 5.7 percent, to 247 million dollars and DTC comparable sales increased 1.1 percent, comprised of eCommerce comparable sales growth of 26.5 percent, partially offset by a retail stores comparable sales decline of 4 percent. The company opened 13 Carter’s retail stores in the United States during the quarter and operated 562 Carter’s retail stores in the United States as of July 4, 2015. Carter’s retail segment sales increased 40.7 million dollars, or 8.8 percent, to 504.7 million dollars and DTC comparable sales increased 0.9 percent, comprised of eCommerce comparable sales growth of 16 percent, partially offset by a retail stores comparable sales decline of 2.6 percent. In the first half of fiscal 2015, the company opened 33 Carter’s retail stores in the United States and closed two stores.

Wholesale segment sales increased 11.7 million dollars, or 5.8 percent, to 211.7 million dollars, reflecting strong product demand, a new playwear initiative, and fall product launches. In the first half, wholesale segment sales increased 9.4 million dollars, or 2 percent, to 481 million dollars.

OshKosh retail segment sales increased 5.9 million dollars, or 8.8 percent, to 73.5 million dollars. OshKosh DTC comparable sales increased 3.3 percent, comprised of eCommerce comparable sales growth of 36.2 percent, partially offset by a retail stores comparable sales decline of 2.6 percent. In the second quarter, the company opened 15 OshKosh retail stores in the United States and closed two stores. The company operated 221 OshKosh retail stores in the United States as of July 4, 2015. In the first half, sales increased 15.4 million dollars, or 11.8 percent, to 146.5 million dollars and DTC comparable sales increased 4.2 percent, comprised of eCommerce comparable sales growth of 27.2 percent, partially offset by a decline in retail stores comparable sales of 0.6 percent. In the first half of fiscal 2015, the company opened 24 OshKosh retail stores in the United States and closed three stores.

OshKosh wholesale segment sales increased 2.7 million dollars, or 22.8 percent, to 14.3 million dollars, reflecting favorable timing of demand. Wholesale segment sales increased 3.1 million dollars, or 11.5 percent, to 30.4 million dollars. International segment sales increased 5.1 million dollars, or 8.4 percent, to 66.3 million dollars. This increase reflects growth in the company’s direct-to-consumer businesses in Canada and increased wholesale demand in other international markets. Changes in foreign currency exchange rates in the second quarter of fiscal 2015 as compared to the second quarter of fiscal 2014 negatively impacted international segment net sales in the second quarter of fiscal 2015 by 5.6 million dollars, or 9.1 percent. On a constant currency basis, international segment net sales increased 17.5 percent. Canadian comparable retail stores sales increased 0.2 percent. In the second quarter of fiscal 2015, the company opened six retail stores in Canada. The Company operated 133 retail stores in Canada as of July 4, 2015.

International segment sales increased 3.2 million dollars, or 2.5 percent, to 134.9 million dollars. This growth was partially offset by the impact of the Target Canada bankruptcy in January 2015, the company’s exit of retail operations in Japan in fiscal 2014, and unfavorable foreign currency exchange rates. Changes in foreign currency exchange rates in the first half of fiscal 2015 as compared to the first half of fiscal 2014 negatively impacted international segment net sales in the first half of fiscal 2015 by 11.1 million dollars, or 8.5 percent. On a constant currency basis, international segment net sales increased 10.9 percent. Canadian comparable retail stores sales increased 3.3 percent in the first half of fiscal 2015. In the first half of fiscal 2015, the company opened nine retail stores in Canada.

For the third quarter of fiscal 2015, the company projects net sales to increase approximately 7 percent over the third quarter of fiscal 2014 and adjusted diluted earnings per share to increase approximately 10 percent to 15 percent compared to adjusted diluted earnings per share of 1.27 dollars in the third quarter of fiscal 2014. For fiscal 2015, the company projects net sales to increase approximately 5 percent over fiscal 2014 and adjusted diluted earnings per share to increase approximately 12 percent to 15 percent compared to adjusted diluted earnings per share of 3.93 dollars in fiscal 2014.

Carter's