Carter's Shares Fall, Despite Earnings Beat - Analyst Blog


The market seems to be muted on Carter's Inc. 's ( CRI ) third-quarter 2013 performance as the stock fell marginally by 0.4% within a day of the earnings announcement. The company posted quarterly earnings of $1.12 per share that beat the Zacks Consensus Estimate of $1.09 and rose 9.8% from the prior-year quarter.

However, on a reported basis, earnings fell 2% to 97 cents a share, reflecting the impact of office consolidation expenses, revaluation and amortization.

Carter's, one of the leading providers of clothing and related products for kids, reported nets sales of $760.2 million that surged 13.7% on the back of its compelling brands, promotional strategies and multi-channel business model. Net Sales also handily surpassed the Zacks Consensus Estimate of $750 million.

Gross profit rose 14.7% to $309.6 million with the margin increasing 30 basis points to 40.7% of net sales. Adjusted operating income for the quarter saw a year-over-year rise of 7.1% to $104.2 million from $97.3 million, with the margin falling approximately 90 basis points to 13.7% of sales.

Segmental Information

Carter's retail sales increased 15.5% to $251.0 million owing to increment in sales worth $19.2 million from new outlets, 52.5% rise in sales from e-Commerce operations and a 0.5% rise in same-store sales. These were partly offset by store closures, which reduced sales by $1 million. Wholesale sales went up 15.6% to $318.6 million

OshKosh B'gosh retail sales rose 4.9% to $81.9 million, backed by a 38.8% rise in e-Commerce sales, sales benefit of $2.8 million from new outlets and a 1% increase in same-store sales, partly offset by a $2.8 million decline in sales owing to store closures. Wholesale sales declined 13.1% to $24.6 million.

International sales advanced 21.1% to $84.1 million owing to the robust performance of the company's wholesale channel and Canadian retail segment. However, same-store sales dropped 3.6%. Alongside, the segment reported sales worth $3.9 million from its Japanese business.

Store Update

During the third quarter of 2013, 17 new Carter's retail stores were opened bringing the number to 455 and 7 new OshKosh B'gosh retail stores taking the count to 170 in the United States.

Other Financial Updates

On Aug 12, 2013 Carter's issued senior notes worth $400 million bearing a coupon rate of 5.25% due Aug 15, 2021. Carter's took this initiative to enhance its capital structure. On account of this, the company received net amount of $394.2 million.

In the third quarter, the company bought back 226,400 shares for $16.4 million. Under its accelerated stock repurchase program the company bought back roughly 4.6 million shares worth $328.4 million, as of Sep 28, 2013.


This biggest marketer of babies' and kids' apparel and other related items in America ended the quarter with cash and cash equivalents of $201.8 million, long-term debt of $586.0 million and shareholders' equity of $658.9 million.


For the final quarter of 2013, the management envisions a 9-10% increase in net sales and a 10-15% rise in the adjusted earnings a share, compared to the last quarter of 2012.

For full-year 2013, Carter's estimates net sales and adjusted earnings per share to be up by 10% and roughly 15-17% from 2012, respectively.

Other Stocks to Consider

Carter's Inc.'s carries a Zacks Rank #3 (Hold). However, some other companiesin the shoes and related apparel sector that warrant a look include Brown Shoe Co. Inc. ( BWS ), with a Zacks Rank #1 (Strong Buy) and ANTA Sports Products Ltd ( ANPDF ) and Deckers Outdoor Corp. ( DECK ), both carrying a Zacks Rank #2 (Buy).


BROWN SHOE CO (BWS): Free Stock Analysis Report

CARTERS INC (CRI): Free Stock Analysis Report

DECKERS OUTDOOR (DECK): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ANPDF , BWS , CRI , DECK

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