Carter's, Inc. (CRI)

CRI 
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Industry: Consumer Non-Durables
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Carter's, Inc. (CRI)

March 12, 2013 9:20 am ET

Executives

Michael D. Casey - Chairman and Chief Executive Officer

Analysts

Robert F. Ohmes - BofA Merrill Lynch, Research Division

Presentation

Robert F. Ohmes - BofA Merrill Lynch, Research Division

Thanks, everybody, for coming to Carter's presentation. We're very pleased to have Mike Casey, the Chairman and CEO of Carter's, here with us today, as well as Sean McHugh from IR. And I'm going to turn it over to Mike for some -- a brief overview and then we'll go right into Q&A.

Michael D. Casey

Good. Thanks, Robbie. I appreciate Robbie Ohmes being with us this morning. Robbie followed us from the IPO 10 years ago. We were celebrating our 10th year as a public company this year. Those who followed Robbie's advice 10 years ago have done well with their investment in Carter's.

So as you may know, Carter's is the largest branded market of young children's apparel in the United States. We own 2 of the best known brands in young children's apparel, Carter's and OshKosh B'Gosh. Carter's represents about 80% of our business and OshKosh the balance, two very complementary brands. I've been with the company, Carter's, 20 years. We have bought OshKosh B'Gosh about 7 years ago, and we love having both brands because they serve the needs of a consumer from birth to about an 8- or 9-year-old child. The sweet spot of Carter's is baby. It's known as a baby brand, even though it extends up to about a 5- or 6-year-old child, so the sweet spot is the newborn to a 2-year-old child. The sweet spot of OshKosh B'Gosh is a preschooler, a toddler, so we got 2 good complementary brands.

We own the largest share of the $21 billion young children's apparel market, that's newborn to size 7. We own nearly 17% share of that market, nearly twice the share of our nearest competitor. OshKosh owns about 3% share of the market. Carter's owns about 14% share of the market. And we've been gaining share in recent years, even though the market hasn't grown much during the recession, understandably so. The number of births, in 2007, record level of births, about 4.3 million babies born in 2007 just before the recession hit. Number of births last year was about 3.9 million births. We don't really worry too much about the increase or decrease, we view it as about 4 million new babies being born every year, 4 million new reasons to come out and shop with us. The biggest drop in the number of births were to teenage moms, so no objection to that. The older moms, actually number of births to older moms, more established moms, moms who are well into their career, comparable to, if not a bit better than it was in 2007.

We have the broadest distribution of young children's apparel in the market. We do business with all of the major retailers, Macy's, Kohl's, Penney's, Walmart, Target, Costco, Sam's. We're in about 18,000 doors in the United States, nobody has that reach in young children's apparel. The wholesale component of our business is about 45% of our sales, very good business, very profitable business, long relationships with these retailers, some relationships go back a better part of 100 years.

The retail component of our business, direct to the consumers, the balance -- 45% is wholesale, working through others, best retailers in the business. And then, the balance is through our own stores. We have about 600 of our own stores, about, in round numbers, 400 Carter's stores, about 200 OshKosh stores. Most of those stores are in outlet centers. That's where the history of the company -- 20 years ago when I joined the company, we had a big wholesale business. It was probably 90% or more of our business and we had some outlet stores.

And over 10 years ago, we started taking the same outlet model closer to the consumer and the same footprint, same product offerings, same pricing, same timing of delivery, everything was the same but for location, we started opening up stores in strip center locations with success. So Carter's today, we've got a little over 230 of those, we've got a little over 20 OshKosh stores outside the outlet centers and the profits are good. So it's the way forward.

We have a growing eCommerce business, we were probably the last company in the world to go online, just was never a burning platform for our business, so we started doing business online about 2.5 years ago and it's been enormously successful for us. First year, and I guess it was 2010, we did some portion of $20 million. For 2011, they gave me a plan that we think we can double the business, do $40 million, but they did about $70 million online, and last year we did about $140 million online. And this year, it will be closer to $200 million, so -- and in the earnings call a couple of weeks ago, I briefed the investors that year-to-date, that the eCommerce business for both brands, both Carter's and OshKosh, we're comping up about 60% year-to-date.

So the eCommerce business, this is the way Mom's shopping, it's convenient, she knows our brand, she knows the quality of the brand, she knows the value of the brand, she just needs the next size up, that's the beauty of our business.

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