Carter's posts 5.7 percent increase in Q4 net sales

Carter’s, Inc. reported consolidated net sales increase of 5.7 percent or 58.5 million dollars to 1.1 billion dollars, driven by growth in the company’s U.S. retail and U.S. wholesale segments. On a constant currency basis, consolidated net sales increased 6.1 percent in the quarter. Consolidated net sales increased 61.8 million dollars or 1.8 percent to 3.5 billion dollars in fiscal 2018, reflecting growth in the company’s U.S. retail and international segments, partially offset by a decline in the U.S. wholesale segment. On a constant currency basis, consolidated net sales increased 1.9 percent in fiscal 2018.

“We saw good demand for our brands in the final months of 2018, with growth driven by our retail and wholesale businesses,” said Michael D. Casey, the company’s Chairman and CEO in a statement, adding, “In the fourth quarter, our retail sales in the United States grew 7 percent reflecting, we believe, the strength of our brands and less discretionary nature of young children’s apparel purchases. For the year, Carter’s achieved its 30th consecutive year of sales growth, and a record level of profitability enabled by the significant benefits from the Tax Cuts and Jobs Act of 2017.”

Review of Cater’s Q4 performance

Operating income in the fourth quarter increased 24.2 million dollars or 16.5 percent to 170.6 million dollars, while operating margin increased 150 basis points to 15.7 percent, compared to 14.2 percent in the fourth quarter of fiscal 2017. Adjusted operating income increased 2.5 million dollars or 1.5 percent to 170.5 million dollars, while adjusted operating margin decreased 60 basis points to 15.7 percent compared to 16.3 percent in the fourth quarter of fiscal 2017.

Net income decreased 5.6 million dollars or 4.1 percent to 130.6 million dollars or 2.83 dollars per diluted share compared to 136.1 million dollars or 2.85 dollars per diluted share, in the fourth quarter of fiscal 2017. Adjusted net income increased 19.5 million dollars or 17.5 percent to 130.9 million dollars compared to 111.4 million dollars in the fourth quarter of fiscal 2017, while adjusted earnings per diluted share increased 21.8 percent to 2.84 dollars compared to 2.33 dollars in the fourth quarter of fiscal 2017.

During the fourth quarter of fiscal 2018, the company paid a cash dividend of 45 cents per share totalling 20.6 million dollars.

Highlights of Carter’s full year results

Operating income in fiscal 2018 decreased 28.2 million dollars or 6.7 percent to 391.4 million dollars compared to 419.6 million dollars in fiscal 2017. Operating margin decreased 100 basis points to 11.3 percent compared to 12.3 percent in fiscal 2017. Adjusted operating income decreased 37.6 million dollars or 8.4 percent to 407.3 million dollars compared to 444.8 million dollars in fiscal 2017, while adjusted operating margin decreased 130 basis points to 11.8 percent compared to 13.1 percent in fiscal 2017.

Net income decreased 20.8 million dollars or 6.9 percent to 282.1 million dollars or 6 dollars per diluted share compared to 302.8 million dollars or 6.24 dollars per diluted share, in fiscal 2017. Adjusted net income increased 15.6 million dollars or 5.6 percent to 295.4 million dollars compared to 279.8 million dollars in fiscal 2017, while adjusted earnings per diluted share increased 9 percent to 6.29 dollars compared to 5.77 dollars in fiscal 2017.

In fiscal 2018, the company paid quarterly cash dividends of 45 cents per share each quarter totalling 83.7 million dollars. On February 14, 2019, the company’s board of directors authorized an 11 percent increase or 5 cents per share to its quarterly cash dividend to 50 cents per share, for payment on March 22, 2019, to shareholders of record at the close of business on March 12, 2019.

Carter’s expects FY19 net sales to rise between 1 to 2 percent

For fiscal 2019, the company projects net sales will increase approximately 1 percent to 2 percent and adjusted diluted earnings per share to increase approximately 4 percent to 6 percent compared to adjusted diluted earnings per share of 6.29 dollars in fiscal 2018.

Net sales and adjusted earnings growth in the first quarter of fiscal 2019 are expected to be affected by comparisons to discontinued sales to Toys “R” Us and Bon-Ton in the prior year and a later Easter holiday in 2019 than in 2018. As a result, the company projects net sales will decline approximately 4 percent to 5 percent and adjusted diluted earnings per share to be approximately 65 cents to 70 cents compared to 1.09 dollars in the first quarter of fiscal 2018.

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