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Carter’s Q1 net sales up 5.7 percent, updates outlook

By Prachi Singh

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Business |REPORT

Carter’s first quarter net sales increased 39.3 million dollars, or 5.7 percent to 724.1 million dollars, reflecting growth in the company’s US Carter’s and OshKosh retail and Carter’s wholesale businesses as well as in its international segment. However, the company said, changes in foreign currency exchange rates negatively impacted consolidated net sales in the first quarter by 4.5 million dollars or 0.7 percent. On a constant currency basis, consolidated net sales increased 6.4 percent.

“We saw increased demand for our brands and achieved a record level of sales and earnings in our first quarter,” said Michael D. Casey, Chairman and Chief Executive Officer, adding, “We achieved good growth in our wholesale, retail and international businesses, and meaningfully increased the distribution of capital to our shareholders. We’re forecasting good growth in sales and earnings for the year, and have raised our earnings guidance for 2016.”

Consolidated first quarter results

Operating income increased 8.5 million dollars, or 10.1 percent to 93 million dollars, compared to 84.5 million dollars in the first quarter of fiscal 2015. Operating margin increased approximately 50 basis points to 12.8 percent and adjusted operating income increased 6.7 million dollars or 7.7 percent to 94 million dollars.

Net income increased 4.2 million dollars or 8.4 percent, to 54 million dollars, or 1.04 dollars per diluted share. Adjusted net income increased 2.9 million dollars or 5.5 percent to 54.6 million dollars. Adjusted earnings per diluted share increased 7.9 percent to 1.05 dollars compared to 0.97 dollar in the first quarter of fiscal 2015.

Business segment perform well in the US

Carter’s retail segment sales increased 14.6 million dollars or 5.7 percent to 272.3 million dollars. Carter’s retail comparable sales decreased 0.1 percent, comprised of ecommerce comparable sales growth of 15.2 percent, offset by a stores comparable sales decline of 4 percent. In the first quarter of fiscal 2016, the company opened 16 Carter’s stores in the United States and operated 610 Carter’s stores in the United States as of April 2, 2016. Wholesale segment net sales increased 10.8 million dollars or 4 percent to 280.1 million dollars.

OshKosh retail segment net sales increased 8.7 million dollars or 11.9 percent to 81.8 million dollars and comparable sales increased 2.7 percent comprised of ecommerce comparable sales growth of 19.8 percent, partially offset by a stores comparable sales decline of 1.9 percent. The company opened 11 OshKosh stores in the United States during the quarter and closed one. The company operated 251 OshKosh stores in the United States as of April 2, 2016. Wholesale segment net sales decreased 4.1 million dollars or 25.8 percent to 11.9 million dollars.

International segment net sales increased 9.3 million dollars or 13.6 percent to 77.9 million dollars, driven by growth in the company’s retail businesses in Canada and new ecommerce sales in China, partially offset by unfavorable foreign currency exchange rates. For the first quarter of fiscal 2016, Canada retail comparable sales increased 14.9 percent, comprised of stores comparable sales growth of 12.8 percent and ecommerce comparable sales growth of 46.6 percent. The company opened two stores in Canada in the quarter and operated 149 stores in country as of April 2, 2016.

2016 business outlook reflects sales growth

For the second quarter of fiscal 2016, the company projects net sales will increase approximately 3 percent to 4 percent compared to the second quarter of fiscal 2015 and adjusted diluted earnings per share will decrease approximately 10 percent to 15 percent compared to adjusted diluted earnings per share of 0.73 dollar in the second quarter of fiscal 2015.

For the first half of fiscal 2016, the company projects net sales will increase approximately 4 percent to 5 percent compared to the first half of fiscal 2015 and adjusted diluted earnings per share will be approximately comparable to adjusted diluted earnings per share of 1.70 dollars in the first half of fiscal 2015.

For fiscal 2016, the company projects net sales will increase approximately 6 percent to 7 percent compared to fiscal 2015 and adjusted diluted earnings per share will increase approximately 10 percent to 12 percent compared to adjusted diluted earnings per share of 4.61 dollars in fiscal 2015.

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