Credit: Carters Inc.

Kid's clothing retailer Carters (CRI 0.13%) is set to announce quarterly earnings before the market opens on Wednesday, July 29. Following its better-than-expected performance in April, Carter's has beaten Wall Street's expectations for seven consecutive quarters, and the stock is already up more than 20% so far this year. What will Carter's need to do to make it eight for eight?

Under promise, over deliver
This time, analysts' consensus estimates predict Carter's revenue will climb 6.2% year over year, to $609.6 million, while net income is expected rise a more modest 3.3%, to $0.63 per share. By contrast, both figures stand above Carter's own guidance, which calls for earnings to be flat over the same year-ago period, at $0.61 per share, and revenue to grow roughly 6%, to $608.5 million.

Investors should also expect to hear comments from management regarding Carter's full-year goals. Carter's most-recent guidance is for revenue to rise 5% over fiscal 2014, to $3.03 billion, while adjusted earnings per share should increase 10% to 14%, or to a per-share range of $4.32 to $4.48. Here again, Wall Street wants Carter's to raise its outlook, as consensus estimates see full-year revenue increasing 5.5%, to $3.05 billion, and earnings up 16%, to $4.56 per share.

It's hard to blame analysts for their optimism, given Carter's nearly two-year streak of under promising and over delivering. But eventually, as they ratchet up estimates in response, it begs the question of when Carter's will -- at least temporarily -- fall victim to unrealistic expectations from our fickle market.

On strengths
In the meantime, Carter's has enjoyed relative broad strength in its retail businesses. Last quarter, for example, the domestic Carter's retail segment increased revenue 11.9%, to represent about 37.6% of total company sales. That result was boosted by a combination of new locations -- including a net of 18 opened last quarter -- and e-Commerce comparable-store sales growth of 8.1%.

One potential weak spot exists here, however, in Carter's retail store comparable sales, which declined 1.2% last quarter. Investors should watch for whether that trend of declining brick-and-mortar comps persists or accelerates.

In addition, Carter's OshKosh B'gosh retail segment has performed even better, as OshKosh revenue rose 14.9% last quarter to comprise roughly 10.7% of sales. Similarly, OshKosh was helped by a net of eight new retail stores opened in the U.S. in the most-recent period, with even more impressive eCommerce comparable-sales growth of 20.3%, and growth in comps from retail stores of 1.5%.

On weaknesses
On the wholesale side, both chains have seen much more underwhelming results. Carter's wholesale revenue fell 0.9%, and represented more than 39% of total sales, while OshKosh wholesale segment sales rose 3%, to comprise a much smaller 2.4% of the total.

Another potential trouble area exists with the International segment, where sales declined 2.7%, and represented 10% of Carter's total. Despite growth in Carter's retail stores and online business in Canada, international sales have been crimped by a combination of Carter's exit of retail operations in Japan last fiscal year, the negative impact of the Target Canada bankruptcy this past January, and foreign exchange headwinds.

These are temporary problems, however. Eventually Carter's will recover from both its exit in Japan and the Target Canada bankruptcy, and the effect of foreign currencies isn't a sign of problems with its underlying business. But for now, that's little consolation for our short-term oriented market.

In the meantime, however, Carter's continues to perform well in the U.S., and shows no signs of slowing down. For long-term investors, Carter's has shown a willingness to reward shareholders for their patience with a $0.22-per-share quarterly dividend -- equating to a modest annual yield of around 0.8% -- as well as around $163 million remaining under its current share-repurchase authorization at the end of last quarter.

For those willing to wait and let compounding do its work, these value-creating efforts serve to supplement investors' gains regardless of whether Carter's extends its quarterly winning streak.