Carter's shares hit fresh 12-month low on weak outlook

Shares of Carter's Inc., which makes apparel for babies and young children, hit a fresh 52-week low on Wednesday, after the company said earnings could fall 5 percent in 2008.

Chief Financial Officer Mike Casey said in a conference call that earnings could fall 5 percent or more in 2008 amid weakness in consumer spending. Previously, the company had projected its 2008 earnings would remain flat.

Casey forecast full-year sales growth in the low-single digits.

He also said second-quarter earnings will be between break even to a "small loss." Analysts polled by Thomson Financial expect a profit of 9 cents per share.

Meanwhile, the Atlanta-based company said first-quarter profit rose 20 percent to $11.6 million, or 19 cents per share, from $9.6 million, or 16 cents per share, last year. Analysts expected a more modest profit of 16 cents per share.

However, excluding year-ago costs related to closing a plant, net income fell 14 percent.

Revenue rose 3 percent to $330 million from $320.1 million last year. Sales of Carter's brands grew 7 percent to $267.2 million, but sales of OshKosh apparel fell 11 percent to $62.8 million.

Retail sales increased 8 percent to $130.8 million. Same-store sales, or sales in stores open at least one year, rose 12.3 percent at Carter's stores and fell 6.6 percent at OshKosh stores.

"OshKosh continues to struggle with (same-store sales) and wholesale _ which should add fuel to the 'management needs to pull the ripcord' argument," said Morgan Keegan analyst Brad Stephens.

However, the company said it is making "significant" investments to OshKosh merchandising and retail teams to turn the underperforming brand around. But it acknowledged it was "unclear" how long it will take to improve the brand, along with its Child of Mine brand.

Stephens reiterated his "Buy" rating and said that strong retail performance could show the brand isn't "overly tarnished."

However, shares fell $1.70, or 10.8 percent, to $14.01, after earlier bottoming at a 52-week low of $13.12. The stock has ranged between $13.48 and $29 over the past 12 months, and is off nearly 19 percent since the start of the year.