Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Carter's Rides U.S. Growth to a Strong Holiday Season

By Steve Symington - Updated Apr 21, 2019 at 1:02AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Toys "R" Us and Bon-Ton couldn't hold the kids' clothing retailer back this quarter.

Carter's ( CRI 3.00% ) announced fourth-quarter 2018 results on Monday morning, delivering higher-than-expected revenue and profits during the holiday season even against the bankruptcies of two large customers last year. The children's clothing retailer also raised its quarterly dividend and offered an encouraging look at the year ahead.

With shares up around 9% today as of this writing, let's take a closer look at how Carter's ended 2018.

Blue text Carter's Logo

Image source: Carter's.

Carter's results: The raw numbers

Metric

Q4 2018

Q4 2017

Year-Over-Year Growth

Revenue

$1.086 million

$1.028 million

5.7%

GAAP net income

$130.6 million

$136.1 million

(4.1%)

GAAP earnings per diluted share

$2.83

$2.85

(0.7%)

Data source: Carter's. 

What happened with Carter's this quarter?

  • Excluding items such as restructuring and acquisition expenses, non-GAAP earnings arrived at $129.9 million, or $2.84 per share, up 21.9% from $2.33 per share in the same year-ago period.
  • These results arrived well above guidance provided in October, which called for adjusted earnings of $2.56 per share on more modest 5% revenue growth.
  • By segment:
    • U.S. retail sales grew 7.1% to $40.1 million, including a 5.7% increase in comparable-store sales with growth in both e-commerce and retail stores.
    • U.S. wholesale revenue climbed 6.5% to $351.4 million, as roughly $32 million in net sales lost to last year's bankruptcies of Toys "R" Us and Bon-Ton were more than offset by higher Carter's product shipments to other customers.
    • International sales declined 2.4% to $3.2 million, as higher demand in Mexico was offset by lower demand in China and unfavorable foreign currency exchange rates. 
  • Carter's repurchased and retired 515,109 shares of stock at an average price at $92.28 per share.
  • On Feb. 14, the Carter's board approved an 11% increase in the company's quarterly dividend to $0.50 per share.

What management had to say

Carter's Chairman and CEO Michael Casey elaborated:

We saw good demand for our brands in the final months of 2018, with growth driven by our retail and wholesale businesses. In the fourth quarter, our retail sales in the United States grew 7%, 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. We believe Carter's is well positioned to achieve good growth in sales and earnings in the years ahead. Carter's is the market leader in young children's apparel in North America, and we are extending the reach of our brands throughout the world through [e-commerce] capabilities and strategic relationships. Given our strong balance sheet and cash flow, we plan to continue investing in strategies which we believe will enable us to outperform market trends and deliver attractive returns to shareholders. 

Check out the latest Carter's earnings call transcript.

Looking forward

Looking ahead to fiscal 2019, Carter's expects net sales to increase 1% to 2% from $3.462 billion in 2018, which should translate to a 4% to 6% increase in adjusted earnings per share, from $6.29 in fiscal 2018.

But that growth won't materialize in the near term. Given the impact of discontinued sales to Toys "R" Us and Bon-Ton and a later Easter holiday last year, Carter's sees first-quarter sales declining roughly 4% to 5% year over year, with adjusted earnings per share falling to a range of $0.65 to $0.70, from $1.09 per share in the same year-ago period.

Still, shareholders have more than enough reason to cheer today after combining the company's solid full-year outlook with its impressive fourth quarter and freshly raised dividend. And the stock is responding in kind.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Carter's, Inc. Stock Quote
Carter's, Inc.
CRI
$101.61 (3.00%) $2.96

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
634%
 
S&P 500 Returns
141%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/02/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.