Carter's (CRI 0.48%) 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.
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.
