What happened

Shares of Carter's (NYSE:CRI) were up 10.6% as of noon EST Friday after the children's clothing retailer announced strong fourth-quarter 2018 results.

More specifically, Carter's quarterly net sales climbed 5.7% year over year, to $1.08 billion, translating to adjusted net income of $130.6 million, or $2.84 per share, up from adjusted earnings of $2.32 per share in the same year-ago period. Both figures were well above Carter's guidance (provided in October) for adjusted earnings of $2.56 per share on a roughly 5% increase in revenue. 

Shirts hanging on a store clothing rack


So what

"We saw good demand for our brands in the final months of 2018, with growth driven by our retail and wholesale businesses," added Carter's chairman and CEO Michael Casey. "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."

Indeed, Carter's U.S. retail business climbed 7.1% to $606.3 million, helped by a 5.7% increase in comparable-store sales. Its U.S. wholesale segment also saw revenue climb 6.5% to $351.4 million, even despite the impact of lost sales from last year's bankruptcies of Toys R Us and Bon-Ton. Carter's smaller international segment saw revenue fall a modest 2.4% to $128.6 million.

Check out the latest Carter's earnings call transcript.

Now what

Looking ahead to fiscal 2019, Carter's expects net sales to increase 1% to 2% (from $3.46 billion in 2018), which should translate to a 4% to 6% increase in adjusted earnings per share (from $6.29 in fiscal 2018). By comparison -- and though we don't usually pay close attention to Wall Street's demands -- most analysts were modeling earnings near the low end of Carter's outlook on revenue closer to the top end of its expected range.

In any case, after coupling that guidance with Carter's relative outperformance during the lucrative holiday season, it's clear the market is more than pleased with this report.

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