What: Shares of Carter's (CRI 2.85%) were up nearly 11% as of 11:30 a.m. EST Thursday after the children's clothing retailer released better-than-expected fourth-quarter 2015 results and an expanded capital returns initiatives.
So what: Quarterly revenue fell 0.3% year over year to $866.5 million, due to a combination of declines in the company's U.S. wholesale segments and an extra week in the same year-ago period. Excluding the extra week last year, fourth-quarter revenue would have risen 5% year over year. Nonetheless, that translated to 6% growth in adjusted diluted earnings to $1.39 per share.
By comparison, Carter's latest guidance called for fourth-quarter revenue of $852 million, and adjusted earnings per diluted share of $1.22 to $1.30.
In addition, Carter's board authorized a new $500 million share repurchase program -- or more than 10% of the company's float -- and increased its quarterly dividend 50% to $0.33 per share.
Carter's CEO Michael Casey added, "Our focus on providing the best value and experience in young children's apparel enabled us to achieve our 27th consecutive year of sales growth, gain market share, and deliver a record level of sales and profitability in 2015. We are planning good growth in sales and earnings in 2016 and plan to grow our business to over $4 billion in sales by 2020 by extending the reach of our iconic brands through our global and multi-channel distribution capabilities."
Now what: In the meantime for fiscal year 2016, Carter's expects net sales to increase 6% to 7% over fiscal year 2015, or to a range of $3.18 billion to $3.21 billion, which should translate to an 8% to 10% increase in adjusted diluted earnings per share, representing an EPS range of $4.98 to $5.07. For the current quarter, Carter's expects net sales to increase 4% year over year, while adjusted net income should remain roughly flat at $0.07 per share.
In the end, given Carter's significant beat, solid guidance, and expanded capital returns, I think investors have every reason to celebrate Thursday's report.