A few weeks back, The Motley Fool's Rich Smith had the chance to speak with Fred Rowan, CEO of Motley Fool Inside Value recommendation Carter's (NYSE: CRI). Our Inside Value subscribers have already had the chance to hear Fred's thoughts on his company, its plans for recent acquisition OshKosh, and what makes for a successful turnaround operation. Now you can, too. What follows is an excerpt from the interview.

Rich Smith: Fred, I imagine there are few parents in America who don't know the Carter's and OshKosh brands. But can you introduce your company to those of our readers lacking small children?

Fred Rowan: We're the largest branded marketer of young children's apparel in the United States. Our two flagship brands, Carter's and OshKosh, are sold through top retailers like Kohl's (NYSE: KSS), JCPenney (NYSE: JCP), Babies 'R' Us, and Macy's (NYSE: M). We also sell directly to the consumer through our nearly 400 retail stores located throughout the United States.

We have a very strong mass-channel business as well. We market our Just One Year brand exclusively at Target (NYSE: TGT), and our Child of Mine brand exclusively at Wal-Mart (NYSE: WMT), and we license our Genuine Kids brand exclusively to Target. We also sell our products throughout the world, through licensing and direct-sale arrangements.

We have the largest share of the $22 billion market for young children's apparel. Unlike most apparel segments, the young children's space has been growing about 3% to 4% a year. Our sales growth in this market has averaged 23% over the past five years, and 16% over the past 10 years.

On our most recent earnings call, we estimated that our sales in 2007 will exceed $1.4 billion, with Carter's sales contributing about $1.1 billion and OshKosh sales contributing more than $300 million.

Smith: It has been two years since you bought OshKosh B'Gosh. Can you lay out for us your thinking at the time? Why did this look like an attractive purchase?

Rowan: The transaction with OshKosh made a lot of sense for Carter's. It's rare to have the opportunity to own two of the top brands in your space, and the acquisition allowed us to do that.

With OshKosh, we see an opportunity to replicate the success we've had with Carter's. In 1992, I came to Carter's to lead the turnaround of what was then a $200 million business with marginal profitability. Like OshKosh, Carter's product assortment in the early '90s was too broad, and the company lacked focus on essential core products.

Over the past 15 years, we've built Carter's into a large and very profitable business, with consistency in performance for our wholesale customers and consumers. We've extended the Carter's brand into the very large and growing mass channel by introducing exclusive brands for Target and Wal-Mart. Together, these mass channel brands represent nearly $250 million in annual sales.

Although it has taken us more time than we originally planned, we remain confident that through focusing on our core product offering and leveraging our operational disciplines and customer relationships, we can successfully rebuild OshKosh and have its sales and profitability match its brand recognition.

Smith: But it hasn't worked out so well to date. In layman's terms, can you summarize for us what has gone wrong?

Rowan: It's premature to measure the success of any acquisition -- particularly one in need of a turnaround -- in such a short period of time. And keep in mind, from a product cycle standpoint, we've only owned OshKosh a little over a year.

With that said, we have received very good feedback from our wholesale customers and consumers who felt our artwork (on the garments) needed to be younger and our colors were a bit too sophisticated. We also learned that we were out of line in the price/value equation.

We've taken this, and other feedback we've gotten through consumer research, and developed a better merchandising and design strategy for 2008. Our progress will be evolutionary. It will take time and additional consumer research to improve OshKosh's performance, but we believe we're on the right track.

Smith: So let me ask this straight out: Is OshKosh fixable?

Rowan: Yes. There is no doubt in my mind that OshKosh is fixable. It's a great young children's brand, not a technology company. OshKosh is a business so similar to Carter's that I'm confident we will turn it around.

We have a proven track record of rebuilding great brands. OshKosh is a great brand, and we believe it will meaningfully contribute to our long-term growth objectives. I'm glad we own it.

Smith: The analysts at Motley Fool Inside Value spend a lot of time seeking out turnaround situations -- companies where the market seems to be exaggerating the problems and underestimating their fixability. It looks like you've got just such a situation on your hands with OshKosh. I'm curious about what kinds of tools CEOs reach for when trying to fix a retailer/wholesaler with stagnant to declining sales. What are your options, generally, for conducting a classic "turnaround"?

What does it take to run a successful turnaround operation? Current Inside Value subscribers can read the full transcript of this interview and learn the answer by clicking right here -- and find out how Carter's plans to survive the recession, and discover the future of footie pajamas to boot (pun intended). Not yet a subscriber? Get yourself a 30-day free trial, complete with access to the rest of this interview, and those with all of the other CEOs we've had the pleasure to speak with over the years. You'll also be able to see our current recommendations and our top 10 stock choices for new money now.

Fool contributor Rich Smith does not own shares of any company mentioned in this article. Carter's and Wal-Mart are Inside Value recommendations. The Motley Fool has a disclosure policy.