Carter's FY17 net sales increase 6.3 percent

Carter’s, Inc. reported consolidated net sales increased 93.1 million dollars or 10 percent to 1.03 billion dollars in the fourth quarter reflecting growth in all business segments and contributions from the 2017 Skip Hop and Mexico licensee acquisitions. Consolidated net sales increased 201.2 million dollars or 6.3 percent to 3.4 billion dollars reflecting growth in the company’s US retail segment and contribution from the Skip Hop acquisition.

“We saw strong demand in all channels of distribution in the fourth quarter, and are reporting another year of record sales and earnings,” said Carter’s Chairman and CEO Michael D. Casey in a media statement, adding, “In 2017, we achieved our 29th consecutive year of sales growth, strengthened our business with the acquisitions of Skip Hop and our largest international licensee based in Mexico, and returned 260 million dollars to shareholders through dividends and share repurchases. Given the benefit in 2017 of the historic tax reform legislation, our board of directors has approved 20 million dollars in special compensation awards to all of our company’s employees.”

Highlight of Carter's Q4 and FY17 results

The Skip Hop and Mexico acquisitions, the company said, contributed 96.3 million dollars and 15.4 million dollars, respectively, to consolidated net sales in fiscal 2017. Changes in foreign currency exchange rates also favourably affected consolidated net sales by 6.6 million dollars. On a constant currency basis, consolidated net sales increased 6.1 percent in the year under review.

In the fourth quarter, Skip Hop contributed 32.9 million dollars and 8.8 million dollars, respectively, to consolidated net sales in the fourth quarter of fiscal 2017, changes in foreign currency exchange rates favourably affected consolidated net sales by 4.5 million dollars. On a constant currency basis, consolidated net sales increased 9.5 percent in the fourth quarter of fiscal 2017.

Operating income in fiscal 2017 decreased 7 million dollars or 1.6 percent, to 419.6 million dollars compared to 426.6 million dollars in fiscal 2016. Operating margin decreased 100 basis points to 12.3 percent compared to 13.3 percent in fiscal 2016. Adjusted operating income increased 13.4 million dollars or 3.1 percent to 444.8 million dollars, while adjusted operating margin decreased 40 basis points to 13.1 percent compared to 13.5 percent in fiscal 2016. Net income increased 44.7 million dollars or 17.3 percent to 302.8 million dollars or 6.24 dollars per diluted share and adjusted net income increased 18.6 million dollars or 7.1 percent to 279.7 million dollars. Adjusted earnings per diluted share increased 12.1 percent to 5.76 dollars compared to 5.14 dollars in fiscal 2016.

Operating income in the fourth quarter increased 6.4 million dollars or 4.6 percent to 145.8 million dollars, while operating margin decreased 70 basis points to 14.2 percent compared to 14.9 percent in the fourth quarter of fiscal 2016. Adjusted operating income increased 25.4 million dollars or 17.9 percent, to 167.4 million dollars and adjusted operating margin increased 110 basis points to 16.3 percent compared to 15.2 percent in the fourth quarter of fiscal 2016. Net income in the quarter increased 48.6 million dollars or 55.8 percent to 135.7 million dollars or 2.84 dollars per diluted share, while adjusted net income increased 22.2 million dollars or 25.1 percent, to 111 million dollars. Adjusted earnings per diluted share increased 29.6 percent to 2.32 dollars.

Carter’s performance across segments

US retail segment sales increased 37.8 million dollars or 7.2 percent to 565.7 million dollars in the fourth quarter, while comparable sales increased 4.5 percent, comprised of ecommerce comparable sales growth of 19.1 percent and a comparable retail store sales decline of 1 percent. Skip Hop contributed 5.8 million dollars to segment net sales in the quarter. In the fourth quarter, the company opened 19 stores and closed 10 stores in the United States and As of the end of the quarter, operated 830 retail stores in the United States.

In fiscal 2017, US retail segment sales increased 118.9 million dollars or 7.2 percent to 1.78 billion dollars, while comparable sales increased 2.7 percent, comprised of ecommerce comparable sales growth of 21.6 percent and a comparable retail store sales decline of 3.3 percent. Skip Hop contributed 8.8 million dollars to segment net sales in fiscal 2017. In fiscal 2017, the company opened 57 stores and closed 19 stores in the United States.

In the fourth quarter, US wholesale segment sales increased 32.7 million dollars or 11 percent to 329.8 million dollars driven by the contribution from the Skip Hop acquisition and an increase in demand for Carter’s brand products. Skip Hop contributed 17.5 million dollars to segment net sales.

In 2017, US wholesale segment sales increased 31.6 million dollars or 2.7 percent to 1.21 billion dollars, reflecting the contribution from the Skip Hop acquisition, partially offset by a decrease in demand for Carter’s and OshKosh products. Skip Hop contributed 55.7 million dollars to segment net sales in fiscal 2017.

International segment sales increased 22.6 million dollars or 20.7 percent to 131.8 million dollars in the fourth quarter, reflecting contributions from the Skip Hop and Mexico acquisitions and growth in Canada and China, partially offset by decreased wholesale demand in other markets outside of the United States. The Skip Hop and Mexico acquisitions contributed 9.6 million dollars and 8.8 million dollars, respectively, to segment net sales in the fourth quarter of fiscal 2017. Changes in foreign currency exchange favourably affected international segment net sales by 4.5 million dollars. On a constant currency basis, International segment net sales increased 16.6 perent.

Compared to the fourth quarter of fiscal 2016, Canada retail comparable sales decreased 0.2 percent, comprised of comparable stores sales decline of 2.6 percent, partially offset by comparable ecommerce sales growth of 20 percent. In the fourth quarter, the company opened seven stores in Canada and one store in Mexico.

In FY17, international segment sales increased 50.7 million dollars or 13.9 percent to 415.5 million dollars reflecting the contributions from the Skip Hop and Mexico acquisitions and growth in Canada and China, partially offset by decreased wholesale demand in other markets outside of the US. The Skip Hop and Mexico acquisitions contributed 31.8 million dollars and 15.4 million dollars, respectively, to segment net sales in fiscal 2017. Changes in foreign currency exchange rates favourably affected international segment net sales by 6.6 million dollars. On a constant currency basis, International segment net sales increased 12.1 percent.

Compared to fiscal 2016, Canada retail comparable sales increased 0.2 percent in fiscal 2017, comprised of comparable ecommerce sales growth of 37.6 percent, partially offset by comparable stores sales decline of 3.1 percent. In fiscal 2017, the company opened 17 stores and closed two stores in Canada and opened two stores in Mexico. As of the end of fiscal 2017, the company operated 179 retail stores in Canada and 41 stores in Mexico.

Carter’s expects FY18 net sales to rise 5 percent

For the first quarter of fiscal 2018, the company projects net sales to increase approximately 2 percent and adjusted diluted earnings per share to be approximately comparable to adjusted diluted earnings per share of 0.97 dollar in the first quarter of fiscal 2017. This forecast for first quarter adjusted earnings per share, the company added, reflects an anticipated effective tax rate of approximately 22 percent.

For fiscal 2018, the company projects net sales to increase approximately 5 percent and adjusted diluted earnings per share to increase approximately 15 percent compared to 5.76 dollars in fiscal 2017.

During the fourth quarter, the company paid a cash dividend of 0.37 dollars per share totalling 17.5 million dollars and in fiscal 2017, the company paid quarterly cash dividends of 0.37 dollar per share each quarter totalling 70.9 million dollars.

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