Carter's expects low single-digit growth in net sales for Q3
Carter's Inc, the largest branded marketer in the United States of apparel exclusively for babies and young children, reported its second quarter 2009 results.
“We are very pleased with our performance in the second quarter, which was driven by the strength of our product offerings and very good execution of our inventory management and cost reduction initiatives,” said Michael D. Casey, Chief Executive Officer. “Our outlook for the year has improved based on our first half performance and the growth we anticipate in the second half of the year. We believe we're well positioned to deliver strong performance in this difficult retail marketplace given the compelling design and value of our Carter's and OshKosh B'Gosh products.”
Second Quarter of Fiscal 2009 compared to Second Quarter of Fiscal 2008
Consolidated net sales increased 5.4% to $317.9 million. Net sales of the Company's Carter's brands increased 6.9% to $254.4 million. Net sales of the Company's OshKosh B'Gosh brand decreased 0.3% to $63.5 million.
Consolidated retail sales increased 13.9% to $162.3 million. Carter's retail segment sales increased 18.9% to $110.1 million, with comparable store sales increasing 8.1%. OshKosh retail segment sales increased 4.6% to $52.2 million, with comparable store sales increasing 2.6%. Consolidated retail operating income increased $9.6 million to $17.4 million, driven primarily by Carter's retail sales growth and OshKosh retail gross margin improvement.
In the second quarter of fiscal 2009, the Company opened 11 Carter's and three OshKosh retail stores. As of the end of the second quarter of fiscal 2009, the Company operated 271 Carter's and 168 OshKosh retail stores.
Carter's wholesale sales increased $5.8 million, or 6.1%, to $100.1 million due to increased product demand. OshKosh wholesale sales decreased $2.4 million, or 17.7%, to $11.3 million due to timing of shipments, which were heavier in the first quarter.
The Company's mass channel sales, which are comprised of sales of its Child of Mine brand to Walmart and Just One Year brand to Target, decreased 13.4% to $44.2 million due largely to strategic merchandising assortment changes made by Walmart.
In connection with a previously announced workforce reduction and distribution facility closure, the Company recorded pre-tax charges of approximately $2.9 million related to severance and other benefits and accelerated depreciation in the second quarter of fiscal 2009. Also during the second quarter of fiscal 2009, the Company reduced the carrying value of its White House, Tennessee distribution facility held for sale by $0.7 million.
In connection with the retirement of an executive officer, the Company recorded charges of $5.3 million in the second quarter of fiscal 2008.
Operating income in the second quarter of fiscal 2009 was $20.9 million, an increase of $11.7 million, or 126.3%, from $9.3 million in the second quarter of fiscal 2008. Excluding the effect of certain items, which are detailed at the end of this release, adjusted operating income increased $10.0 million, or 68.5%, to $24.5 million from $14.6 million in the second quarter of fiscal 2008, driven largely by growth in earnings from its Carter's retail segment as well as improved performance of its OshKosh retail and wholesale segments.