Carter's expects low single-digit growth in net sales for Q3

29 Jul '09

6 min read

Net income increased $8.6 million to $11.3 million, or $0.19 per diluted share, compared to $2.8 million, or $0.05 per diluted share, in the second quarter of fiscal 2008. Excluding the effect of certain items, which are detailed at the end of this release, adjusted net income increased $7.5 million to $13.6 million, or $0.23 per adjusted diluted earnings per share, compared to $6.1 million, or $0.10 per adjusted diluted earnings per share in the second quarter of fiscal 2008.

First Half of Fiscal 2009 compared to First Half of Fiscal 2008
Consolidated net sales increased 6.8% to $674.7 million. Net sales of the Company's Carter's brands increased 6.5% to $538.0 million. Net sales of the Company's OshKosh B'Gosh brand increased 8.1% to $136.7 million.

Consolidated retail sales increased 15.6% to $316.0 million. Carter's retail segment sales increased 18.4% to $212.1 million, with comparable store sales increasing 6.7%. OshKosh retail segment sales increased 10.3% to $104.0 million, with comparable store sales increasing 6.7%. Consolidated retail operating income increased $21.2 million to $33.6 million. Increased sales, improved gross margin, and better inventory management in both retail segments contributed to the growth in earnings. In the first half of fiscal 2009, the Company opened 18 Carter's and three OshKosh retail stores.

Carter's wholesale sales increased $10.8 million, or 5.1%, to $223.0 million due to improved product performance. OshKosh wholesale sales increased $0.5 million, or 1.5%, to $32.7 million.

The Company's mass channel sales decreased 9.7% to $103.0 million primarily due to strategic merchandising assortment changes made by Walmart.

In connection with the workforce reduction and distribution facility closure, the Company recorded pre-tax charges in the first half of fiscal 2009 of approximately $11.6 million related to severance and other benefits, asset impairment, accelerated depreciation, and other closure costs.

Results for the first half of fiscal 2009 include the $0.7 million write-down in the second quarter of the carrying value of the Company's White House, Tennessee distribution facility held for sale.

Operating income in the first half of fiscal 2009 was $49.5 million, an increase of $19.7 million, or 66.1%, from $29.8 million in the first half of fiscal 2008. Excluding the effect of certain items, which are detailed at the end of this release, adjusted operating income increased $26.7 million, or 76.1%, to $61.8 million from $35.1 million in first half of fiscal 2008, driven largely by growth in earnings in the Company's Carter's and OshKosh retail segments in addition to growth in earnings in its wholesale segments and its Carter's mass channel segment.

Net income increased $13.4 million to $27.7 million, or $0.47 per diluted share, compared to $14.3 million, or $0.24 per diluted share, in the first half of fiscal 2008. Excluding the effect of certain items, which are detailed at the end of this release, adjusted net income increased $17.8 million to $35.5 million, or $0.61 per adjusted diluted earnings per share, compared to $17.7 million, or $0.30 per adjusted diluted earnings per share in the first half of fiscal 2008.

Cash flow from operations in the first half of fiscal 2009 increased $2.9 million over the first half of fiscal 2008 due primarily to increased earnings, partially offset by net working capital needs.

Outlook
For the third quarter of fiscal 2009, the Company expects low single-digit growth in net sales and mid to high single-digit growth in adjusted diluted earnings per share, as compared to the third quarter of fiscal 2008, excluding a $2.6 million charge in the third quarter of fiscal 2008 related to the write-down of the carrying value of the Company's White House, Tennessee distribution facility held for sale.

Carter's Inc

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