Abnormal spike in cotton prices affect Carter's Q1 results

03 May '11

4 min read

Carter's Inc, the largest branded marketer in the United States of apparel exclusively for babies and young children, reported its first quarter 2011 results.

“Our first quarter sales reflect the strength of our Carter's brand product offering. The growth in sales is being driven by the national retailers, expansion of our retail stores, and the success of our eCommerce initiatives,” said Michael D. Casey, Chairman and Chief Executive Officer. “As expected, our profitability this year will be affected by the abnormal spike in cotton prices.”

First Quarter of Fiscal 2011 compared to First Quarter of Fiscal 2010

Consolidated net sales increased $60.0 million, or 14.7%, to $469.0 million. Net sales of the Company's Carter's brands increased $60.1 million, or 18.1%, to $392.4 million. Net sales of the Company's OshKosh B'gosh brand were comparable to the first quarter of fiscal 2010.

Operating income in the first quarter of fiscal 2011 was $53.6 million, a decrease of $17.5 million, or 24.6%, from $71.2 million in the first quarter of fiscal 2010 primarily due to higher product costs.

Net income decreased $10.7 million, or 25.0%, to $32.1 million, or $0.55 per diluted share, compared to $42.8 million, or $0.71 per diluted share, in the first quarter of fiscal 2010.

Cash flow from operations in the first quarter was $9.3 million, a decrease of $14.1 million, or 60.3%, from the first quarter of fiscal 2010 primarily due to decreased earnings and net changes in working capital.

Carter's Brand Businesses

Carter's wholesale sales increased $41.6 million, or 28.5%, to $187.9 million driven by higher sales in the off-price channel and strong over-the-counter performance of our product offerings.

Carter's retail segment sales increased $19.7 million, or 16.7%, to $137.9 million, driven by incremental sales of $18.3 million generated by new store openings and eCommerce sales, and a comparable store sales increase of $1.4 million, or 1.2%. We believe Carter's retail results were negatively impacted by poor weather and a later Easter holiday this year. In the first quarter of fiscal 2011, the Company opened ten Carter's retail stores and as of the end of the first quarter, operated 316 Carter's retail stores.

Carter's mass channel segment sales, which are comprised of sales of its Child of Mine brand and Just One You brand, decreased $1.3 million, or 1.9%, to $66.6 million. The decrease resulted from seasonal transition issues and timing of shipments of our Child of Mine brand, partially offset by increased sales of our Just One You brand resulting from increased productivity, additional floor space, and earlier demand than a year ago.

OshKosh B'gosh Brand Businesses

OshKosh retail segment sales decreased $1.2 million, or 2.1%, to $54.0 million, due to a comparable store sales decrease of $5.2 million, or 9.8%, partially offset by incremental sales of $4.7 million generated by new store openings and eCommerce sales. We believe OshKosh retail results were negatively impacted by poor weather and a later Easter holiday this year. In the first quarter of fiscal 2011, the Company opened two OshKosh retail stores and closed three and as of the end of the first quarter, operated 179 OshKosh retail stores.

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