- Net sales $600 million
- Diluted EPS $0.64; adjusted diluted EPS $0.64
- Returned $58 million to shareholders through share
repurchases and dividends in Q2; $97 million returned in the first
half of fiscal 2023
- Full year fiscal 2023 outlook1:
- Net sales of $2.95 billion to $3.00 billion
- Adjusted operating income of $325 million to $340
million
- Adjusted diluted EPS of $5.95 to $6.15
Carter’s, Inc. (NYSE:CRI), the largest branded marketer in North
America of apparel exclusively for babies and young children, today
reported its second quarter fiscal 2023 results.
“We achieved our second quarter sales and earnings objectives,”
said Michael D. Casey, Chairman and Chief Executive Officer. “For
the third consecutive quarter, we saw higher than planned demand in
our wholesale business driven, we believe, by the strength of our
product offerings and leaner inventory positions.
“Our comparable retail sales in the second quarter were in line
with our forecast. Unseasonably cool weather weighed on consumer
demand in the earlier months of the quarter. We saw a meaningful
improvement in the trend of our retail sales beginning Memorial Day
weekend, which has continued into July.
“International sales were lower than forecasted due largely to
cooler weather in Canada. Similar to our experience in the United
States, the trend in our retail sales in Canada has also
improved.
“We believe our performance relative to last year reflects the
effects of inflation weighing on families with young children and
adjustments they have made to constrain spending, where possible.
Like our consumers, we have also reduced spending in many areas of
our business to mitigate the effects of inflation. Most notably, we
have meaningfully reduced inventory levels to improve our product
sell-throughs, price realization, and gross profit margin.
“Given the continued efforts by the Federal Reserve to reduce
inflation and slow consumer spending, we have risk-adjusted our
second half sales and earnings forecasts. That said, we are
forecasting a meaningfully improved trend in sales and earnings in
the second half this year driven by, among other things, a stronger
product offering, improved on-time shipping performance, and lower
ocean freight rates and product costs.
“In the balance of the year, we plan to remain focused on margin
preservation and cash flow. Given our collective efforts to
strengthen our performance, we are forecasting a significant
improvement in operating cash flow this year which we expect will
enable Carter’s to continue investing in our growth strategies and
returning excess capital to our shareholders through dividends and
share repurchases.
“Carter’s is the market leader in young children’s apparel. We
are the largest specialty retailer in North America focused on
young children’s apparel.
“We are also the largest supplier of young children’s apparel to
the largest, most successful retailers, including Target, Walmart,
and Amazon. Together with our wholesale customers, we serve the
needs of families with young children in over 20,000 points of
distribution globally.
“We believe our unparalleled market distribution capabilities
and brand reputation for quality and value will enable us to
continue leading the market and be well-positioned to gain market
share in the years ahead.”
1 Refer to “Business Outlook” section of
this release for additional information regarding reconciliations
of forward-looking non-GAAP financial measures.
Adjustments to Reported GAAP Results
In addition to the results presented in this earnings release in
accordance with GAAP, the Company has provided adjusted, non-GAAP
financial measurements, as presented below. The Company believes
these non-GAAP financial measurements provide a meaningful
comparison of the Company’s results and afford investors a view of
what management considers to be the Company’s underlying
performance. These measures are presented for informational
purposes only. See “Reconciliation of Adjusted Results to GAAP”
section of this release for additional disclosures and
reconciliations regarding these non-GAAP financial measures.
Adjustments made to Q2 and first half of fiscal 2023 results
reflect costs related to organizational restructuring. In Q2 of
fiscal 2022, a pre-tax adjustment of approximately $19.9 million
($15.2 million net of tax, or $0.38 per diluted share) was made
related to a loss on extinguishment of debt.
Second Fiscal Quarter
2023
2022
(In millions, except earnings per
share)
Operating Income
% Net Sales
Net Income
Diluted EPS
Operating Income
% Net Sales
Net Income
Diluted EPS
As reported (GAAP)
$
37.6
6.3
%
$
23.9
$
0.64
$
75.4
10.8
%
$
37.0
$
0.93
Organizational restructuring
0.4
0.3
0.01
—
—
—
Loss on extinguishment of debt
—
—
—
—
15.2
0.38
As adjusted
$
37.9
6.3
%
$
24.2
$
0.64
$
75.4
10.8
%
$
52.1
$
1.30
First Half
2023
2022
(In millions, except earnings per
share)
Operating Income
% Net Sales
Net Income
Diluted EPS
Operating Income
% Net Sales
Net Income
Diluted EPS
As reported (GAAP)
$
93.9
7.2
%
$
59.9
$
1.59
$
178.0
12.0
%
$
104.9
$
2.59
Organizational restructuring
1.5
1.2
0.03
—
—
—
Loss on extinguishment of debt
—
—
—
—
15.2
0.37
As adjusted
$
95.5
7.4
%
$
61.0
$
1.62
$
178.0
12.0
%
$
120.1
$
2.97
Note: Results may not be additive due to rounding.
Consolidated Results
Second Quarter of Fiscal 2023 compared to Second Quarter of
Fiscal 2022
Net sales decreased $100.5 million, or 14.3%, to $600.2 million,
compared to $700.7 million in the second quarter of fiscal 2022.
Macroeconomic factors, including inflation, higher interest rates,
higher consumer debt levels, and risk of recession, negatively
affected demand from consumers and wholesale customers. U.S.
Retail, U.S. Wholesale, and International segment net sales
declined 15%, 17%, and 8%, respectively. U.S. Retail comparable net
sales declined 15.9%. Changes in foreign currency exchange rates in
the second quarter of fiscal 2023, as compared to the second
quarter of fiscal 2022, had an unfavorable effect on consolidated
net sales of approximately $1.2 million, or 0.2%.
Operating income decreased $37.9 million, or 50.2% to $37.6
million, compared to $75.4 million in the second quarter of fiscal
2022. Operating margin decreased to 6.3%, compared to 10.8% in the
prior-year period, reflecting fixed cost deleverage on lower sales
and higher performance-based compensation provisions, partially
offset by lower inventory provisions and lower ocean freight
rates.
Adjusted operating income (a non-GAAP measure) decreased $37.5
million, or 49.7% to $37.9 million, compared to $75.4 million in
the second quarter of fiscal 2022. Adjusted operating margin
declined to 6.3%, compared to 10.8% in the prior year period,
principally due to the factors noted above.
Net income was $23.9 million, or $0.64 per diluted share,
compared to $37.0 million, or $0.93 per diluted share, in the
second quarter of fiscal 2022.
Adjusted net income (a non-GAAP measure) was $24.2 million,
compared to $52.1 million in the second quarter of fiscal 2022.
Adjusted earnings per diluted share (a non-GAAP measure) was $0.64,
compared to $1.30 in the prior-year quarter.
First Half of Fiscal 2023 compared to First Half of Fiscal
2022
Net sales decreased $185.9 million, or 12.5%, to $1.30 billion,
compared to $1.48 billion in the first half of 2022. Macroeconomic
factors, as noted in the discussion of second quarter results
above, negatively affected demand from consumers and wholesale
customers. U.S. Retail, U.S. Wholesale, and International net sales
declined 13%, 12%, and 11%, respectively. U.S. Retail comparable
net sales declined 14.4%. Changes in foreign currency exchange
rates in the first half of fiscal 2023, as compared to the first
half of fiscal 2022, had an unfavorable effect on consolidated net
sales of approximately $3.3 million, or 0.2%.
Operating income decreased $84.1 million, or 47.3% to $93.9
million, compared to $178.0 million in the first half of fiscal
2022. Operating margin declined to 7.2%, compared to 12.0% in the
prior year period, reflecting fixed cost deleverage on lower sales,
partially offset by lower inventory provisions, lower air freight
costs, and lower ocean freight rates.
Adjusted operating income (a non-GAAP measure) decreased $82.6
million, or 46.4% to $95.5 million, compared to $178.0 million in
the first half of fiscal 2022. Adjusted operating margin declined
to 7.4%, compared to 12.0% in the prior year period, principally
due to the factors noted above.
Net income was $59.9 million, or $1.59 per diluted share,
compared to $104.9 million, or $2.59 per diluted share, in the
first half of fiscal 2022.
Adjusted net income (a non-GAAP measure) was $61.0 million,
compared to $120.1 million in the first half of fiscal 2022.
Adjusted earnings per diluted share (a non-GAAP measure) was $1.62,
compared to adjusted earnings per diluted share of $2.97 in the
first half of fiscal 2022.
Net cash provided by operations in the first half of fiscal 2023
was $209.2 million, compared to net cash used in operations of
$93.6 million in the first half of fiscal 2022. The improved
operating cash flow principally reflects favorable changes in
working capital, primarily lower inventories, partially offset by
decreased net income.
See the “Business Segment Results” and “Reconciliation of GAAP
to Adjusted Results” sections of this release for additional
disclosures regarding business segment performance and non-GAAP
measures.
Liquidity and Financial Position
The Company’s total liquidity at the end of the second quarter
of fiscal 2023 was $1.0 billion, comprised of cash and cash
equivalents of $175 million and $846 million in unused borrowing
capacity on the Company’s $850 million secured revolving credit
facility.
Return of Capital
In the second quarter and first half of fiscal 2023, the Company
returned to shareholders a total of $58.5 million and $96.6
million, respectively, through share repurchases and cash dividends
as described below.
- Share repurchases: During the second quarter of fiscal
2023, the Company repurchased and retired 0.4 million shares of its
common stock for $30.3 million at an average price of $67.49 per
share. In the first half of fiscal 2023, the Company repurchased
and retired 0.6 million shares of its common stock for $39.9
million at an average price of $68.20 per share. Fiscal
year-to-date through July 27, 2023, the Company has repurchased and
retired 0.7 million shares for $48.9 million at an average price of
$69.08 per share. All shares were repurchased in open market
transactions pursuant to applicable regulations for such
transactions. As of July 27, 2023, the total remaining capacity
under the Company’s previously announced repurchase authorizations
was approximately $701 million.
- Dividends: In the second quarter of fiscal 2023, the
Company paid a cash dividend of $0.75 per common share totaling
$28.2 million. In the first half of fiscal 2023, the Company paid
cash dividends totaling $56.6 million. Future payments of quarterly
dividends will be at the discretion of the Company’s Board of
Directors based on a number of factors, including the Company’s
future financial performance and other considerations.
2023 Business Outlook
We do not reconcile forward-looking adjusted operating income or
adjusted diluted earnings per share to their most directly
comparable GAAP measures because we cannot predict with reasonable
certainty the ultimate outcome of certain components of such
reconciliations that are not within our control due to factors
described below, or others that may arise, without unreasonable
effort. For these reasons, we are unable to assess the probable
significance of the unavailable information, which could materially
impact the amount of future operating income or diluted EPS, the
most directly comparable GAAP metrics to adjusted operating income
and adjusted diluted earnings per share, respectively.
For the third quarter of fiscal 2023, the Company expects
approximately:
- $770 million to $790 million in net sales (compared to $819
million in Q3 fiscal 2022);
- $80 million to $85 million in adjusted operating income
(compared to $92 million in Q3 fiscal 2022); and
- $1.45 to $1.55 in adjusted diluted earnings per share (compared
to $1.67 in Q3 fiscal 2022).
Our forecast for the third quarter of fiscal 2023 assumes:
- Continued macroeconomic pressure on consumer demand and
cautious inventory commitments by wholesale customers;
- Improved gross margin, reflecting improved price realization
and lower transportation and inventory-related costs;
- SG&A rate deleverage on lower sales;
- Comparable interest expense and a higher effective tax rate;
and
- Lower average number of shares outstanding.
For fiscal year 2023, the Company expects
approximately:
- $2.95 billion to $3.00 billion in net sales (compared to $3.21
billion in fiscal 2022);
- $325 million to $340 million in adjusted operating income
(compared to $388 million in fiscal 2022);
- $5.95 to $6.15 in adjusted diluted earnings per share (compared
to $6.90 in fiscal 2022);
- Operating cash flow of over $300 million (compared to $88
million in fiscal 2022); and
- Capital expenditures of approximately $75 million (compared to
$40 million in fiscal 2022).
Our forecast for fiscal year 2023 assumes:
- In the second half, improved demand trend as inflation
moderates;
- Gross margin expansion, driven by improved price realization
and lower transportation and inventory-related costs;
- Comparable SG&A dollars;
- Lower interest expense and higher effective tax rate; and
- Continued return of excess capital.
Unless otherwise noted, the forecast assumptions for the third
quarter of fiscal 2023 and fiscal year 2023 are relative to the
prior-year period.
Our adjusted operating income and diluted earnings per share
forecasts for fiscal year 2023 exclude pre-tax net charges of $1.5
million related to organizational restructuring, which were
recorded in the first half of the year.
Conference Call
The Company will hold a conference call with investors to
discuss second quarter fiscal 2023 results and its business outlook
on July 28, 2023 at 8:30 a.m. Eastern Daylight Time. To listen to a
live webcast and view the accompanying presentation materials,
please visit ir.carters.com and select links for “News &
Events” followed by “Webcasts & Presentations.”
To access the call by phone, please preregister via the
following link to receive your dial-in number and unique passcode:
https://register.vevent.com/register/BI611c61f01abb4a47bd5214857d4a008c
A webcast replay will be available shortly after the conclusion
of the call at ir.carters.com.
About Carter’s, Inc.
Carter’s, Inc. is the largest branded marketer in North America
of apparel exclusively for babies and young children. The Company
owns the Carter’s and OshKosh B’gosh brands, two of the most
recognized brands in the marketplace. These brands are sold through
1,000 Company-operated stores in the United States, Canada, and
Mexico and online at www.carters.com, www.oshkosh.com,
www.cartersoshkosh.ca, and www.carters.com.mx. They are also sold
in leading department stores, national chains, and specialty
retailers domestically and internationally. The Company’s Child of
Mine brand is available at Walmart, its Just One You brand is
available at Target, and its Simple Joys brand is available on
Amazon. The Company also owns Little Planet, a brand focused on
organic fabrics and sustainable materials, and Skip Hop, a global
lifestyle brand for families with young children. Carter’s is
headquartered in Atlanta, Georgia. Additional information may be
found at www.carters.com.
Forward Looking Statements
Statements contained in this press release that are not
historical fact and use predictive words such as “estimates”,
“outlook”, “guidance”, “expect”, “believe”, “intend”, “designed”,
“target”, “plans”, “may”, “will”, “are confident” and similar words
are forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995). These
forward-looking statements and related assumptions involve risks
and uncertainties that could cause actual results and outcomes to
differ materially from any forward-looking statements or views
expressed in this press release. These risks and uncertainties
include, but are not limited to, the factors disclosed in Part I,
Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2022, and otherwise in our
reports and filings with the Securities and Exchange Commission, as
well as the following factors: the continuing effects of the novel
coronavirus (COVID-19) pandemic; macroeconomic factors, including
inflationary pressures; the impact of supply chain delays;
financial difficulties for one or more of our major customers; an
overall decrease in consumer spending, including, but not limited
to, decreases in birth rates; our products not being accepted in
the marketplace; increased competition in the market place;
diminished value of our brands; the failure to protect our
intellectual property; the failure to comply with applicable
quality standards or regulations; unseasonable or extreme weather
conditions; pending and threatened lawsuits; a breach of our
information technology systems and the loss of personal data;
increased margin pressures, including increased cost of materials
and labor and our inability to successfully increase prices to
offset these increased costs; our foreign sourcing arrangements;
disruptions in our supply chain, including increased transportation
and freight costs; the management and expansion of our business
domestically and internationally; the acquisition and integration
of other brands and businesses; changes in our tax obligations,
including additional customs, duties or tariffs; our ability to
achieve our forecasted financial results for the fiscal year; our
continued ability to declare and pay a dividend and conduct share
repurchases in future periods; our planned opening and closing of
stores during the fiscal year; and other risks detailed in the
Company’s periodic reports as filed in accordance with the
Securities Exchange Act of 1934, as amended. The Company does not
undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
CARTER’S, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(dollars in thousands, except per
share data)
(unaudited)
Fiscal Quarter Ended
Two Fiscal Quarters
Ended
July 1, 2023
July 2, 2022
July 1, 2023
July 2, 2022
Net sales
$
600,199
$
700,695
$
1,296,079
$
1,481,980
Cost of goods sold
308,303
369,456
694,716
795,699
Gross profit
291,896
331,239
601,363
686,281
Royalty income, net
4,341
5,602
10,860
13,076
Selling, general, and administrative
expenses
258,676
261,423
518,308
521,315
Operating income
37,561
75,418
93,915
178,042
Interest expense
8,083
8,652
17,727
23,784
Interest income
(1,005
)
(272
)
(1,705
)
(610
)
Other (income) expense, net
(767
)
17
(1,025
)
(494
)
Loss on extinguishment of debt
—
19,940
—
19,940
Income before income taxes
31,250
47,081
78,918
135,422
Income tax provision
7,383
10,111
19,055
30,519
Net income
$
23,867
$
36,970
$
59,863
$
104,903
Basic net income per common share
$
0.64
$
0.93
$
1.59
$
2.60
Diluted net income per common share
$
0.64
$
0.93
$
1.59
$
2.59
Dividend declared and paid per common
share
$
0.75
$
0.75
$
1.50
$
1.50
CARTER’S, INC.
BUSINESS SEGMENT
RESULTS
(dollars in thousands)
(unaudited)
Fiscal Quarter Ended
Two Fiscal Quarters
Ended
July 1, 2023
% of
Total Net Sales
July 2, 2022
% of
Total Net Sales
July 1, 2023
% of
Total Net Sales
July 2, 2022
% of
Total Net Sales
Net
sales:
U.S. Retail
$
323,466
53.9
%
$
379,097
54.1
%
$
647,187
49.9
%
$
745,455
50.3
%
U.S. Wholesale
186,867
31.1
%
224,016
32.0
%
466,856
36.0
%
531,317
35.9
%
International
89,866
15.0
%
97,582
13.9
%
182,036
14.1
%
205,208
13.8
%
Consolidated net sales
$
600,199
100.0
%
$
700,695
100.0
%
$
1,296,079
100.0
%
$
1,481,980
100.0
%
Operating
income:
% of
Segment
Net Sales
% of
Segment
Net Sales
% of
Segment
Net Sales
% of
Segment
Net Sales
U.S. Retail
$
28,211
8.7
%
$
55,540
14.7
%
$
55,150
8.5
%
$
105,534
14.2
%
U.S. Wholesale
29,209
15.6
%
33,593
15.0
%
81,301
17.4
%
94,099
17.7
%
International
6,690
7.4
%
12,163
12.5
%
9,814
5.4
%
22,551
11.0
%
Corporate expenses (*)
(26,549
)
n/a
(25,878
)
n/a
(52,350
)
n/a
(44,142
)
n/a
Consolidated operating income
$
37,561
6.3
%
$
75,418
10.8
%
$
93,915
7.2
%
$
178,042
12.0
%
(*)
Corporate expenses include expenses
related to incentive compensation, stock-based compensation,
executive management, severance and relocation, finance, office
occupancy, information technology, certain legal fees, consulting
fees, and audit fees.
(dollars in millions)
Fiscal Quarter Ended July 1,
2023
Two Fiscal Quarters Ended July
1, 2023
Charges:
U.S. Retail
U.S. Wholesale
International
U.S. Retail
U.S. Wholesale
International
Organizational restructuring(*)
$
0.2
$
0.1
$
—
$
(0.6
)
$
(0.4
)
$
—
(*)
Relates to gains for organizational
restructuring and related corporate office lease amendment actions.
Additionally, the second fiscal quarter and first two fiscal
quarters ended July 1, 2023 includes a corporate charge of $0.1
million and $2.5 million, respectively, related to organizational
restructuring and related corporate office lease amendment
actions.
Note: Results may not be additive due to rounding.
CARTER’S, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(dollars in thousands, except per
share data)
(unaudited)
July 1, 2023
December 31, 2022
July 2, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
174,503
$
211,748
$
231,339
Accounts receivable, net of allowance for
credit losses of $3,849, $7,189, and $5,758, respectively
132,679
198,587
183,920
Finished goods inventories, net of
inventory reserves of $17,847, $19,268, and $18,057,
respectively
681,573
744,573
858,258
Prepaid expenses and other current assets
(*)
56,616
33,812
68,245
Total current assets
1,045,371
1,188,720
1,341,762
Property, plant, and equipment, net of
accumulated depreciation of $592,310, $569,528, and $548,013,
respectively
178,100
189,822
186,778
Operating lease assets
499,689
492,335
449,350
Tradenames, net
298,274
298,393
307,518
Goodwill
210,517
209,333
211,247
Customer relationships, net
28,995
30,564
32,248
Other assets
27,525
30,548
31,747
Total assets
$
2,288,471
$
2,439,715
$
2,560,650
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
281,333
$
264,078
$
408,006
Current operating lease liabilities
(*)
137,473
142,432
129,744
Other current liabilities
98,730
122,439
96,102
Total current liabilities
517,536
528,949
633,852
Long-term debt, net
496,984
616,624
616,275
Deferred income taxes
45,436
41,235
45,730
Long-term operating lease liabilities
420,805
421,741
400,046
Other long-term liabilities
32,701
34,757
43,881
Total liabilities
$
1,513,462
$
1,643,306
$
1,739,784
Commitments and contingencies
Stockholders' equity:
Preferred stock; par value $0.01 per
share; 100,000 shares authorized; none issued or outstanding
$
—
$
—
$
—
Common stock, voting; par value $0.01 per
share; 150,000,000 shares authorized; 37,354,464, 37,692,132, and
39,315,094 shares issued and outstanding, respectively
374
377
393
Additional paid-in capital
—
—
—
Accumulated other comprehensive loss
(24,963
)
(34,338
)
(32,203
)
Retained earnings
799,598
830,370
852,676
Total stockholders' equity
775,009
796,409
820,866
Total liabilities and stockholders'
equity
$
2,288,471
$
2,439,715
$
2,560,650
(*)
Prepaid expenses and other current assets
and Current operating lease liabilities as of July 2, 2022 were
revised to reflect the presentation for payments of rent before
payment due date of $13.2 million.
CARTER’S, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Two Fiscal Quarters
Ended
July 1, 2023
July 2, 2022
Cash flows from operating activities:
Net income
$
59,863
$
104,903
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation of property, plant, and
equipment
30,655
29,838
Amortization of intangible assets
1,877
1,865
(Recoveries of) provisions for excess and
obsolete inventory, net
(1,581
)
3,709
Gain on partial termination of corporate
lease
(4,366
)
—
Other asset impairments and loss on
disposal of property, plant and equipment, net of recoveries
2,751
246
Amortization of debt issuance costs
788
1,173
Stock-based compensation expense
10,984
12,218
Unrealized foreign currency exchange gain,
net
(429
)
(32
)
Recoveries of doubtful accounts receivable
from customers
(491
)
(1,520
)
Unrealized (gain) loss on investments
(633
)
1,867
Loss on extinguishment of debt
—
19,940
Deferred income taxes expense
4,274
4,762
Other
—
1,019
Effect of changes in operating assets and
liabilities:
Accounts receivable
67,425
48,973
Finished goods inventories
70,017
(215,519
)
Prepaid expenses and other assets(*)
(21,643
)
(19,071
)
Accounts payable and other
liabilities(*)
(10,249
)
(87,966
)
Net cash provided by (used in) operating
activities
$
209,242
$
(93,595
)
Cash flows from investing activities:
Capital expenditures
$
(26,356
)
$
(16,313
)
Net cash used in investing activities
$
(26,356
)
$
(16,313
)
Cash flows from financing activities:
Payment of senior notes due 2025
$
—
$
(500,000
)
Premiums paid to extinguish debt
—
(15,678
)
Payment of debt issuance costs
—
(2,420
)
Borrowings under secured revolving credit
facility
—
120,000
Payments on secured revolving credit
facility
(120,000
)
—
Repurchases of common stock
(39,922
)
(176,306
)
Dividends paid
(56,641
)
(60,460
)
Withholdings from vesting of restricted
stock
(4,837
)
(6,681
)
Proceeds from exercises of stock
options
83
311
Other
—
(321
)
Net cash used in financing activities
$
(221,317
)
$
(641,555
)
Net effect of exchange rate changes on
cash and cash equivalents
1,186
(1,492
)
Net decrease in cash and cash
equivalents
$
(37,245
)
$
(752,955
)
Cash and cash equivalents, beginning of
period
211,748
984,294
Cash and cash equivalents, end of
period
$
174,503
$
231,339
(*)
Cash flows for the two fiscal
quarters ended July 2, 2022 were revised to reflect the
presentation for payments of rent before payment due date of $13.2
million.
CARTER’S, INC.
RECONCILIATION OF GAAP TO
ADJUSTED RESULTS
(dollars in millions, except
earnings per share)
(unaudited)
Fiscal Quarter Ended July 1,
2023
Gross Profit
% Net Sales
SG&A
% Net Sales
Operating Income
% Net Sales
Income Taxes
Net Income
Diluted EPS
As reported (GAAP)
$
291.9
48.6
%
$
258.7
43.1
%
$
37.6
6.3
%
$
7.4
$
23.9
$
0.64
Organizational restructuring (b)
—
(0.4
)
0.4
0.1
0.3
0.01
As adjusted (a)
$
291.9
48.6
%
$
258.3
43.0
%
$
37.9
6.3
%
$
7.5
$
24.2
$
0.64
Two Fiscal Quarters Ended July
1, 2023
Gross Profit
% Net Sales
SG&A
% Net Sales
Operating Income
% Net Sales
Income Taxes
Net Income
Diluted EPS
As reported (GAAP)
$
601.4
46.4
%
$
518.3
40.0
%
$
93.9
7.2
%
$
19.1
$
59.9
$
1.59
Organizational restructuring (b)
—
(1.5
)
1.5
0.4
1.2
0.03
As adjusted (a)
$
601.4
46.4
%
$
516.8
39.9
%
$
95.5
7.4
%
$
19.4
$
61.0
$
1.62
Fiscal Quarter Ended July 2,
2022
Gross Profit
% Net Sales
SG&A
% Net Sales
Operating Income
% Net Sales
Income Taxes
Net Income
Diluted EPS
As reported (GAAP)
$
331.2
47.3
%
$
261.4
37.3
%
$
75.4
10.8
%
$
10.1
$
37.0
$
0.93
Loss on extinguishment of debt (c)
—
—
—
4.8
15.2
0.38
As adjusted (a)
$
331.2
47.3
%
$
261.4
37.3
%
$
75.4
10.8
%
$
14.9
$
52.1
$
1.30
Two Fiscal Quarters Ended July
2, 2022
Gross Profit
% Net Sales
SG&A
% Net Sales
Operating Income
% Net Sales
Income Taxes
Net Income
Diluted EPS
As reported (GAAP)
$
686.3
46.3
%
$
521.3
35.2
%
$
178.0
12.0
%
$
30.5
$
104.9
$
2.59
Loss on extinguishment of debt (c)
—
—
—
4.8
15.2
0.37
As adjusted (a)
$
686.3
46.3
%
$
521.3
35.2
%
$
178.0
12.0
%
$
35.3
$
120.1
$
2.97
Fiscal Year Ended December 31,
2022
Gross Profit
% Net Sales
SG&A
% Net Sales
Operating Income
% Net Sales
Income Taxes
Net Income
Diluted EPS
As reported (GAAP)
$
1,472.4
45.8
%
$
1,110.0
34.6
%
$
379.2
11.8
%
$
66.7
$
250.0
$
6.34
Intangible asset impairment (d)
—
—
9.0
2.1
6.9
0.17
Loss on extinguishment of debt (c)
—
—
—
4.8
15.2
0.38
As adjusted (a)
$
1,472.4
45.8
%
$
1,110.0
34.6
%
$
388.2
12.1
%
$
73.6
$
272.0
$
6.90
(a)
In addition to the results provided in
this earnings release in accordance with GAAP, the Company has
provided adjusted, non-GAAP financial measurements that present
gross profit, SG&A, operating income, income tax, net income,
and net income on a diluted share basis excluding the adjustments
discussed above. The Company believes these adjustments provide a
meaningful comparison of the Company’s results and afford investors
a view of what management considers to be the Company's core
performance. The adjusted, non-GAAP financial measurements included
in this earnings release should not be considered as an alternative
to net income or as any other measurement of performance derived in
accordance with GAAP. The adjusted, non-GAAP financial measurements
are presented for informational purposes only and are not
necessarily indicative of the Company’s future condition or results
of operations.
(b)
Net expenses related to organizational
restructuring and related corporate office lease amendment
actions.
(c)
Related to the redemption of the $500
million aggregate principal amount of senior notes due 2025 in
April 2022 that were previously issued by a wholly-owned subsidiary
of the Company.
(d)
Related to the write-down of the Skip Hop
tradename asset.
Note: No adjustments were made to GAAP results in the third
quarter of fiscal 2022. Results may not be additive due to
rounding.
CARTER’S, INC.
RECONCILIATION OF NET INCOME
ALLOCABLE TO COMMON SHAREHOLDERS
(unaudited)
Fiscal Quarter Ended
Two Fiscal Quarters
Ended
July 1, 2023
July 2, 2022
July 1, 2023
July 2, 2022
Weighted-average number of common and
common equivalent shares outstanding:
Basic number of common shares
outstanding
36,824,490
39,344,834
36,964,509
39,807,354
Dilutive effect of equity awards
127
29,153
3,850
48,274
Diluted number of common and common
equivalent shares outstanding
36,824,617
39,373,987
36,968,359
39,855,628
As reported on a
GAAP Basis:
(dollars in thousands, except per share
data)
Basic net income per common share:
Net income
$
23,867
$
36,970
$
59,863
$
104,903
Income allocated to participating
securities
(426
)
(536
)
(1,018
)
(1,480
)
Net income available to common
shareholders
$
23,441
$
36,434
$
58,845
$
103,423
Basic net income per common share
$
0.64
$
0.93
$
1.59
$
2.60
Diluted net income per common share:
Net income
$
23,867
$
36,970
$
59,863
$
104,903
Income allocated to participating
securities
(426
)
(536
)
(1,018
)
(1,479
)
Net income available to common
shareholders
$
23,441
$
36,434
$
58,845
$
103,424
Diluted net income per common share
$
0.64
$
0.93
$
1.59
$
2.59
As adjusted
(a):
Basic net income per common share:
Net income
$
24,165
$
52,121
$
61,044
$
120,053
Income allocated to participating
securities
(431
)
(774
)
(1,040
)
(1,705
)
Net income available to common
shareholders
$
23,734
$
51,347
$
60,004
$
118,348
Basic net income per common share
$
0.64
$
1.31
$
1.62
$
2.97
Diluted net income per common share:
Net income
$
24,165
$
52,121
$
61,044
$
120,053
Income allocated to participating
securities
(431
)
(774
)
(1,040
)
(1,704
)
Net income available to common
shareholders
$
23,734
$
51,347
$
60,004
$
118,349
Diluted net income per common share
$
0.64
$
1.30
$
1.62
$
2.97
(a)
In addition to the results provided in
this earnings release in accordance with GAAP, the Company has
provided adjusted, non-GAAP financial measurements that present per
share data excluding the adjustments discussed above. The Company
has excluded $0.3 million and $1.2 million in after-tax expenses
from these results for the fiscal quarter and two fiscal quarters
ended July 1, 2023, respectively. The Company has excluded $15.2
million in after-tax expenses from these results for both the
fiscal quarter and two fiscal quarters ended July 2, 2022.
Note: Results may not be additive due to rounding.
RECONCILIATION OF U.S. GAAP
AND NON-GAAP INFORMATION
(dollars in millions)
(unaudited)
The following table provides a
reconciliation of net income to EBITDA and Adjusted EBITDA for the
periods indicated:
Fiscal Quarter Ended
Two Fiscal Quarters
Ended
Four Fiscal Quarters
Ended
July 1, 2023
July 2, 2022
July 1, 2023
July 2, 2022
July 1, 2023
Net income
$
23.9
$
37.0
$
59.9
$
104.9
$
205.0
Interest expense
8.1
8.7
17.7
23.8
36.7
Interest income
(1.0
)
(0.3
)
(1.7
)
(0.6
)
(2.4
)
Income tax expense
7.4
10.1
19.1
30.5
55.2
Depreciation and amortization
16.8
17.5
32.5
31.7
66.1
EBITDA
$
55.1
$
73.0
$
127.5
$
190.3
$
360.7
Adjustments to EBITDA
Organizational restructuring (a)
$
0.4
$
—
$
1.5
$
—
$
1.5
Loss on extinguishment of debt (b)
—
19.9
—
19.9
$
—
Intangible asset impairment (c)
—
—
—
—
9.0
Total adjustments
0.4
19.9
1.5
19.9
10.5
Adjusted EBITDA
$
55.5
$
92.9
$
129.0
$
210.2
$
371.2
a.
Net expenses related to organizational restructuring and related
corporate office lease amendment actions.
b.
Related to the redemption of the $500 million aggregate
principal amount of senior notes due 2025 in April 2022 that were
previously issued by a wholly-owned subsidiary of the Company.
c.
Related to the write-down of the Skip Hop tradename asset.
Note: Results may not be additive due to rounding.
EBITDA and Adjusted EBITDA are supplemental financial measures
that are not defined or prepared in accordance with GAAP. We define
EBITDA as net income before interest, income taxes, and
depreciation and amortization. Adjusted EBITDA is EBITDA adjusted
for the items described in footnotes (a) - (c) to the table
above.
We present EBITDA and Adjusted EBITDA because we consider them
important supplemental measures of our performance and believe they
are frequently used by securities analysts, investors, and other
interested parties in the evaluation of companies in our industry.
These measures also afford investors a view of what management
considers to be the Company's core performance.
The use of EBITDA and Adjusted EBITDA instead of net income or
cash flows from operations has limitations as an analytical tool,
and you should not consider them in isolation, or as a substitute
for analysis of our results as reported under GAAP. EBITDA and
Adjusted EBITDA do not represent net income or cash flow from
operations as those terms are defined by GAAP and do not
necessarily indicate whether cash flows will be sufficient to fund
cash needs. While EBITDA, Adjusted EBITDA and similar measures are
frequently used as measures of operations and the ability to meet
debt service requirements, these terms are not necessarily
comparable to other similarly titled captions of other companies
due to the potential inconsistencies in the method of calculation.
EBITDA and Adjusted EBITDA do not reflect the impact of earnings or
charges resulting from matters that we consider not to be
indicative of our ongoing operations. Because of these limitations,
EBITDA and Adjusted EBITDA should not be considered as
discretionary cash available to us for working capital, debt
service and other purposes.
RECONCILIATION OF U.S. GAAP
AND NON-GAAP INFORMATION
(dollars in millions)
(unaudited)
The table below reflects the calculation
of constant currency net sales on a consolidated and International
segment basis for the fiscal quarter and two fiscal quarters ended
July 1, 2023:
Fiscal Quarter Ended
Reported Net Sales July
1, 2023
Impact of Foreign Currency
Translation
Constant-Currency Net
Sales July 1, 2023
Reported Net Sales July
2, 2022
Reported Net Sales %
Change
Constant-Currency Net Sales %
Change
Consolidated net sales
$
600.2
$
(1.2
)
$
601.4
$
700.7
(14.3
)%
(14.2
)%
International segment net sales
$
89.9
$
(1.2
)
$
91.0
$
97.6
(7.9
)%
(6.7
)%
Two Fiscal Quarters
Ended
Reported Net Sales July
1, 2023
Impact of Foreign Currency
Translation
Constant-Currency Net
Sales July 1, 2023
Reported Net Sales July
2, 2022
Reported Net Sales %
Change
Constant-Currency Net Sales %
Change
Consolidated net sales
$
1,296.1
$
(3.3
)
$
1,299.4
$
1,482.0
(12.5
)%
(12.3
)%
International segment net sales
$
182.0
$
(3.3
)
$
185.4
$
205.2
(11.3
)%
(9.7
)%
Note: Results may not be additive due to rounding.
The Company evaluates its net sales on both an “as reported” and
a “constant currency” basis. The constant currency presentation,
which is a non-GAAP measure, excludes the impact of fluctuations in
foreign currency exchange rates that occurred between the
comparative periods. Constant currency net sales results are
calculated by translating current period net sales in local
currency to the U.S. dollar amount by using the currency conversion
rate for the prior comparative period. The Company consistently
applies this approach to net sales for all countries where the
functional currency is not the U.S. dollar. The Company believes
that the presentation of net sales on a constant currency basis
provides useful supplemental information regarding changes in our
net sales that were not due to fluctuations in currency exchange
rates and such information is consistent with how the Company
assesses changes in its net sales between comparative periods.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230727896786/en/
Sean McHugh Vice President & Treasurer (678) 791-7615
Carters (NYSE:CRI)
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