- CONSOLIDATED NET SALES INCREASED 5%
- CARTER'S RETAIL STORE SALES INCREASED 21%, COMPS +17%
ATLANTA, July 22 /PRNewswire-FirstCall/ -- Carter's, Inc. (NYSE: CRI), the
largest branded marketer in the United States of apparel exclusively for
babies and young children, reported its second quarter fiscal 2008 results.
'Our second quarter sales were better than expected due to the strength of
our Carter's retail segment,' noted Michael D. Casey, Executive Vice President
and Chief Financial Officer, who will become the Company's Chief Executive
Officer on August 1, 2008. 'Our results reflect the benefit of investments
made in our new retail leadership team over the past year, the strengthening
of our product offerings, and better inventory management,' continued Mr.
Casey. 'In this difficult economic period, our stores continue to offer
significant value to the consumer.'
Second Quarter of Fiscal 2008 compared to Second Quarter of Fiscal 2007
Consolidated net sales increased 4.8% to $301.7 million. Net sales of the
Company's Carter's brands increased 4.1% to $238.0 million. Net sales of the
Company's OshKosh brand increased 7.7% to $63.6 million.
Consolidated retail store sales increased 13.9% to $142.5 million.
Carter's retail store sales increased 21.5% to $92.7 million, driven by a
comparable store sales increase of 17.3%, or $13.2 million, and sales of $3.5
million from new Carter's stores opened since the second quarter of fiscal
2007. OshKosh retail store sales increased 2.0% to $49.9 million, driven by
sales of $1.8 million from new OshKosh stores opened since the second quarter
of fiscal 2007. Comparable OshKosh retail store sales declined 0.9%, or $0.4
million.
In the second quarter of fiscal 2008, the Company opened two Carter's
retail stores. As of June 28, 2008, the Company had 231 Carter's and 163
OshKosh stores. The Company plans to open a total of 25 Carter's and two
OshKosh stores during fiscal 2008. The Company also plans to close five
Carter's and three OshKosh stores during fiscal 2008.
The Company's wholesale sales increased 4.4% to $108.1 million. Carter's
wholesale sales increased $1.0 million, or 1.1%, to $94.3 million. OshKosh
wholesale sales increased $3.5 million, or 34.5%, to $13.8 million, due
primarily to an increase in off-price shipments in the second quarter of
fiscal 2008.
The Company's mass channel sales, which are comprised of sales of our Just
One Year brand to Target and Child of Mine brand to Wal-Mart, decreased 13.6%
to $51.1 million. Sales of our Just One Year brand increased $0.5 million, or
2.3%, to $21.2 million. Child of Mine brand sales decreased $8.5 million, or
22.2%, to $29.9 million, due primarily to product performance.
In connection with the retirement of Frederick J. Rowan, II, Chairman and
Chief Executive Officer, the Company recorded charges during the second
quarter of $5.3 million, $3.1 million of which relates to severance and
benefit obligations and $2.2 million relates to the vesting of Mr. Rowan's
performance-based stock options.
Consolidated operating income in the second quarter of fiscal 2008 was
$9.3 million as compared to a consolidated operating loss of $137.9 million in
the second quarter of fiscal 2007. Excluding executive retirement charges in
the second quarter of fiscal 2008 and impairment and closure costs in the
second quarter of fiscal 2007, the Company's adjusted operating income
decreased $3.5 million, or 19.5%. This decrease was due to Child of Mine
product performance, higher inventory and bad debt provisions, and provisions
for incentive compensation.
Net income was $2.8 million, or $0.05 per diluted share, compared to a net
loss of $143.4 million, or $2.48 per diluted share, in the second quarter of
fiscal 2007. Excluding executive retirement charges in the second quarter of
fiscal 2008 and impairment and closure costs in the second quarter of fiscal
2007, the Company's adjusted net income decreased $1.6 million, or 20.9%, and
adjusted diluted earnings per share decreased 23.1%.
'While our second quarter sales were better than expected, we will
continue to take a cautious outlook for the year given the uncertainty of the
current economic environment. Our business continues to produce very healthy
levels of cash flow, which enables us to invest in our business,' noted Mr.
Casey. 'As expected, OshKosh continued to negatively impact our results for
the quarter. With the improvement in our product offerings and better
inventory management disciplines, however, we expect to achieve improved
profitability from our OshKosh retail segment in the second half of this
year.'
The reconciliation of income as reported under accounting principles
generally accepted in the United States of America ('GAAP') to adjusted income
is as follows:
(dollars in millions, except EPS)
Three-month period ended June 28, 2008
Operating Net Diluted
Income Income EPS
Income, as reported (GAAP) $ 9.3 $2.8 $0.05
Executive retirement charges 5.3 3.3 0.05
Income, as adjusted (a) $14.6 $6.1 $0.10
(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 operating income, net income, and
net income on a diluted share basis excluding the adjustments
discussed above. We believe these adjustments provide a meaningful
comparison of the Company's results. 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 information is presented for informational purposes
only and is not necessarily indicative of the Company's future
condition or results of operations.
(dollars in millions, except EPS)
Three-month period ended June 30, 2007
Operating Net
(Loss) (Loss) Diluted
Income Income EPS
Loss, as reported (GAAP) ($137.9) ($143.4) ($2.48)
Intangible asset impairment (a) 154.9 150.5 2.60
Distribution facility closure
costs (b) 0.5 0.3 0.00
Accelerated depreciation (c) 0.6 0.3 0.01
Income, as adjusted (d) $18.1 $7.7 0.13
(a) OshKosh-related intangible asset impairment charges.
(b) Costs associated with the closure of OshKosh's White House, Tennessee
distribution facility
(c) Accelerated depreciation charges (included in selling, general, and
administrative expenses) related to the closure of the OshKosh
distribution facility.
(d) 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 operating income, net income, and
net income on a diluted share basis excluding the adjustments
discussed above.
