Carter's (CRI) Q4 2004 earnings summary

Executive summary

• FY2004 net sales reached $823.1M, up 16.9% YoY; net income rose to $49.7M from $23.3M, with growth across wholesale, retail, and mass channels.

• Record operating cash flow was $42.7M; debt fell $28.2M, or 13%, and reported EBITDA grew 38%.

• Market share increased to 6.8% from 5.1%; the growth plan targets $1B in sales by 2007.

Financial highlights

• FY2004 net sales were $823.1M, up 16.9% YoY; gross profit was $298.0M, up 16.7%.

• Operating income rose 35.3% to $101.0M; net income was $49.7M versus $23.3M in FY2003.

• Diluted EPS was $1.66 versus $0.92; operating cash flow was $42.7M versus $40.5M.

• FY2004 included $0.6M of closure costs; FY2003 operating results included closure costs, accelerated depreciation, management-fee termination, and a vested-option-holder bonus.

Outlook and guidance

• FY2005 targets: 8–10% topline growth, 15–20% net income growth, 25–50 bps operating-margin expansion, improved working capital, and faster debt reduction.

• Capital expenditures planned at $25.0M for FY2005; average inventory is expected to rise with forecast demand.

• Retail expansion plan calls for 10–12 new stores annually through 2008; mass-channel sales are expected to sustain double-digit growth for at least five years.

• $1B in net sales is the stated milestone for 2007.