Carter's (CRI) Q4 2008 earnings summary

Executive summary

• Fiscal 2008 net sales reached $1.490 billion, up 5.5% YoY; growth spanned Carter’s distribution channels and OshKosh retail despite a severe consumer downturn.

• Reported net income was $75.1 million and diluted EPS $1.29, versus a $70.6 million net loss and $1.22 loss per share in fiscal 2007, which included major OshKosh impairment charges.

• Combined Carter’s and OshKosh brands held 14.1% share of the $24 billion U.S. baby and young children’s apparel market in 2008.

Financial highlights

• Net sales rose to $1,490.0 million from $1,412.2 million; gross profit was $514.0 million, up 6.4% YoY.

• Operating income was $135.5 million versus a $6.0 million loss; net income was $75.1 million versus a $70.6 million loss.

• Adjusted operating income was $143.4 million, adjusted net income $80.1 million, and adjusted diluted EPS $1.37; fiscal 2007 adjusted results were $153.6 million, $82.9 million, and $1.37, respectively.

• Operating cash flow rose to $183.6 million from $52.0 million, primarily due to improved working-capital management; cash ended at $162.3 million.

Outlook and guidance

• Sales and earnings growth was considered possible in 2009, but the economic and consumer-spending outlook remained uncertain.

• Fiscal 2009 mass-channel sales could decline ~15% YoY; operating cash flow was expected to return to levels more consistent with the prior two years.

• Planned fiscal 2009 capital expenditures were ~$40 million, primarily for store openings and remodels, wholesale fixtures, and information technology.

• Plans called for ~20 Carter’s store openings and five closures, plus three OshKosh store closures; restructuring charges were likely during fiscal 2009 as costs were reviewed.