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Carter's Reports a 34% Increase in First Quarter Earnings on 13% Growth in Net Sales

ATLANTA, April 26 /PRNewswire-FirstCall/ -- Carter's, Inc. (NYSE: CRI), the largest branded marketer of apparel for babies and young children in the United States, today reported its first quarter results for fiscal 2005.

Net sales in the first quarter of fiscal 2005 increased 13% to $206.2 million from $182.7 million in the first quarter of fiscal 2004. The increase in net sales was driven by growth in all channels, including an increase in retail comparable store sales of 8.8%. Net income for the first quarter of fiscal 2005 increased 34% to $13.8 million, or $0.46 per diluted share, from $10.3 million, or $0.35 per diluted share, in the first quarter of fiscal 2004.

Fred Rowan, Chairman of the Board of Directors and Chief Executive Officer of Carter's said, "We achieved record first quarter sales and earnings. In our wholesale segment, we are pleased with our spring product performance, especially in our playwear product category. Our retail segment has exceeded our expectations with growth driven by great core product and our new retail leadership team. In the mass channel, we have expanded our Child of Mine product offering to include newborn playwear and are very encouraged by the sell-throughs. We believe our diversified platform for growth will enable us to achieve our objectives for fiscal 2005."

First quarter net sales were led by an increase in retail store sales of $8.5 million, or 14%, to $67.8 million in the first quarter of fiscal 2005 from $59.2 million in the first quarter of fiscal 2004. This increase in retail store sales was driven by a comparable store sales increase of 8.8% and incremental revenue from eleven store openings since the first quarter of fiscal 2004. Also contributing to this growth was an increase in mass channel sales of $6.6 million, or 20%, to $39.5 million in the first quarter of fiscal 2005 from $32.9 million in the first quarter of fiscal 2004 driven by growth in sales of our Child of Mine brand to Wal-Mart, including our new playwear product line. Wholesale sales, excluding off-price sales, increased $5.6 million, or 6%, to $92.2 million in the first quarter of fiscal 2005 from $86.7 million in the first quarter of fiscal 2004 driven by our playwear and sleepwear product categories.

Cash flow from operations was $24.6 million in the first quarter of fiscal 2005 as compared to $13.4 million in the first quarter of fiscal 2004. Growth in cash flow from operations in the first quarter of fiscal 2005 reflects the growth in earnings and a reduction in accounts receivable, partially offset by decreases in accounts payable and other liabilities. In March of 2005, the Company made a voluntary payment of $20 million on its term loan. Since the end of the first quarter of fiscal 2004, the Company has reduced long-term debt by approximately 20%.

Carter's Business Outlook

This outlook is based on current expectations and includes "forward- looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although the Company believes the comments reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct.

    ($ in millions, except EPS)  Second Quarter 2005   Fiscal Year 2005

    Net sales                   $175  +12% (1)  $895 to $910   +9% to +11% (2)
    Diluted EPS                $0.24  +20% (1) $1.95 to $2.03 +17% to +22% (3)

     (1) Comparison to second quarter of fiscal 2004.

     (2) Comparison to fiscal 2004.

     (3) Estimated increase as compared to pro forma fiscal 2004 results of
         $1.67 per diluted share as previously described in our earnings
         release filed February 22, 2005 on Form 8-K.

Carter's will broadcast its quarterly conference call on April 27, 2005 at 8:30 a.m. EDT. To participate in the call, please dial 1-913-981-4910. To listen to the live broadcast over the internet, please log on to, go to "Investor Relations" and then click on the link, "First Quarter Conference Call." A replay of the call will be available shortly after the broadcast through midnight EDT, Friday, May 6, 2005, at 1-719-457-0820, pass code 5643788, and archived on the Company's website at the same location as the live webcast.

For more information on Carter's, please visit

Cautionary Language

Statements contained herein that relate to the Company's future performance, including, without limitation, statements with respect to the Company's anticipated results for fiscal 2005 or any other future period, are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. Factors that could cause actual results to materially differ include a decrease in sales to, or the loss of one or more of the Company's key customers, deflationary trends in prices, disruptions in foreign supply sources, negative publicity, the loss of one or more of the Company's major suppliers for raw materials, competition in the baby and young children's apparel market, the Company's leverage which increases the Company's exposure to interest rate risk and could require the Company to dedicate a substantial portion of its cash flow to repay principal, the impact of governmental regulations and environmental risks applicable to the Company's business, and seasonal fluctuations in the children's apparel business. These risks are described in the Company's most recently filed annual report on Form 10-K under the headings "Risk Factors" and "Statement Regarding Forward-Looking Statements." The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

                                CARTER'S, INC.
                (dollars in thousands, except for share data)

                                                   Three-month periods ended
                                                     April 2,       April 3,
                                                       2005           2004

    Net sales                                       $206,207       $182,720

    Cost of goods sold                               130,442        116,450

    Gross profit                                      75,765         66,270

    Selling, general, and administrative expenses     51,996         47,370

    Closure costs                                         --            534

    Royalty income                                    (3,523)        (3,164)

    Operating income                                  27,292         21,530

    Interest expense, net                              4,402          4,624

    Income before income taxes                        22,890         16,906

    Provision for income taxes                         9,041          6,593

    Net income                                       $13,849        $10,313

    Basic net income per common share                  $0.49          $0.37

    Diluted net income per common share                $0.46          $0.35

    Basic weighted average number of shares
     outstanding                                  28,466,734     27,985,360

    Diluted weighted average number of shares
     outstanding                                  30,181,110     29,836,179

                                CARTER'S, INC.
                          CONSOLIDATED BALANCE SHEET
                (dollars in thousands, except for share data)

                                   April 2, 2005 January 1, 2005 April 3, 2004

    Current assets:
      Cash and cash equivalents          $36,548        $33,265       $38,156
      Accounts receivable, net            75,806         80,440        72,781
      Inventories, net                   106,842        120,792        91,189
      Prepaid expenses and other
       current assets                      5,647          4,499         5,900
      Deferred income taxes               10,950         12,571         8,177

        Total current assets             235,793        251,567       216,203
    Property, plant, and equipment, net   51,155         53,187        50,678
    Tradename                            220,233        220,233       220,233
    Cost in excess of fair value of
     net assets acquired                 139,282        139,282       139,282
    Licensing agreements, net                --              --         1,875
    Deferred debt issuance costs, net     5,287           5,867         7,188
    Other assets                          2,260           2,829         2,922

        Total assets                   $654,010        $672,965      $638,381


    Current liabilities:
      Current maturities of long-term debt $521            $724          $927
      Accounts payable                   18,111          26,453        25,372
      Other current liabilities          35,089          40,696        32,386

        Total current liabilities        53,721          67,873        58,685

    Long-term debt                      163,870         183,778       204,215
    Deferred income taxes                83,597          83,579        82,749
    Other long-term liabilities           9,802           9,802         9,816

        Total liabilities               310,990         345,032       355,465

    Commitments and contingencies
    Stockholders' equity:
      Preferred stock; par value
       $.01 per share; 100,000 shares
       authorized; none issued or
       outstanding at April 2, 2005,
       January 1, 2005, and April 3, 2004    --              --            --
      Common stock, voting; par value $.01
       per share; 40,000,000 shares
       authorized; 28,506,652 shares issued
       and outstanding at April 2, 2005,
       28,432,452 shares issued and
       outstanding at January 1, 2005, and
       27,985,360 shares issued and
       outstanding at April 3, 2004         285             284           280
    Additional paid-in capital          248,838         247,610       241,847
    Deferred compensation                   (86)            (95)           --
    Retained earnings                    93,983          80,134        40,789

      Total stockholders' equity        343,020         327,933       282,916

       Total liabilities and
        stockholders' equity           $654,010        $672,965      $638,381

     Eric Martin, Vice President of Investor Relations
     (404) 745-2889

SOURCE Carter's, Inc.