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Flash Report

Carter’s (CRI) 1Q16 Results: Beats Estimates, Driven by Retail and Wholesale Segments

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Coresight Research

Key Points

  • Carter’s reported 1Q16 revenue of $724.1 million, up 5.7% year over year, beating the consensus estimate of $716.0 million and above company guidance of $712.4 million. On a constant-currency basis, revenue increased by 6.4% in the quarter.
  • Adjusted EPS was $1.05, up 7.9% year over year and above the consensus estimate of $1.00. The upside was driven by the Carter’s and OshKosh B’gosh retail segments and the wholesale business.
  • The company provided adjusted EPS guidance for 2Q16 of $0.62–$0.66, down 10%–15% year over year and below the $0.80 consensus estimate. Revenue is expected to increase by 3%–4% year over year, to $631.1–$637.3 million, which is lower than the consensus estimate of $651.5 million. For 2016, Carter’s raised its adjusted EPS guidance range to 10%–12% from 8%–10%, implying adjusted EPS of $5.07–$5.16 versus prior guidance of $4.98–$5.07 and the consensus estimate of $5.09.

Source: Company reports

Revenue growth in 1Q16 was driven by growth in the domestic retail division, specifically the Carter’s and OshKosh B’gosh segments, and in the wholesale business.

The Carter’s retail segment reported sales of $272.3 million, up 5.7%. Comparable sales decreased by 0.1%, reflecting a 4.0% decline in retail comps that was partially offset by e-commerce sales growth of 15.2%. Consensus called for a 1.4% decline in retail comps, which were negatively impacted by lower demand from international tourists, likely due to the strength of the US dollar.

In the Carter’s wholesale segment, sales increased by 4.0%, to $280.1 million, reflecting increased product demand that was partially due to a new playwear initiative and the timing of orders.

The OshKosh retail segment’s sales increased by 11.9%, to $81.8 million. OshKosh’s comp sales increased by 2.7%, reflecting e-commerce sales growth of 19.8% that was partially offset by a 1.9% decline in retail comps. The comp sales were above the consensus estimate of (2.7)%. Comp sales were negatively impacted by lower demand from international tourists shopping in US stores.

In the quarter, the company opened 11 OshKosh stores in the US and closed one. The company now operates 251 OshKosh stores.

GUIDANCE

For 2Q16, the company expects sales to increase by approximately 3%–4% year over year, to $631.1–$637.3 million, below the consensus estimate of $651.5 million. Adjusted EPS is expected to decrease by 10%–15%, to $0.62–$0.66, compared to the consensus estimate of $0.80.

For 2016, Carter’s raised its adjusted EPS guidance range to up 10%–12% from up 8%–10%, implying adjusted EPS of $5.07–$5.16 versus prior guidance of $4.98–$5.07 and the consensus estimate of $5.09. The company reaffirmed its sales guidance of 6%–7% growth year over year, to about $3.2 billion, which is in line with consensus estimates.

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