• Consolidated Net Sales: $860 million, slightly up over last year.
• Adjusted Operating Income: $115 million, representing a 13.4% adjusted operating margin.
• Adjusted EPS: $2.39, down 13% from last year.
• Gross Margin: 47.8%, down 90 basis points from last year.
• US Wholesale Sales Growth: 7% year-over-year.
• International Retail Comps: Canada up 6%, Mexico up 8%.
• Full Year Net Sales: $2.8 billion, down 3% from last year.
• Full Year Operating Income: $287 million, down 13% from last year.
• Full Year EPS: $5.81, down 6% versus last year.
• Year-End Inventories: Down 6% versus last year.
• Operating Cash Flow: Nearly $300 million generated.
• 2025 Sales Outlook: $2.780 billion to $2.855 billion.
• 2025 Operating Income Outlook: $180 million to $210 million.
• 2025 Adjusted EPS Outlook: $3.20 to $3.80.
• 2025 Operating Cash Flow Outlook: Around $200 million.
• 2025 CapEx Forecast: $65 million, up about $10 million over last year.

• Warning! GuruFocus has detected 10 Warning Signs with GFL.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Carter's Inc (NYSE:CRI) exceeded its sales and earnings expectations for the fourth quarter of 2024.
• The company saw a rise in consumer confidence and favorable holiday selling, contributing to a positive end to the year.
• Carter's Inc (NYSE:CRI) grew its market share in the baby and toddler apparel segments in the US in 2024.
• The company's exclusive brand products achieved record sales in 2024, leveraging consumer shifts to mass channels.
• Carter's Inc (NYSE:CRI) introduced new personalization capabilities and rebranded its loyalty program, enhancing customer engagement.

Negative Points

• Carter's Inc (NYSE:CRI) anticipates a challenging profitability outlook for 2025.
• The company recorded a $30 million noncash pretax charge related to the impairment of the OshKosh B'gosh brand trade name.
• Fourth quarter adjusted EPS was down 13% from the previous year.
• US Retail segment faced a decline in sales, impacting overall performance.
• The stronger US dollar negatively affected international segment results and is expected to be a headwind in 2025.

Q & A Highlights

Q: Kendra, can you discuss the changes in inventory assortment as you modernize it and how you plan to avoid alienating core consumers? A: Kendra Krugman, Chief Creative and Growth Officer, explained that the changes are not dramatic in the baby and toddler segments, focusing on best categories and must-have products. The most opportunity lies in the kids segment, where a 20-point shift towards more style-forward categories is planned, which should help retain customers longer and compete more effectively.

Q: Richard, what was different about the pricing actions in the back half of the year that drove better unit volumes compared to the last two-plus years? A: Richard Westenberger, Interim CEO, noted that the market saw dramatic pricing actions from competitors, prompting Carter's to adjust prices on comparable items. The holiday season also contributed to improved consumer optimism, and effective promotional strategies around key events like Black Friday helped drive unit velocity.

Q: Can you elaborate on the challenges in retail and when comps might return to growth? A: Richard Westenberger highlighted that the main challenge is driving traffic to retail. While the in-store and online experiences are strong, the focus is on improving product offerings and marketing to attract consumers. The expectation is for comps to improve, potentially turning positive by the fourth quarter.

Q: What gives you confidence that pricing actions will stabilize in the back half of the year? A: Richard Westenberger stated that the assumption is based on current competitive pricing and the expectation that the market will stabilize after a challenging spring. Wholesale pricing is expected to be down modestly, with a focus on improving product make and service.

Q: Is there still an opportunity to add shelf space with your largest wholesale partners in 2025? A: Kendra Krugman confirmed that there is still opportunity, particularly in the toddler segment at Walmart and Target. The focus is on expanding both door count and categories, with exclusive brands driving growth in the wholesale segment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.