ATLANTA--(BUSINESS WIRE)--Carter’s, Inc. (NYSE:CRI), the largest branded marketer in the United States and Canada of apparel exclusively for babies and young children, today reported its second quarter fiscal 2016 results.

“We achieved our sales and earnings objectives in the second quarter,” said Michael D. Casey, Chairman and Chief Executive Officer. “Our sales growth was driven by higher demand in our retail and international businesses. We are expecting good growth in the balance of the year, and have revised our previous forecasts to reflect the current outlook for our wholesale and international businesses.”

Consolidated Results

Second Quarter of Fiscal 2016 compared to Second Quarter of Fiscal 2015

Net sales increased $26.7 million, or 4.4%, to $639.5 million, reflecting growth in the Company’s U.S. Carter’s and OshKosh retail businesses as well as in its international segment. Changes in foreign currency exchange rates in the second quarter of fiscal 2016 compared to the second quarter of fiscal 2015 negatively impacted consolidated net sales in the second quarter of fiscal 2016 by $2.5 million, or 0.4%. On a constant currency basis, consolidated net sales increased 4.8% in the second quarter of fiscal 2016.

Operating income in the second quarter of fiscal 2016 increased $1.3 million, or 2.1%, to $63.2 million, compared to $62.0 million in the second quarter of fiscal 2015. Operating margin decreased approximately 20 basis points to 9.9%, compared to 10.1% in the second quarter of fiscal 2015. Adjusted operating income (a non-GAAP measure) decreased $1.4 million, or 2.1%, to $64.0 million, compared to $65.4 million in the second quarter of fiscal 2015. Adjusted operating margin (a non-GAAP measure) decreased approximately 70 basis points to 10.0%, compared to 10.7% in the second quarter of fiscal 2015, which reflects improved gross margin offset by increased investments in store expansion, technology, marketing, and China eCommerce.

Net income in the second quarter of fiscal 2016 increased $0.1 million, or 0.3%, to $36.2 million, or $0.71 per diluted share, compared to $36.1 million, or $0.68 per diluted share, in the second quarter of fiscal 2015. Adjusted net income (a non-GAAP measure) decreased $2.1 million, or 5.4%, to $36.7 million, compared to $38.8 million in the second quarter of fiscal 2015. Adjusted earnings per diluted share (a non-GAAP measure) in the second quarter of fiscal 2016 decreased 1.7% to $0.72, compared to $0.73 in the second quarter of fiscal 2015.

First Half of Fiscal 2016 compared to First Half of Fiscal 2015

Net sales increased $66.0 million, or 5.1%, to $1.36 billion, reflecting growth in the Company’s U.S. Carter’s and OshKoshretail and Carter’s wholesale businesses, as well as in its international segment. Changes in foreign currency exchange rates in the first half of fiscal 2016 compared to the first half of fiscal 2015 negatively impacted consolidated net sales in the first half of fiscal 2016 by $7.0 million, or 0.5%. On a constant currency basis, consolidated net sales increased 5.6% in the first half of fiscal 2016.

Operating income in the first half of fiscal 2016 increased $9.8 million, or 6.7%, to $156.3 million, compared to $146.5 million in the first half of fiscal 2015. Operating margin increased approximately 20 basis points to 11.5%, compared to 11.3% in the first half of fiscal 2015. Adjusted operating income (a non-GAAP measure) increased $5.3 million, or 3.5%, to $158.0 million, compared to $152.7 million in the first half of fiscal 2015. Adjusted operating margin (a non-GAAP measure) decreased approximately 20 basis points to 11.6%, compared to 11.8% in the first half of fiscal 2015, which reflects improved gross margin offset by increased investments in our growth initiatives.

Net income in the first half of fiscal 2016 increased $4.3 million, or 5.0%, to $90.2 million, or $1.75 per diluted share, compared to $85.9 million, or $1.62 per diluted share, in the first half of fiscal 2015. Adjusted net income (a non-GAAP measure) increased $0.8 million, or 0.8%, to $91.3 million, compared to $90.5 million in the first half of fiscal 2015. Adjusted earnings per diluted share (a non-GAAP measure) in the first half of fiscal 2016 increased 3.9% to $1.77, compared to $1.70 in the first half of fiscal 2015.

Cash flow from operations in the first half of fiscal 2016 was $85.6 million compared to $27.1 million in the first half of fiscal 2015. The increase reflected favorable changes in net working capital and an increase in net income.

See the “Reconciliation of GAAP to Adjusted Results” section of this release for additional disclosures and reconciliations regarding non-GAAP measures.

Business Segment Results

During the second quarter and first half of fiscal 2016, the Company believes, based on analysis of credit card transactions and other data, that Carter’s and OshKosh retail comparable sales were negatively affected by lower demand from international consumers shopping in its U.S. stores and on its website, which was likely influenced by the strength of the U.S. dollar relative to other global currencies.

Carter’s Retail Segment

Second Quarter of Fiscal 2016 compared to Second Quarter of Fiscal 2015

Carter’s retail segment sales increased $26.9 million, or 10.9%, to $273.8 million. Carter’s retail comparable sales increased 4.4%, comprised of eCommerce comparable sales growth of 17.4% and a stores comparable sales increase of 1.4%.

In the second quarter of fiscal 2016, the Company opened 15 Carter’s stores and closed one store in the United States.

First Half of Fiscal 2016 compared to First Half of Fiscal 2015

Carter’s retail segment sales increased $41.4 million, or 8.2%, to $546.2 million. Carter’s retail comparable sales increased 2.1%, comprised of eCommerce comparable sales growth of 16.3%, partially offset by a stores comparable sales decline of 1.4%.

In the first half of fiscal 2016, the Company opened 31 Carter’s stores and closed one store in the United States. The Company operated 624 Carter’s stores in the United States as of July 2, 2016.

Carter’s Wholesale Segment

Second Quarter of Fiscal 2016 compared to Second Quarter of Fiscal 2015

Carter’s wholesale segment net sales decreased $6.0 million, or 2.8%, to $205.7 million, reflecting a decrease in product demand, in part due to timing of orders.

First Half of Fiscal 2016 compared to First Half of Fiscal 2015

Carter’s wholesale segment net sales increased $4.8 million, or 1.0%, to $485.9 million.

OshKosh Retail Segment

Second Quarter of Fiscal 2016 compared to Second Quarter of Fiscal 2015

OshKosh retail segment net sales increased $5.5 million, or 7.5%, to $79.0 million. OshKosh retail comparable sales declined 1.3%, comprised of a stores comparable sales decline of 5.8%, partially offset by eCommerce comparable sales growth of 17.6%.

In the second quarter of fiscal 2016, the Company opened 12 OshKosh stores in the United States and closed one store.

First Half of Fiscal 2016 compared to First Half of Fiscal 2015

OshKosh retail segment net sales increased $14.2 million, or 9.7%, to $160.7 million. OshKosh retail comparable sales increased 0.7%, comprised of eCommerce comparable sales growth of 18.8%, partially offset by a stores comparable sales decline of 3.8%.

In the first half of fiscal 2016, the Company opened 23 OshKosh stores in the United States and closed two stores. The Company operated 262 OshKosh stores in the United States as of July 2, 2016.

OshKosh Wholesale Segment

Second Quarter of Fiscal 2016 compared to Second Quarter of Fiscal 2015

OshKosh wholesale segment net sales decreased $4.9 million, or 34.4%, to $9.4 million, due to a decrease in the number of units shipped, reflecting lower seasonal bookings.

First Half of Fiscal 2016 compared to First Half of Fiscal 2015

OshKosh wholesale segment net sales decreased $9.1 million, or 29.8%, to $21.3 million, due to a decrease in the number of units shipped, reflecting lower seasonal bookings.

International Segment

Second Quarter of Fiscal 2016 compared to Second Quarter of Fiscal 2015

International segment net sales increased $5.3 million, or 8.0%, to $71.6 million, driven by growth in the Company’s retail businesses in Canada and new eCommerce sales in China, partially offset by a decline in sales to international wholesale customers outside Canada and unfavorable foreign currency exchange rates.

Changes in foreign currency exchange rates in the second quarter of fiscal 2016 compared to the second quarter of fiscal 2015 negatively affected international segment net sales in the second quarter of fiscal 2016 by $2.5 million, or 3.7%. On a constant currency basis, international segment net sales increased 11.7%.

For the second quarter of fiscal 2016, Canada retail comparable sales increased 8.0%, comprised of stores comparable sales growth of 6.9% and eCommerce comparable sales growth of 27.4%. In the second quarter of fiscal 2016, the Company opened one store in Canada.

First Half of Fiscal 2016 compared to First Half of Fiscal 2015

International segment net sales increased $14.6 million, or 10.8%, to $149.5 million, driven by growth in the Company’s retail businesses in Canada and new eCommerce sales in China, partially offset by unfavorable foreign currency exchange rates.

Changes in foreign currency exchange rates in the first half of fiscal 2016 compared to the first half of fiscal 2015 negatively affected international segment net sales in the first half of fiscal 2016 by $7.0 million, or 5.2%. On a constant currency basis, international segment net sales increased 16.0%.

For the first half of fiscal 2016, Canada retail comparable sales increased 11.3%, comprised of stores comparable sales growth of 9.7% and eCommerce comparable sales growth of 37.4%. In the first half of fiscal 2016, the Company opened three stores in Canada. The Company operated 150 stores in Canada as of July 2, 2016.

Return of Capital

In the second quarter of fiscal 2016, the Company returned a total of $125.3 million to shareholders through share repurchases and cash dividends. In the first half of fiscal 2016, the Company returned a total of $213.9 million to shareholders through share repurchases and cash dividends, as described below.

During the second quarter of fiscal 2016, the Company repurchased and retired 1,049,483 shares of its common stock for $108.6 million at an average price of $103.52 per share. In the first half of fiscal 2016, the Company repurchased and retired 1,771,847 shares of its common stock for $180.2 million at an average price of $101.71 per share. Fiscal year-to-date through July 26, 2016, the Company repurchased and retired a total of 1,910,247 shares for $195.1 million at an average price of $102.15 per share. All shares were repurchased in open market transactions pursuant to applicable regulations for such transactions. As of July 26, 2016, the total remaining capacity under the Company’s previously announced repurchase authorizations was approximately $380 million.

During the second quarter of fiscal 2016, the Company paid a cash dividend of $0.33 per share totaling $16.6 million. In the first half of fiscal 2016, the Company paid cash dividends of $0.66 per share totaling $33.7 million. Future declarations of quarterly dividends and the establishment of related record and payment dates will be at the discretion of the Company’s Board of Directors based on a number of factors, including the Company’s future financial performance and other considerations.

2016 Business Outlook

For the third quarter of fiscal 2016, the Company projects net sales will increase approximately 6% to 7% compared to the third quarter of fiscal 2015 and adjusted diluted earnings per share will increase approximately 6% to 10% compared to adjusted diluted earnings per share of $1.52 in the third quarter of fiscal 2015.

For fiscal 2016, the Company now projects net sales will increase approximately 5% to 6% (previously projected growth of 6% to 7%) compared to fiscal 2015 and adjusted diluted earnings per share will increase approximately 10% (previously projected growth of 10% to 12%) compared to adjusted diluted earnings per share of $4.61 in fiscal 2015. This forecast for fiscal 2016 adjusted earnings per share excludes anticipated expenses of approximately $1.7 million related to the amortization of acquired tradenames and other items the Company believes to be non-representative of underlying business performance.

About Carter’s, Inc.

Carter’s, Inc. is the largest branded marketer in the United States and Canada of apparel and related products exclusively for babies and young children. The Company owns the Carter’s and OshKosh B’gosh brands, two of the most recognized brands in the marketplace. These brands are sold in leading department stores, national chains, and specialty retailers domestically and internationally. They are also sold through more than 1,000 Company-operated stores in the United States and Canada and on-line at www.carters.com, www.oshkoshbgosh.com, and www.cartersoshkosh.ca. The Company’s Just One You, Precious Firsts, and Genuine Kids brands are available at Target, and its Child of Mine brand is available at Walmart. Carter’s is headquartered in Atlanta, Georgia. Additional information may be found atwww.carters.com.