ATLANTA--(BUSINESS WIRE)--Carter’s, Inc. (NYSE:CRI), the largest branded marketer in North America of apparel exclusively for babies and young children, today reported its fourth quarter and fiscal 2020 results.
“Despite the ongoing pandemic-related challenges, we achieved our sales and earnings objectives in the fourth quarter,” said Michael D. Casey, Chairman and Chief Executive Officer. “The strength and growth of our eCommerce capabilities and exclusive brands sold through Amazon, Target and Walmart helped to mitigate the impact of lower traffic to our stores and demand from international customers.
“Since the market disruption began last March, we have focused on profitability and cash flow. As a result, we achieved a record gross profit margin in the fourth quarter through exceptional inventory management, more effective promotions, and improved price realization. Our progress with these initiatives enabled us to strengthen our digital capabilities including eCommerce, which continued to be our fastest growing and highest margin business.
“We are also reporting a record level of cash flow from operations and liquidity achieved through working capital management and the support from our lenders, suppliers, and landlords.
“We’re projecting good growth in sales and profitability in 2021. The new year got off to a good start with the arrival of our Spring product offerings and the benefit from government stimulus payments to families with young children.
“With the promise of vaccines more broadly available in the months ahead, we are expecting a good multi-year recovery from the pandemic. As the leader in young children’s apparel, we believe Carter’s is well-positioned to benefit from this recovery.”
53rd Week
The Company’s fiscal year ends on the Saturday nearest the last day of December, resulting in an additional week of results every five to six years. Accordingly, the fourth quarter of fiscal 2020 included 14 weeks, compared to 13 weeks in the fourth quarter of fiscal 2019. Fiscal year 2020 included 53 weeks, compared to 52 weeks in fiscal 2019. The additional week in fiscal 2020 contributed approximately $32 million in consolidated net sales.
Adjustments to Reported GAAP Results
In addition to the results presented in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements, as presented below. The Company believes these adjustments provide a meaningful comparison of the Company’s results and afford investors a view of what management considers to be the Company’s core performance. These measures are presented for informational purposes only. See “Reconciliation of GAAP to Adjusted Results” section of this release for additional disclosures and reconciliations regarding these non-GAAP financial measures.
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Fourth Fiscal Quarter |
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2020 (14 weeks) |
2019 (13 weeks) |
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|
(In millions, except earnings per share) |
Operating Income |
% Net Sales |
Net Income |
Diluted EPS |
Operating Income |
% Net Sales |
Net Income |
Diluted EPS |
||||||||||||||||||||||
|
As reported (GAAP) |
$ |
133.9 |
13.5 |
% |
$ |
99.0 |
$ |
2.26 |
$ |
162.8 |
14.8 |
% |
$ |
125.1 |
$ |
2.82 |
||||||||||||||
|
Restructuring costs |
7.9 |
6.0 |
0.14 |
— |
— |
— |
||||||||||||||||||||||||
|
COVID-19 expenses |
2.5 |
1.9 |
0.04 |
— |
— |
— |
||||||||||||||||||||||||
|
Retail store operating leases and other long-lived asset impairments, net |
1.2 |
0.9 |
0.02 |
— |
— |
— |
||||||||||||||||||||||||
|
Customer bankruptcy recovery |
— |
— |
— |
(0.6 |
) |
(0.4 |
) |
(0.01 |
) |
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|
As adjusted |
$ |
145.5 |
14.7 |
% |
$ |
107.9 |
$ |
2.46 |
$ |
162.2 |
14.7 |
% |
$ |
124.7 |
$ |
2.81 |
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Fiscal Year |
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|
2020 (53 weeks) |
2019 (52 weeks) |
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|
(In millions, except earnings per share) |
Operating Income |
% Net Sales |
Net Income |
Diluted EPS |
Operating Income |
% Net Sales |
Net Income |
Diluted EPS |
||||||||||||||||||||||
|
As reported (GAAP) |
$ |
189.9 |
6.3 |
% |
$ |
109.7 |
$ |
2.50 |
$ |
371.9 |
10.6 |
% |
$ |
263.8 |
$ |
5.85 |
||||||||||||||
|
Intangible asset impairment |
26.5 |
20.2 |
0.46 |
30.8 |
23.7 |
0.52 |
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|
Goodwill impairment |
17.7 |
17.7 |
0.40 |
— |
— |
— |
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|
COVID-19 expenses |
21.4 |
16.2 |
0.37 |
— |
— |
— |
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|
Restructuring costs |
16.6 |
12.9 |
0.29 |
1.6 |
1.3 |
0.03 |
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|
Retail store operating leases and other long-lived asset impairments, net |
7.6 |
5.8 |
0.13 |
— |
— |
— |
||||||||||||||||||||||||
|
Debt extinguishment loss |
— |
— |
— |
— |
6.0 |
0.13 |
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|
Customer bankruptcy recovery |
— |
— |
— |
(0.6 |
) |
(0.4 |
) |
(0.01 |
) |
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|
Store restructuring |
— |
— |
— |
(0.7 |
) |
(0.6 |
) |
(0.01 |
) |
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|
China business model change |
— |
— |
— |
(2.1 |
) |
(2.1 |
) |
(0.05 |
) |
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|
As adjusted |
$ |
279.8 |
9.3 |
% |
$ |
182.6 |
$ |
4.16 |
$ |
401.0 |
11.4 |
% |
$ |
291.7 |
$ |
6.46 |
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Note: Results may not be additive due to rounding. |
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Consolidated Results
Fourth Quarter of Fiscal 2020 (14 weeks) compared to Fourth Quarter of Fiscal 2019 (13 weeks)
Consolidated net sales decreased $110.6 million, or 10.1%, to $989.9 million, compared to $1,100.5 million in the fourth quarter of fiscal 2019. Sales declined in all segments principally due to disruptions related to the COVID-19 pandemic. The U.S. Wholesale segment sale decline reflected lower shipments to certain customers, in part due to the Company’s decision to reduce fall and winter inventory commitments and delayed inventory receipts, partially offset by continued momentum in sales of exclusive brands to Target, Walmart, and Amazon. U.S. Retail segment comparable sales declined 9%, reflecting a decline in store sales, partially offset by eCommerce growth of 16%. The International segment sales decline reflected reduced wholesale channel shipments outside of North America and the adverse effects of lower traffic and store closures in Canada, partially offset by strong eCommerce growth in Canada and Mexico.
Operating income decreased $28.9 million, or 17.8%, to $133.9 million, compared to $162.8 million in the fourth quarter of fiscal 2019. Operating margin decreased 130 basis points to 13.5%. Adjusted operating income (a non-GAAP measure) decreased $16.8 million, or 10.3%, to $145.5 million, compared to $162.2 million in the fourth quarter of fiscal 2019. Adjusted operating margin was comparable at 14.7%, reflecting improved price realization and lower inventory provisions that were offset by higher compensation provisions and increased investments in marketing, omni-channel capabilities, and distribution.
Net income decreased $26.1 million, or 20.9%, to $99.0 million, or $2.26 per diluted share, compared to $125.1 million, or $2.82 per diluted share, in the fourth quarter of fiscal 2019. Adjusted net income (a non-GAAP measure) decreased $16.9 million, or 13.5%, to $107.9 million, compared to $124.7 million in the fourth quarter of fiscal 2019. Adjusted earnings per diluted share (a non-GAAP measure) decreased 12.5% to $2.46, compared to $2.81 in the fourth quarter of fiscal 2019.
Fiscal Year 2020 (53 weeks) compared to Fiscal Year 2019 (52 weeks)
Consolidated net sales decreased $495.0 million, or 14.1%, to $3.0 billion. This decline primarily reflected the temporary closure of Company-operated stores (particularly during the months of March, April, and May), and for many of the Company’s stores in Canada and Mexico (in December), and decreased sales to certain wholesale customers as a result of disrupt
