Slide 1: Second Quarter 2019 Business Update
Second Quarter 2019 Business Update July 25, 2019
Slide 2: Second Quarter 2019 Results (GAAP Basis)
Second Quarter 2019 Results (GAAP Basis) $ in millions, except EPS Q2 % of Q2 % of Increase / 2019 Sales 2018 Sales (Decrease) Net sales $734 $696 5% Gross profit 323 44.0% 310 44.5% 4% Royalty income 10 1.3% 10 1.5% (7%) SG&A 268 36.5% 263 37.8% 2% Operating income 64 8.8% 57 8.2% 13% Interest and
Slide 3: First Half 2019 Results (GAAP Basis)
First Half 2019 Results (GAAP Basis) $ in millions, except EPS 1H % of 1H % of Increase / 2019 Sales 2018 Sales (Decrease) Net sales $1,475 $1,452 2% Gross profit 639 43.3% 642 44.2% (1%) Royalty income 18 1.2% 18 1.3% (1%) SG&A 532 36.0% 544 37.4% (2%) Operating income 125 8.5% 117 8.1% 7% Loss on
Slide 4: Second Quarter 2019 Highlights
Second Quarter 2019 Highlights $ in millions, except EPS Adjusted Net Sales Operating Income* Adjusted EPS* (Adjusted Operating Margin) +5% +12% +21% $734 $64 $0.95 $57 $696 $0.79 8.7% 8.2% of of Net Sales Net Sales 2018 2019 2018 2019 2018 2019 • Net sales +5% - Growth driven by U.S. Retail & U.S.
Slide 5: Second Quarter 2019 Adjusted Results
Second Quarter 2019 Adjusted Results* $ in millions, except EPS Q2 % of Q2 % of Increase / 2019 Sales 2018 Sales (Decrease) Net sales $734 $696 5% Gross profit 323 44.0% 310 44.5% 4% Royalty income 10 1.3% 10 1.5% (7%) Adjusted SG&A 269 36.6% 263 37.8% 2% Adjusted operating income 64 8.7% 57 8.2% 12
Slide 6: First Half 2019 Adjusted Results
First Half 2019 Adjusted Results* $ in millions, except EPS 1H % of 1H % of Increase / 2019 Sales 2018 Sales (Decrease) Net sales $1,475 $1,452 2% Adjusted gross profit 637 43.2% 642 44.2% (1%) Royalty income 18 1.2% 18 1.3% (1%) Adjusted SG&A 531 36.0% 531 36.6% (0%) Adjusted operating income 124 8
Slide 7: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions 2019 2018 Cash $118 $183 • Strong liquidity – cash on hand and Accounts Receivable 168 153 available revolver capacity $753 million Balance Sheet (at Q2 end) Inventory 698 663 • Inventory +5% vs. LY Accounts Payable 233 217 - Meaningfully improved excess Lon
Slide 8: Business Segment Performance
Business Segment Performance
Slide 9: Second Quarter 2019 Adjusted Business Segment Performance
Second Quarter 2019 Adjusted Business Segment Performance* $ in millions Adjusted Adjusted Operating Operating Net Sales Income* Margin* $ $ 2019 2018 Growth 2019 2018 Growth 2019 2018 U.S. Retail (a) $423 $402 $21 $50 $45 $5 11.9% 11.3% U.S. Wholesale 229 209 20 35 30 5 15.4% 14.5% International (b
Slide 10: First Half 2019 Adjusted Business Segment Performance
First Half 2019 Adjusted Business Segment Performance* $ in millions Adjusted Adjusted Operating Operating Net Sales Income* Margin* $ $ 2019 2018 Growth 2019 2018 Growth 2019 2018 U.S. Retail (a) $800 $786 $14 $74 $75 ($0) 9.3% 9.5% U.S. Wholesale 504 490 14 91 93 (3) 18.0% 19.0% International (b)
Slide 11: Second Quarter Highlights – U.S. Retail
Second Quarter Highlights – U.S. Retail $ in millions Total Segment Net Sales Sales Q2 Highlights +5.3% • Strong Q2 Retail comparable sales +3.8% $423 $402 - Easter shift estimated to have benefited Q2 comps Retail1 by ~2 points Comp +3.8% • Store portfolio optimization - Opened 9 stores, closed 20
Slide 12: Co-branded Mall Store – Houston Galleria
Co-branded Mall Store – Houston Galleria 12
Slide 13: New Baby Experience In Store
New Baby Experience In Store 13
Slide 14: Launched Private Label Credit Card in Q2
Launched Private Label Credit Card in Q2 • Opportunity to strengthen overall relationship with customers, drive incremental sales and margin, and reduce credit card fees • Developed in response to customer demand • Launched program in stores and online nationwide in June • Enhances our Rewarding Mom
Slide 15: Carter's Continues to Lead in Consumer Following and Engagement on Social Media
Carter’s Continues to Lead in Consumer Following and Engagement on Social Media Our Brands Have a Strong Consumer Following on CRI Earned 24 of the Top 25 Most Engaged Posts Instagram and Facebook1 Among Peers on Instagram in Q22 Instagram Followers Facebook Followers 1Source: Instagram and Facebook
Slide 16: Carter's Back to School Marketing
Carter’s Back to School Marketing 16
Slide 17: Carter's Back to School Marketing
Carter’s Back to School Marketing 17
Slide 18: OshKosh Back to School Marketing
OshKosh Back to School Marketing 18
Slide 19: OshKosh Back to School Marketing
OshKosh Back to School Marketing 19
Slide 20: Skip Hop Back to School
Skip Hop Back to School carter’s 20
Slide 21: Second Quarter Highlights – U.S. Wholesale
Second Quarter Highlights – U.S. Wholesale $ in millions Segment Net Sales Total Q2 Highlights Sales $229 +9% • U.S. Wholesale sales growth: +9% vs. LY; $209 Strong demand for: - Exclusive brands: Child of Mine, Just One You, Simple Joys - Spring and summer seasonal products • Improved profitability
Slide 22: Carter's Little Baby Basics at Kohl's
Carter’s Little Baby Basics at Kohl’s 22
Slide 23: OshKosh B'gosh at Target
OshKosh B’gosh at Target • Launched OshKosh with Target in over 600 doors and online • Initial selling exceeding expectations • Planning expanded presence to >1,000 doors by year end • Represents new growth opportunity in Toddler 23
Slide 24: Second Quarter Highlights – International
Second Quarter Highlights – International $ in millions Segment Net Sales Q2 Highlights Total $85 $82 Sales (3%) • International segment net sales: -3% vs. LY - Sales roughly comparable on a constant currency basis - Decline includes change in business model in China Constant 1 Currency • Canada (0.
Slide 25: International Partner Store – India
International Partner Store – India (Opened June 2019) 25
Slide 26: International Partner Store – Argentina
International Partner Store – Argentina (Opened July 2019) 26
Slide 27: International Partner Store – Russia
International Partner Store – Russia (Opened July 2019) 27
Slide 28: Guidance
Sibling shots Guidance 28
Slide 29: Second Half 2019 – Performance Drivers
Second Half 2019 – Performance Drivers • Stronger product offering Improved • New omni-channel capabilities (‘same day’ pick up of online orders) Offerings / Capabilities • U.S. website enhancements • Private label credit card • Higher mix of co-branded stores Fleet • Fewer underperforming stores Op
Slide 30: 2019 Outlook
2019 Outlook (Adjusted Basis) • Net sales growth of ~1% - U.S. Retail comp up low-single digits - Lower U.S. Wholesale sales (largely timing) - International segment sales comparable Q3 2019 • Adjusted diluted EPS: growth of ~3% to 4% (vs. $1.61 Q3 2018)1. Outlook reflects: - Gross margin rate impro
Slide 31: Thank you
thank you.
Slide 32: Appendix
appendix
Slide 33: Second Quarter Reconciliation of Net Income Allocable to Common Shareholders
Second Quarter Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter Ended June 29, 2019 June 30, 2018 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 44,706,307 46,437,093 Dilutiv e effect of equity award
Slide 34: First Half Reconciliation of Net Income Allocable to Common Shareholders
First Half Reconciliation of Net Income Allocable to Common Shareholders Two Fiscal Quarters Ended June 29, 2019 June 30, 2018 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 44,888,552 46,604,599 Dilutiv e effect of equity awar
Slide 35: Second Quarter Fiscal 2019 Reconciliation of Reported to Adjusted Earnings
Second Quarter Fiscal 2019 Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS U.S. Retail % of U.S. Wholesale % of International % of Corporate % of Gross % of % of Operating % of Net Diluted Operating segment Operating segment Operating segment Operating total Second Quarter
Slide 36: First Half Reconciliation of Reported to Adjusted Earnings
First Half Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS Segment Reporting U.S. Retail % of U.S. Wholesale % of International % of Corporate % of Gross % of % of Operating % of Net Diluted Operating segment Operating segment Operating segment Operating total First Half 20
Slide 37: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA $ in millions Four Fiscal Fiscal Quarter Ended Two Fiscal Quarters Ended Quarters Ended June 29, 2019 June 30, 2018 June 29, 2019 June 30, 2018 June 29, 2019 Net income $43.9 $37.3 $78.4 $79.7 $280.7 Interest expense 9.1 7.9 18.7 15.9 37.3 Interest inc
Slide 38: Third Quarter Fiscal 2018 Reconciliation of Reported to Adjusted Earnings
Third Quarter Fiscal 2018 Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS Segment Reporting U.S. Retail % of U.S. Wholesale % of International % of Corporate % of Gross % of % of Operating % of Net Diluted Operating segment Operating segment Operating segment Operating tota
Slide 39: Full Year Fiscal 2018 Reconciliation of Reported to Adjusted Earnings
Full Year Fiscal 2018 Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS U.S. Retail % of U.S. Wholesale % of International % of Corporate % of Gross % of % of Operating % of Net Diluted Operating segment Operating segment Operating segment Operating total Fiscal 2018 Margin n
Slide 40: Constant Currency Reconciliation
Constant Currency Reconciliation $ in millions Fiscal Quarter Ended Constant- Reported Impact of Currency Reported Constant- Net Sales Foreign Net Sales Net Sales Reported Currency June 29, Currency June 29, June 30, Net Sales Net Sales 2019 Translation 2019 2018 % Change % Change Consolidated net s
Slide 41: Store Count Data
Store Count Data Single-brand Dual-brand Dual-brand U.S. U.S. U.S. Canada Total Stand-alone Side-by-Side Co-branded Total U.S. Co-branded Total Consolidated Format Format Format Retail Format Mexico 1 International Retail Stores Store count at June 30, 2018 545 162 119 826 181 42 223 1,049 Openings
Slide 42: Forward-looking Statements and Other Information
Forward-looking Statements and Other Information Results provided in this presentation are preliminary and unaudited. This presentation should be read in conjunction with the audio broadcast or transcript of the Company’s earnings call, held on July 25, 2019 which is available at www.carters.com. Th