Slide 1: Fourth Quarter 2018 Business Update
Fourth Quarter 2018 Business Update February 25, 2019
Slide 2: Fourth Quarter 2018 Results (GAAP Basis)
Fourth Quarter 2018 Results (GAAP Basis) $ in millions, except EPS Q4 % of Q4 % of Increase / 2018 Sales 2017 Sales (Decrease) Net sales $1,086 $1,028 6% Gross profit 468 43.0% 461 44.8% 1% Royalty income 10 1.0% 11 1.1% (6%) SG&A 307 28.3% 326 31.7% (6%) Operating income 171 15.7% 146 14.2% 17% Int
Slide 3: 2018 Full Year Results (GAAP Basis)
2018 Full Year Results (GAAP Basis) $ in millions, except EPS Fiscal % of Fiscal % of Increase / 2018 Sales 2017 Sales (Decrease) Net sales $3,462 $3,401 2% Gross profit 1,497 43.3% 1,483 43.6% 1% Royalty income income, net 39 1.1% 43 1.3% (10%) SG&A 1,145 33.1% 1,107 32.6% 3% Operating income 391 1
Slide 4: Fourth Quarter / Fiscal 2018 Highlights
Fourth Quarter / Fiscal 2018 Highlights (Adjusted Basis) Q4 $ in millions, except EPS Full Year Net Sales Adjusted EPS* Net Sales Adjusted EPS* +2% +9% +6% +22% $3,462 $1,086 $3,401 $6.29 $1,028 $2.84 $5.77 $2.33 15.2% of Net Sales 2017 2018 2017 2018 2017 2018 2017 2018 Q4 Highlights* Fiscal 2018 H
Slide 5: Fourth Quarter 2018 Net Sales
Fourth Quarter 2018 Net Sales Retail1 $ in millions Comp +6% +5.7% $22 ($3) $1,086 $40 $1,028 Q4 2017 U.S. Retail U.S. Wholesale International Q4 2018 Growth vs. 2017 +7.1% +6.5% (2.4%) +5.7% Constant 1Retail Comp is defined as the combination of store and eCommerce comparable sales. Currency 2 +0.6
Slide 6: Fourth Quarter 2018 Adjusted Results
Fourth Quarter 2018 Adjusted Results* $ in millions, except EPS Q4 % of Q4 % of Increase / 2018 Sales 2017 Sales (Decrease) Net sales $1,086 $1,028 6% Adjusted gross profit* 469 43.2% 461 44.9% 2% Royalty income, income net 10 1.0% 11 1.1% (6%) Adjusted SG&A* 309 28.4% 304 29.6% 2% Adjusted operatin
Slide 7: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions 2018 2017 • Strong liquidity Cash $170 $178 - Cash on hand + available revolver Balance Sheet Accounts Receivable 258 241 capacity $719 million (at Q4 end) - Repatriated $79 million in FY18 Inventory 574 549 Accounts Payable 199 182 • Inventory +5% vs. LY (u
Slide 8: Business Segment Performance
Business Segment Performance 8
Slide 9: Fourth Quarter 2018 Adjusted Business Segment Performance
Fourth Quarter 2018 Adjusted Business Segment Performance* $ in millions Adjusted Adjusted Operating Operating Net Sales Income* Margin* $ $ 2018 2017 Growth 2018 2017 Growth 2018 2017 U.S. Retail (a) $606 $566 $40 $103 $101 $2 16.9% 17.8% U.S. Wholesale 351 330 22 74 71 2 21.0% 21.7% International
Slide 10: Fourth Quarter Highlights – U.S. Retail
Fourth Quarter Highlights – U.S. Retail $ in millions Q4 Highlights Segment Net Sales Total Sales • Q4 Retail comp +5.7% $606 +7.1% - Best Q4 comp since 2013 $566 - Positive comp in stores Retail1 - Double digit growth in eCommerce business Comp - Stronger U.S. Dollar continues to impact internation
Slide 11: Co-branded Store – Garfield, NJ
Co-branded Store – Garfield, NJ 11
Slide 12: Co-branded Store – Atlanta, GA
Co-branded Store – Atlanta, GA 12
Slide 13: U.S. Retail Store Composition and Growth Plan
U.S. Retail Store Composition and Growth Plan Single vs. Dual-Brand Brand Stores vs. Outlet 2% 35% 26% 37% 51% 51% Portfolio 98% Single- Composition brand74% 63% 65% 49% 49% 51% 2013 2018 2023 2013 2018 2023 Projected Projected Stand Alone Dual-Brand Brand Outlet U.S. Retail Location Counts Net Chan
Slide 14: Carter's Spring 2019 Marketing
Carter’s Spring 2019 Marketing 14
Slide 15: OshKosh Spring 2019 Marketing
OshKosh Spring 2019 Marketing 15
Slide 16: Skip Hop Product Innovation
Skip Hop Product Innovation 16
Slide 17: Leading Social Media Engagement
Leading Social Media Engagement Carter’s, OshKosh, and Skip Hop Continue Strong Carter’s Attained 9 of the Top 10 Instagram Consumer Consumer Following on Instagram & Facebook1 Engagement Scores Among Peers during Q4 20182 Instagram Followers Carter's 1.4M Gap Kids 1M Disney Baby 666K Children's Pla
Slide 18: Fourth Quarter Highlights – U.S. Wholesale
Fourth Quarter Highlights – U.S. Wholesale $ in millions Total Q4 Highlights Segment Net Sales Sales +7% $351 • U.S. Wholesale segment net sales +7% $330 - Solid growth in exclusive brands - Achieved 85% of $40M sales recapture assumption1 (lost sales to Toys “R” Us and Bon-Ton in 2018) - $34M in co
Slide 19: Carter's Baby Shop at Kohl's
Carter’s Baby Shop at Kohl’s 19
Slide 20: Exclusive Brands – Just One You & Child of Mine
Exclusive Brands – Just One You & Child of Mine 20
Slide 21: Exclusive Brands – Simple Joys
Exclusive Brands – Simple Joys 21
Slide 22: Fourth Quarter Highlights – International
Fourth Quarter Highlights – International $ in millions Segment Net Sales Q4 Highlights Total $132 $129 Sales • International segment Q4 net sales (2%) (2%) - Lower demand in China partially offset by contribution from Mexico - Unfavorable effect of foreign currency exchange Constant rate movements
Slide 23: International Partner Store – Istanbul, Turkey
International Partner Store – Istanbul, Turkey (Opened October 2018) 23
Slide 24: International eCommerce – India
International eCommerce – India 24
Slide 25: International eCommerce – Brazil
International eCommerce – Brazil 25
Slide 26: International eCommerce – Israel
International eCommerce – Israel 26
Slide 27: International eCommerce – Russia
International eCommerce – Russia 27
Slide 28: 2018 Highlights
2018 Highlights Financial Results • 30th consecutive year of sales growth: +2% vs. 2017 • Record adjusted EPS, $6.29, +9% vs. 2017 • Record free cash flow, $292 million • Returned $277 million to shareholders (share repurchases & dividends) Highlights • #1 market share in the U.S. and Canada – 2x sh
Slide 29: Full Year 2018 Adjusted Results
Full Year 2018 Adjusted Results* $ in millions, except EPS Fiscal % of Fiscal % of Increase / 2018 Sales 2017 Sales (Decrease) Net sales $3,462 $3,401 2% Adjusted gross profit* 1,501 43.4% 1,485 43.7% 1% Royalty income 39 1.1% 43 1.3% (10%) Adjusted SG&A* 1,133 32.7% 1,083 31.8% 5% Adjusted operatin
Slide 30: Fiscal 2018 Net Sales
Fiscal 2018 Net Sales $ in millions Retail1 Comp +2% +2.8% $76 ($29) $15 $3,462 $3,401 Fiscal 2017 U.S. Retail U.S. Wholesale International Fiscal 2018 Growth vs. 2017 +4.3% (2.4%) +3.6% +1.8% 1Retail Comp is defined as the combination of store and eCommerce comparable sales. Constant 2 See reconcil
Slide 31: Full Year 2018 Adjusted Business Segment Performance
Full Year 2018 Adjusted Business Segment Performance* $ in millions Adjusted Adjusted Operating Operating Net Sales Income* Margin* $ $ 2018 2017 Growth 2018 2017 Growth 2018 2017 U.S. Retail (a) $1,851 $1,775 $76 $224 $231 ($7) 12.1% 13.0% U.S. Wholesale 1,181 1,210 (29) 235 256 (21) 19.9% 21.2% In
Slide 32: Longer-Term Growth Opportunities
Longer-Term Growth Opportunities (2018 – 2023) In billions CRI $4.0 CAGR $3.5 $0.5 3% $0.4 $1.3 Net Sales $1.2 Objective: $4 Billion by 2023 $2.2 $1.9 2018 2023E U.S. Retail U.S. Wholesale International • EPS growth (2018 - 2023): ~7% CAGR • Earnings growth drivers: - Net sales growth EPS Objective
Slide 33: Guidance
Guidance 33
Slide 34: 2019 Outlook
2019 Outlook (Adjusted Basis) • Net sales decline of approximately 4% to 5% - QTD results below expectations - Easter holiday demand expected to shift into Q2 (vs. Q1 in 2018) Q1 2019 - Impact of discontinued sales to Toys “R” Us, Bon-Ton, and Sears (~$13M in Q1 ‘18) • Adjusted diluted EPS: ~$0.65 t
Slide 35: thank you.
thank you. 35
Slide 36: appendix
appendix 36
Slide 37: Fourth Quarter Reconciliation of Net Income Allocable to Common Shareholders
Fourth Quarter Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter Ended December 29, December 30, 2018 2017 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 45,437,536 46,883,462 Dilutiv e effect of equi
Slide 38: Fourth Quarter Reconciliation of Reported to Adjusted Earnings
Fourth Quarter 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 Fourth Qu
Slide 39: Full Year 2018 Reconciliation of Net Income Allocable to Common Shareholders
Full Year 2018 Reconciliation of Net Income Allocable to Common Shareholders Fiscal Year Ended December 29, December 30, 2018 2017 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 46,160,935 47,593,211 Dilutiv e effect of equity
Slide 40: Fiscal 2018 Reconciliation of Reported to Adjusted Earnings
Fiscal 2018 Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS (a) Beginning in fiscal 2018, the Company adopted the Financial Accounting Standards Board’s Accounting Standards Codification No. 606, Revenue from Contracts with Customers, and related amendments (“ASC 606”) usin
Slide 41: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA $ in millions Fiscal Quarter Ended Fiscal Year Ended December 29, December 30, December 29, December 30, 2018 2017 2018 2017 Net income $130.6 $136.1 $282.1 $302.8 Interest expense 8.8 7.7 34.6 30.0 Interest income (0.1) (0.1) (0.5) (0.3) Tax expense 3
Slide 42: 2018 First Quarter Reconciliation of Reported to Adjusted Earnings
2018 First Quarter 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
Slide 43: Store Count Data
Store Count Data Single-brand Dual-brand Dual-brand U.S. U.S. Canada Total U.S. Stand- Side-by-Side Co-branded Total U.S. Co-branded Total Consolidated 1 alone Format Format Format Retail Format Mexico International Retail Stores Store count at December 30, 2017 597 159 74 830 179 41 220 1,050 Openi
Slide 44: 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 December 29, Currency December 29, December 30, Net Sales Net Sales 2018 Translation 2018 2017 % Change % Change Consol
Slide 45: 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 February 25, 2019 which is available at www.carters.com