Slide 1: First Quarter 2018 Business Update
First Quarter 2018 Business Update April 26, 2018
Slide 2: First Quarter 2018 Results (GAAP Basis)
First Quarter 2018 Results (GAAP Basis) $ in millions, except EPS Q1 % of Q1 % of Increase / 2018 Sales 2017 Sales (Decrease) Net sales $756 $733 3% Gross profit 332 44.0% 316 43.1% 5% Royalty income 8 1.1% 11 1.4% (24%) SG&A 280 37.1% 248 33.8% 13% Operating income 60 8.0% 78 10.7% (23%) Interest a
Slide 3: First Quarter 2018 Highlights
First Quarter 2018 Highlights $ in millions, except EPS Adjusted Net Sales Operating Income* Adjusted EPS* (Adjusted Operating Margin) +3% +12% (9%) $756 $80 $1.09 $733 $73 $0.97 11.0% 9.6% of of Net Sales Net Sales 2017 2018 2017 2018 2017 2018 • Net sales +3% - Growth led by U.S. Retail and Intern
Slide 4: First Quarter 2018 Net Sales
First Quarter 2018 Net Sales $ in millions Retail1 Canada Comp xRetail1,2 +3% Comp +3.0% +3.6% $20 ($12) $15 $756 $733 Q1 2017 U.S. Retail U.S. Wholesale International Q1 2018 Growth vs. 2017 +5.5% (4.0%) +19.3% +3.1% Constant Constant 1 Aggregate store and eCommerce comparable sales Currency Curren
Slide 5: First Quarter 2018 Adjusted Results
First Quarter 2018 Adjusted Results* $ in millions, except EPS Q1 % of Q1 % of Increase / 2018 Sales 2017 Sales (Decrease) Net sales $756 $733 3% Gross profit 332 44.0% 316 43.1% 5% Royalty income 8 1.1% 11 1.4% (24%) Adjusted SG&A* 268 35.4% 246 33.6% 9% Adjusted operating income* 73 9.6% 80 11.0%
Slide 6: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions 2018 2017 • Inventory +10% vs. LY, primarily driven by Cash $180 $154 growth initiatives (Retail, Amazon, Skip Hop, Balance Sheet Accounts Receivable 221 207 and Mexico) (at Q1 end) Inventory 479 435 • Increase in short term borrowings to support Accounts Pa
Slide 7: Business Segment Performance
Business Segment Performance 7
Slide 8: First Quarter 2018 Adjusted Business Segment Performance
First 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) $384 $364 $20 $29 $30 ($1) 7.6% 8.2% U.S. Wholesale 281 293 (12) 63 70 (7) 22.4% 23.8% International
Slide 9: First Quarter Highlights – U.S. Retail
First Quarter Highlights – U.S. Retail $ in millions Segment Net Sales Total Q1 Highlights Sales $384 +5.5% • Q1 Retail comp +3.0% $364 - Driven by double-digit eCommerce growth Retail - Winter weather negatively affected comparable Comp traffic and sales +3.0% • Co-branded format remains best perfo
Slide 10: Co-branded Store – Santa Maria, CA
Co-branded Store – Santa Maria, CA (Opened Q1 2018) 10
Slide 11: Co-branded Store – Tustin, CA
Co-branded Store – Tustin, CA (Converted Q1 2018) 11
Slide 12: Carter's Brand Marketing Campaign
Carter’s Brand Marketing Campaign • Launched mid-March • Digital focus • Meaningful initial consumer reach: - Impressions: 263M - Video views: 49M Click here to view video Note: Consumer reach metrics through April 23, 2018 12
Slide 13: Carter's Continues to Lead in Consumer Following and Engagement in Social Media
Carter’s Continues to Lead in Consumer Following and Engagement in Social Media Carter’s achieves milestone of 1 million Carter’s earned 20 of the top 25 engagement scores followers on Instagram among peers on Instagram Instagram Followers Carter's 1M Gap Kids 893K Disney Baby 418K Children's Place
Slide 14: First Quarter Highlights – U.S. Wholesale
First Quarter Highlights – U.S. Wholesale $ in millions Segment Net Sales Total Sales Q1 Highlights (4%) $293 $281 • U.S. Wholesale segment net sales -4% - Reflects timing of shipments, partially offset by contribution from Skip Hop and higher replenishment / Little Baby Basics demand • Segment oper
Slide 15: Carter's Little Baby Basics
carter’s little baby basics~
Slide 16: Just One You by Carter's
imple YS bycarter's “5 jo 16
Slide 17: Just One You by Carter's
JOYS pycarter's’
Slide 18: Skidaddle by Skip Hop Developed For Walmart
Skidaddle by Skip Hop Developed For Walmart 18
Slide 19: First Quarter Highlights – International
First Quarter Highlights – International $ in millions Segment Net Sales Total Q1 Highlights $91 Sales • International segment net sales +19% +19% (+16% constant currency) $76 - Meaningful contributions from Skip Hop and Mexico acquisitions • Canada $91 - Double-digit sales growth; retail comp sales
Slide 20: International Store – Mexico City
International Store – Mexico City 20
Slide 21: Skip Hop – Canada Retail Presence
Skip Hop – Canada Retail Presence 21
Slide 22: 2018 Outlook
2018 Outlook (Adjusted Basis) • Net sales growth of approximately 3% - Growth assumes ~50% recapture of lost sales related to wholesale customer bankruptcies - Good second half growth planned in U.S. Retail and International segments Fiscal Year 2018 • EPS growth of approximately 12% (vs. $5.77 in 2
Slide 23: Thank you
ery thank you.
Slide 24: Appendix
appendix 24
Slide 25: Reconciliation of Net Income Allocable to Common Shareholders
First Quarter Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter Ended March 31, 2018 April 1, 2017 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 46,772,737 48,322,692 Dilutiv e effect of equity award
Slide 26: Reconciliation of Reported to Adjusted Earnings
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 Quar
Slide 27: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA $ in millions Four Fiscal Fiscal Quarter Ended Quarters Ended March 31, 2018 April 1, 2017 March 31, 2018 Net income $ 42.5 $ 46.6 $ 298.6 Interest expense 8.0 7.1 30.9 Interest income (0.2) (0.1) (0.4) Tax expense 10.4 25.1 73.4 Depreciation and amort
Slide 28: 2017 Second Quarter Reconciliation of Reported to Adjusted Earnings
2017 Second 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 Seco
Slide 29: 2017 Full Year Reconciliation of Reported to Adjusted Earnings
2017 Full Year 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 Fiscal 20
Slide 30: 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 April 1, 2017 622 145 35 802 163 N/A 163 965 Openings 9
Slide 31: 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 April 26, 2018 which is available at www.carters.com. T