Slide 1: Third Quarter 2017 Business Update
Third Quarter 2017 Business Update October 26, 2017
Slide 2: Third Quarter 2017 Results (GAAP Basis)
Third Quarter 2017 Results (GAAP Basis) $ in millions, except EPS Q3 % of Q3 % of Increase/ 2017 Sales 2016 Sales (Decrease) Net sales $948.2 $901.4 5% Gross profit 403.8 42.6% 375.5 41.7% 8% SG&A 283.5 29.9% 255.3 28.3% 11% Royalty income (10.4) (1.1%) (10.7) (1.2%) (3%) Operating income 130.7 13.8
Slide 3: Third Quarter 2017 Highlights
Third Quarter 2017 Highlights $ in millions, except EPS Adjusted Net Sales Operating Income* Adjusted EPS* (Adjusted Operating Margin) +5% +6% $948.2 $1.70 $1.61 $901.4 $131.4 $131.2 10.0% 9.5% of of 9.6% 14.6% 13.8% Net Sales Net10% Sales of of of of Net Sales Net Sales Net Sales Net Sales 2016 201
Slide 4: Third Quarter 2017 Net Sales
Third Quarter 2017 Net Sales $ in millions +5% $32.3 $18.6 $4.2 $948.2 $901.4 Wholesale $10.4 eCommerce $24.6 Stores 4.9 Stores 7.7 eCommerce 3.3 Q3 2016 U.S. Retail International U.S. Wholesale Q3 2017 Growth vs. 2016 +7.7% +17.6% -1.1% +5.2% Constant Constant Currency Currency +14.5% +4.8% 4
Slide 5: Third Quarter 2017 Adjusted Results
Third Quarter 2017 Adjusted Results* $ in millions, except EPS Q3 % of Q3 % of Increase / 2017 Sales 2016 Sales (Decrease) Net sales $948.2 $901.4 5% Gross profit 404.2 42.6% 375.5 41.7% 8% Adjusted SG&A* 283.4 29.9% 254.8 28.3% 11% Royalty income (10.3) (1.1%) (10.7) (1.2%) (3%) Adjusted operating
Slide 6: Third Quarter 2017 Adjusted SG&A
Third Quarter 2017 Adjusted SG&A* $ in millions +11% $10.4 $1.4 $283.4 $16.8 $254.8 New stores $10.8 eCommerce volume 3.3 Technology 2.1 29.9% of 28.3% Net Sales of Net Sales Q3 2016 Retail Acquisitions Other, net Q3 2017 Investments in new stores, Businesses Higher distribution/freight omni-channel
Slide 7: Comprehensive Investment Agenda
Comprehensive Investment Agenda • Braselton distribution center capacity expansion • 2017 eCommerce • Website refresh & Skip Hop tab • 2017 • Mobile App • 2017 • New point of sale system enabling: • 2015 - 2017 ‒ Buy online, ship to store Omni-channel ‒ In store access to full online assortment • Im
Slide 8: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions 2017 2016 • Inventory +10% vs. LY; Skip Hop and Cash $105 $141 Mexico contributed 8 percentage points to YOY growth Balance Sheet Accounts Receivable 286 271 (at Q3 end) Inventory 610 553 • Increase in debt balance reflects short Accounts Payable 194 155 ter
Slide 9: Business Segment Performance
Business Segment Performance
Slide 10: Third Quarter 2017 Adjusted Business Segment Performance
Third Quarter 2017 Adjusted Business Segment Performance* $ in millions Adjusted Operating Adjusted Operating Net Sales Income* Margin* $ $ 2017 2016 Growth 2017 2016 Growth 2017 2016 U.S. Retail (a) $ 454 $ 422 $ 32 $ 59 $ 51 $ 8 12.9% 12.0% U.S. Wholesale (b) 370 374 (4) 79 86 (7) 21.3% 23.0% Inte
Slide 11: Third Quarter Highlights – U.S. Retail
Third Quarter Highlights – U.S. Retail $ in millions Segment Net Sales Total • Q3 retail comp +2.6% $454 Sales • Believe comp performance adversely impacted by store $422 +8% closures related to hurricanes in Texas, the Southeast, $125 and Puerto Rico $100 Retail • Good consumer response to omni-cha
Slide 12: Co-branded Store – Alpharetta, GA
Co-branded Store – Alpharetta, GA (Converted Q3 2017) 12
Slide 13: Launch of Carter's Mobile App
Launch of Carter’s Mobile App 13
Slide 14: Carter's Instagram Snapshot
Carter’s Instagram Snapshot 14
Slide 15: OshKosh Instagram Snapshot
OshKosh Instagram Snapshot 15
Slide 16: Skip Hop – Holiday 2017
Skip Hop — Holiday 2017 carter’s
Slide 17: Skip Hop at Macy's
Skip Hop at Macy’s sKIPeHOP
Slide 18: Third Quarter Highlights – U.S. Wholesale
Third Quarter Highlights – U.S. Wholesale $ in millions Segment Net Sales & Operating Income* $374 $370 -1% Segment Segment Margin Margin 23.0% $86 $79 21.3% Q3 2016 Q3 2017 Operating Income Net Sales • Sales performance reflects lower shipments of seasonal products, mostly offset by the benefit of
Slide 19: Third Quarter Highlights – International
Third Quarter Highlights – International $ in millions Segment Net Sales Net Sales $125 Total • International segment net sales +18% on a reported basis $11 Sales (+14.5% constant currency) $106 +18% - Skip Hop and Mexico acquisitions contributed total $8 of $15 million to YOY growth $54 - Canada Re
Slide 20: Acquisition of Mexico Licensee
Acquisition of Mexico Licensee • 40 year old company based in Mexico City; ~400 employees Licensee • 20 year+ licensee (initially with OshKosh and then Carter’s) Background • Strong wholesale business (Sam’s Club, Liverpool, Costco) • 61 retail locations across Mexico (40 owned / 21 franchised) Rece
Slide 21: Carter's Mexico
Carter’s Mexico Retail Stores Wholesale • 61 retail store locations (at Q3 end) • 2016 Wholesale net sales ~$20 million USD - 40 owned (~72% of total) - 21 franchised • 2016 Retail net sales ~$8 million USD (~28% of total) * Based on Mexican Peso to U.S. Dollar conversion rate of 19.04 21
Slide 22: International Partner Store – Dubai, UAE
International Partner Store – Dubai, UAE (Opened Q3 2017) 22
Slide 23: 2017 Outlook
2017 Outlook • Net sales growth of approximately 10% - Expecting growth in all segments • Adjusted EPS growth of approximately 21% (vs. $1.79 LY1). Key drivers: Q4 2017 - Strong revenue growth - Gross margin expansion - Lower effective tax rate - Benefit of share repurchases • Full year outlook refi
Slide 24: Thank you
thank you.
Slide 25: Appendix
epbercint &
Slide 26: Third Quarter Reconciliation of Net Income Allocable to Common Shareholders
Third Quarter Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter Ended September October 1, 30, 2017 2016 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 47,303,074 49,526,480 Dilutiv e effect of equity
Slide 27: Third Quarter Reconciliation of Reported to Adjusted Earnings
Third 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 Third Quar
Slide 28: 2017 Q3 YTD Results (GAAP Basis)
2017 Q3 YTD Results (GAAP Basis) $ in millions, except EPS 2017 % of 2016 % of Increase/ Q3 YTD Sales Q3 YTD Sales (Decrease) Net sales $2,373.1 $2,265.0 5% Gross profit 1,023.1 43.1% 968.7 42.8% 6% SG&A 781.4 32.9% 712.8 31.5% 10% Royalty income (32.1) (1.4%) (31.3) (1.4%) 3% Operating income 273.8
Slide 29: 2017 Q3 YTD Adjusted Results
2017 Q3 YTD Adjusted Results* $ in millions, except EPS Fiscal % of Fiscal % of Increase / 2017 Sales 2016 Sales (Decrease) Net sales $2,373.1 $2,265.0 5% Gross profit 1,023.9 43.1% 968.7 42.8% 6% Adjusted SG&A* 778.6 32.8% 710.5 31.4% 10% Royalty income (32.1) (1.4%) (31.3) (1.4%) 3% Adjusted opera
Slide 30: Q3 YTD 2017 Adjusted Business Segment Performance
Q3 YTD 2017 Adjusted Business Segment Performance* $ in millions Adjusted Operating Adjusted Operating Net Sales Income (Loss)* Margin* $ $ 2017 2016 Growth 2017 2016 Growth 2017 2016 U.S. Retail (a) $ 1,210 $ 1,129 $ 81 $ 131 $ 127 $ 4 10.8% 11.3% U.S. Wholesale (b) 880 881 (1) 185 196 (11) 21.0% 2
Slide 31: Q3 YTD Reconciliation of Net Income Allocable to Common Shareholders
Q3 YTD Reconciliation of Net Income Allocable to Common Shareholders Three Fiscal Quarters Ended September 30, October 1, 2017 2016 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 47,829,794 50,282,345 Dilutiv e effect of equity
Slide 32: Q3 YTD Reconciliation of Reported to Adjusted Earnings
Q3 YTD 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 Three Quart
Slide 33: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA $ in millions Four Fiscal Fiscal Quarter Ended Three Fiscal Quarters Ended Quarters Ended September 30, October 1, September 30, October 1, September 30, 2017 2016 2017 2016 2017 Net income $ 82.5 $ 80.8 $ 167.1 $ 171.0 $ 254.2 Interest expense 8.1 6.8
Slide 34: 2016 Fourth Quarter and Full Year Reconciliation of Reported to Adjusted Earnings
2016 Fourth Quarter and Full Year Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS Segment Reporting Corporate % of Gross % of % of Operating % of Net Diluted Operating total Fourth Quarter of Fiscal 2016 Margin sales SG&A sales Income sales Income EPS Expenses net sales As
Slide 35: 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 October 1, 2016 636 127 13 776 156 N/A 156 932 Openings
Slide 36: 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 October 26, 2017 which is available at www.carters.com.