Slide 1: Third Quarter 2020 Results & Business Update
Third Quarter 2020 Results & Business Update October 23, 2020
Slide 2: Third Quarter Results (GAAP Basis)
Third Quarter Results (GAAP Basis) $ in millions, except EPS Q3 % of Q3 % of Increase / 2020 Sales 2019 Sales (Decrease) Net sales $865 $943 (8%) Gross profit 384 44.4% 402 42.6% (5%) Royalty income 9 1.0% 9 1.0% (1%) SG&A 279 32.3% 297 31.5% (6%) Goodwill impairment - - 31 3.3% 100% Operating incom
Slide 3: Non-GAAP Adjustments (Q3, Q3 Year-to-Date)
Non-GAAP Adjustments (Q3, Q3 Year-to-Date) Third Fiscal Quarter 2020 2019 Operating % Net Diluted Operating % Net Diluted (In millions, except earnings per share) Income Sales EPS Income Sales EPS As reported (GAAP) $ 113.5 13.1% $ 1.85 $ 83.9 8.9% $ 1.34 COVID-19 expenses 3.3 0.06 - - Store lease i
Slide 4: Third Quarter Adjusted Results
Third Quarter Adjusted Results1 $ in millions, except EPS Q3 % of Q3 % of Increase / 2020 Sales 2019 Sales (Decrease) Net sales $865 $943 (8%) Gross profit 384 44.4% 402 42.6% (5%) Royalty income 9 1.0% 9 1.0% (1%) Adjusted SG&A 273 31.6% 297 31.5% (8%) Adjusted operating income 120 13.8% 115 12.2%
Slide 5: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions • Strong liquidity at Q3 end: ~$1.6B Q3 Balance Sheet - $831M cash on hand - $743M available under revolving credit facility 2020 2019 • Net inventory down 11% vs. LY Cash $831 $154 - Reflects strong inventory management, Accounts receivable 263 293 improved
Slide 6: Business Segment Results
Business Segment Results
Slide 7: Q3 2020 Adjusted Business Segment Performance
Q3 2020 Adjusted Business Segment Performance1 $ in millions Adjusted Adjusted Operating Operating Net Sales Income Margin $ $ 2020 2019 Growth 2020 2019 Growth 2020 2019 U.S. Retail $449 $464 ($15) $51 $51 $- 11.4% 10.9% U.S. Wholesale 302 352 (50) 67 73 (6) 22.3% 20.9% International 114 127 (13) 1
Slide 8: Q3 Results – U.S. Retail
Q3 Results – U.S. Retail $ in millions Total Segment Net Sales Q3 Highlights Sales $464 $449 (3%) • Net sales (3%) to LY - Comp sales -3.5% - Strong eCommerce performance, +17% - Stores lower driven by decline in traffic - Strong holiday period selling - July 4th: +7% comp - Labor Day: +15% comp (be
Slide 9: Our Omnichannel Initiatives Enabled Strong eCommerce Growth in Q3
Our Omnichannel Initiatives Enabled Strong eCommerce Growth in Q3 Curbside Pickup Buy Online, Pickup in Store Online Fulfillment From Store 9
Slide 10: Carter's Continues to Lead in Consumer Engagement in Social Media
Carter’s Continues to Lead in Consumer Engagement in Social Media Carter’s and OshKosh Earned 86% Our Brands Have a Strong Consumer of all Engagements Among Peers Following on Instagram and Facebook1 on Instagram in Q32 In millions Instagram Followers Carter's 2.1 Gap Kids 1.3 Disney Baby 1.0 Childr
Slide 11: Most-Engaged Instagram Content in Brand History
Most-Engaged Instagram Content in Brand History 11
Slide 12: Celebrating the Virtual Announcement of 10,000 Pregnancies in September
Celebrating the Virtual Announcement of 10,000 Pregnancies in September 12
Slide 13: Helping Families Create Special Moments
Helping Families Create Special Moments 13
Slide 14: First of its Kind Collaboration with Cameo to Bring Santa Visits into Home
First of its Kind Collaboration with Cameo to Bring Santa Visits into Home 14
Slide 15: Celebrating the Optimism of the Holidays
Celebrating the Optimism of the Holidays 15
Slide 16: Holiday Marketing – Jammies for the Entire Family
Holiday Marketing – Jammies for the Entire Family 16
Slide 17: Holiday Marketing – Beautiful Holiday Dress-Up
Holiday Marketing – Beautiful Holiday Dress-Up 17
Slide 18: Holiday Marketing – Santa's Toy Shop
Holiday Marketing – Santa’s Toy Shop 18
Slide 19: Q3 Results – U.S. Wholesale
Q3 Results – U.S. Wholesale $ in millions Segment Net Sales Q3 Highlights Total $352 Sales • Net sales (14%) vs. LY $302 (14%) - Strong demand for exclusive brands at Target, Walmart & Amazon; +10% vs. LY - Strong Skip Hop performance - Lower sales to off-price retailers - Online demand for our bran
Slide 20: Little Baby Basics – Strongest Performance in Years in All Channels
Little Baby Basics – Strongest Performance in Years in All Channels 20
Slide 21: Exclusive Brands – Just One You at Target
Exclusive Brands – Just One You at Target 21
Slide 22: Exclusive Brands – Child of Mine at Walmart
Exclusive Brands – Child of Mine at Walmart 22
Slide 23: Exclusive Brands – Simple Joys on Amazon
Exclusive Brands – Simple Joys on Amazon 23
Slide 24: Q3 Results – International
Q3 Results – International $ in millions Segment Net Sales Q3 Highlights Total $127 Sales $114 (10%) • Net sales: (10%) vs. LY - Canada - Strong retail comp (+7%), driven by eCommerce (+58%) - Lower store sales - Mexico - Strong retail growth: eComm and new, larger co-branded stores performing well
Slide 25: International Co-branded Store – Guadalajara, Mexico
International Co-branded Store – Guadalajara, Mexico (Opened September 2020) 25
Slide 26: New International Partner Stores – Brazil
New International Partner Stores – Brazil (Opened September/October 2020) Sao Paulo Sao Paulo Rio de Janeiro 26
Slide 27: Q4 2020 Outlook
Q4 2020 Outlook • Expecting COVID-19 to have a significant impact on our Q4 performance − Continued lower store traffic; demand shift online − Gross margin expansion − Inventory levels entering Q4 meaningfully lower vs. LY − Continued strong liquidity • Risks − COVID-19 resurgence − Macroeconomic en
Slide 28: Thank you!
Thank you!
Slide 29: Appendix
Appendix
Slide 30: Q3 Year-to-Date Results (GAAP Basis)
Q3 Year-to-Date Results (GAAP Basis) $ in millions, except EPS Q3 YTD % of Q3 YTD % of Increase / 2020 Sales 2019 Sales (Decrease) Net sales $2,034 $2,419 (16%) Gross profit 847 41.7% 1,041 43.0% (19%) Royalty income 20 1.0% 27 1.1% (27%) SG&A 767 37.7% 829 34.3% (7%) Goodwill impairment 18 0.9% - -
Slide 31: Q3 Year-to-Date Adjusted Results
Q3 Year-to-Date Adjusted Results1 $ in millions, except EPS Q3 YTD % of Q3 YTD % of Increase / 2020 Sales 2019 Sales (Decrease) Net sales $2,034 $2,419 (16%) Adjusted gross profit 847 41.7% 1,039 43.0% (18%) Royalty income 20 1.0% 27 1.1% (27%) Adjusted SG&A 733 36.0% 828 34.2% (11%) Adjusted operat
Slide 32: Q3 Year-to-Date Adjusted Business Segment Performance
Q3 Year-to-Date Adjusted Business Segment Performance1 $ in millions Adjusted Adjusted Operating Operating Net Sales Income Margin $ $ 2020 2019 Growth 2020 2019 Growth 2020 2019 U.S. Retail $1,086 $1,264 ($178) $71 $125 ($54) 6.5% 9.9% U.S. Wholesale 706 857 (151) 108 164 (57) 15.2% 19.2% Internati
Slide 33: Q3 Reconciliation of Net Income Allocable to Common Shareholders
Q3 Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter Ended September 26, September 28, 2020 2019 Weighted-average number of common and common equivalent shares outstanding: Basic number of common shares outstanding 43,193,752 44,144,135 Dilutive effect of equity awards 156
Slide 34: Q3 Year-to-Date Reconciliation of Net Income Allocable to Common Shareholders
Q3 Year-to-Date Reconciliation of Net Income Allocable to Common Shareholders Three Fiscal Quarters Ended September 26, September 28, 2020 2019 Weighted-average number of common and common equivalent shares outstanding: Basic number of common shares outstanding 43,237,319 44,640,413 Dilutive effect
Slide 35: Reconciliation of Reported to Adjusted Earnings
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 Income Net Diluted Operating segment Operating segment Operating segment Operating total Third Quarter of
Slide 36: Reconciliation of Reported to Adjusted Earnings (Continued)
Reconciliation of Reported to Adjusted Earnings (Continued) (a) In addition to the results provided in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements that present gross margin, SG&A, operating income, income tax, net income, and net
Slide 37: 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 26, September 28, September 26, September 28, September 26, 2020 2019 2020 2019 2020 Net income $ 81.2 $ 60.3 $ 10.7 $ 138.7 $ 135.9 Interest expense 16
Slide 38: 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 September 26, Currency September 26, September 28, Net Sales Net Sales 2020 Translation 2020 2019 % Change % Change Con
Slide 39: Net Debt Reconciliation
Net Debt Reconciliation $ in millions Fiscal Quarter Ended September 26, September 28, 2020 2019 Long-term debt, net $ 989.1 $ 769.5 Cash and cash equivalents (831.2) (153.9) Net debt $ 157.9 $ 615.6 39
Slide 40: Store Count Data
Store Count Data Total Total U.S. Retail Canada Mexico International Consolidated Store Count at September 28, 2019 845 198 44 242 1,087 Openings 35 3 4 7 42 Closings (17) (5) (3) (8) (25) Store Count at September 26, 2020 863 196 45 241 1,104 40
Slide 41: Forward-looking Statements and Other Information
Forward-looking Statements and Other Information This presentation contains forward-looking statements within the meaning of the federal securities laws relating to our future performance, including statements with respect to the potential effects of the COVID-19 pandemic and the Company’s liquidity