Slide 1: Second Quarter 2018 Business Update
Second Quarter 2018 Business Update July 26, 2018
Slide 2: Second Quarter 2018 Results (GAAP Basis)
Second Quarter 2018 Results (GAAP Basis) $ in millions, except EPS Q2 % of Q2 % of Increase / 2018 Sales 2017 Sales (Decrease) Net sales $696 $692 1% Gross profit 310 44.5% 303 43.8% 2% Royalty income 10 1.5% 11 1.6% (8%) SG&A 263 37.8% 250 36.2% 5% Operating income 57 8.2% 64 9.3% (11%) Interest an
Slide 3: Second Quarter 2018 Highlights
Second Quarter 2018 Highlights $ in millions, except EPS Adjusted Net Sales Operating Income* Adjusted EPS* (Adjusted Operating Margin) +1% (13%) $696 $0.79 $0.79 $692 $66 $57 9.5% 8.2% of of Net Sales Net Sales 2017 2018 2017 2018 2017 2018 • Net sales +1% - Growth in U.S. and Canada Retail busines
Slide 4: Second Quarter 2018 Net Sales
Second Quarter 2018 Net Sales $ in millions +1% $11 ($8) $2 $696 $692 Q2 2017 U.S. Retail U.S. Wholesale International Q2 2018 Growth vs. 2017 +2.7% (3.8%) +2.6% +0.6% Constant Constant Currency Currency (0.6%) +0.3% Note: Results may not be additive due to rounding. 4
Slide 5: Second Quarter 2018 Adjusted Results
Second Quarter 2018 Adjusted Results* $ in millions, except EPS Q2 % of Q2 % of Increase / 2018 Sales 2017 Sales (Decrease) Net sales $696 $692 1% Gross profit 310 44.5% 304 43.9% 2% Royalty income 10 1.5% 11 1.6% (8%) Adjusted SG&A* 263 37.8% 249 36.0% 6% Adjusted operating income* 57 8.2% 66 9.5%
Slide 6: First Half 2018 Results (GAAP Basis)
First Half 2018 Results (GAAP Basis) $ in millions, except EPS 1H % of 1H % of Increase / 2018 Sales 2017 Sales (Decrease) Net sales $1,452 $1,425 2% Gross profit 642 44.2% 619 43.4% 4% Royalty income 18 1.3% 22 1.5% (16%) SG&A 544 37.4% 498 35.0% 9% Operating income 117 8.1% 143 10.0% (18%) Interes
Slide 7: First Half 2018 Adjusted Results
First Half 2018 Adjusted Results* $ in millions, except EPS 1H % of 1H % of Increase / 2018 Sales 2017 Sales (Decrease) Net sales $1,452 $1,425 2% Gross profit 642 44.2% 619 43.5% 4% Royalty income 18 1.3% 22 1.5% (16%) Adjusted SG&A* 531 36.6% 495 34.8% 7% Adjusted operating income* 130 8.9% 146 10
Slide 8: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions 2018 2017 • Inventory +9% vs. LY, primarily driven by Cash $183 $174 new businesses (Amazon, Skip Hop, Accounts Receivable 153 165 and Mexico) Balance Sheet (at Q2 end) - Projecting mid-single digit increase in Inventory 663 610 inventory at year-end Account
Slide 9: Business Segment Performance
Business Segment Performance 9
Slide 10: Second Quarter 2018 Adjusted Business Segment Performance
Second 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) $402 $391 $11 $45 $42 $3 11.3% 10.8% U.S. Wholesale 209 218 (8) 30 36 (6) 14.5% 16.6% International
Slide 11: First Half 2018 Adjusted Business Segment Performance
First Half 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) $786 $755 $30 $75 $72 $3 9.5% 9.5% U.S. Wholesale 490 510 (20) 93 106 (12) 19.0% 20.7% International (b
Slide 12: Second Quarter Highlights – U.S. Retail
Second Quarter Highlights – U.S. Retail $ in millions Segment Net Sales Total Q2 Highlights Sales $402 +2.7% • Q2 Retail comp +0.9% (1H comp +1.9%) $391 - Strong comp in May as spring-like weather arrived in more parts of the U.S. Retail Comp +0.9% • Co-branded format remains best performing store m
Slide 13: Carter's, OshKosh & Skip Hop Instagram Posts Earned 15 of the Top 16 Engagement Scores
Carter’s, OshKosh & Skip Hop Instagram Posts Earned 15 of the Top 16 Engagement Scores Among Peers in Q2 Source: Third-party engagement scoring on Instagram from 4/1/18 through 6/30/18. Note: Peer set includes The Children’s Place, Gymboree, Hanna Andersson, and Gap Kids 13
Slide 14: With You From the Start – Strong Response to New Brand Campaign
With You From the Start – Strong Response to New Brand Campaign 14
Slide 15: With You From the Start – Carter's KID
With You From the Start – Carter’s KID 15
Slide 16: U.S. Retail Carter's KID Display – Atlanta, GA
U.S. Retail Carter’s KID Display – Atlanta, GA 16
Slide 17: Carter's KID – Very Favorable Customer Feedback
Carter’s KID – Very Favorable Customer Feedback Carter’s has always been my Carter’s is the best! I’m so happy favorite baby store, and I’m so you have extended the sizes!! My glad I can continue to shop son and daughter are 7 years there as my kids grow up. apart, and now she will be able Checked o
Slide 18: OshKosh – Back to School Marketing
OshKosh – Back to School Marketing 18
Slide 19: Skip Hop – Back to School Product Offering
Skip Hop – Back to School Product Offering 19
Slide 20: Second Quarter Highlights – U.S. Wholesale
Second Quarter Highlights – U.S. Wholesale $ in millions Segment Net Sales Total Sales (4%) Q2 Highlights $218 $209 • U.S. Wholesale segment net sales (4%) - Reflects lower shipments principally due to discontinued sales to Toys “R” Us and Bon-Ton (~$26 million in Q2 2017) - Better-than-forecasted p
Slide 21: U.S. Wholesale – Macy's
U.S. Wholesale – Macy’s Orlando, FL New Toddler Fixtures in ~300 Macy’s Locations 21
Slide 22: Second Quarter Highlights – International
Second Quarter Highlights – International $ in millions Segment Net Sales Q2 Highlights Total $83 $85 Sales • International segment net sales +3% +3% (-1% constant currency) - 1H net sales +11% (+7% constant currency) • Canada - Mid-single digit growth - Q2 retail comp -1.2%; 1H retail comp +0.9% •
Slide 23: Guidance
Guidance 23
Slide 24: Key Second Half 2018 Growth Drivers / Assumptions
Key Second Half 2018 Growth Drivers / Assumptions • Stronger comparable sales planned - Age Up launch - Toys “R” Us / Bon-Ton recapture U.S. Retail - Marketing investments / brand campaign - Investments in eCommerce distribution - Higher mix of co-branded stores • Benefit of new stores; sales transf
Slide 25: 2018 Outlook
2018 Outlook (Adjusted Basis) • Net sales comparable to last year (vs. $948 million Q3 2017) - Growth in U.S. Retail and International, offset by lower sales in U.S. Wholesale Q3 2018 • Adjusted EPS also comparable to last year (vs. $1.70 Q3 20171) - Toys “R” Us / Bon-Ton recapture anticipated to be
Slide 26: thank you.
thank you. 26
Slide 27: appendix
appendix 27
Slide 28: Second Quarter Reconciliation of Net Income Allocable to Common Shareholders
Second Quarter Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter Ended June 30, 2018 July 1, 2017 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 46,437,093 47,863,618 Dilutiv e effect of equity awards
Slide 29: Second Quarter Reconciliation of Reported to Adjusted Earnings
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 Second Qu
Slide 30: 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 30, 2018 July 1, 2017 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 46,604,599 48,093,155 Dilutiv e effect of equity award
Slide 31: 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 of
Slide 32: 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 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017 June 30, 2018 Net income $37.3 $37.8 $79.7 $84.4 $298.2 Interest expense 7.9 7.2 15.9 14.3 31.7 Interest incom
Slide 33: 2017 Third Quarter Reconciliation of Reported to Adjusted Earnings
2017 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
Slide 34: 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 35: 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 July 1, 2017 621 151 38 810 179 N/A 179 989 Openings 7 9
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 July 26, 2018 which is available at www.carters.com. Th