Slide 1: Third Quarter 2019 Business Update
Third Quarter 2019 Business Update October 24, 2019
Slide 2: Third Quarter 2019 Results (GAAP Basis)
Third Quarter 2019 Results (GAAP Basis) $ in millions, except EPS Q3 % of Q3 % of Increase / 2019 Sales 2018 Sales (Decrease) Net sales $943 $924 2% Gross profit 402 42.6% 387 41.9% 4% Royalty income 9 1.0% 10 1.1% (10%) SG&A 297 31.5% 294 31.8% 1% Intangible asset impairment 31 3.3% - - N/A Operati
Slide 3: Q3 2019 GAAP Results – Notable Item: Skip Hop Tradename Value Impairment
Q3 2019 GAAP Results – Notable Item: Skip Hop Tradename Value Impairment • Skip Hop business acquired February 2017 Background • Skip Hop tradename assigned a value of $57 million at time of acquisition; the carrying values of intangible assets are assessed periodically • Q3 2019 results include a $
Slide 4: Q3 YTD 2019 Results (GAAP Basis)
Q3 YTD 2019 Results (GAAP Basis) $ in millions, except EPS Q3 YTD % of Q3 YTD % of Increase / 2019 Sales 2018 Sales (Decrease) Net sales $2,419 $2,376 2% Gross profit 1,041 43.0% 1,030 43.3% 1% Royalty income 27 1.1% 29 1.2% (4%) SG&A 829 34.3% 838 35.3% (1%) Intangible asset impairment 31 1.3% - -
Slide 5: Third Quarter 2019 Highlights
Third Quarter 2019 Highlights $ in millions, except EPS Adjusted Net Sales Operating Income* Adjusted EPS* (Adjusted Operating Margin) +2% +16% +7% $924 $943 $1.87 $115 $107 $1.61 12.2% 11.6% of of Net Sales Net Sales 2018 2019 2018 2019 2018 2019 • Net sales +2% - Earlier-than-planned demand in U.S
Slide 6: U.S. Record High Temperatures in September, Carrying Over Into October
U.S. Record High Temperatures in September, Carrying Over Into October 6
Slide 7: Third Quarter 2019 Adjusted Results
Third Quarter 2019 Adjusted Results* $ in millions, except EPS Q3 % of Q3 % of Increase / 2019 Sales 2018 Sales (Decrease) Net sales $943 $924 2% Adjusted gross profit 402 42.6% 390 42.2% 3% Royalty income 9 1.0% 10 1.1% (10%) Adjusted SG&A 297 31.5% 293 31.7% 1% Adjusted operating income 115 12.2%
Slide 8: Q3 YTD 2019 Adjusted Results
Q3 YTD 2019 Adjusted Results* $ in millions, except EPS Q3 YTD % of Q3 YTD % of Increase / 2019 Sales 2018 Sales (Decrease) Net sales $2,419 $2,376 2% Adjusted gross profit 1,039 43.0% 1,032 43.5% 1% Royalty income 27 1.1% 29 1.2% (4%) Adjusted SG&A 828 34.2% 824 34.7% 0% Adjusted operating income 2
Slide 9: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions 2019 2018 Cash $154 $124 • Strong liquidity – cash on hand and Accounts Receivable 293 293 available revolver capacity $624 million Balance Sheet Inventory 723 693 (at Q3 end) • Inventory +4% vs. LY Accounts Payable 206 185 - Growth consistent with forecast
Slide 10: Business Segment Performance
Business Segment Performance 10
Slide 11: Third Quarter 2019 Adjusted Business Segment Performance
Third Quarter 2019 Adjusted Business Segment Performance* $ in millions Adjusted Adjusted Operating Operating Net Sales Income* Margin* $ $ 2019 2018 Growth 2019 2018 Growth 2019 2018 U.S. Retail (a) $464 $459 $5 $51 $47 $4 10.9% 10.3% U.S. Wholesale 352 339 13 73 68 6 20.9% 20.0% International (b)
Slide 12: Q3 YTD 2019 Adjusted Business Segment Performance
Q3 YTD 2019 Adjusted Business Segment Performance* $ in millions Adjusted Adjusted Operating Operating Net Sales Income* Margin* $ $ 2019 2018 Growth 2019 2018 Growth 2019 2018 U.S. Retail (a) $1,264 $1,245 $19 $125 $122 $3 9.9% 9.8% U.S. Wholesale 857 829 27 164 161 3 19.2% 19.4% International (b)
Slide 13: Third Quarter Highlights – U.S. Retail
Third Quarter Highlights – U.S. Retail $ in millions Total Segment Net Sales Sales Q3 Highlights +1% $459 $464 • Retail comparable sales: -0.6% Retail1 - Performance led by eCommerce Comp - Unusually hot temperatures across much of U.S. -0.6% adversely affected consumer traffic, particularly in Sept
Slide 14: Co-branded Mall Store – Chesterfield, VA
Co-branded Mall Store – Chesterfield, VA (Opened October 2019) 14
Slide 15: U.S. Retail – Improving Omni-channel Capabilities
U.S. Retail – Improving Omni-channel Capabilities • Objectives / benefits - Enhance customer experience - Reduce cost to serve - Leverage store inventory • Carter’s Credit Card - Enhanced loyalty program - Nationwide rollout in Q2 - Good consumer response • ‘Same day’ buy online, pickup in store (BO
Slide 16: U.S. Retail – Relaunched Website in Q3
U.S. Retail – Relaunched Website in Q3 • More engaging experience • Better product presentation • Improved personalization • Optimized for mobile device users • Enhanced gifting features • Improved performance post-launch ‒ Conversion 10.3% of ‒ Sales / session Net Sales 16
Slide 17: 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 Our Brands Have a Strong Consumer Following on CRI Earned 24 of the Top 25 Most Engaged Posts Instagram and Facebook1 Among Peers on Instagram in Q32 Instagram Followers Facebook Followers 1Source: Instagram and Facebook
Slide 18: Carter's Holiday Marketing – Jammies for the Entire Family
Carter’s Holiday Marketing – Jammies for the Entire Family 18
Slide 19: Carter's Holiday Marketing
Carter’s Holiday Marketing 19
Slide 20: OshKosh Holiday Marketing
OshKosh Holiday Marketing 20
Slide 21: OshKosh Holiday Marketing
OshKosh Holiday Marketing 21
Slide 22: Retail Experience – Extending the Emotion of the Holidays to our Stores
Retail Experience – Extending the Emotion of the Holidays to our Stores 22
Slide 23: Third Quarter Highlights – U.S. Wholesale
Third Quarter Highlights – U.S. Wholesale $ in millions Total Segment Net Sales Sales Q3 Highlights +4% $352 • Net sales growth vs. LY: +4% $339 - Growth driven by exclusive brands - Reflects earlier-than-planned demand across multiple customers • Adjusted operating margin 20.9%, +90 bps - Reflects
Slide 24: Simple Joys by Carter's
Simple Joys by Carter's carter'’s simple JOYS vycarter's . simple JOYS bycarter's: find joy in the simple From baby bodysuits to toddler looks and jammies, we're bringing you everything you love about Carter’s® to your favorite place to shop. amazon A 24
Slide 25: Third Quarter Highlights – International
Third Quarter Highlights – International $ in millions Segment Net Sales Q3 Highlights Total $126 $127 Sales • International segment net sales: +1% vs. LY +1% (+2% constant currency1) • Canada - Total retail comp: -1.9% Constant Currency 1 - Strong eCommerce growth +1.9% - Extended summer-like weath
Slide 26: International Co-branded Store – Pachuca, Mexico
International Co-branded Store – Pachuca, Mexico (Opened July 2019) 26
Slide 27: International Co-branded Store – Queretaro, Mexico
International Co-branded Store – Queretaro, Mexico (Opened September 2019) 27
Slide 28: International Partner Store – Argentina
International Partner Store – Argentina (Opened October 2019) 28
Slide 29: Guidance
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Slide 30: 2019 Outlook
2019 Outlook (Adjusted Basis) • Net sales growth of ~1% - Low single-digit comps in U.S. and Canada Retail - Lower sales in U.S. Wholesale (reflects earlier-than-planned demand in Q3) • Adjusted diluted EPS: growth of ~1% Q4 2019 (vs. $2.84 Q4 2018)1. Outlook reflects: - Gross margin comparable to L
Slide 31: thank you.
thank you. 31
Slide 32: appendix
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Slide 33: Third Quarter Reconciliation of Net Income Allocable to Common Shareholders
Third Quarter Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter Ended September 28, September 29, 2019 2018 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 44,144,135 45,990,039 Dilutiv e effect of equ
Slide 34: 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 28, September 29, 2019 2018 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 44,640,413 46,399,746 Dilutiv e effect of equ
Slide 35: 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 36: 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 Q3 YTD 2019 Margi
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 28, September 29, September 28, September 29, September 28, 2019 2018 2019 2018 2019 Net income $60.3 $71.8 $138.7 $151.5 $269.2 Interest expense 10.0 9
Slide 38: Fourth Quarter Fiscal 2018 Reconciliation of Reported to Adjusted Earnings
Fourth Quarter Fiscal 2018 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 tot
Slide 39: Full Year Fiscal 2018 Reconciliation of Reported to Adjusted Earnings
Full Year Fiscal 2018 Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS 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 2018 Margin n
Slide 40: 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 28, Currency September 28, September 29, Net Sales Net Sales 2019 Translation 2019 2018 % Change % Change Con
Slide 41: 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 September 29, 2018 533 163 139 835 184 42 226 1,061 Open
Slide 42: 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 24, 2019 which is available at www.carters.com.