Slide 1: First Quarter 2020 Results & Business Update
First Quarter 2020 Results & Business Update May 5, 2020
Slide 2: Q1 2020 Results – Net Sales
Q1 2020 Results – Net Sales $ in millions Consolidated Net Sales Q1 2020 Net Sales: $654 (15%) (12%) $741 (8%) $654 U.S. Wholesale U.S. Retail $252 $321 39% 49% International $82 12% Q1 2019 Q1 2020 (8%) Note: Results may not be additive due to rounding. 2
Slide 3: Q1 2020 Results – Charges and Notable Items
Q1 2020 Results – Charges and Notable Items Pre-Tax Amount Treated as Non-GAAP Item Cash / Non-Cash ($M) Adjustment? Organizational Restructuring (pre-COVID-19) $4 Cash Yes COVID-19 Expenses $4 Cash Yes Inventory Provisions $49 Non-Cash1 No Bad Debt Provisions $4 Non-Cash No Intangible Asset Impairm
Slide 4: First Quarter 2020 Results (GAAP Basis)
First Quarter 2020 Results (GAAP Basis) $ in millions, except EPS Q1 % of Q1 % of Increase / 2020 Sales 2019 Sales (Decrease) Net sales $654 $741 (12%) Gross profit 228 34.9% 316 42.6% (28%) Royalty income 7 1.1% 9 1.2% (14%) SG&A 270 41.2% 264 35.6% 2% Goodwill impairment 18 2.7% - ‒% N/M Intangibl
Slide 5: Q1 2020 Results – Adjusted Operating Income (Loss)
Q1 2020 Results – Adjusted Operating Income (Loss)1 $ in millions Q1 Adjusted Operating Income (Loss) $60 8.1% of Net Sales ($38) 8.1% of Net Sales (4.0%) of Net Sales $6 ($47) ($26) ($7) (4.0%) Q1 2019 Decline Due to of Net Inventory Bad Debt Lower Spending Q1 2020 Adj. Operating Lower Sales Sales
Slide 6: First Quarter Adjusted Results
First Quarter Adjusted Results1 $ in millions, except EPS Q1 % of Q1 % of Increase / 2020 Sales 2019 Sales (Decrease) Net sales $654 $741 (12%) Adjusted gross profit 228 34.9% 314 42.3% (27%) Royalty income 7 1.1% 9 1.2% (14%) Adjusted SG&A 262 40.0% 262 35.4% ‒% Adjusted operating (loss) income (26
Slide 7: First Quarter Results – U.S. Wholesale
First Quarter Results – U.S. Wholesale $ in millions Segment Net Sales Total Q1 Highlights Sales $275 (8%) • Net sales (8%) vs. LY $252 - Performance through February consistent with plan, offset by suspended shipments to stores that closed in mid-March in response to the pandemic - Strong online sa
Slide 8: First Quarter Results – U.S. Retail
First Quarter Results – U.S. Retail $ in millions Total Q1 Highlights Segment Net Sales Sales $377 (15%) • U.S. Retail sales (15%) to LY $321 - Sales largely consistent with plan through mid- March, when COVID-19 began to impact traffic to our stores - Stores began closing mid-March; all stores clos
Slide 9: Strong eCommerce Demand for Our Brands
Strong eCommerce Demand for Our Brands Weekly $ Change vs. LY U.S. Wholesale eCommerce1 U.S. Retail eCommerce2 Canada Retail eCommerce2 Total Site 266% Domestic Customers 164% 223% 164% 160% 149% 208% 153% 105% 98% 131% 91% 104% 76% 57% 49% 66% 62% 53% 40% 22% 44% 24% 23% 17% 12% 17% 14% 10% 4% 1 2
Slide 10: Carter's Brands Own the #1 Share of Children's Apparel Online
Carter’s Brands Own the #1 Share of Children’s Apparel Online 10
Slide 11: Focused on the Safety of Our Employees
Focused on the Safety of Our Employees 11
Slide 12: Helping Parents Get Through the Day
Helping Parents Get Through the Day 12
Slide 13: Fostering an Even Deeper Sense of Community
Fostering an Even Deeper Sense of Community CAMP Declaring May Survive the Summer with “The Month of Mom” “Virtual” Camp OshKosh 13
Slide 14: Our Frontline Heroes Wear Scrubs
Our Frontline Heroes Wear Scrubs 14
Slide 15: #InThisTogether Brand Campaign
#InThisTogether Brand Campaign #InThisTogether drove over 15M impressions Link to video: https://youtu.be/8-wUVjy81l0 15
Slide 16: First Quarter Results – International
First Quarter Results – International $ in millions Q1 Highlights Segment Net Sales Total • Net sales: (8%) vs. LY $89 Sales $82 (8%) - Reflects store closures in Canada and Mexico as a result of COVID-19 safety concerns - Delayed wholesale shipments in markets outside North America due to COVID-19,
Slide 17: Balance Sheet
Balance Sheet $ in millions Q1 Balance Sheet Accounts Receivable • Receivable quality is high 2020 2019 • Increased provision for troubled retailers Cash $759 $160 Inventory Accounts Receivable 222 239 • Strong actions taken to reduce forward inventory Inventory 566 520 commitments over balance of t
Slide 18: Focus on Liquidity and Financial Flexibility
Focus on Liquidity and Financial Flexibility • Drew down substantially all of our $750 million credit facility in March • Significant reduction of planned inventory commitments • Extension of payment terms with suppliers, vendors, and landlords Actions to • Suspension of share repurchases and divide
Slide 19: The Path Forward
The Path Forward • Expect COVID-19 to have a material impact on: ‒ Net Sales ‒ Profitability ‒ Cash Flow • Not providing financial guidance today • Forecasting gradual recovery in the balance of 2020 and into next year • Planning re-opening of some stores beginning in May ‒ Safety of customers and e
Slide 20: Carter's is the Leader in Young Children's Apparel
Carter’s is the Leader in Young Children’s Apparel • #1 market share in North America Market Share • Carter’s brand has more than twice the share of nearest competitor • We own two of the best known and trusted names in young Brand Strength children’s apparel • Less discretionary purchase; essential
Slide 21: A Business Known for its Consistency and Growth
A Business Known for its Consistency and Growth $ in millions Adjusted Operating Income 31st Net Sales consecutive % to Net Sales year of growth $3,519 $3,462 13.5% $3,400 13.3% 13.1% $3,199 11.8% $3,014 11.4% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Disruption in children’s apparel market
Slide 22: Strong Record of Cash Flow Generation
Strong Record of Cash Flow Generation $ in millions Operating Cash Flow Free Cash Flow1 $387 $369 $356 $330 $326 $308 $292 $281 $260 $204 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 1 Non-GAAP measure defined as operating cash flow less capital expenditures; see reconciliation in appendix. 22
Slide 23: Experienced Leadership Team
Experienced Leadership Team Years With Name Title Previous Experience Carter’s Michael D. Casey Chairman & Chief Executive Officer 27 Price Waterhouse (11 years) The Walt Disney Company (9 years); Brian J. Lynch President 15 Hanesbrands Executive Vice President & Richard F. Westenberger 11 Hewitt As
Slide 24: Thank you!
Thank you!
Slide 25: Appendix
Appendix 25
Slide 26: First Quarter 2020 Adjusted Business Segment Performance
First Quarter 2020 Adjusted Business Segment Performance1 $ in millions Adjusted Adjusted Operating Operating Net Sales Income (Loss) Margin $ $ 2020 2019 Growth 2020 2019 Growth 2020 2019 U.S. Retail (a) $321 $377 ($56) ($13) $24 ($37) (4.2%) 6.4% U.S. Wholesale 252 275 (23) 11 55 (44) 4.5% 20.1% I
Slide 27: First Quarter Reconciliation of Net (Loss) Income Allocable to Common Shareholders
First Quarter Reconciliation of Net (Loss) Income Allocable to Common Shareholders Fiscal Quarter Ended March 28, 2020 March 30, 2019 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 43,355,635 45,070,796 Dilutiv e effect of equi
Slide 28: First Quarter 2020 Reconciliation of Reported to Adjusted Earnings
First Quarter 2020 Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS Segment Reporting U.S. Retail U.S. Wholesale International Operating Net Operating % of Operating % of Operating % of Corporate % of Gross % of % of Income % of Income Income Diluted Income segment Income se
Slide 29: First Quarter 2019 Reconciliation of Reported to Adjusted Earnings
First Quarter 2019 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 tota
Slide 30: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA $ in millions Four Fiscal Fiscal Quarter Ended Quarters Ended March 28, 2020 March 30, 2019 March 28, 2020 Net income ($78.7) $34.5 $150.6 Interest expense 8.9 9.6 36.9 Interest income (0.5) (0.2) (1.5) Tax expense (13.0) 9.3 41.9 Depreciation and amor
Slide 31: Constant Currency Reconciliation
Constant Currency Reconciliation $ in millions Fiscal Quarter Ended Net Sales Foreign Net Sales Net Sales Reported Currency March 28, Currency March 28, March 30, Net Sales Net Sales 2020 Translation 2020 2019 % Change % Change Consolidated net sales $654.5 ($0.7) $655.2 $741.1 (11.7%) (11.6%) Inter
Slide 32: Free Cash Flow
Free Cash Flow $ in millions FY2015 FY2016 FY2017 FY2018 FY2019 Operating Cash Flow $ 308 $ 369 $ 330 $ 356 $ 387 Less: Capital Expenditures (103) (89) (69) (64) (62) Free Cash Flow $ 204 $ 281 $ 260 $ 292 $ 326 Note: Results may not be additive due to rounding. 32
Slide 33: 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 1 Format Format Format Retail Format Mexico International Retail Stores Store count at March 30, 2019 517 160 157 834 187 42 229 1,063 Openings
Slide 34: 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 liquidity, store closures, and cost reduction strategies. Such statements