Slide 1: Third Quarter 2016 Business Update
Third Quarter 2016 Business Update OCTOBER 27, 2016
Slide 2: Third Quarter 2016 Highlights
Third Quarter 2016 Highlights $ in millions, except EPS Adjusted Net Sales Operating Income* Adjusted EPS* (Adjusted Operating Margin) +6% +6% Comparable to LY $1.61 $901.4 $1.52 $849.8 $131.2 $131.4 15.4% 14.6% of of Net Sales Net Sales 2015 2016 2015 2016 2015 2016 • Net sales +6% reflecting growt
Slide 3: Third Quarter 2016 Net Sales
Third Quarter 2016 Net Sales $ in millions Carter’s +5% OshKosh +6% Int’l +12% +6% $8.7 ($1.3) $11.8 $901.4 $12.7 $19.8 $849.8 eCommerce $6.0 Wholesale $5.8 Stores 4.8 Stores 2.7 eCommerce $15.0 eCommerce 1.2 Stores 4.8 Retail1 Canada Retail1 Comp Retail Comp Comp1,2 +4.1% +2.1% +1.6% Total U.S. Ret
Slide 4: Third Quarter 2016 Adjusted Results
Third Quarter 2016 Adjusted Results* $ in millions, except EPS Q3 % of Q3 % of Increase / 2016 Sales 2015 Sales (Decrease) Net sales $901.4 $849.8 6% Gross profit 375.5 41.7% 347.5 40.9% 8% Adjusted SG&A* 254.8 28.3% 229.1 27.0% 11% Royalty income (10.7) (1.2%) (12.7) (1.5%) (16%) Adjusted operating
Slide 5: Third Quarter 2016 Adjusted SG&A
Third Quarter 2016 Adjusted SG&A* $ in millions +11% $2.1 $2.0 $254.8 $18.6 $3.0 $229.1 28.3% of 27.0% Net Sales of Net Sales Q3 2015 Retail IT Distribution & Freight Other, net Q3 2016 110 net new stores Updates to Higher sales Increased (94 U.S., 16 enterprise volume professional Canada) and syste
Slide 6: Q3 YTD 2016 Adjusted Results
Q3 YTD 2016 Adjusted Results* $ in millions, except EPS Three Three Quarters Quarters Ended % of Ended % of Increase / 2016 Sales 2015 Sales (Decrease) Net sales $2,265.0 $2,147.3 5% Gross profit 968.7 42.8% 894.5 41.7% 8% Adjusted SG&A* 710.5 31.4% 643.3 30.0% 10% Royalty income (31.3) (1.4%) (32.7
Slide 7: Q3 YTD 2016 Net Sales
Q3 YTD 2016 Net Sales $ in millions Carter’s +5% OshKosh +4% Int’l +12% +5% $61.2 $17.5 $22.9 ($10.4) $26.3 $2,265.0 $2,147.3 Stores $11.7 Stores $15.9 eCommerce $31.0 eCommerce 11.3 eCommerce 8.2 Stores 30.3 Wholesale 2.3 Retail1 Canada Retail1 Comp Retail Comp +2.1% Comp1,2 +2.1% +7.2% Total U.S.
Slide 8: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions 2016 2015 • Inventory +8% vs. LY principally due to business growth Cash $141 $288 Accounts Receivable 271 247 • Decline in free cash flow reflects movements Balance Sheet (at Q3 end) in working capital (principally timing of Inventory 553 512 inventory paym
Slide 9: Business Segment Performance
Business Segment Performance 9
Slide 10: Third Quarter Adjusted Business Segment Performance
Third Quarter Adjusted Business Segment Performance* $ in millions Adjusted Operating Adjusted Operating Net Sales Income (Loss)* Margin* $ $ 2016 2015 Growth 2016 2015 Growth 2016 2015 Carter's Wholesale (a) $ 356 $ 344 $ 13 $ 82 $ 74 $ 7 22.9% 21.6% Carter's Retail (b) 315 295 20 48 52 (4) 15.3% 1
Slide 11: Q3 YTD Adjusted Business Segment Performance
Q3 YTD Adjusted Business Segment Performance* $ in millions Adjusted Operating Adjusted Operating Net Sales Income (Loss)* Margin* $ $ 2016 2015 Growth 2016 2015 Growth 2016 2015 Carter's Wholesale (a) $ 842 $ 825 $ 18 $ 188 $ 172 $ 15 22.3% 20.9% Carter's Retail (b) 861 800 61 128 135 (7) 14.8% 16.
Slide 12: Third Quarter Highlights – Carter's Wholesale
Third Quarter Highlights – Carter’s Wholesale $ in millions Segment Net Sales & Operating Income $356 Sales $344 +4% Segment Segment Margin Margin 21.6% 22.9% $74 $82 Q3 2015 Q3 2016 Operating Income Net Sales • Q3 net sales growth reflects earlier demand • Segment operating margin improvement refle
Slide 13: Third Quarter Highlights – Carter's Retail
Third Quarter Highlights – Carter’s Retail $ in millions Total Segment Net Sales Stores Sales $315 +7% • Net sales +2% $295 • Store Comp: (4.1%) $76 $61 - Reflects lower demand for fall seasonal products Retail from domestic customers, which we attribute to Comp unseasonably warm weather +2.1% • Ope
Slide 14: International Consumer Demand in U.S. Retail Stabilized in Q3
International Consumer Demand in U.S. Retail Stabilized in Q3 Significant improvement in traffic/sales from International consumers compared to prior quarters; domestic demand weakened in Q3 Trend showing improvement Q3 U.S. Retail Comparable Sales International consumer sales vs. LY 34.0% Q3-15 Q4-
Slide 15: Carter's Direct Marketing
Carter’s Direct Marketing 15
Slide 16: Carter's Direct Marketing
Carter’s Direct Marketing 16
Slide 17: Third Quarter Highlights – OshKosh Retail
Third Quarter Highlights – OshKosh Retail $ in millions Total Stores Segment Net Sales Sales +9% • Net sales: +3% $107 $98 • Comp sales declined (3.0%) $24 - Reflects lower demand for fall seasonal products from $18 Retail domestic customers, which we attribute to unseasonably Comp warm weather +4.1
Slide 18: OshKosh Direct Marketing
OshKosh Direct Marketing FOR OUR BEST-EST CUSTOMERS (THAT’S YOU!) “35x carter's OSHKOSH Beot 18
Slide 19: OshKosh Direct Marketing
Oshkosh Direct Marketing ‘ | OSHKOSH carter's rey SPSS SSSE SES EGEEEEESEES Aeannnencnninneancanantis Up LOWE Histon DO2 EEE NANO N SNE 4-4-4 NEW ARRIVALS TO LOVE #ee¢44 re BOYS & GIRLS FALL FAVES OF SHR ser sh BABY FALL FAVES AOFM S098-98 reer WORLD'S BEST OVERALLS SOROAF NOUS co at 19
Slide 20: Co-branded Store – Louisville, KY
Co-branded Store – Louisville, KY 20
Slide 21: Co-branded Store – Newnan, GA
Co-branded Store – Newnan, GA 21
Slide 22: Third Quarter Highlights – International
Third Quarter Highlights – International $ in millions Segment Net Sales Net Sales $106 Total • Solid International segment growth $8 Sales $94 - Reported and constant currency net sales: +12% +12% $7 - Canada retail comp +1.6% $45 • Canada Stores $39 - Net sales +10% - Store comp (0.5%), driven by
Slide 23: China Store Opening – Nanjing
China Store Opening – Nanjing (opened September 2016) 23
Slide 24: China Store Opening – Xiamen
China Store Opening – Xiamen (opened October 2016) 24
Slide 25: Outlook
Outlook • Net sales growth of approximately 5% to 6% Q4 2016 • Adjusted EPS between $1.65 - $1.70 (vs. $1.40 LY) (growth of ~18% to 21%) • Net sales increase of approximately 5% to 6% • Adjusted EPS growth of approximately 9% to 10% (vs. $4.61 LY) • New stores: - Carter’s ~64 Fiscal Year - OshKosh ~
Slide 26: thank you.
thank you. 26
Slide 27: appendix
appendix
Slide 28: Third Quarter Reconciliation of Net Income Allocable to Common Shareholders
Third Quarter Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter End October 1, October 3, 2016 2015 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 49,526,480 51,740,523 Dilutiv e effect of equity aw a
Slide 29: Third Quarter Reconciliation of Reported to Adjusted Earnings
Third Quarter Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS Segment Reporting Corporate % of Gross % of % of Operating % of Net Diluted Operating total Third Quarter of Fiscal 2016 Margin sales SG&A sales Income sales Income EPS Expenses net sales As reported (GAAP) $375.
Slide 30: Q3 YTD Reconciliation of Net Income Allocable to Common Shareholders
Q3 YTD Reconciliation of Net Income Allocable to Common Shareholders Three Fiscal Quarters Ended October 1, October 3, 2016 2015 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 50,282,345 51,960,041 Dilutiv e effect of equity aw
Slide 31: Q3 YTD Reconciliation of Reported to Adjusted Earnings
Q3 YTD Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS Segment Reporting International % of Corporate % of Gross % of % of Operating % of Net Diluted Operating segment Operating total Three Quarters Ended of Fiscal 2016 Margin sales SG&A sales Income sales Income EPS Income
Slide 32: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA $ in millions Four Fiscal Quarters Fiscal Quarter Ended Three Fiscal Quarters Ended Ended October 1, October 3, October 1, October 3, October 1, 2016 2015 2016 2015 2016 Net income $ 80.8 $ 79.3 $ 171.0 $ 165.2 $ 243.6 Interest expense 6.8 6.9 20.3 20.
Slide 33: 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 27, 2016 which is available at www.carters.com.