Slide 1: Fourth Quarter 2017 Business Update
Fourth Quarter 2017 Business Update February 27, 2018
Slide 2: Fourth Quarter 2017 Results (GAAP Basis)
Fourth Quarter 2017 Results (GAAP Basis) $ in millions, except EPS Q4 % of Q4 % of Increase / 2017 Sales 2016 Sales (Decrease) Net sales $1,027 $934 10% Gross profit 460 44.8% 410 43.9% 12% SG&A 326 31.7% 283 30.3% 15% Royalty income (11) (1.1%) (12) (1.2%) (4%) Operating income $146 14.2% $139 14.9
Slide 3: 2017 Full Year Results (GAAP Basis)
2017 Full Year Results (GAAP Basis) $ in millions, except EPS Fiscal % of Fiscal % of Increase / 2017 Sales 2016 Sales (Decrease) Net sales $3,400 $3,199 6% Gross profit 1,483 43.6% 1,379 43.1% 8% SG&A 1,107 32.6% 995 31.1% 11% Royalty income (43) (1.3%) (43) (1.3%) 1% Operating income $420 12.3% $4
Slide 4: Fourth Quarter / Fiscal 2017 Highlights
Fourth Quarter / Fiscal 2017 Highlights Q4 $ in millions, except EPS Full Year Net Sales Adjusted EPS* Net Sales Adjusted EPS* +6% +12% +10% +30% $3,400 $1,027 $2.32 $3,199 $5.76 $5.14 $934 $1.79 15.2% of Net Sales 2016 2017 2016 2017 2016 2017 2016 2017 Q4 Highlights* Fiscal 2017 Highlights* • Net
Slide 5: Fourth Quarter 2017 Net Sales
Fourth Quarter 2017 Net Sales $ in millions +10% Retail1 Comp +4.5% $23 $1,027 $33 $38 Wholesale $14 $934 Stores 6 eCommerce 2 eCommerce $25 Stores 12 Q4 2016 U.S. Retail U.S. Wholesale International Q4 2017 Growth vs. 2016 +7.2% +11.0% +20.7% +10.0% Constant Constant Currency Currency 1Retail Comp
Slide 6: Fourth Quarter 2017 Adjusted Results
Fourth Quarter 2017 Adjusted Results* $ in millions, except EPS Q4 % of Q4 % of Increase / 2017 Sales 2016 Sales (Decrease) Net sales $1,027 $934 10% Gross profit 461 44.8% 410 43.9% 12% Adjusted SG&A* 304 29.6% 280 30.0% 9% Royalty income (11) (1.1%) (12) (1.2%) (4%) Adjusted operating income* $167
Slide 7: Adjustments to Q4 2017 GAAP Results – Tax Reform and Special Compensation Provisions
Adjustments to Q4 2017 GAAP Results – Tax Reform and Special Compensation Provisions In millions Income (Expense) Revaluation of the Company's net deferred tax liabilities - benefit $50 One time "toll" tax on accumulated earnings outside of the United States (10) Net benefit $40 Special employee com
Slide 8: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions 2017 2016 • Inventory +12.5% vs. LY; +4.5% excluding Cash $178 $299 acquisitions Accounts Receivable 241 202 • Higher short term borrowings to support Balance Sheet Inventory 549 488 seasonal working capital needs, (at Q4 end) acquisitions, and return of cap
Slide 9: Business Segment Performance
Business Segment Performance 9
Slide 10: Fourth Quarter 2017 Adjusted Business Segment Performance
Fourth Quarter 2017 Adjusted Business Segment Performance* $ in millions Adjusted Adjusted Operating Net Sales Operating Income* Margin* $ $ 2017 2016 Growth 2017 2016 Growth 2017 2016 U.S. Retail (a) $566 $528 $38 $100 $85 $15 17.7% 16.2% U.S. Wholesale 330 297 33 71 65 6 21.7% 21.9% International
Slide 11: Fourth Quarter Highlights – U.S. Retail
Fourth Quarter Highlights – U.S. Retail $ in millions • Q4 retail comp: +4.5% Segment Net Sales Total - Q4 2016 comp: +5.5% Sales $566 +7% - Q4 2015 comp: +5.3% $528 • Continued positive consumer response to omni-channel initiatives $165 Retail $140 - Solid comps during November / December Comp holi
Slide 12: Co-branded Store – Ann Arbor, MI
Co-branded Store – Ann Arbor, MI (Opened 2017) 12
Slide 13: Co-branded Store – Warren, MI
Co-branded Store – Warren, MI (Opened 2017) 13
Slide 14: U.S. Retail Store Portfolio
U.S. Retail Store Portfolio Single vs. Dual-Brand Brand Stores vs. Outlet 28% 20% 38% 50% 56% Portfolio 100% Single- Composition 72% brand 80% 62% 51% 50% 44% 2012 2017 2022 2012 2017 2022 Projected Projected Single-Brand Dual-Brand Brand Outlet U.S. Retail Location Counts Net Change ~160 ~(115) +45
Slide 15: LiFe. lake carter's
LiFe. lake carter’s
Slide 16: Highest Social Media Engagement in Young Children's Apparel
Highest Social Media Engagement in Young Children’s Apparel Carter’s, OshKosh, and Skip Hop – Strong Consumer Carter’s Achieved 8 of the Top 10 Instagram Consumer Following on Instagram & Facebook Engagement Scores over the December/January Period Instagram Followers Carter's 960k Gap Kids 864k Disn
Slide 17: Skip Hop – Spring 2018
Skip Hop – Spring 2018 Skip Hop tab on carters.com In our U.S. stores launched July 2017 Entire Skip Hop assortment now available online 17
Slide 18: Fourth Quarter Highlights – U.S. Wholesale
Fourth Quarter Highlights – U.S. Wholesale $ in millions Segment Net Sales & Operating Income* $330 Total $297 Sales 11% Segment Segment Margin Margin 21.9% $65 $71 21.7% Q4 2016 Q4 2017 Operating Income Net Sales • Sales growth reflects strength of the product offering, favorable shipment timing, a
Slide 19: Fourth Quarter Highlights – International
Fourth Quarter Highlights – International $ in millions Segment Net Sales Net Sales $132 Total • International segment net sales: +21% Sales (+16.6% constant currency) $15 +21% $109 - Skip Hop and Mexico acquisitions contributed $18 million to net sales $13 $48 - Canada total Retail comp: (0.2%) $34
Slide 20: International Partner Store – Nanjing, China
International Partner Store – Nanjing, China (Opened Q4 2017) 20
Slide 21: Full Year Performance
Full Year Performance 21
Slide 22: 2017 Highlights
2017 Highlights Financial Results • 29th consecutive year of sales growth: +6% vs. 2016 • Achieved record adjusted operating income, $445 million • Record adjusted EPS, $5.76, +12% vs. 2016 • Returned $260 million to shareholders (share repurchases & dividends) Key Milestones • Continue to lead U.S.
Slide 23: 2017 Full Year Adjusted Results
2017 Full Year Adjusted Results* $ in millions, except EPS Fiscal % of Fiscal % of Increase / 2017 Sales 2016 Sales (Decrease) Net sales $3,400 $3,199 6% Gross profit 1,485 43.7% 1,379 43.1% 8% Adjusted SG&A* 1,083 31.8% 991 31.0% 9% Royalty income (43) (1.3%) (43) (1.3%) 1% Adjusted operating incom
Slide 24: Fiscal 2017 Net Sales
Fiscal 2017 Net Sales $ in millions Retail1 Comp +6% +2.7% $51 $3,400 $119 $32 $3,199 Wholesale $27 Stores 15 eCommerce $87 eCommerce 9 Stores 32 Fiscal 2016 U.S. Retail U.S. Wholesale International Fiscal 2017 Growth vs. 2016 +7.2% +2.7% +13.9% +6.3% Constant 1Retail Comp is defined as the combinat
Slide 25: 2017 Full Year Adjusted Business Segment Performance
2017 Full Year Adjusted Business Segment Performance* $ in millions Adjusted Adjusted Operating Net Sales Operating Income* Margin* $ $ 2017 2016 Growth 2017 2016 Growth 2017 2016 U.S. Retail (a) $1,775 $1,656 $119 $231 $213 $19 13.0% 12.8% U.S. Wholesale 1,210 1,178 32 256 261 (5) 21.2% 22.2% Inter
Slide 26: Longer-Term Growth Opportunities (2017 – 2022)
Longer-Term Growth Opportunities (2017 – 2022) In billions CAGR $0.2 $4.4 ‘17-’22 $0.3 $0.1 5% $0.4 $3.4 Net Sales Objective: $4.4 Billion by 2022 2017 U.S. Retail U.S. Retail International U.S. 2022E eCommerce Stores Wholesale • EPS growth (2017-2022): double digit CAGR • Earnings growth drivers: -
Slide 27: 2018 Outlook
2018 Outlook (Adjusted Basis) • Net sales growth of approximately 2% - Growth driven by U.S. Retail and International Q1 2018 • EPS approximately comparable (vs. $0.97 Q1 20171) - Effective tax rate ~22% • Net sales growth of approximately 5% - Growth driven by U.S. Retail and International business
Slide 28: thank you.
thank you. 28
Slide 29: appendix
appendix 29
Slide 30: Fourth Quarter Reconciliation of Net Income Allocable to Common Shareholders
Fourth Quarter Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter Ended December December 30, 2017 31, 2016 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 46,883,462 48,824,395 Dilutiv e effect of equi
Slide 31: Fourth Quarter Reconciliation of Reported to Adjusted Earnings
Fourth 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 Fourth Qu
Slide 32: 2017 Full Year Reconciliation of Net Income Allocable to Common Shareholders
2017 Full Year Reconciliation of Net Income Allocable to Common Shareholders Fiscal Year Ended December 30, December 31, 2017 2016 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 47,593,211 49,917,858 Dilutiv e effect of equity
Slide 33: 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 34: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA $ in millions Fiscal Quarter Ended Fiscal Year Ended December 30, December 31, December 30, December 31, 2017 2016 2017 2016 Net income $ 135.7 $ 87.1 $ 302.8 $ 258.1 Interest expense 7.7 6.7 30.0 27.0 Interest income (0.1) (0.1) (0.3) (0.6) Tax expens
Slide 35: Store Count Data
Store Count Data 1 Includes single brand and co-branded formats 35
Slide 36: 2017 First Quarter Reconciliation of Reported to Adjusted Earnings
2017 First Quarter Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS Segment Reporting Corporate % of Gross % of % of Operating % of Net Diluted Operating total First Quarter of Fiscal 2017 Margin net sales SG&A net sales Income net sales Income EPS Expenses net sales As repo
Slide 37: 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 February 27, 2018 which is available at www.carters.com