Slide 1: Second Quarter 2016 Business Update
Second Quarter 2016 Business Update JULY 27, 2016
Slide 2: Second Quarter 2016 Highlights
Second Quarter 2016 Highlights $ in millions, except EPS Adjusted Net Sales Operating Income* Adjusted EPS* (Adjusted Operating Margin) +4% (2%) (2%) $639.5 $65.4 $612.8 $64.0 $0.73 $0.72 10.7% of 10.0% Net Sales of Net Sales 2015 2016 2015 2016 2015 2016 • Q2 results exceeded prior guidance • Net s
Slide 3: Second Quarter 2016 Net Sales
Second Quarter 2016 Net Sales $ in millions Total Carter’s +5% Total OshKosh +1% +4% $26.9 ($6.0) $5.5 ($4.9) $5.3 $639.5 $612.8 Stores $3.1 Stores $18.5 eCommerce 2.4 Canada eCommerce 8.3 Retail Comp1,2 Retail1 +8.0% Retail1 Comp Comp (1.3%) +4.4% Q2 2015 Carter's Retail Carter's Wholesale OshKosh
Slide 4: Second Quarter 2016 Adjusted Results
Second Quarter 2016 Adjusted Results* $ in millions, except EPS Q2 % of Q2 % of Increase / 2016 Sales 2015 Sales (Decrease) Net sales $639.5 $612.8 4% Gross profit 282.2 44.1% 262.9 42.9% 7% Adjusted SG&A* 227.7 35.6% 205.8 33.6% 11% Royalty income (9.5) (1.5%) (8.4) (1.4%) 14% Adjusted operating in
Slide 5: First Half 2016 Adjusted Results
First Half 2016 Adjusted Results* $ in millions, except EPS First Half % of First Half % of Increase / 2016 Sales 2015 Sales (Decrease) Net sales $1,363.6 $1,297.5 5% Gross profit 593.1 43.5% 546.9 42.2% 8% Adjusted SG&A* 455.7 33.4% 414.3 31.9% 10% Royalty income (20.6) (1.5%) (20.0) (1.5%) 3% Adju
Slide 6: First Half 2016 Net Sales
First Half 2016 Net Sales $ in millions Total Carter’s +5% Total OshKosh +3% +5% $41.4 $4.8 $14.2 ($9.1) $14.6 $1,363.6 $1,297.5 Stores $9.0 Stores $25.5 eCommerce 5.3 Canada eCommerce 16.0 Retail Comp1,2 Retail1 +11.3% Retail1 Comp Comp +0.7% +2.1% 1H 2015 Carter's Retail Carter's Wholesale OshKosh
Slide 7: First Half Adjusted Business Segment Performance
First Half 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) $ 486 $ 481 $ 5 $ 106 $ 98 $ 8 21.8% 20.4% Carter's Retail (b) 546 505 41 80 83 (3) 14.6% 16.4
Slide 8: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions 2016 2015 • Solid liquidity Cash $205 $244 • Inventory +8% vs. LY principally due to Accounts Receivable 151 157 Balance Sheet business growth (at Q2 end) Inventory 587 544 • Free cash flow improvement reflects Accounts Payable 190 146 favorable changes in n
Slide 9: Business Segment Performance
Business Segment Performance 9
Slide 10: Second Quarter Adjusted Business Segment Performance
Second 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) $ 206 $ 212 $ (6) $ 40 $ 40 $ - 19.4% 19.0% Carter's Retail (b) 274 247 27 38 38 - 14.0% 1
Slide 11: Second Quarter Highlights – Carter's Wholesale
Second Quarter Highlights – Carter’s Wholesale $ in millions Segment Net Sales & Operating Income $212 $206 Sales (3%) Segment Segment Margin Margin 19.0% 19.4% $40 $40 Q2 2015 Q2 2016 Operating Income Net Sales • Q2 net sales affected by timing of customer demand - Stronger than planned demand in Q
Slide 12: Carter's Wholesale – Babies "R" Us
Carter’s Wholesale – Babies “R” Us 12
Slide 13: Second Quarter Highlights – Carter's Retail
Second Quarter Highlights – Carter’s Retail $ in millions Total Segment Net Sales Stores Sales $274 +11% • Net sales +9% $247 • Store Comp: +1.4% $55 - Solid domestic consumer demand, partially $47 Retail offset by continued lower demand from Comp international consumers +4.4% - Brand stores stronge
Slide 14: Declines in Traffic/Sales From International Consumers Continue to Negatively Affect U.S. Retail Sales
Declines in Traffic/Sales From International Consumers Continue to Negatively Affect U.S. Retail Sales Estimated Q2 U.S. Retail (Carter’s + OshKosh) International Customer U.S. Most significant sources of Comp Sales By Customer Type Retail Comp Sales Trends international comp sales 8% decline in Q2
Slide 15: Carter's Fall Direct Marketing
Carter’s Fall Direct Marketing 15
Slide 16: Carter's Fall Direct Marketing
Carter’s Fall Direct Marketing 16
Slide 17: Second Quarter Highlights – OshKosh Retail
Second Quarter Highlights – OshKosh Retail $ in millions Total Stores Segment Net Sales Sales • Net sales: +5% +7% • Comp sales declined (5.8%) $79 $73 - Reflects lower consumer traffic, heavily affected by lower Retail demand from international consumers $16 $13 Comp - Side-by-Side stores comped po
Slide 18: OshKosh Fall Direct Marketing
OshKosh Fall Direct Marketing 18
Slide 19: OshKosh Fall Direct Marketing
OshKosh Fall Direct Marketing 19
Slide 20: Side-by-Side Store – Woodbury, MN
Side-by-Side Store – Woodbury, MN (opened June 2016) 20
Slide 21: Second Quarter Highlights – International
Second Quarter Highlights – International* $ in millions Net Sales Segment Net Sales Total • Solid International segment growth $72 $66 Sales - Reported net sales: +8% $7 +8% - Constant currency net sales: +12% $3 - Canada retail comp +8.0% $26 $22 Constant • Canada Stores Currency - Net sales +15%
Slide 22: Canada New Store Opening – Dufferin Mall (Toronto)
Canada New Store Opening – Dufferin Mall (Toronto) (opened May 2016) 22
Slide 23: Outlook
Outlook • Net sales growth of approximately 6% to 7% • Adjusted EPS growth of approximately Q3 2016 6% to 10% (vs. $1.52 LY) • Net sales increase of approximately 5% to 6% (previously 6% to 7%) • Adjusted EPS growth of approximately 10% (previously growth of 10% to 12%) (vs. $4.61 LY) • New stores:
Slide 24: Thank you
= er thank you. _
Slide 25: Appendix
appendix
Slide 26: Second Quarter 2016 Adjusted SG&A
Second Quarter 2016 Adjusted SG&A* $ in millions +11% $1.9 $1.3 $227.7 $15.9 $2.8 $205.8 35.6% of 33.6% Net Sales of Net Sales Q2 2015 Retail IT Marketing Other, net Q2 2016 120 net new stores Updates to Investments (103 U.S., 17 enterprise to support Canada) and systems growth eComm growth *Results
Slide 27: Second Quarter Reconciliation of Net Income Allocable to Common Shareholders
Second Quarter Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter Ended July 2, 2016 July 4, 2015 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 50,143,568 52,020,386 Dilutiv e effect of equity aw ards
Slide 28: Second Quarter Reconciliation of Reported to Adjusted Earnings
Second Quarter 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 Second Quarter of Fiscal 2016 Margin sales SG&A sales Income sales Income EPS Inco
Slide 29: First Half Reconciliation of Net Income Allocable to Common Shareholders
First Half Reconciliation of Net Income Allocable to Common Shareholders Two Fiscal Quarters Ended July 2, 2016 July 4, 2015 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 50,660,278 52,069,800 Dilutiv e effect of equity aw ard
Slide 30: First Half Reconciliation of Reported to Adjusted Earnings
First Half 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 First Half of Fiscal 2016 Margin sales SG&A sales Income sales Income EPS Income net s
Slide 31: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA $ in millions Four Fiscal Quarters Fiscal Quarter Ended Two Fiscal Quarters Ended Ended July 2, 2016 July 4, 2015 July 2, 2016 July 4, 2015 July 2, 2016 Net income $36.2 $36.1 $90.2 $85.9 $242.1 Interest expense 6.8 6.9 13.5 13.6 26.9 Interest income (
Slide 32: 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 27, 2016 which is available at www.carters.com. Al