Slide 1: Fourth Quarter/Fiscal Year 2019 Results & Business Update
Fourth Quarter/Fiscal Year 2019 Results & Business Update February 24, 2020
Slide 2: Fourth Quarter 2019 Results (GAAP Basis)
Fourth Quarter 2019 Results (GAAP Basis) $ in millions, except EPS Q4 % of Q4 % of Increase / 2019 Sales 2018 Sales (Decrease) Net sales $1,101 $1,086 1% Gross profit 467 42.5% 468 43.0% - Royalty income 7 0.7% 10 1.0% (30%) SG&A 312 28.3% 307 28.3% 2% Operating income 163 14.8% 171 15.7% (5%) Inter
Slide 3: Fiscal Year 2019 Results (GAAP Basis)
Fiscal Year 2019 Results (GAAP Basis) $ in millions, except EPS Fiscal % of Fiscal % of Increase / 2019 Sales 2018 Sales (Decrease) Net sales $3,519 $3,462 2% Gross profit 1,509 42.9% 1,497 43.3% 1% Royalty income 35 1.0% 39 1.1% (11%) SG&A 1,141 32.4% 1,145 33.1% - Intangible asset impairment 31 0.
Slide 4: Fiscal Year 2019 Highlights
Fiscal Year 2019 Highlights Financial Results • 31st consecutive year of sales growth: +2% vs. 2018 • Record adjusted EPS, $6.46, +3% vs. 2018 • Record operating cash flow ($387 million) and free cash flow ($326 million)1 • Returned $287 million to shareholders (share repurchases & dividends) Highli
Slide 5: In 2019 We Strengthened Our #1 Share Position in the U.S.
In 2019 We Strengthened Our #1 Share Position in the U.S. U.S. Children’s Apparel Market Carter’s, Inc. U.S. Market Share (Ages 0-10) (Ages 0-10) In billions +0.4 -6% ppts $28 13.8% $27 13.4% 2018 2019 2018 2019 Source: NPD Group / Consumer Tracking Service for 12 months ended December 2019 vs. 2018
Slide 6: Fiscal Year 2019 Adjusted Results
Fiscal Year 2019 Adjusted Results1 $ in millions, except EPS Fiscal % of Fiscal % of Increase / 2019 Sales 2018 Sales (Decrease) Net sales $3,519 $3,462 2% Adjusted gross profit 1,506 42.8% 1,501 43.4% - Royalty income 35 1.0% 39 1.1% (11%) Adjusted SG&A 1,140 32.4% 1,133 32.7% 1% Adjusted operating
Slide 7: Fourth Quarter 2019 Adjusted Results
Fourth Quarter 2019 Adjusted Results1 $ in millions, except EPS Q4 % of Q4 % of Increase / 2019 Sales 2018 Sales (Decrease) Net sales $1,101 $1,086 1% Adjusted gross profit 467 42.5% 469 43.2% - Royalty income 7 0.7% 10 1.0% (30%) Adjusted SG&A 313 28.4% 309 28.4% 1% Adjusted operating income 162 14
Slide 8: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions 2019 2018 • Strong liquidity – cash on hand Cash $214 $170 and available revolver capacity Accounts Receivable 251 258 $645 million Balance Sheet (at Q4 end) Inventory 594 574 Accounts Payable 184 199 • Inventory +3% vs. LY (units comparable) Long-Term Debt
Slide 9: Fourth Quarter Business Performance
Fourth Quarter Business Performance
Slide 10: Fourth Quarter 2019 Adjusted Business Segment Performance
Fourth Quarter 2019 Adjusted Business Segment Performance1 $ in millions Adjusted Adjusted Operating Operating Net Sales Income Margin $ $ 2019 2018 Growth 2019 2018 Growth 2019 2018 U.S. Retail $620 $606 $14 $101 $103 ($1) 16.3% 16.9% U.S. Wholesale 349 351 (2) 67 74 (7) 19.2% 21.0% International 1
Slide 11: Fourth Quarter Highlights – U.S. Retail
Fourth Quarter Highlights – U.S. Retail $ in millions Total Segment Net Sales Sales Q4 Highlights $606 $620 +2% • Retail comparable sales: +1.6% Retail1 - Strong eCommerce performance Comp - Good holiday demand; November/December +1.6% comp +2.1% • Store portfolio optimization - Opened 43 stores, cl
Slide 12: U.S. Retail – Providing Higher Service Levels to Consumers
U.S. Retail – Providing Higher Service Levels to Consumers • Comprehensive omni-channel capabilities - Buy online, ship to store - Buy online, pick up in store - Deliver from store - Endless aisle (access to full assortment from store) • Increasing customer utilization of omni-channel - Drove estima
Slide 13: Strong Consumer Response to New Online Experience
Strong Consumer Response to New Online Experience 13
Slide 14: New Co-branded Store – Atlanta
New Co-branded Store – Atlanta (Opened November 2019) 14
Slide 15: Carter's Continues to Lead in Consumer Engagement in Social Media
Carter’s Continues to Lead in Consumer Engagement in Social Media Our Brands Have a Strong Consumer Following on Carter’s Earned 23 of the Top 25 Most Engaged Posts Instagram and Facebook1 Among Peers on Instagram in Q42 In millions Instagram Followers Carter's 1.9 Gap Kids 1.2 Disney Baby 0.9 The C
Slide 16: Carter's Spring Marketing
Carter’s Spring Marketing 16
Slide 17: OshKosh Spring Marketing
OshKosh Spring Marketing carter's y HOW WE SPRING; with color Bright and easy styles are our BFFs. with fun xs Fun prints, fun details, —_ = ee ipa fun times! FL am sR ith denim! Our Favorite styles start With denim. "hi i
Slide 18: Fourth Quarter Highlights – U.S. Wholesale
Fourth Quarter Highlights – U.S. Wholesale $ in millions Total Segment Net Sales Sales Q4 Highlights (-1%) $351 $349 • Net sales -1% vs. LY - Performance reflects decline in off-price channel sales and growth in exclusive brands • Adjusted operating margin 19.2% vs. 21.0% LY - Reflects higher invent
Slide 19: Just One You – Exclusive Brand For Target
Just One You – Exclusive Brand For Target 19
Slide 20: Child of Mine – Exclusive Brand For Walmart
Child of Mine – Exclusive Brand For Walmart 20
Slide 21: Simple Joys – Exclusive Brand For Amazon
Simple Joys – Exclusive Brand For Amazon 21
Slide 22: Fourth Quarter Highlights – International
Fourth Quarter Highlights – International $ in millions Segment Net Sales Q4 Highlights Total $129 $132 Sales • Net sales: +2% vs. LY +2% - Reflects growth in Canada and markets outside North America, partially offset by business model transition in China • Canada - Retail comp: +7.9% - Growth in bo
Slide 23: International Co-branded Store – Mexico City
International Co-branded Store – Mexico City (Opened December 2019) 23
Slide 24: Launched eCommerce in Mexico
Launched eCommerce in Mexico 24
Slide 25: Growing our Brands Internationally – Brazil
Growing our Brands Internationally – Brazil • Large and attractive market - $6 billion annual consumer sales1 - ~3 million annual births2 • Executed exclusive 10 year licensing agreement with Riachuelo - One of the largest fashion retailers in Brazil (300+ stores) - Currently offers Carter’s through
Slide 26: Long-Term Outlook
Long-Term Outlook
Slide 27: Strategic Framework / Long-Term Objectives
Strategic Framework / Long-Term Objectives Mission Vision Mission / To serve the needs of all families To be the world’s favorite brands in Vision with young children young children’s apparel and related products In billions Net Sales CAGR $3.9 2% $3.5 $0.5 Five Year $0.4 Target CAGR Growth $1.2 $1.
Slide 28: Our Focus
Our Focus • Win in Baby: market-leading baby assortment Winning • Age Up: Toddler and Kid market expansion Product • Exceptional value: #1 for quality and value • U.S. Retail - Best in-store presentation of Carter’s and OshKosh - Leading eCommerce capabilities - Superior omni-channel consumer experi
Slide 29: Multiple Sales Drivers; Committed to Margin Expansion
Multiple Sales Drivers; Committed to Margin Expansion Sales Drivers Margin Drivers • Growth will be driven by U.S. eCommerce Gross Margin • Inventory productivity - Industry leading website Improvement • Improved price realization - New mobile app • More productive U.S. Retail store portfolio • Skip
Slide 30: Significant Organizational Restructurings Underway
Significant Organizational Restructurings Underway • Reorganization of staffing models across multiple areas to drive labor savings and efficiencies - U.S. / Canada Retail field organization Key - Distribution centers Elements - Asia sourcing operations • Consolidation of certain functions and teams
Slide 31: Strong Commitment to Returning Capital to Shareholders
Strong Commitment to Returning Capital to Shareholders • Planning over $2 billion in Since 2007… cumulative operating cash flow In billions over the next 5 years (2020 – 2024) Share Repurchases $ 1.7 • Board of Directors has approved: Dividends 0.4 Total Return of Capital $ 2.1 - A new $500 million
Slide 32: 2020 Outlook
2020 Outlook
Slide 33: 2020 Outlook
2020 Outlook (Adjusted Basis & Exclusive of Possible Coronavirus-related Supply Chain Disruptions) • Net sales: growth of ~2% to 3% Fiscal Year • Adjusted diluted EPS: growth of ~4% to 6% 2020 (vs. $6.46 in 2019)1 (53 week year) • Operating cash flow: ~$375 to $400 million • CapEx: ~$75 million • Ne
Slide 34: Thank you!
Thank you!
Slide 35: Appendix
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Slide 36: Fiscal Year 2019 Adjusted Business Segment Performance
Fiscal Year 2019 Adjusted Business Segment Performance1 $ in millions Adjusted Adjusted Operating Operating Net Sales Income Margin $ $ 2019 2018 Growth 2019 2018 Growth 2019 2018 U.S. Retail $1,884 $1,851 $33 $226 $224 $2 12.0% 12.1% U.S. Wholesale 1,206 1,181 25 231 235 (4) 19.2% 19.9% Internation
Slide 37: Fourth Quarter Reconciliation of Net Income Allocable to Common Shareholders
Fourth Quarter Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter Ended December 28, December 29, 2019 2018 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 43,688,514 45,437,536 Dilutiv e effect of equi
Slide 38: Fiscal Year Reconciliation of Net Income Allocable to Common Shareholders
Fiscal Year Reconciliation of Net Income Allocable to Common Shareholders Fiscal Year Ended December 28, December 29, 2019 2018 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 44,402,438 46,160,935 Dilutiv e effect of equity awa
Slide 39: Fourth Quarter Reconciliation of Reported to Adjusted Earnings
Fourth Quarter 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 Income Net Diluted Operating segment Operating segment Operating segment Operating total Fourth Quarter of Fi
Slide 40: Fiscal Year Reconciliation of Reported to Adjusted Earnings
Fiscal 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 Income Net Diluted Operating segment Operating segment Operating segment Operating total Fisca
Slide 41: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA $ in millions Fiscal Quarter Ended Fiscal Year Ended December 28, December 29, December 28, December 29, 2019 2018 2019 2018 Net income $125.1 $130.6 $263.8 $282.1 Interest expense 9.0 8.8 37.6 34.6 Interest income (0.4) (0.1) (1.3) (0.5) Tax expense 2
Slide 42: First Quarter Fiscal 2019 Reconciliation of Reported to Adjusted Earnings
First Quarter Fiscal 2019 Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS Net Gross % of % of Operating % of Net Diluted First Quarter of Fiscal 2019 Sales Profit net sales SG&A net sales Income net sales Income EPS As reported (GAAP) $741.1 $315.9 42.6% $263.7 35.6% $60.8
Slide 43: 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 December 28, Currency December 28, December 29, Net Sales Net Sales 2019 Translation 2019 2018 % Change % Change Consol
Slide 44: 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 December 29, 2018 528 2 163 153 844 188 42 230 1,074 Ope
Slide 45: 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 24, 2020 which is available at ir.carters.com.