Slide 1: Third Quarter 2023 Results & Business Update
Third Quarter 2023 Results & Business Update October 27, 2023
Slide 2: Third Quarter 2023 Results (GAAP Basis)
Third Quarter 2023 Results (GAAP Basis) $ in millions, except EPS Q3 % of Q3 % of 2023 Sales 2022 Sales Change Net sales $792 $819 (3%) Gross profit 376 47.5% 371 45.3% 2% Royalty income 6 0.7% 7 0.9% (21%) SG&A 289 36.5% 286 35.0% 1% Operating income 93 11.8% 92 11.2% 2% Interest expense and other,
Slide 3: Q3 Year-to-Date 2023 Results (GAAP Basis)
Q3 Year-to-Date 2023 Results (GAAP Basis) $ in millions, except EPS Q3 YTD % of Q3 YTD % of 2023 Sales 2022 Sales Change Net sales $2,088 $2,301 (9%) Gross profit 978 46.8% 1,057 45.9% (7%) Royalty income 17 0.8% 20 0.9% (19%) SG&A 807 38.7% 808 35.1% − Operating income 187 9.0% 270 11.7% (31%) Inte
Slide 4: Non-GAAP Adjustments
Non-GAAP Adjustments1 $ in millions, except EPS Third Quarter 2023 2022 Operating % Net Pre-Tax Net Diluted Operating % Net Pre-Tax Net Diluted Income Sales Income Income EPS Income Sales Income Income EPS As reported (GAAP) $93 11.8% $85 $66 $1.78 $92 11.2% $81 $65 $1.67 Organizational restructurin
Slide 5: We Achieved Our Q3 Sales and Earnings Objectives
We Achieved Our Q3 Sales and Earnings Objectives (Adjusted Basis1) $ in millions, except EPS Q3 Results Guidance2 Net Sales $792 $770 - $790 U.S. Retail Comparable Sales Down 10% Down high-single digits U.S. Wholesale Up 4% Down low-single digits International Down 4% Comparable Operating Income $96
Slide 6: Third Quarter 2023 Performance
Third Quarter 2023 Performance $ in millions, except EPS Adjusted Operating Income1 Net Sales (Adjusted Operating Margin) Adjusted Diluted EPS1 -3% vs. +5% vs. +10% vs. 2022 2022 2022 $819 $792 $96 $1.84 $92 $1.67 11.2% 12.2% of of Net Sales Net Sales 2022 2023 2022 2023 2022 2023 1 Non-GAAP measure
Slide 7: Q3 Year-to-Date 2023 Performance
Q3 Year-to-Date 2023 Performance $ in millions, except EPS Adjusted Operating Income1 Net Sales (Adjusted Operating Margin) Adjusted Diluted EPS1 -9% vs. -29% vs. -26% vs. 2022 2022 2022 $2,301 $270 $4.64 $2,088 $192 $3.45 11.7% 9.2% of of Net Sales Net Sales 2022 2023 2022 2023 2022 2023 1 Non-GAAP
Slide 8: Third Quarter 2023 Adjusted Results
Third Quarter 2023 Adjusted Results1 $ in millions, except EPS Q3 % of Q3 % of 2023 Sales 2022 Sales Change Net sales $792 $819 (3%) Gross profit 376 47.5% 371 45.3% 2% Royalty income 6 0.7% 7 0.9% (21%) Adjusted SG&A 286 36.1% 286 35.0% − Adjusted operating income 96 12.2% 92 11.2% 5% Interest expe
Slide 9: Third Quarter Year-to-Date 2023 Adjusted Results
Third Quarter Year-to-Date 2023 Adjusted Results1 $ in millions, except EPS Q3 YTD % of Q3 YTD % of 2023 Sales 2022 Sales Change Net sales $2,088 $2,301 (9%) Gross profit 978 46.8% 1,057 45.9% (7%) Royalty income 17 0.8% 20 0.9% (19%) Adjusted SG&A 803 38.4% 808 35.1% (1%) Adjusted operating income
Slide 10: Balance Sheet & Cash Flow
Balance Sheet & Cash Flow $ in millions Balance Sheet Cash Flow (Q3 End) (Q3 Year-to-Date) 2023 2022 2023 2022 Operating cash flow $206 ($217) Cash $169 $122 Capital expenditures (42) (27) Accounts receivable 241 266 2 Free cash flow $163 ($244) Inventory 621 899 2023 2022 Accounts payable 222 318 S
Slide 11: Business Segment Performance
Business Segment Performance 11
Slide 12: Third Quarter 2023 Adjusted Segment Performance
Third Quarter 2023 Adjusted Segment Performance $ in millions Adjusted Operating Adjusted Operating 1 1 Net Sales Income Margin Q3 Q3 Q3 Q3 Q3 Q3 2023 2022 $ Change 2023 2022 $ Change 2023 2022 U.S. Retail $375 $408 ($33) $49 $58 ($9) 13.0% 14.1% U.S. Wholesale 300 288 12 66 40 26 22.0% 13.9% Intern
Slide 13: Third Quarter 2023 Segment Performance
Third Quarter 2023 Segment Performance U.S. Retail U.S. Wholesale International • Net sales: -8% • Net sales: +4% • Net sales: -4% ― Macro factors adversely ― Higher than planned seasonal ― Growth in Mexico affected traffic product demand ― Warm weather late in quarter ― Sales trends slowed in ― Nea
Slide 14: Q3 Year-to-Date 2023 Adjusted Segment Performance
Q3 Year-to-Date 2023 Adjusted Segment Performance $ in millions Adjusted Operating Adjusted Operating Net Sales Income1 Margin1 Q3 YTD Q3 YTD Q3 YTD Q3 YTD Q3 YTD Q3 YTD 2023 2022 $ Change 2023 2022 $ Change 2023 2022 U.S. Retail $1,022 $1,154 ($132) $103 $163 ($60) 10.1% 14.2% U.S. Wholesale 767 82
Slide 15: New Carter's Love Every Moment Campaign
New Carter’s Love Every Moment Campaign SOCIAL & ONLINE VIDEO DIRECT MAIL IN STORE DIGITAL 15
Slide 16: Little Planet Continues Accelerated Growth
Little Planet Continues Accelerated Growth • Eco-friendly, accessible premium brand • Continued door expansion and new category launches • Expanded global distribution 16
Slide 17: Soft and silky feel, eco-friendly fabric
• Soft and silky feel • Eco-friendly fabric • Online and in 200 doors; planned expansion in 2024 17
Slide 18: Improving the Store Experience in Young Children's Apparel
Improving the Store Experience in Young Children's Apparel • Created separate baby / toddler and kid experiences • Testing multiple format types and brand presentations • Leveraging learnings in new store openings and remodels 18
Slide 19: Carter's Leads the Category in Total Instagram Followers
Carter's Leads the Category in TOTAL INSTAGRAM FOLLOWERS Social Followers in millions on TikTok, Instagram and Facebook1 Carter's 2.2 Gap Kids 1.3 The Children's Place 1.1 Disney Baby 1.1 OshKosh 0.8 Skip Hop 0.5 Gymboree 0.4 Garanimals 0.1 TOTAL FACEBOOK LIKES in millions 1 Source: Instagram, Faceb
Slide 20: Just One You New Holiday Fashion
New Holiday Fashion Just One You 20
Slide 21: Our Holiday Offerings at Walmart
Our Holiday Offerings at Walmart 21
Slide 22: Kicking Off the Holiday Season with Amazon
Kicking Off the Holiday Season with Amazon Simple Joys 22
Slide 23: 2023 Outlook
2023 Outlook 23
Slide 24: 2023 Q4 Sales & Earnings Drivers
2023 Q4 Sales & Earnings Drivers Sales Earnings • Strength of product offerings • Contribution from new high-margin stores • Expecting improving trend in • Closure of low-margin stores consumer demand (delayed arrival of cooler weather) • Conservative inventory commitments & better sell-throughs • I
Slide 25: Fourth Quarter 2023 Outlook
Fourth Quarter 2023 Outlook1 • Outlook assumes: - Improvement in consumer demand trend relative to Q3 - Continued cautious inventory commitments by wholesale customers - Gross margin expansion, reflecting improved pricing and lower ocean freight rates - Lower SG&A - Higher effective tax rate and few
Slide 26: Forecasting an Improving Trend in the Second Half
Forecasting an Improving Trend in the Second Half $ in millions First Half Second Half Year Net Sales (vs. 2022) U.S. Retail (13%) Down MSD to HSD Down HSD to LDD U.S. Wholesale (12%) Down LSD Down HSD International (11%) Up LSD Down LSD Consolidated Net Sales (13%) (4%) (8%) Adjusted Operating Inco
Slide 27: Outlook for Fiscal Year 2023
Outlook for Fiscal Year 20231 • Net sales: ~$2.950 to $2.965 billion ($3.21 billion FY 2022) - U.S. Retail: down high single-digits to low double-digits - U.S. Wholesale: down high single-digits - International: down low single-digits Fiscal Year • Adjusted operating income: ~$325 to $335 2023 milli
Slide 28: Thank You!
Thank You! Thank You! 28
Slide 29: Supplemental Information
Supplemental Information 29
Slide 30: Third Quarter 2023 Reconciliation of Adjusted Net Income Allocable to Common Shareholders
Third Quarter 2023 Reconciliation of Adjusted Net Income Allocable to Common Shareholders Fiscal Quarter Ended September 30, 2023 October 1, 2022 Weighted-average number of common and common equivalent shares outstanding: Basic number of common shares outstanding 36,438,403 38,222,151 Dilutive effec
Slide 31: Q3 Year to Date 2023 Reconciliation of Adjusted Net Income Allocable to Common Shareholders
Q3 Year to Date 2023 Reconciliation of Adjusted Net Income Allocable to Common Shareholders Three Fiscal Quarters Ended September 30, 2023 October 1, 2022 Weighted-average number of common and common equivalent shares outstanding: Basic number of common shares outstanding 36,789,140 39,279,293 Dilut
Slide 32: Reconciliation of Adjusted to Reported Earnings
Reconciliation of Adjusted to Reported Earnings1 $ in millions, except EPS Segment Reporting U.S. Retail % of U.S. Wholesale % of International % of Corporate % of % of Operating % of Income Net Diluted Operating segment Operating segment Operating segment Operating total Third Quarter of Fiscal 202
Slide 33: Reconciliation of Adjusted to Reported Earnings (Continued)
Reconciliation of Adjusted to Reported Earnings (Continued) $ in millions, except EPS Segment Reporting Income U.S. Retail % of U.S. Wholesale % of International % of Corporate % of % of Operating % of Tax Net Diluted Operating segment Operating segment Operating segment Operating total Fourth Quart
Slide 34: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA $ in millions Four Fiscal Fiscal Quarter Ended Three Fiscal Quarters Ended Quarters Ended September 30, October 1, September 30, October 1, September 30, 2023 2022 2023 2022 2023 Net income $66.1 $65.0 $126.0 $169.9 $206.2 Interest expense 8.6 9.7 26.3
Slide 35: 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 September 30, Currency September 30, October 1, Net Sales Net Sales 2023 Translation 2023 2022 % Change % Change Consol
Slide 36: Planning Continued Store Growth in North America in 2023
Planning Continued Store Growth in North America in 2023 U.S. Canada Mexico Total Store count at October 1, 2022 741 185 44 970 Openings 19 2 6 27 Closings (3) - (1) (4) Store count at December 31, 2022 757 187 49 993 Openings 23 3 12 38 Closings (12) (2) (8) (22) Store count at September 30, 2023 7
Slide 37: Forward-looking Statements and Other Information
Forward-looking Statements and Other Information Statements contained in this presentation that are not historical fact and use predictive words such as “estimates”, “outlook”, “guidance”, “expect”, “believe”, “intend”, “designed”, “target”, “plans”, “may”, “will”, “are confident” and similar words