Slide 1: Second Quarter 2020 Results & Business Update
Second Quarter 2020 Results & Business Update July 24, 2020
Slide 2: Second Quarter 2020 Results (GAAP Basis)
Second Quarter 2020 Results (GAAP Basis) $ in millions, except EPS Q2 % of Q2 % of Increase / 2020 Sales 2019 Sales (Decrease) Net sales $515 $734 (30%) Gross profit 236 45.7% 323 44.0% (27%) Royalty income 4 0.7% 10 1.3% (63%) SG&A 218 42.4% 268 36.5% (19%) Operating income 21 4.1% 64 8.8% (68%) In
Slide 3: Non-GAAP Adjustments (Q2, First Half)
Non-GAAP Adjustments (Q2, First Half) (In millions, except earnings per share) Second Quarter 2020 2019 Operating Operating Diluted Income Diluted EPS Income EPS As reported (GAAP) $ 21.0 $ 0.19 $ 64.5 $ 0.97 COVID-19 expenses 13.0 0.23 - - Store lease and other impairments 3.7 0.06 - - Organization
Slide 4: Second Quarter Adjusted Results
Second Quarter Adjusted Results1 $ in millions, except EPS Q2 % of Q2 % of Increase / 2020 Sales 2019 Sales (Decrease) Net sales $515 $734 (30%) Gross profit 236 45.7% 323 44.0% (27%) Royalty income 4 0.7% 10 1.3% (63%) Adjusted SG&A 198 38.5% 269 36.6% (26%) Adjusted operating income 41 8.0% 64 8.7
Slide 5: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions • Substantial liquidity at Q2 end: $1.5B Q2 Balance Sheet - $1.0B cash on hand - ~$500M available capacity under $750M revolving credit facility 2020 2019 • Accounts receivable down 1% vs. LY Cash $1,001 $118 - Receivable quality remains high Accounts Receiv
Slide 6: Business Segment Results
Business Segment Results
Slide 7: Second Quarter 2020 Adjusted Business Segment Performance
Second Quarter 2020 Adjusted Business Segment Performance1 $ in millions Adjusted Adjusted Operating Operating Net Sales Income (Loss) Margin $ $ 2020 2019 Change 2020 2019 Change 2020 2019 U.S. Retail (a) $316 $423 ($107) $33 $50 ($17) 10.6% 11.9% U.S. Wholesale 152 229 (77) 29 35 (7) 19.0% 15.4% I
Slide 8: Second Quarter Results – U.S. Retail
Second Quarter Results – U.S. Retail $ in millions Total Segment Net Sales Q2 Highlights Sales $423 (25%) • Net sales (25%) to LY $316 - Significant disruption from store closures in Q2 - Strong eCommerce comp: +101% vs. LY - Significant acceleration in ‘omnichannel sales’ (buy online, ship to store
Slide 9: Ensuring a Safe Environment for Guests & Employees
Ensuring a Safe Environment for Guests & Employees Actions We’ve Taken: • Social distancing – customers & employees • Frequent cleanings • Masks for all 9
Slide 10: Omnichannel Sales Accelerated in Q2
Omnichannel Sales Accelerated in Q2 Buy Online, Pickup in Store Online Fulfillment From Store Curbside Pickup 10
Slide 11: Product Innovation – Kids' Face Masks
Product Innovation – Kids’ Face Masks 11
Slide 12: Kelly Clarkson Virtual Baby Shower – Connecting With Expecting Moms
Kelly Clarkson Virtual Baby Shower – Connecting With Expecting Moms During Unexpected Times • Teamed up with Kelly Clarkson to host virtual baby shower along with Jordin Sparks, Shawn Johnson East, Tia Mowry and others • Largest sweepstakes in Carter’s history: >110K entries and 100 lucky winners •
Slide 13: Summer Activities For Children – Camp OshKosh
Summer Activities For Children – Camp OshKosh • Developed a virtual summer camp program to help families get through this season without camps (June 15th – July 10th) • Actress Molly Sims kicked off the program with a backyard family campout that included books, blankets and s’mores • Guided weekly
Slide 14: Creating Change Together – Standing Against Injustice
Creating Change Together – Standing Against Injustice 14
Slide 15: Celebrating All Families With Young Children
Celebrating All Families With Young Children 15
Slide 16: Second Quarter Results – U.S. Wholesale
Second Quarter Results – U.S. Wholesale $ in millions Segment Net Sales Q2 Highlights Total $229 Sales • Net sales (34%) vs. LY (34%) - Reduced shipments to many customers $152 who closed their stores and cancelled / delayed orders - Strong growth in wholesale customers’ online businesses – CRI bran
Slide 17: Second Quarter Results – International
Second Quarter Results – International $ in millions Segment Net Sales Q2 Highlights Total $82 Sales • Net sales: (43%) vs. LY (43%) - Lower retail store and wholesale sales in Canada and Mexico due to COVID-19 $47 • Strong momentum in international eCommerce - Canada: comp sales +194% - Mexico: str
Slide 18: Accelerating Investments
Accelerating Investments • Launching new mobile app Strengthen Omnichannel • Rolling out curbside pickup Capabilities • Expanding eCommerce fulfillment from store • Investing in new, higher ROI stores Optimize Store Portfolio • Exiting lower-performing stores • Segmentation Connect With Customers on
Slide 19: Balance of Year Outlook
Balance of Year Outlook • Expect COVID-19 to have a material impact on our second half net sales & profitability • Balance of year outlook − Assuming continued, gradual recovery in marketplace − Lower store traffic; demand shift online − Profitable second half − Positive cash flow − Strong liquidity
Slide 20: Thank you!
Thank you!
Slide 21: Appendix
as O Cc 0) OQ. ©. <
Slide 22: First Half Results (GAAP Basis)
First Half Results (GAAP Basis) $ in millions, except EPS H1 % of H1 % of Increase / 2020 Sales 2019 Sales (Decrease) Net sales $1,169 $1,475 (21%) Gross profit 464 39.7% 639 43.3% (27%) Royalty income 11 0.9% 18 1.2% (40%) SG&A 488 41.7% 532 36.0% (8%) Goodwill impairment 18 1.5% - - N/M Intangible
Slide 23: First Half Adjusted Results
First Half Adjusted Results1 $ in millions, except EPS H1 % of H1 % of Increase / 2020 Sales 2019 Sales (Decrease) Net sales $1,169 $1,475 (21%) Adjusted gross profit 464 39.7% 637 43.2% (27%) Royalty income 11 0.9% 18 1.2% (40%) Adjusted SG&A 460 39.3% 531 36.0% (13%) Adjusted operating income 15 1
Slide 24: First Half Adjusted Business Segment Performance
First Half Adjusted Business Segment Performance1 $ in millions Adjusted Adjusted Operating Operating Net Sales Income (Loss) Margin $ $ 2020 2019 Change 2020 2019 Change 2020 2019 U.S. Retail (a) $637 $800 ($163) $20 $74 ($54) 3.1% 9.3% U.S. Wholesale 404 504 (101) 40 91 (51) 10.0% 18.0% Internatio
Slide 25: Second Quarter Reconciliation of Net Income Allocable to Common Shareholders
Second Quarter Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter Ended June 27, 2020 June 29, 2019 Weighted-average number of common and common equivalent shares outstanding: Basic number of common shares outstanding 43,162,571 44,706,307 Dilutive effect of equity awards 1
Slide 26: First Half Reconciliation of Net (Loss) Income Allocable to Common Shareholders
First Half Reconciliation of Net (Loss) Income Allocable to Common Shareholders Two Fiscal Quarters Ended June 27, 2020 June 29, 2019 Weighted-average number of common and common equivalent shares outstanding: Basic number of common shares outstanding 43,259,103 44,888,552 Dilutive effect of equity
Slide 27: Reconciliation of Reported to Adjusted Earnings
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 t ot al Second Quarter
Slide 28: Reconciliation of Reported to Adjusted Earnings (Continued)
Reconciliation of Reported to Adjusted Earnings (Continued) (a) In addition to the results provided in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements that present gross margin, SG&A, operating income (loss), income tax (benefit), net
Slide 29: Reconciliation of Net Income (Loss) to Adjusted EBITDA
Reconciliation of Net Income (Loss) to Adjusted EBITDA $ in millions Four Fiscal Quarters Fiscal Quarter Ended Two Fiscal Quarters Ended Ended June 27, June 29, June 27, June 29, 2020 2019 2020 2019 June 27, 2020 Net income (loss) $ 8.2 $ 43.9 $ (70.5) $ 78.4 $ 114.9 Interest expense 15.3 9.1 24.2 1
Slide 30: 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 June 27, Currency June 27, June 29, Net Sales Net Sales 2020 Translation 2020 2019 % Change % Change Consolidated net s
Slide 31: Net Debt Reconciliation
Net Debt Reconciliation $ in millions Fiscal Quarter Ended June 27, 2020 June 29, 2019 Long-term debt, net $ 1,232.6 $ 604.4 Cash and cash equivalents (1,000.6) (118.5) Net debt $ 232.1 $ 485.9 31
Slide 32: Store Count Data
Store Count Data Total Total U.S. Retail Canada Mexico International Consolidated Store count at June 29, 2019 834 189 42 231 1,065 Openings 37 12 4 16 53 Closings (11) (5) (3) (8) (19) Store count at June 27, 2020 860 196 43 239 1,099 32
Slide 33: Forward-looking Statements and Other Information
Forward-looking Statements and Other Information This presentation contains forward-looking statements within the meaning of the federal securities laws relating to our future performance, including statements with respect to the potential effects of the COVID-19 pandemic and the Company’s liquidity