Slide 1: Fourth Quarter 2016 Business Update
Fourth Quarter 2016 Business Update FEBRUARY 23, 2017
Slide 2: Fourth Quarter / Fiscal 2016 Highlights
Fourth Quarter / Fiscal 2016 Highlights $ in millions, except EPS Q4 Full Year Net Sales Adjusted EPS* Net Sales Adjusted EPS* +6% +11% +8% +28% $3,199 $934 $1.79 $3,014 $5.14 $867 $4.61 $1.40 15.2% of Net Sales 2015 2016 2015 2016 2015 2016 2015 2016 Q4 Highlights* Fiscal 2016 Highlights* • Net sal
Slide 3: Fourth Quarter 2016 Net Sales
Fourth Quarter 2016 Net Sales $ in millions Carter’s +7% OshKosh +8% Int’l +13% +8% $16.3 ($5.6) $12.2 $934.2 $41.7 $3.1 $866.5 Stores $8.8 Stores eCommerce $8.8 3.2 eCommerce 7.5 Wholesale 0.2 Stores $22.0 eCommerce 19.6 Canada Retail1 Retail Retail1 Comp Comp1,2 Comp +5.8% +10.9% +5.4% Total U.S.
Slide 4: Fourth Quarter 2016 Adjusted Results
Fourth Quarter 2016 Adjusted Results* $ in millions, except EPS Q4 % of Q4 % of Increase / 2016 Sales 2015 Sales (Decrease) Net sales $934.2 $866.5 8% Gross profit 410.5 43.9% 363.5 42.0% 13% Adjusted SG&A* 280.1 30.0% 257.8 29.7% 9% Royalty income (11.5) (1.2%) (11.4) (1.3%) 1% Adjusted operating i
Slide 5: Fourth Quarter 2016 Adjusted SG&A
Fourth Quarter 2016 Adjusted SG&A* $ in millions +9% $3.3 $2.7 $0.1 $280.1 $16.2 $257.8 30.0% of 29.7% Net Sales of Net Sales Q4 2015 Retail Marketing Distribution & Freight Other, net Q4 2016 71 net new stores Investments Higher sales (54 U.S., 17 to support volume Canada) and growth eComm growth *
Slide 6: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow $ in millions 2016 2015 • Inventory +4% vs. LY principally due to Cash $299 $381 business growth Accounts Receivable 202 208 • Record free cash flow – $281 million Balance Sheet (at Q4 end) Inventory 488 470 - Increase reflects higher net income, favorable changes in net
Slide 7: Business Segment Performance
Business Segment Performance 7
Slide 8: Fourth Quarter Adjusted Business Segment Performance
Fourth 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 Retail (a) $ 393 $ 352 $ 42 $ 74 $ 64 $ 10 18.9% 18.3% Carter's Wholesale (b) 286 283 3 62 60 2 21.8% 21
Slide 9: Fourth Quarter Highlights – Carter's Wholesale
Fourth Quarter Highlights – Carter’s Wholesale $ in millions Segment Net Sales & Operating Income $283 $286 Sales +1% Segment Segment Margin Margin 21.2% $60 $62 21.8% Q4 2015 Q4 2016 Operating Income Net Sales • Sales growth reflects higher shipments of fall product and the benefit of in-sourcing c
Slide 10: Fourth Quarter Highlights – Carter's Retail
Fourth Quarter Highlights – Carter’s Retail $ in millions Total Strong Retail comp: +5.4% (+5.7% comp Q4 2015) Segment Net Sales • Sales $393 +12% Stores $352 $105 • Net sales +8% $85 Retail • Store Comp: +0.1% Comp - Reflects increased demand from domestic consumers, +5.4% offset by lower demand fr
Slide 11: U.S. Retail – International Consumer Demand
U.S. Retail – International Consumer Demand Q4 2016 international comp lower than Q3 2016, but significant improvement over 1H 2016 Q4 U.S. Retail Comparable Sales International Consumer Comparable Sales vs. LY 27.8% Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 22.7% 1.2% 8.7% 5.5% (1.5%) 1.0% (0.1%) Domestic Int’
Slide 12: Carter's Direct Marketing
Carter’s Direct Marketing 12
Slide 13: Carter's Direct Marketing
Carter’s Direct Marketing 13
Slide 14: Fourth Quarter Highlights – OshKosh Retail
Fourth Quarter Highlights – OshKosh Retail $ in millions Total • Strong Retail comp: +5.8% (+4.0% comp Q4 2015) Segment Net Sales Sales $135 +14% Stores $118 • Net sales: +10% $35 Retail • Comp sales declined (0.6%) $28 Comp - Reflects lower demand from international +5.8% consumers, offset in part
Slide 15: OshKosh Direct Marketing
OshKosh Direct Marketing carter’s | OSHKOSH PRETTY PINT-SIZED Style in a snap! Baby's first denim plus bubble shorts. A 5 PEPLUM ToPS° SALE $12 o-5t, MSRP* $20 BUBBLE SHORTS? SALE $13.20-14.40 0-st MSRP* $22-24 _ - - — EYELET-SLEEVE TEES® SALE $12 0-5t, MSRP $20 EYELET TOPS SALE $14.40-15.60 0-st, M
Slide 16: OshKosh Direct Marketing
OshKosh Direct Marketing carter’s | OSHKQsH LITTLE-MAN LOOKS Crisp button-fronts Just like Dad's! \ ¥ \ Tiny as suspenders are never too much. OXFORD SHIRTS® SALE $15.60~16.80 o-st, MSAP* $26-28 GRAPHIC TEES & BODYSUITS? SALE $12.0-st, MSRP* $20 BUTTON- FRONTS¢ SALE $13.20-14,40 o-st,wsnP* 522-24 SU
Slide 17: U.S. Retail Store Portfolio
U.S. Retail Store Portfolio 2011 2016* 2021 (Projected) Dual- The brand Composition 20% Dual- of Our Store brand Single-brand Portfolio 42% 100% Continues to Single-brand Single-brand Shift 58% 80% Enhance Customer Technology Investments To Store Model Experience Improve Productivity • Co-branded fo
Slide 18: Co-branded Store – Louisville, KY
Co-branded Store – Louisville, KY (opened July 2016) 18
Slide 19: Side-by-Side store – La Habra, CA
Side-by-Side store – La Habra, CA (opened October 2016) 19
Slide 20: Fourth Quarter Highlights – International
Fourth Quarter Highlights – International $ in millions Segment Net Sales Net Sales $109 Total • Solid International segment growth Sales $97 $13 - Reported and constant currency net sales: +13% +13% $9 - Canada Retail comp: +10.9% (+14.6% comp Q4 2015) $34 • Canada Stores $34 - Net sales +16% - Sto
Slide 21: New Store Opening – Brandon, Canada
New Store Opening – Brandon, Canada (opened December 2016) 21
Slide 22: China Q4 Store Opening – Beijing
China Q4 Store Opening – Beijing Beijing 1,500 sq. ft. Opened December 2016 22
Slide 23: Full Year Performance
Full Year Performance
Slide 24: 2016 Highlights
2016 Highlights Financial Results • 28th consecutive year of sales growth: +6% vs. LY • Continued adjusted operating margin expansion: +20 bps to 13.5% • Achieved record adjusted operating income $431 million • Record adjusted EPS $5.14, +11% • Record operating and free cash flow • Returned $367 mil
Slide 25: Fiscal 2016 Adjusted Results
Fiscal 2016 Adjusted Results* $ in millions, except EPS Fiscal % of Fiscal % of Increase / 2016 Sales 2015 Sales (Decrease) Net sales $3,199.2 $3,013.9 6% Gross profit 1,379.1 43.1% 1,258.0 41.7% 10% Adjusted SG&A* 990.6 31.0% 901.1 29.9% 10% Royalty income (42.8) (1.3%) (44.1) (1.5%) (3%) Adjusted
Slide 26: Fiscal 2016 Net Sales
Fiscal 2016 Net Sales $ in millions Carter’s +5% OshKosh +5% Int’l +12% +6% $102.9 $20.7 $39.2 ($15.9) $38.5 $3,199.2 $3,013.9 Stores $20.4 Stores $24.6 Stores $52.3 eCommerce 18.7 eCommerce 11.4 eCommerce 50.6 Wholesale 2.5 Retail1 Canada Retail1 Comp Retail Comp +3.3% Comp1,2 +3.1% +8.4% Total U.S
Slide 27: Fiscal 2016 Adjusted Business Segment Performance
Fiscal 2016 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 Retail (a) $ 1,254 $ 1,151 $ 103 $ 202 $ 199 $ 3 16.1% 17.3% Carter's Wholesale (b) 1,128 1,108 21 250 232
Slide 28: Acquisition of Skip Hop
‘| OSHKOSH carter's | HKD Acquisition of Skip Hop 28
Slide 29: Skip Hop Acquisition - Highlights
Skip Hop Acquisition - Highlights • Global lifestyle brand for families with young children. Founded in 2003. • Offers key essentials that are re-imagined and differentiated from a design and function perspective Company • Product categories include: diaper bags, backpacks, travel accessories, home
Slide 30: Changes to Reported Business Segments
Changes to Reported Business Segments Former Segments New Segments • Carter’s Retail (stores/eCommerce) • U.S. Retail Segment • Carter’s Wholesale Reporting • OshKosh Retail • U.S. Wholesale Changes (stores/eCommerce) • International • OshKosh Wholesale • International • New reporting begins in Q1 2
Slide 31: 2017 Outlook
2017 Outlook • Net sales down low-single digits to Q1 2016 - Forecasting growth in U.S. Retail and declines in U.S. and International Wholesale businesses Q1 2017 • Adjusted EPS approximately $0.80 to $0.85 (vs. $1.05 LY) - Reflects lower net sales and increased investments in the Company’s growth a
Slide 32: thank you.
thank you. 32
Slide 33: appendix
appendix
Slide 34: Fourth Quarter Reconciliation of Net Income Allocable to Common Shareholders
Fourth Quarter Reconciliation of Net Income Allocable to Common Shareholders Fiscal Quarter End December January 2, 31, 2016 2016 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 48,824,395 51,460,090 Dilutiv e effect of equity a
Slide 35: Fourth Quarter Reconciliation of Reported to Adjusted Earnings
Fourth Quarter Reconciliation of Reported to Adjusted Earnings $ in millions, except EPS Segment Reporting Corporate % of Gross % of % of Operating % of Net Diluted Operating total Fourth Quarter of Fiscal 2016 Margin sales SG&A sales Income sales Income EPS Expenses net sales As reported (GAAP) $41
Slide 36: Fiscal 2016 Reconciliation of Net Income Allocable to Common Shareholders
Fiscal 2016 Reconciliation of Net Income Allocable to Common Shareholders Fiscal Year Ended December 31, January 2, 2016 2016 Weighted-av erage number of common and common equiv alent shares outstanding: Basic number of common shares outstanding 49,917,858 51,835,053 Dilutiv e effect of equity aw ar
Slide 37: Fiscal 2016 Reconciliation of Reported to Adjusted Earnings
Fiscal 2016 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 Fiscal 2016 Margin sales SG&A sales Income sales Income EPS Income net sales Expenses
Slide 38: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA $ in millions Fiscal Year Fiscal Quarter Ended Ended December 31, January 2, December 31, 2016 2016 2016 Net income $ 87.1 $ 72.6 $ 258.1 Interest expense 6.7 6.5 27.0 Interest income (0.1) (0.1) (0.6) Tax expense 45.3 38.5 138.0 Depreciation and amort
Slide 39: Store Count Data
Store Count Data Single-brand Dual-brand U.S. Canada U.S. Carter's U.S. OshKosh U.S. Side-by- Co-branded Co-branded Total Retail Stand-alone Stand-alone Side Format Format Format Stores Store count at January 3, 2015 480 149 51 — 124 804 Openings 34 3 31 — 23 91 Closings (4) (6) — — — (10) Conversio
Slide 40: 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 23, 2017 which is available at www.carters.com