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Carter's Kicks Off 2019 on a Strong Note

Steve Symington, The Motley Fool

Carter's (NYSE: CRI) released first-quarter 2019 results early Tuesday. The kids' clothing retailer detailed strong demand for its wares so far in the spring season and reaffirmed its full-year objectives.

With shares down around 1% today as the market absorbs the news, albeit with the stock still up big on the heels of its impressive fourth-quarter report in February, let's dig deeper into how Carter's kicked off the new year.

Blue and white shirts on a store hanger rack.

IMAGE SOURCE: GETTY IMAGES.

Carter's results: The raw numbers

Metric

Q1 2019

Q1 2018

Year-Over-Year Growth

Revenue

$741.1 million

$755.8 million

(1.9%)

GAAP net income

$34.5 million

$42.5 million

(18.8%)

GAAP earnings per diluted share

$0.75

$0.89

(15.7%)

Data source: Carter's.

What happened with Carter's this quarter?

  • On an adjusted (non-GAAP) basis, which excludes unusual items like restructuring costs, Carter's earnings were $39.3 million, or $0.87 per diluted share, down from $51.6 million, or $1.09 per share, in the same year-ago period.
  • These results compared favorably to Carter's guidance provided in February, which called for adjusted earnings per share of $0.65 to $0.70 on a 4% to 5% sales decline.
  • U.S. retail sales fell 1.7% year over year to $377.1 million as a 3.7% drop in comparable-store sales was partially offset by e-commerce growth.
  • U.S. wholesale sales declined 1.9% to $275.4 million, largely driven by the loss of sales from the bankruptcies of Toys R Us and Bon-Ton.
  • International sales fell 2.8% to $88.6 million, as currency headwinds and lower sales from Canada and China were only partially offset by higher demand in Mexico and other markets outside North America.
  • The company repurchased and retired 460,257 shares for $40 million during the quarter for an average price of $86.83 per share.

What management had to say

Carter's chairman and CEO Michael Casey stated:

We exceeded our sales and earnings objectives in the first quarter. As expected, demand for our brands improved meaningfully in the weeks leading up to Easter, which occurred three weeks later than last year. Given the current trends in our business and favorable response to our product offerings and marketing strategies, we are expecting good growth in sales and earnings this year and are reaffirming our growth objectives for 2019.

Looking forward

As a reminder, those objectives include full-fiscal-year 2019 net sales growth of 1% to 2% and adjusted earnings growth of 4% to 6% from $6.29 in 2018.

In the meantime, for the current second quarter of fiscal 2019, Carter's expects net sales to rise 4% to 6%, while adjusted earnings per share should remain roughly flat from the same year-ago period at $0.79.

All things considered, there were no big surprises in Carter's slightly better-than-expected start to the year. So with shares already up 30% year to date leading into this report, the stock is understandably little changed in response.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Carter's. The Motley Fool has a disclosure policy.