Carter’s, Inc. CRI has been reeling under sluggish sales performance stemming from continued uncertainties related to the COVID-19 pandemic. Sales not only lagged the Zacks Consensus Estimate but also declined year over year in third-quarter 2020 due to muted demand during the back-to-school season. Also, lower wholesale sales and soft store traffic weighed on its top line. Further, sales at the U.S. Retail, U.S. Wholesale and International segments declined year over year in the third quarter.
Apart from these, it witnessed a spike in freight charges imposed by inbound and outbound carriers due to rising online orders and limited capacity during the aforementioned quarter. Going ahead, management expects increased freight charges to weigh on its fourth-quarter earnings to the tune of roughly $2 million.
Notably, shares of this company have declined 13% year to date against the industry and Consumer Discretionary sector’s growth of 28.9% and 8.4%, respectively.
Efforts to Overcome Hurdle
Despite a sluggish sales performance, the e-commerce business has been performing well. Consequently, Carter’s is seeking opportunities to strengthen e-commerce capabilities through investments to speed up deliveries. Notably, its stores are now fulfilling 24% of online orders. Moreover, its revamped website with improved products, convenient shopping options and enhanced checkout experience is aiding online sales. In the third quarter, the company witnessed sturdy e-commerce demand in the wholesale channel to the tune of more than 40%, with its top wholesale customers recording triple-digit growth in online demand.
Moving on, the company is gaining from its same-day pickup service for online ordersand easy access to its new credit card program. Even as stores have now reopened, consumers shift to the online platform due to the ongoing pandemic is likely to persist. As a result, the company is now focusing on its ship-from-store facility. Apart from these, management is offering same-day pickup and curbside pickup facilities across 600 stores in the United States.
That said, online sales are expected to exceed $1 billion in 2020 with increasing demand for products online, particularly baby, sleepwear and playwear products.
Although drab store traffic is likely to persist, this Zacks Rank #3 (Hold) stock has been witnessing demand recovery, which along with a robust product portfolio, reduced spending and sturdy e-commerce growth are likely to help it get back on track. In fact, a VGM Score of B and a long-term earnings growth rate of 3.87% raise optimism for the stock.
3 Apparel Stocks to Watch
Crocs CROX has outperformed the Zacks Consensus Estimate by 191.7%, on average, in the trailing four quarters and flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Gildan Activewear, Inc. GIL has a long-term earnings growth rate of 5.4% and a Zacks Rank #1, at present.
Deckers Outdoor Corporation DECK has a long-term earnings growth rate of 18.6%. The company currently hasa Zacks Rank #2 (Buy).
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