Carter's Delivered A Q2 Beat, But Will Face Back-Half Headwinds, DA Davidson Says
Carter's, Inc. (NYSE: CRI) beat second-quarter EPS expectations by 14 cents but lowered its third-quarter guidance due to the likely reversal of a shift in timing of SG&A expenses and wholesale order upside, according to DA Davidson.
The Analyst
DA Davidson’s John Morris maintained a Neutral rating on Carter's with a price target of $91.
The Thesis
Carter’s EPS beat was driven by strong retail and wholesale revenues and lower SG&A, Morris said in the note. Management noted, however, that around $4 million-$5 million of SG&A cost savings were pushed from the second quarter into the back-half of the year.
The analyst added that some of the second-quarter wholesale revenue upside also seems to have been pulled forward from third quarter, given that management expects wholesale revenue growth to decline by low-single digits.
Although gross margins were in-line with expectations, this represented a 50bp contraction on a year-on-year basis, Morris said. Management cited slightly higher promotions as the reason for the contraction.
Morris added that gross margins were also impacted by a mix shift in the wholesale channel and higher shipping costs.
The company lowered its third-quarter EPS guidance from $1.87 to $1.67 and left its full-year forecast unchanged, which calls for 4%-6% EPS growth.
Price Action
Shares of Carter’s were down 2.55% at $96.45 at time of publishing.
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Latest Ratings for CRI
Apr 2019 | Initiates Coverage On | Neutral | ||
Apr 2019 | Initiates Coverage On | Hold | ||
Mar 2019 | Assumes | Buy |
View More Analyst Ratings for CRI
View the Latest Analyst Ratings
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