Carter's Inc (CRI) Reports Mixed Fiscal Year 2023 Results Amid Macroeconomic Challenges
Net Sales: Q4 net sales decreased by 5.9% to $858 million; FY 2023 net sales down 8.3% to $2.9 billion.
Operating Margin: Improved to 15.9% in Q4 from 12.0% in Q4 2022; FY operating margin slightly down to 11.0%.
Diluted EPS: Q4 adjusted diluted EPS up to $2.76 from $2.29; FY adjusted diluted EPS decreased to $6.19 from $6.90.
Operating Cash Flow: Significant increase to $529 million in FY 2023.
Capital Return: $212 million returned to shareholders through repurchases and dividends in FY 2023.
Dividend: Board declares a 7% increase in quarterly dividend to $0.80 per share.
FY 2024 Outlook: Anticipates low single-digit growth in net sales and mid single-digit growth in adjusted operating income and EPS.
On February 27, 2024, Carter's Inc (NYSE:CRI), a leading retailer of children's apparel, released its 8-K filing, detailing the financial performance for the fourth quarter and fiscal year 2023. The company, known for its Carter's and OshKosh B'gosh brands, operates through a multi-channel business model, including retail stores, eCommerce, and wholesale channels, primarily in the U.S. Despite a challenging macroeconomic environment, Carter's Inc managed to improve its operating margin in Q4, although net sales and adjusted diluted EPS for the fiscal year reflected the impact of inflation and other market pressures.
Financial Performance and Challenges
Carter's Inc reported a decrease in net sales for both the fourth quarter and the fiscal year, attributing the decline to inflation, higher interest rates, and unseasonably warm weather affecting demand for fall and holiday products. Despite these challenges, the company improved its operating margin in the fourth quarter to 15.9%, up from 12.0% in the same period last year, thanks to favorable ocean freight rates, lower inventory provisions, and decreased distribution and freight costs.
For the fiscal year, the operating margin slightly decreased to 11.0% from 11.8% in the previous year. Adjusted diluted EPS for the fiscal year was $6.19, down from $6.90 in 2022. The company's focus on product innovation, inventory management, pricing discipline, and cash flow contributed to over 20% growth in earnings per share in the fourth quarter and over $500 million of operating cash flow for the year.
Strategic Adjustments and Outlook
Chairman and CEO Michael D. Casey highlighted the company's strategic adjustments, including higher margin sales driven by product offerings, store closures, leaner inventories, and improved price realization. These initiatives are expected to drive growth in sales and earnings in 2024. Carter's Inc enters the new year with a better mix and level of inventories, having reduced inventories by nearly 30% last year.
"We believe Carters is best in class in young childrens apparel. As demonstrated in recent years, Carters has multiple levers that have enabled us to manage through historic periods of market volatility, and we believe we are well positioned to benefit from the market recovery in the years ahead," said Michael D. Casey.
The company's fiscal year 2024 outlook anticipates low single-digit growth in net sales to approximately $3.0 billion, with mid single-digit growth in adjusted operating income and adjusted diluted EPS. The Board of Directors has declared a 7% increase in the quarterly dividend to $0.80 per share, reflecting confidence in the company's financial position and commitment to shareholder returns.
Investor Considerations
Value investors may find Carter's Inc's strong operating cash flow and commitment to returning capital to shareholders through dividends and share repurchases appealing. The company's resilience in the face of macroeconomic headwinds and strategic adjustments to maintain profitability provide a positive outlook for potential recovery and growth in the coming fiscal year.
For a detailed analysis of Carter's Inc's financial performance and future outlook, investors can access the full 8-K filing.
Explore the complete 8-K earnings release (here) from Carter's Inc for further details.
This article first appeared on GuruFocus.
