Here's What Makes Carter's (CRI) Poised for Growth in 2024
Carter's, Inc. CRI has been doing well, thanks to its robust business strategies. The company is benefiting from the success of its pricing strategy, inventory management efforts and improved product offerings. Management is focused on creating a trend-right merchandise assortment, deepening relations with customers via marketing, expanding international markets and efficiently controlling expenses.
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for 2024 sales and earnings per share (EPS) is currently pegged at $3 billion and $6.41, respectively. These estimates show corresponding growth of 2.6% and 7.4% year over year.
Buoyed by such strengths, shares of this apparel and related products dealer have gained 7.5% against the industry’s 2% drop over the past three months. A Value Score of B further adds strength to this current Zacks Rank #2 (Buy) company.
Delving Deeper
Carter's has made significant efforts in pricing to address market conditions and enhance profitability. In third-quarter 2023, the company saw improved price realization and profit margins primarily due to the strength of its product offerings and lower ocean freight rates, along with better inventory management. This approach not only improved its cash flow but also supported its overall financial performance.
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The company has been focused on essential core products, especially in the inflationary markets. This focus, coupled with a compelling value proposition, wherein average retail price points are around $11, makes Carter's an attractive option for budget-conscious consumers. The company’s pricing strategy involves keeping its brands competitively priced, usually within $1 or $2 of private label brands, which has proven effective in maintaining competitiveness in the market.
Although Carter’s has been witnessing the impacts of inflation and consequently reduced consumer spending, the demand trends in the wholesale segment have been showing improvement. Its wholesale segment has been gaining from leaner inventories with wholesale customers since the start of 2023. As a result, CRI experienced higher-than-planned demand in its wholesale business for the fourth consecutive quarter in the third quarter of 2023. The U.S. wholesale segment’s sales increased 4.1% year over year in the third quarter.
Additionally, Carter’s is seeing a notable expansion in the margin rates, driven in part by lower ocean freight rates, which were the significant contributor to the 228 basis points gross margin expansion in the third quarter. Additionally, lower inventory levels in the third quarter aided the gross margin. This narrates the company’s focus on efficient cost management and operational improvements. Looking ahead, Carter's anticipates lower product costs, which are expected to strengthen its product offerings and sharpen price points, thereby improving profitability.
To wrap up, Carter’s seems to be a lucrative investment bet given all the aforementioned positives.
Eye These Solid Picks Too
Some other top-ranked companies are Royal Caribbean RCL, lululemon athletica LULU and Ralph Lauren RL.
Royal Caribbean sports a Zacks Rank #1 (Strong Buy), at present. RCL has a trailing four-quarter earnings surprise of 28.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates increases of 13.7% and 38.1%, respectively, from the year-ago period’s reported levels.
lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank of 2, at present.
The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS suggests growth of 18.4% and 23.7%, respectively, from the year-ago corresponding figures. LULU has a trailing four-quarter earnings surprise of 9.2%, on average.
Ralph Lauren, a footwear and accessories dealer, has a Zacks Rank of 2 at present. RL has a trailing four-quarter earnings surprise of 18%, on average.
The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales and EPS suggests growth of 1.4% and 13.1%, respectively, from the year-ago corresponding figures.
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Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
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Carter's, Inc. (CRI) : Free Stock Analysis Report
