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Key Takeaways From Carter's 1st-Quarter Results

Carter's Inc. (NYSE:CRI) released its first-quarter results on May 5 before the opening bell.

Overview of the quarter

The maker of children's apparel and accessories registered an adjusted loss of $0.81 per diluted share. Wall Street had anticipated earnings of 30 cents per share. Revenue of $654 million was down 12% on a year-over-year basis as the Covid-19 pandemic led to store closures in North America. In addition, weak wholesale demand dented sales.

Reflecting on the company's performance, Chairman and CEO Michael D. Casey said:

"The global pandemic has meaningfully disrupted the lives of families with young children. It began to impact our Company's performance in March and will weigh on the growth we had planned this year.

Through early March, our sales and earnings were in line with our growth objectives, and 2020 was forecasted to be another good year for Carter's. In the second week of March, our sales began to decline as consumers reacted to the various media reports which heightened the awareness of significant risks related to COVID-19, and related precautions needed. In the days that followed, for the safety of consumers and employees, our store operations and related sales were suspended."

The company said it is operating through the ecommerce platform to meet customer demand. "Carter's has remained open for business, and continues to support the demand for our brands through our extensive ecommerce capabilities, both direct-to-consumer, and through the major retailers," Casey said.

Performance of business divisions

In the U.S. Retail segment, sales dropped roughly 15% to $320.7 million. The company attributed the decline to store closures on account of Covid-19, which was only partly offset by a rise in ecommerce sales. In the reported quarter, the company opened as many as three stores in the U.S. and shut down five stores.

The U.S. wholesale segment saw sales decline 8.4% to $252.1 million. The quarter witnessed shutdowns of wholesale customers' stores.

On the global front, sales fell 7.9% to $81.6 million. The reduction in sales was primarily driven by a fall in retail store sales in Canada. At quarter-end, the company runs 198 retail stores in Canada and 43 retail stores in Mexico in its international segment.

Liquidity and financial standing

The company claims to have adequate liquidity to meet its near term obligations and operational needs amid the disruption arising from the novel coronavirus. The company is confident that it will be able to navigate through the foreseeable future until the prevailing circumstances improve.

To strengthen its financial position, the company has temporarily halted its stock buyback program. Moreover, the Board of Directors suspended the cash dividend on May 1, 2020.


The company did not provide 2020 guidance, citing the global uncertainty caused by the pandemic.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.