Carter’s(CRI) - 2024 Q4 - Annual Report

Market Position and Sales - The baby and young children's apparel market in the U.S. is approximately $28 billion as of December 2024, with Carter's brands holding a 1 position and approximately 10% market share[23]. - Carter's brands maintained a leading market share of approximately 21% in the zero to two-year-old baby market and approximately 11% in the three to four-year-old toddler market as of December 2024[33]. - In fiscal 2024, approximately 36% of consolidated net sales were derived from the U.S. Wholesale segment, with the top ten wholesale customers accounting for about 35% of consolidated net sales[107]. - The two largest wholesale customers represented 10.9% and 10.1% of consolidated net sales in fiscal 2024[107]. - As of the end of fiscal 2024, around 83% of gross accounts receivable were from the ten largest wholesale customers, with three customers having individual receivable balances exceeding 10% of total accounts receivable[108]. - The company experienced a decrease in net sales in the eCommerce channel for both fiscal 2024 and fiscal 2023 compared to fiscal 2022[115]. - The U.S. Wholesale segment's two largest customers accounted for 10.9% and 10.1% of consolidated net sales in fiscal 2024[52]. Retail Operations - The company operates 1,057 company-owned retail stores in North America and approximately 19,500 wholesale locations in North America as of the end of fiscal 2024[24]. - In fiscal 2024, the company opened its first flagship store in Atlanta, Georgia, featuring brand-centric presentations and community engagement events[46]. - The company has optimized its retail store fleet and improved marketing effectiveness, including the relaunch of its loyalty program in fiscal 2024[216]. - The company operates 804 retail stores in the United States, 191 in Canada, and 62 in Mexico, with an average remaining lease term of approximately 3.4 years[188]. Supply Chain and Sourcing - Approximately 75% of products were sourced from Vietnam, Cambodia, Bangladesh, and India, while 60% of fabric was sourced from China in fiscal 2024[58]. - The company actively monitors import restrictions and seeks to minimize exposure to import-related risks through geographical diversification of supply sources[70]. - The company relies on foreign-based suppliers and manufacturers, making it vulnerable to global sourcing and manufacturing risks[89]. - Approximately 60% of the fabric used in product manufacturing is sourced from China, indicating a significant reliance on this region[131]. - The Uyghur Forced Labor Prevention Act, effective June 21, 2022, imposes a presumptive ban on imports from the Xinjiang Uyghur Autonomous Region, potentially affecting global supply chains[129]. - Labor disputes at third-party factories and shipping ports have previously resulted in significant backlogs and delays in product delivery[132]. Financial Performance and Risks - The company has significant debt, which could adversely affect its financial health and ability to obtain future financing[90]. - The company’s profitability may decline due to lower margins from deflationary pressures and increased production costs[89]. - The company is subject to increasing scrutiny regarding environmental, social, and governance (ESG) practices, which may lead to additional compliance costs[123]. - The company has set goals related to ESG topics but may face challenges in meeting these targets, potentially impacting its reputation and financial condition[124]. - The company is vulnerable to disruptions in its global supply chain due to political instability, natural disasters, and financial instability of major vendors[129]. - The company’s failure to comply with various laws and regulations could result in fines, penalties, and damage to its reputation, negatively affecting its business operations[151]. Marketing and Customer Engagement - The company plans to enhance its marketing capabilities, which contributed to sequential improvement in U.S. Retail comparable sales and growth in new and reactivated customers in the second half of fiscal 2024[32]. - The rebranded Carter's Rewards loyalty program aims to deepen customer loyalty and increase visit frequency, with U.S. retail sales predominantly made to members[56]. - A strategic investment of approximately$ 65 million was made to enhance direct-to-consumer offerings, including $55 million for pricing competitiveness and$ 10 million for brand marketing[217]. Employee and Operational Management - As of the end of fiscal 2024, the company had approximately 15,350 employees globally, with 79.3% located in the United States[74]. - The company has faced significant competition in hiring employees for its distribution facility, which may lead to additional employee-related costs[136]. - The company has increased wages to attract and retain employees at its Braselton, Georgia distribution facility, impacting operating results[136]. - The company relies on automated systems for eCommerce order processing, and any system failures could negatively impact sales and profitability[137]. Environmental and Social Governance - Over 50% of cotton was sourced through the Better Cotton Initiative, supporting the transition to sustainably grown cotton[66]. - The company has established targets to reduce risks associated with Scope 1 and 2 greenhouse gas emissions, validated by the Science-Based Target Initiative[66]. - The company has implemented various cybersecurity controls, including intrusion prevention and access controls, to mitigate risks from cybersecurity threats[179]. Strategic Initiatives and Future Outlook - The company intends to pursue improvements to its operating model to respond more rapidly to changing consumer preferences and improve productivity[30]. - Future growth is heavily dependent on successful branding and marketing efforts, which, if unsuccessful, could diminish brand value and sales[102]. - The company’s international expansion plans may not be successful, as it lacks significant experience operating outside North America, which could adversely affect its results[149]. - The company may be unable to grow through acquisitions if it cannot identify suitable candidates or secure favorable terms, which could adversely impact its financial condition[159].