Carter’s(US:CRI)2023-02-24 17:16Financial Data and Key Metrics Changes - Net sales for Q4 2022 were $912 million, a decline of 14% year-over-year, primarily due to high inflation impacting consumer spending and aggressive inventory management by wholesale customers [41][41][41] - Adjusted operating income for Q4 was $119 million, maintaining an adjusted operating margin of 13%, comparable to the prior year [70][70][70] - Full year adjusted operating margin was 12.1%, down from 14.4% in the previous year, reflecting higher ocean freight rates and inventory provisions [124][124][124] Business Line Data and Key Metrics Changes - U.S. retail sales declined 13% in Q4, with comparable sales also down 13%, against a strong growth of 15% in the same quarter last year [31][126][126] - International sales decreased by 12% in Q4, with a decline of 8% on a constant currency basis, while sales in Mexico grew by 11% [127][127][127] - U.S. wholesale adjusted operating margin was 12.7%, down from 14.1% the previous year, impacted by higher product costs and ocean freight rates [71][71][71] Market Data and Key Metrics Changes - The company expects the largest decrease in sales from U.S. wholesale customers, with a planned decline of about 10% for the year [8][8][8] - International sales are expected to be slightly lower, particularly in the Middle East, Central America, and Europe, but growth is anticipated in Brazil and Argentina [115][115][115] - The company plans to open over 50 new co-branded stores in 2023, which are expected to support online transactions and enhance market presence [33][33][33] Company Strategy and Development Direction - The company aims to capture market opportunities as competitors downsize, focusing on opening new stores and enhancing e-commerce capabilities [10][10][10] - Investments will continue in e-commerce, store growth, and distribution capabilities, with a focus on improving marketing personalization [49][49][49] - The company plans for gross margin expansion driven by improved pricing and inventory management capabilities, alongside a favorable trend in product costs [38][38][38] Management's Comments on Operating Environment and Future Outlook - Management noted that inflation has significantly impacted consumer demand, with many families living paycheck to paycheck [6][6][6] - The company anticipates a return to more stable growth beginning in 2024, following a challenging 2023 [35][35][35] - Management expressed optimism about improved supply chain performance and on-time deliveries, which are expected to enhance customer experience [110][110][110] Other Important Information - The company generated over $300 million in operating cash flow in Q4, bringing the full year total to $88 million, which declined due to lower earnings and higher inventory [20][20][20] - The company returned $418 million to shareholders in 2022, including $118 million in dividends and $300 million in share repurchases [69][69][69] - The Little Planet brand saw sales double last year, with plans for expanded wholesale distribution [36][36][36] Q&A Session Summary Question: What is the outlook for the first quarter? - Management expects the first quarter to represent the largest decrease in sales and earnings compared to 2022, with performance expected to improve in subsequent quarters [26][26][26] Question: How is inventory management being handled? - The company has a good inventory position in wholesale, with less carryover and a better mix of inventory planned for the year [55][55][55] Question: What are the expectations for gross margin in the first quarter? - Management anticipates good gross margin expansion in the first quarter, with stronger performance expected in the second half of the year [62][62][62]