Carter’s(US:CRI)2021-02-27 21:34Financial Data and Key Metrics Changes - The company reported net sales of $990 million for Q4 2020, a decrease of 10% from the prior year, with a 53rd week contributing approximately $32 million in additional sales [26][31] - Reported operating income for Q4 was $134 million, down 18%, and reported EPS was $2.26, down 20% compared to $2.82 a year ago [26][27] - For the full year, net sales were just over $3 billion, a decline of 14%, with reported operating income down nearly 50% to $190 million and reported EPS down 57% to $2.50 [27][28] Business Segment Data and Key Metrics Changes - The Retail segment was the largest contributor to Q4 sales and profitability, with total segment sales declining 6% compared to last year, while comparable sales declined 9% [12][43] - ECommerce sales grew significantly, with comparable sales up 16% in the U.S. and 47% in Canada [29] - The Wholesale segment saw net sales of $290 million, down from $349 million a year ago, with online demand through wholesale customers growing 36% [49] Market Data and Key Metrics Changes - International sales contributed over 11% of Q4 sales, with eCommerce sales in Canada and Mexico growing over 60% [17][56] - The company experienced significant disruptions in Canadian and Mexican stores due to pandemic-related closures, impacting overall international sales [56] Company Strategy and Development Direction - The company plans to close about 25% of its 2019 store portfolio upon lease expiration, focusing on higher-margin stores in densely populated areas [14] - ECommerce continues to be the fastest-growing segment, with penetration growing to 45% of retail sales, and the company expects omni-channel sales to grow to nearly 40% of online orders by 2025 [15][19] - The company aims for mid-single-digit growth in net sales and low double-digit growth in operating income over the next several years, with a focus on eCommerce and international expansion [58][59] Management's Comments on Operating Environment and Future Outlook - Management noted that while there may be fewer births in the near term due to the pandemic, they have not seen a significant impact on baby product performance [66] - The company expects good growth in both sales and earnings in 2021, with consolidated net sales projected to grow about 5% [61] - Management is cautious about supply chain disruptions and rising transportation costs, which may impact sales and profitability [63] Other Important Information - The company reported a record gross profit margin in Q4, increasing by 460 basis points to 47.1% [33] - Operating cash flow in 2020 increased by about $200 million to $590 million, reflecting strong working capital management [38] Q&A Session Summary Question: Impact of declining birth rates on business - Management acknowledged a potential exposure of $70 million to $100 million in revenue due to fewer births but noted no significant change in baby product performance to date [66][67] Question: Clarification on Q1 revenue guidance - Management indicated that Q1 revenue expectations were modest due to product delays, with slight growth anticipated in wholesale and U.S. retail, while eCommerce is expected to grow [68] Question: Sales transfer from closed stores - Management expects a transfer rate of 20% to 25% of sales from closed stores to other channels, including online and nearby stores [70] Question: Gross margin and SG&A expectations for Q1 - Management anticipates gross margin expansion in Q1, with SG&A expected to increase slightly but not at the same level as Q4 [77]