Carter’s(US:CRI)2020-07-24 17:57Financial Data and Key Metrics Changes - The company reported net sales of $515 million, down 30% from the previous year, with operating income at $21 million, down 68%, and adjusted EPS at $0.54 compared to $0.95 last year [24][27][30] - Gross margin improved by 170 basis points due to better pricing realization and progress in moving through excess inventory [25] - Total liquidity at the end of the quarter was $1.5 billion, including $1 billion in cash and approximately $500 million in available borrowing capacity [28][31] Business Line Data and Key Metrics Changes - U.S. retail segment sales declined 25% compared to last year, but e-commerce demand increased by 101% [33][34] - The wholesale segment saw a 34% decline in net sales, but e-commerce demand in wholesale was up over 100% [17][41] - International net sales were $47 million, down from $82 million last year, with significant growth in online sales [42] Market Data and Key Metrics Changes - Online demand from domestic consumers increased over 120%, while international online demand dropped 4% [12][19] - Sales in stores located in tourist areas were down over 20%, while non-tourist store locations comped up 15% [11] - The company expects international sales to be weighed down by the pandemic and a stronger dollar [20] Company Strategy and Development Direction - The company plans to close over 200 stores, or about 25% of its U.S. stores, by 2024, focusing on fewer, more profitable locations [15][16] - Investment in technology for e-commerce fulfillment is a priority, with plans to enhance omni-channel capabilities [13][44] - The company aims to leverage its strong relationships with major retailers to gain market share amid store closures [63][64] Management's Comments on Operating Environment and Future Outlook - Management noted that the pandemic has had a less severe impact on sales than initially expected, with a gradual improvement anticipated in the second half of the year [6][45] - The company expects profitability in the third and fourth quarters, albeit not at the same levels as last year, and is monitoring risks related to consumer traffic and economic conditions [45] - Management expressed confidence in the brand's resilience and ability to outperform the market during the pandemic [22][23] Other Important Information - The company has seen a significant increase in e-commerce sales, with expectations that online sales will exceed $1 billion this year [23] - The company has implemented curbside pickup, with nearly 50% of consumers opting for this service [14] - The company has successfully managed to reduce planned inventory commitments for certain wholesale customers due to anticipated changes in demand [18] Q&A Session Summary Question: How are sales with exclusive brands in Q2 compared to the rest of the wholesale channel? - Exclusive brand sales were higher in Q2 than last year, while the remainder of the account base was lower [47] Question: Have you seen a material drop off in store performance in states with recent virus surges? - Yes, there has been a drop off in states experiencing a surge in COVID-19 cases [48] Question: What are your expectations for the back half of the year regarding wholesale business? - Growth is expected with exclusive brands, but demand from non-exclusive wholesale customers is anticipated to be lower [50][51] Question: Can you provide insights on July's performance and e-commerce growth? - July sales are at about 90% of last year, with strong online demand and some store closures due to COVID-19 [53] Question: How do you view market share gains during the quarter? - The company believes it gained market share due to strong relationships with major retailers and the closure of smaller competitors [62][63]