Carter’s(US:CRI)2023-10-27 23:40Financial Data and Key Metrics Changes - The company achieved net sales of $792 million in Q3 2023, slightly above the high end of guidance, reflecting higher-than-planned demand in the U.S. Wholesale business [46] - Adjusted operating income grew 5% to $96 million, with an adjusted operating margin improving by 100 basis points to 12.2% [19][48] - Year-to-date net sales were down 9%, with adjusted operating income and adjusted EPS down 29% and 26% respectively, reflecting macroeconomic factors impacting consumer demand [20] Business Line Data and Key Metrics Changes - U.S. Retail sales declined 8% in Q3, with comparable sales down 10%, attributed to macroeconomic factors and unseasonably warm weather [51] - U.S. Wholesale sales grew 4%, driven by higher-than-planned demand for seasonal products, with an operating margin of 22%, significantly up from 13.9% a year ago [52][73] - International net sales declined 4%, primarily due to lower demand in Canada, but are expected to improve with colder weather [53][41] Market Data and Key Metrics Changes - E-commerce sales in the U.S. were down about 19%, while retail store sales were down about 5%, indicating a stronger performance in physical stores [32] - The company expects international sales to contribute about 15% of total sales, with growth anticipated in Mexico and Brazil, offsetting lower sales in Canada [41][42] Company Strategy and Development Direction - The company plans to open nearly 50 new stores in the U.S. this year, contributing over $250 million in sales growth, focusing on open-air centers for consumer convenience [12][33] - Investments in marketing personalization, mobile app enhancements, and loyalty programs are aimed at increasing transaction frequency and customer lifetime value [13] - The company is focused on maintaining competitive pricing, with a strategy to keep prices within $1 or $2 of private label brands to remain attractive to consumers [65][38] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer spending has been cautious due to inflation, with families prioritizing essential purchases [11][43] - The company anticipates improved sales and earnings trends in Q4, driven by colder weather and better on-time delivery performance [16][58] - The outlook for Q4 includes net sales projected between $862 million to $877 million, with adjusted operating income expected in the range of $133 million to $143 million [59] Other Important Information - The company reported total liquidity of $945 million, with cash on hand of approximately $170 million and a significant reduction in debt [22][24] - The introduction of new brands like Little Planet and Purely Soft is expected to drive growth, with a focus on sustainable materials [10][77] Q&A Session Summary Question: What is the expectation for retail sales in Q4 given the warm weather? - Management indicated a strong correlation between weather and retail sales, expecting a high single to low double-digit negative comp in retail sales for Q4, with sluggishness noted in September [64] Question: How is pricing strategy being managed in the current environment? - The company has raised prices in response to increased costs but remains competitive with private label brands, focusing on margin preservation and cash flow [65][86] Question: What are the expectations for product costs moving forward? - Management expects lower product costs in the first half of next year due to improved global capacity and lower cotton prices, which will allow for margin expansion [90][116]