Carter's (CRI) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales declined 4.2% year-over-year to $758.5 million, with operating income at $77 million and adjusted EPS at $1.64, driven by strong U.S. retail performance and effective pricing and marketing strategies despite macroeconomic headwinds.

• U.S. Retail sales outperformed internal plans but fell 5.8% year-over-year, while U.S. Wholesale was flat and International sales dropped 8.6–9%.

• Investments in lower prices and brand marketing improved conversion rates, transactions, and new customer acquisition, with $60 million allocated in H2 2024.

• Omnichannel sales rose 12%, with 38% of digital orders fulfilled by stores, enhancing margins and reducing shipping needs.

• Returned $138 million to shareholders via dividends and share repurchases in the first three quarters of 2024.

Financial highlights

• Q3 2024 net sales were $758.5 million (down 4.2% year-over-year); operating income was $77 million (down 17.5%), and adjusted EPS was $1.64 (down 10.9–11%).

• Gross margin declined 60 bps to 46.9%, impacted by price investments, higher wholesale mix, and increased freight costs.

• Q3 adjusted EBITDA was $91 million (down 19%); year-to-date adjusted EBITDA was $214 million (down 11%).

• Inventories at quarter-end were $607.4 million (down 2.1% year-over-year); cash at quarter-end was $175.5–$176 million.

• Net cash from operations for the first three quarters was $11.3 million, down from $205.8 million a year ago.

Outlook and guidance

• Fiscal 2024 net sales expected between $2.785–$2.825 billion; adjusted operating income $240–$260 million; adjusted EPS guidance raised to $4.70–$5.15.

• Q4 2024 guidance: net sales $800–$840 million, adjusted operating income $70–$90 million, adjusted EPS $1.32–$1.72.

• Full-year operating cash flow expected to exceed $200 million; more than 100% of projected 2024 free cash flow to be returned to shareholders.

• Guidance assumes continued macroeconomic pressure, increased SG&A, lower interest expense, and lower share count.

• Management expects continued macroeconomic headwinds, including inflation, higher interest rates, and consumer debt, to impact demand for the remainder of 2024.