CRI - Earnings call transcript Q3 2017

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Operator

Good day, everyone, and welcome to Carter's third quarter 2017 earnings conference call.

On the call today are Michael Casey, Chairman and Chief Executive Officer; Richard Westenberger, Executive Vice President and Chief Financial Officer; Brian Lynch, President; and Sean McHugh, Vice President and Treasurer. After today's prepared remarks, we will take questions as time allows. Carter's issued its third quarter 2017 earnings press release earlier this morning. A copy of the release and presentation materials for today's call have been posted on the Investor Relations section of the company's website at www.carters.com.

future me and that materials in company's plans let this made about begin, statements. outlook, call forward-looking conference the and we remind statements you on the Before are performance company's presentation Actual results projected. from differ may materially those

on I financial factors forward-looking reference and various presentation a measurements the report call actual the A results contained please will company's non-GAAP recorded. filed materials. company Mr. company's would recent Exchange annual these to in refer the to the call with could to over For that now, posted financial this cause provided to Securities non-GAAP earnings from like Commission On financial measurements. GAAP to vary and today's call, reconciliation presentation and being materials Also, of those most the the discussion turn of statements, Casey. release the in website. the company's measurements is is And the

Michael Casey

everyone. you joining Thanks very Thank for the much. us call. morning, Good on

Before you. quarter. we some business in achieved third on growth our our thoughts of on you to with presentation I'd good like website, the major hurricanes, share impact the three we through Despite walk the

with Our you exceeded we the sales and estimates in earnings shared July.

new our China, enable reach to record strengthen to build believe our Mexico. track of brands We're international and largest was our Skip our be our business provide growth. brands also Hop acquisition up on growth initiatives demand from growth our stores our China. in the ways stores. businesses, with and e-Commerce this and opportunity retail new licensee the further co-branded a quarter. strong Amazon, driven of our Our was announcing was Amazon, new with including investment, continue extend by to our best-performing and Traffic growth international with third and the together in in globally, long We contribution investments our Skip of today us model, based to the Hop

Given September month earnings and through holiday performance, the impact strong of objectives comparable these mid-September, growth initiatives, and we a contribution new of quarter. sales was fall the year. very trends this and the up offerings, third together growth product are We achieve impacted in quarter in Sales as terms quarter-to-date the the August hurricanes largest sales view through year. forecasting of our sales with as our our this were improved our to fourth that about moved X.X%. retail contribution we expect strength this given of strong mid-September. Through

our With sales are sales we've continues improvement seen largest Some fall most slowed and to e-commerce early highest-margin of unusually productive XXX the of weather latter be of days over in our believe In our we due parts of many stores and Texas. September, warm the cooler an holiday to in store in fastest-growing, trends. quarter. October, In storms located business. weather total, offerings. part of product we the in arriving the and into Florida the country, lost sales

secular in made online from are we we e-commerce we've investments positioned capabilities, benefit to shift the With the believe well shopping. to

Our or million total total XX% $XXX of ecommerce-related year, projected wholesale, about sales. XX% up this sales are including our to

the third the as on phone the traffic one demand on of coming we our third with XX% in websites. mobile XX% website traffic in of devices. its quarter. US and higher Mobile in globally conversion demand reaching our through world. our is grew customers, website which Brazil, Over convenience rates We're seeing higher expect strengthen To websites. best-known over this is We million We in improve largest sales $XX launching with believe the from speed international came are We the mobile app young of this Carter's this children's names in and position brand online. holidays to US to shopping apparel will our experience, believe year. the the year. our mobile unique exceed are app quarter more consumers customers' coming prior further the and wholesale Twenty-five-percent of a the from us we demand websites in

online this product which orders offerings new technology up home product of scope from to to our third in able of driver those to our continue a we purchases our customers a In stores of sale consumers in the are now our our their online. and during our product We additional to a see convenience the buy and stores. that traffic quarter, the their shopping launched consumers in the save out year, XX% full store, and good are in customers If of also ship pick We've to for provides visits. were response online free. our we choosing stores store of our picked temporarily stores. up online is XX% made purchases This about option

to We OshKosh brands And co-branded store stores the one next continue consumers traffic and performance stores plan the co-branded These to over four in our in convenient from selection B'Gosh scores they relative to other location. sales satisfaction comp relative have our highest X% store quarter. models. over the open and provide receive Carter's were of the years. stores models. XXX comp store other our best up Our to store best Co-branded the

remote of traffic success locations. ecommerce declining some and more our the to co-branded store strategies, our outlet seeing of store Given we're

wholesale to product over the expire. exiting productive expect these billion less $XXX in $X four years. growth next business, to On store e-commerce expect the our core by extension our for combined We Amazon leases year. outlet of business We're Skip the Hop. growth initiatives a million plan our to is and retail we our strength driven The our basis, new over baby range good as our offering stores continue this growth strategies contribute of growth contribution projecting age and of and with Carter's

fall our margins. national to more about commitments, improve sell-throughs given of in their Many inventory were our may partners on was recall, their retail demand product and you down this conservative and As business need Carter's trends X%. and spring year the for offerings

will our Given believe spring results last our we performance of indication enabling for may of bookings see strategies stabilization that in that comparable those their year. them. has visibility in an half This year. better are been this be are for to and this improvement Amazon we XXXX. XXXX We're now year, source us encouraged to latter some wholesale a demand good the growth

are unique We of to our four to selling directly have a brands Amazon. position in

Amazon and B'Gosh, brand, Our Carter's Prime our Simple now designed Joys exclusively OshKosh customers; for Hop. brand, Skip

will We our next through the customer. in to e-commerce of Since five $XXX the year. our we've trend sales largest customers other distribution. this demand quarter, wholesale the our grow brand sales seen a any Hop Amazon, e-commerce expected We wholesale of for In customers negative over launching expect grew million our XX%. our be sales one the channels in other over with in years. Amazon with third the growth to Skip strong contribute nearly to saw is all no

of year. success in to Skip stores, Skip Hop the of time in our have United the stores of accelerated shopping for rollout States we Given XX this all holiday in the Carter's testing Hop

China. website to US are website. represents plan seeing our and next this to We're We our with two-thirds also international in Hop good our a Canada Skip to growth year, about growth Canada good Canada year. international on XX% Hop launch our in sales our about We in grow response of stores, this expected XX% about year. and forecasting Skip Canada in sales

both brick-and-mortar share in have number the and market one We in Canada. ecommerce

nearly up China retail new regarded XX. sales year, world's sales exceeding Black promotional Our significant in US Monday drive brands next amount sale, this in the China. is of recognized largest top business event Alibaba The most one Earlier as Day to of events sales ramp apparel. continues combined. China forecasted the growth big Friday Carter's a XX% Single's on nicely, Cyber four this in November as up year. young and Alibaba's Day popular is online the with in children's the These Single's in

stores the international acceptable partner Carter's in our years. of we Sheng stores by we our open to Our past wholesale Sheng, If will the China acquire to and This to end evaluated opportunity have expect next these continue enable Pou all expects Mexico in the of earnings our team, has business, up us levels This a accretive partner, year, Carter's years. of Pou this It more long build year. ramp and criteria. stores licensee double very growth and over It's acquisition selling four to based children's longest-tenured wholesale management our and, in track open profitability, enabled to the relationship next or that tuck-in Mexico. largest an XXX XX-plus-year Mexico to This XX of B'Gosh apparel. a year. a immediately our focused in young over OshKosh sales met on company acquisition has it's may to It's strong successful a brands. nice five retail record

Mexico Our total million. sales to about be expected are year this $XX in

the growth international will – our and offset We sales in – This local dollar economies. in expect to this largely Skip wholesale by weakness is $XX decline by in believe partners' international about of stronger million year. Hop contribute driven we benefit wholesale a many our sales,

product in supply costs. XXXX. We third from year. wholesale expect chain terms products suppliers our good source in from growth our our to directly in this continued Asia, to international see and investing By on-time the see in We've deliveries capabilities we of demand of XX% partners over stabilization quarter and will in from performance our new in

are and beginning year. enable the new into year, to e-commerce invested sourcing to efficiency margins orders us this our on retail forecasting global enable XXth share. XXXX With our the for in this be direct outperform better our will distribution product and of the gain we holiday Despite we level which speed we challenging profitability success will sales improve the of and this the season. which expect first costs we strategy, We've growth. would delivering consecutive spring and also half believe summary, track customers are us record this to of to year, we lower of capabilities sales of business to continue In market, believe model a year multichannel achieve market next

contributed long-term opportunities XXXX. who this and $X help we're to our execute to growth achieve More plans. billion importantly, our our growth objective we brands strengthen morning. employees for us believe all over the thank reporting of sales passion for there our I'm are of and growth to their many to our I want in business commitment grateful by

months, walk will our we you website. on expecting this current through few our sales earnings based are next refresh estimates, plans on next the year. Richard our good year. on Within now presentation and Based growth we'll our in the growth progress

Richard Westenberger

our GAAP our P&L Mike. presentation Good the today Most materials. begin of you, listen comments everyone. page as earnings will of basis. to performance and third include a review we've the on the of presentation. to press morning, quarter. of Thank these review for today's my business. speak release and I basis adjusted of number important will discussion this two to adjusted our On Today's results included GAAP I reconciliations encourage of presentation results page you to our our reconciliations you an two, on

three page quarter. our some to and Turning of highlights third the of

of acquired driven it growth. over us. in eventful top grew well Consolidated was deliver grew noted, quarter. in as the model X% contribution from allowed line Retail as our segments, Despite multichannel weather, year. the Mike the U.S. warmer by our in per quarter effect we As hurricanes Hop, year, meaningful and sales us Skip growth for the of Adjusted first quarter earnings share to business X% net and last international which this an solid good

in movements some from While our expect which quarter the timing results estimated invest that quarter, we rate effective favorable may we'd fourth earnings our give well in to $X.XX infrastructure foreign exchange tax represent favorability benefited of rates. in shipments the from approximately favorable as to of currency wholesale initiatives growth continued back quarter. spending, as in and We've third and in

Skip rates. Sales of contribution approximately foreign movements Retail XX.X% which summary to U.S. $X closures Florida Wholesale reported compared an effect the comparable Texas, grew Hop about to better related million the from in in last higher was favorable exchange sales growing negative our Sales hurricanes benefit year, the somewhat declined a X% Skip currency and Canada, in continues store all from with third X% had forecasted. than business business. by our segment on with some addition of this sales grew we performance for segment grew four Hop, revenues a nearly X%. U.S. of customers, from wholesale sales demand of significantly segment the the and significant saw fall driven in and Puerto Retail Rico. today which in basis, U.S. We across to International mostly channels, despite earlier-than-planned quarter. nearly a product benefit in page to our some Turning sales is

third growth, to the third to our XX% year, third consolidated quarter forecasted. five. was our compared principally to grew up Moving than XX.X%, gross on sales the to P&L a for page higher-margin quarter points Adjusted costs due margin SG&A the shift we lower favorable last was product in businesses. XX mix the of on Building but retail had and quarter, basis

and, result and As we borrowings Net spending of business to significance higher will operations the a outside change States. in controlled compensation fourth to declined rate benefit of trends, last compared United happen of year. third interest spending part, the the the to expense originally our an last forecasted to planned. versus below year the in that accounting Continuing tax due stock-based some effective likely response as the X%, in quarter for growing of of increased our line, compared other

Our of average share share X% repurchases. count a than lower was last result year approximately as

this versus X% last up $X.XX third nets EPS down all quarter So, of $X.XX, adjusted to year.

were SG&A additive of management six e-commerce higher in and SG&A Adjusted the and and increase the expenses to Skip growth quarter. quarter. third spending third in in continued a sales Hop to were increased inventory XX%. related of new costs drivers stores, page and strong capabilities. workforce Turning new The omni-channel, variable investment management summary investments growth to Mexico in in the

about last versus year. grew SG&A businesses, X% newly-acquired from expenses these Excluding

our adjusted SG&A of sales content are some stores points, repeating seven we technology number think by retail rate we mix basis but XXX shared consolidated quarter, it's an investments and of to Page last across and spending driven reinforce on Our worth increased new increased making initiatives. the here is businesses. we

new be in these meaningful through flow and versus which to businesses, year. last our potential of our eight at summarizes the quarters year. are the investments to up making Quarter-end hold the long business business managing brands inventories and generation sources three were Page quarter-end for technology acquisition of the our growth We first term forward. going capabilities run by of sheet balance and effectively more in the the XX% cash and

short-term Excluding capital acquisitions we year Skip capital to borrowings completed inventories facility increased the Mexico, in $XXX continued support compared Overall, seasonal working and year, increased our and to funding million debt needs, our shareholders. third X%. this Hop and last of for We quarter. two expansion to reflecting credit return completed refinancing of our the

$XX capacity strong working last million, available expenditures. Free substantial forecasting new year, total generation share $X.X this may to million repurchases future. the over by million shareholders three beginning and have we've other billion in million first returned dividends. in in facility We driven from of of repurchases the three cash was share flow to a in capital up the first need quarters have $XXX Since year, $XX XXXX, quarter. We're the to fourth $XXX and under returned $XX quarters Through million comprised cash through shareholders lower capital and flow support principally we the we in the of of liquidity dividends.

cumulative share beginning XXXX. Our as the XX% retired have of shares of approximately repurchases the outstanding of

in page Now, with of turning the our ten an business performance segment third quarter. to overview

points U.S. consecutive announced that corporate margin estimated debts, for points our the largely in comparable programs, the relief about XX XX this second associated Skip Notable in higher leverage of margin as of this result segment, year. mostly operating to and the with as margin completed bad for of and charges lower in also costs the quarter margin sales international provisions points to result store and hurricane U.S. points. Hop. declined, of 'R' Wholesale is we've include lower international a of of the decline quarter wholesale including expansion improvement sales in expenses. addition of as third in result Operating basis related basis bankruptcy bright in a Retail, declined donations well of XX adjusted by Canada. declined basis recently spots We've Toys Us product Margins consolidated this XX Our basis acquisitions

year-over-year For the consolidated planned operating margin a is basis. adjusted quarter, fourth up on

expecting slight margin, due to the Mexican mostly year, partner the in adjusted and this Skip For of we're operating our full year. decline a consolidated our Hop acquisitions

Moving individual quarter Retail to our last versus with business in year. results, Retail U.S. U.S. segment Total segment XX. beginning X% sales on third page increased the

nearly strong comp increased about comps comp a Retail by declined of U.S. Store total X%. e-commerce Our X.X%, XX%. driven

As the store sales opened disruptions as point-and-a-half significant months, we've Retail to U.S. estimated in Retail much a added noted on these quarter, third We've our the And a resulted XX days. overall past operations, in net business new quarter of drag third the disrupted bring three earlier, the XXX as XX that comp U.S. locations the net number resulting new our closure quarter. hurricanes In to count in over XX locations. we stores. our store in

net e-commerce operating We by $XX open income the basis in offset product profitability lower deleverage. segment expect improved store in growth. in improvement improved stores and strong XX XX costs partially new another reflects sales million were These quarter benefits expense margin quarter. by to points XX% XX.X%. This and to third to the fourth Segment

and to converted a Carter's with single format recently as a good years stores opened be XX For in we store new to forecast full-year On roughly photo to area. comparable XXXX, included margins a XX, We've to Metro co-branded stand-alone results. co-branded continue a U.S. brand originally store of page to co-branded the was location ago the about XXXX. in converted Retail This Atlanta several we've format.

some app, Mike the Moving remarks. which Carter's in XX, mentioned his page mobile to of screenshots new we have

their Skip many majority conduct excited Hop. and OshKosh to with you. our Carter's, for brands millennial launch – Among on app scanning and for our their program, of a notifications in-store product easy We're our sharing parents and this Moments and Our shopping mobile barcode shop offers. indicates for way all other push devices. in receive good moms progress to be benefits, reviews, linkage the of the Rewarding retailers, new that deal weeks believe We look like the forward app loyalty to enables information an will experience, of app coming to new

we've channels as XX, their imagery our XX feature feeds. media by and our moms. photos from product of of we also some website, our be and members is to and objective own children social On of a is well is Social combination to submitted mom as On terms interacting important OshKosh very images and pages and with Instagram beautiful included Again, Carter's parents. of providing where our her network. her in our information

Our Facebook, Twitter communication important points and on marketing have Pinterest Instagram, efforts and our for become brands. of connection

campaign. to some from Moving have XX, Skip we page holiday Hop's images

to period. of stores named received the nine these Partner an Recently, category in to 'R' industry addition children remains innovative innovation Skip We're the for dressed a infant retail Toys total in Skip Skip our making including featured Us. at Year Hop. Hop customers encouraged the has and our by very look children's Demand our brand in for Hop-branded in holiday trade demand product. now showcasing introduction XXXX, Hop strong. for of largest clothing. good Skip show We're are Hop's for marketing Skip in the products with award being In Hop progress the for also European important forward and awards Hop of across wholesale OshKosh Carter's in won baby early products, leading consumer Skip and US businesses a Skip shopping the the

results, to million our Hop in a approximately expect XXXX contribute sales $XX million We modest Skip with contribution $XXX earnings. consolidated to to net to

more expect earnings top line meaningfully addition in at to Hop a We contribute Skip will to to very XXXX, rate. in continuing much its revenue grow good

online some in store show These in Hop's Skip Macy's, additional Turning images at news. select stores. and Skip presence includes XX Macy's now Hop area. to with a page the wholesale fixturing both Hop Atlanta Skip

partner. wholesale still with encouraged it's are this new brand's we the performance early, While by

third XX Moving for quarter. results to in U.S. page Wholesale our the with business

Third X% our nearly as Carter's lower quarter approximately U.S. the sales net Hop Wholesale declined products. from in Skip shipments of offset brand contribution seasonal

debt donations year. which year. was with charges, was to bookings sales benefit the Skip year. segment the $XX Segment net by with U.S. single-digit Hop along are partially and sales efforts, margins. XX% reflects and year of discussed to The net higher in relief operating last in Skip of consistent profit to Hop, hurricane million Hop expected new range, contributions Simple $XX brand product compared improved was X%, by Wholesale lower we've product Joys the improved increased on provisions, throughout declined of inventory Full offset margin U.S. was the seasonal business, Wholesale Skip low last the margin driven million from which replenishment included XX.X% product decline addition Excluding demand. segment Amazon, to increase compared which our the bad

previous next we to excluding to to now ahead is our improvement Hop, planning outlook. seasonal Looking spring over which Skip bookings, year, be XXXX, XXXX an are comparable

In International traffic wholesale retail well as increased declines to the partners in believe related related X%, temperatures in to which other Mexico International new the This is quarter. Hop sales net growth which unseasonably grew XX and across was for Canada, Canada world. and approximately the of Store Canada wildfires store basis, growth a on declined of on currency reflects Moving constant results International acquisitions a demand basis. by Skip lower reported approximately China, in country. we part page in China. reflects to net and the sales e-commerce growth sales and China. Skip strong XX% wholesale third XX%, driven third sales year. in on XX provide Net Other international a and Mexico. ago, segment grew reflects were quarter, calls background XX.X% down margin in operating a some and year provisions. higher in to and prior by newly XX.X% year. to as business in a decline this comp previous sales Canada, discussed our versus to and benefit XX.X% Canada bad around strong comps quarter. compared Pages net benefit was as on we've with sales the partially by openings. XX% promotions comp third quarter The total Hop mix the from segment wholesale the This increase of growing XX% the International in in third due increased warm were to Canada in the change driven segment and customers the markets particularly western a acquired in debt XX% disruptions of offset XX international the X%, in

history have net balance the multi-channel was a generated of is generated and We XXXX in well-established Mexico. Mexico. significant its long The with double-digit $X with business from two-thirds in this approximately wholesale The sales net retailers of XXXX, relationships net million in through in sales, sales a in partner channel retail approximately stores. basis, a standalone $XX this In approximately with operating business, owned margin. on franchised million, with

this and it's results, incremental consolidated sales to consider XXXX royalty year, had our with year historically partner the wholesale partner. earlier terms contribution we as we've collected income Mexico's last of to this from this necessary In well as

in million For Mexico sales XXXX, net will a add approximately $XX modest earnings. $XX contribution with we expect to to million incremental

is over store to help start. are a XX Mexico time. store one of Emirates. features opened collective Arab US this of most efforts the to in in tracking by visited to talented located the staff the countries. become e-commerce Page a United our the potential across stores channel the here We've the our good strong the to with partner in recently start see store top-performing integration in augmented XXX some one very off is This from market, Carter's partners' Dubai people is team including developing destinations off and XX locations new roughly us This realize international we good shopping in portfolio of world. the approximately our the Our in in mall, a

and our outlook near-term page for Moving to the XX business.

segments. growth the net we with compared sales For forecasting all year in approximately to solid quarter, fourth to last are XX% grow

ago growth the be in Wholesale driven We Hop. expect U.S. fourth by a from quarter versus strong, of and contribution favorable to in the particularly Skip the year shipments timing changes

in quarter we approximately growth us X%, with growth far as We a guidance. this to are expected The forecast, fourth $XX drivers in is questions. profit for expecting will Retail and to quarter expected revenue in expect rate we are planned, benefit have with EPS the $XXX approximately good annual of with prepared margin an significant SG&A the million. growth good previous will International XX% the If these very compared year, complete year which lower ready be as repurchases. successful so and to U.S. we've fourth of million line year. our sales approximately of expansion, achieving $X.XX growth year-over-year well this growth effective that it for cash supports your approximately of We're take share net sales gross in as earnings forecasted X% tax line of well. and adjusted Adjusted $XXX remarks, in than operating seen lower per the last share top our range flow of somewhat to million, which healthy our And increase we're forecast CapEx

Operator

Thank Stanley. first Morgan for sir. Jay Instructions]. our we'll question, [Operator you, And Sole go with to

Jay Sole

color bit you. book. inventory thank more sequentially My improving just on detail improved Great, more would you. like Is is It Any little place? the growth taking order that question has helpful. why a normalizing? us be you it are the on it rates order is quarter-over-quarter. book sell-through is or Can wholesale Thank there sounds give rate the the in

Michael Casey

now Yeah. the has season the Look, completed. call. booking We gave guidance last on

the to people and are booked And showing are accounts modestly. we reacting product think all and not product I down were the performance. we're the

It's last since year improved. going our to that's comparable last update. not to So, be

XXXX meaningful about spring down mid-single-digit We that's fall we are consecutively from the fact the that rate for and excited change had a XXXX.

that still piece, wholesale the there's softness wholesale mall-based Amazon in portion growth which is XX% of of we're in our some but business. about So, business, the real good seeing

totality, the in that business more e-commerce really accounts we we to sorry, just key book I'm up we're our Amazon finished the – with some and forecast. and original portion the in spring of decided But, well. had and accounts bookings as So, happy as than

we So, with pleased that. were

Jay Sole

sales Terrific. the guidance on growth a how Can build quantify you give for maybe of And some you XX% the us up Hop. to just maybe, and bit mentioned growth, maybe XX% little quarter? of pieces you shipments a bridge those XQ, toward just for in timing Skip

Richard Westenberger

the Sure. Simple good a very more We shipment the probably orders a with have overall. piece is The which growth across wholesale with wholesale guidance of Joys, is minor planned Amazon. just new good program base, piece including

have retail what comps a good above We our experience in been. the has planned year-to-date bit business,

from contributions market. the well of particularly. growth Mexico And more online half significant and the Canada, be the Hop, brought e-commerce big new the quarter-centric as contributions got Those are tend have building Skip obviously, stores which then, as blocks. that new with businesses, to that and We they've businesses, second in fourth

Jay Sole

Got then one it. And more. maybe

continuing Chinese just of format in you you strategy to terms a store of is that a grow China, be Just scaled a the you're can on to in where consumer going go-to-market Can of mentioned really terms way the resonate you sense want? with in having China. give developing us that

Michael Casey

of store the website said, We're growth good That business I it's have in Tmall have early with more China. days to going say with early business, this the the rollout. developed. e-commerce still days. We're The would we Alibaba's year is

continue young is the by China. stores if of say caution, to up learning Sheng of the up days. have year. Pou for Sheng nice profitability. about those We these level stores ramping a model. it's store Sheng That's for We're profitability, open apparel us ramp in up execute how Pou end is why will stores still us. to We're are about to But But the of has to them. learning expect to ability just helping this Pou learning a I'd business. model early children's our we But are store XX its days. I'd opened early stores hundreds They about say

Jay Sole

you Thank so got Okay, it. much.

Michael Casey

welcome. You're

Operator

next we Citi McShane Research. our with question, For Kate to go

Kate McShane

you Are highlight or question. seeing clearance regards improved sell-through margins what the more is Good can my morning. by that's driven in With for Thanks primarily? Wholesale, full-price to year-over-year? taking U.S. you it less product

Richard Westenberger

say part, ongoing channel benefit maintain I'd in product pricing across as able say, to the of the been our well. costs. it's we've Let's

Kate McShane

new I positioned relationship the And a basis. lot just your somewhat a but and is how know is building, we is get brand a question search great. still Amazon that on Okay,

So, searching on walk work more any through can how just us someone they brand regards the when or or if the with for was mechanics of you to the it brand apparel versus Amazon? search Carter's baby Carter's would baby

Michael Casey

brand name algorithms. it to power We their that at Carter's on the the Joys point. to on prime was to Amazon, position comes several extensively conversations as team. this in we label young Amazon our is say interested a brand Simple They the really you strategically Joys talked them with It know, growth. I'd work with of developed in lead decided brand the as business. when apparel them has exclusive about children's and different for Simple are private to

of algorithms in-stocks, of marketing search worked their have behind amount change and programs good amount So, We've said, That enablement there marketing behind on based that. it. with teams a their demand, you. good it. power based based on on on There's being what is and a

watched positive and business continued them. on product. good are right October. a business brand overall. had the Skip April, in OshKosh you along, brand know. position sleepwear driven but into to with our also We chase we So, real reads the stock, are ramp And we Hop We've sales QX. that as mode about and really in up through in going been strong by all now, baby on good the we've remains feel into It that QX And and

launch about size toddler to evaluating Amazon. also XXXX spring the with are business for and we international We're going our excited ranges we're So, opportunities.

Kate McShane

Great, thank you.

Operator

We next Susan to Capital go Markets. FBR Anderson with

Susan Anderson

Hi. growth. Good line top morning. job Nice quarter the and the on

Michael Casey

Good morning, Susan.

Susan Anderson

little current also, you just next differences the should your gross longer-term could margin five you and was closer headwinds the a business you Good that, op wondering growth if perspective. nice I talk And talk around ecommerce about versus your could to margin see about margin guys the over you I bit do with was to we about think or do goal can maybe store then, XX%? think little get that, a as both and Mexico a to of and years, longer-term growth and better – how thoughts continue guys was it despite if morning. that? Especially bit from wondering you good also. maybe

Michael Casey

Susan, businesses but So, lower say, this margin. we've XX% XXXX, that the the improvement. see plan We'll over We'll what we XX% businesses new us through added operating Skip to margin reflects, goal update possible in these still February we of think year, operating for years. today. that Hop, approaching XXXX goal had is our The still the next are Amazon, is Mexico, five margin margin China, you past through four

the otherwise next are over we XX% margin term, long time. forecasting some we believe put that That year have and pressure will the achieved to will margins term. over on goal they the but We contribute operating improvement for would margin near

the made this the math. for the a long-term margin the stayed we're With If we If in opportunity to market. initiatives, size know closer Canada, operating of these We going last of a margin, what family close we the for investments an $X to for do these in lovely at up good monitor years market good on Canada. Mexico. brands on Mexico, well, down with management years. a it initiatives But years. reported these I is year. helping But new board. are operating new new we progress would year next have XX% investments. and We've over goal XX% think to we're bring high-level we respect forecasting some still this did us integration some and four the five to good year XX.X% but to shown some a extremely growth three in ago It's Mexico. have evaluating last team looked can we opportunity. this in it. accomplished we growth It's equivalent saw billion profile is We Mexico good we've a to and the been when We've few we meaningful

largely largely wholesale, is retail. today, And – third got so, They've probably business. The a good-looking wholesale two-thirds very stores. mix it's a

is see but and no on There today, we've success in distribution, to the the an e-commerce we to the in seen that's stores. business expand So, more up based United open wholesale States Canada. opportunity opportunities

of So, years a for growth $XX it It's next should so. some over should – be source us. this be about portion million It a at or business five year. nice least double that the

Susan Anderson

Great. Is we wholesale just it about That's to kind come to the that you material the And, should business? growth on lastly, or how growth very still of ramp still that Amazon, but is as I know helpful. impact. yet think early days, it's yet up

Brian Lynch

Yeah.

we creative a Amazon. millennials to We as And the to I as volume. where think, move children's growth haven't that, we're apparel, commented the wants well for to beautiful young online, that's good. on shop on we of Amazon. are as The is got got Most think the people rest putting investments. Amazon continues our we're to where that And wholesale as support assets look using mom We've of customers. very lot business on we've

efforts the of to folks business. distribution said work our We've on – We continue that complement in early to else long-term for in return that think we're we and apparel to from growth a wholesale it that that good good a core as think growth. it's terrific the a standpoint. putting behind and marketing opening days. So, meaningful the wholesale long-term enable everything and shifts standpoint, modest It's be, in branding to business, brand. do a customer group got will us can remarks, And top we in occur consumer it's have business us Mike as

Susan Anderson

[indiscernible] next quarter. job Great, thanks. good luck Nice and

Brian Lynch

Thank you.

Operator

next with Bill Sachs. to Goldman And we Schultz go

Bill Schultz

Hey, guys. How doing? are you

Michael Casey

Bill. morning, Good

Bill Schultz

sort So, curious quarter, are on of of retailer it announcements. guess, kind each. of I'm just what was in other thoughts terms I related a your pretty and dynamic store closures

first did competitor recapture So, from holiday, tailwinds feel liquidations impact any into is, the store share you that as hit do sort quarter? from major any in question And earlier my you tilt of there? we anticipate

Michael Casey

been the asked big A say Bill. question that's Gymboree been We closures. months us. is Hey, impact would of the for a store we've non-event recent in

say for target we couple, to business We're monitor areas on will a good. what we not would to times. had business. years, We've say our continue been consumers even very closing, it. but where to So, has those had economies tougher positive the fourth is uncertain would more a are a effect it strong in quarter. Last I stores negative or we've able in few our year, Outlook strong meaningful finish forecasting in and

for people so shopping we holidays, kids, and shopping, from the think that. will particularly Over benefit their are out we

ways what love hurricanes during adding have to to store have ways those businesses our brand growth third that new in our the business. and weather That's due for portion performance the storms of the sales that We in still to about the the So, We about good all shareholders. quarter to we portfolio, objectives. will good we the very we about business. some lost our able new and to were yet those feel of feel ways grow. to lots with beauty quarter is of That's those I we're closures, good achieve grow There's $X grow. we and third million other deliver and

Bill Schultz

Canada. some made with your were monitoring? one follow-up, announcements of mean? big quarter that retail of go-forward near-term in might if that just ask partners your could have of we should up And Mike. any thinking and Us be the sort Toys US of Is impact retail sort to Do what you're – How in a you of business? about Thanks, of something sort during expectations and partners bigger I 'R' the some the there Sears quick your Canada

Michael Casey

Sure.

years. represented sales. for X% than going been to Good that So, Babies 'R' very many, has Us customer company for many a of business Us back relationship. less build over years, the our to probably again, us 'R' fortunate we've good But, Babies total been the

small to going related charges 'R' third some a business. It's material the the We up say a certain of been not Toys Sears bankruptcy on the would in be results I Canada, very impact Us our our component had quarter. continue to good with customer. to receivable we accounts. have reserves customer. beefing of We anticipation good concerns had a that in So, resumed shipping.

and have Canada going other So, business. our our Canada than think if a impact we on don't liquidate, stores those impact any that's possible to positive stores perhaps e-commerce

significantly business had growing Our what envisioned. Canada than faster is e-commerce we

children's wherever they're going of for brand. very of apparel, a – So, presentation the our are beauty likely young see to shopping people strong our

the out, Sears and my I not when gosh, to where like am shop says, Carter's for goes going it's consumer So, Canada now. OshKosh

So, we website. up stores beautiful there, have beautiful a

stores close. capture will we So, away those Sears when traffic the will that go

Bill Schultz

and it. we thoughts your for Thanks appreciate

Michael Casey

Pleasure.

Operator

And we Anna Oppenheimer. to next go with Andreeva

Samantha Lanman

taking quarter-to-date, for question. sequentially? for the Good And as quarter. This on are is Were are as on On in regional differences? curious, seeing? Thanks there Congrats change quarter, what trends just we far you outlets for did comp Anna. any good our morning. retail Sam a

Michael Casey

specific Is the your question to outlet stores?

Samantha Lanman

for Quarter-to-date, I guess, generally retail?

Michael Casey

be We're given with When fall usually Fourth would degrees weather quarter positive. Quarter-to-date. will selling start it's warm there. weather, that hot retail selling business Los little holiday XX a is over sleepers the people the than Oh, Atlanta Angeles, blanket thinking comps about in say offerings. total to product – and more are here be weather. A to got it's out – aren't unusually slow going for I when – quarter are just today. the of off in warm short Atlanta we impact. people in an There retail

change meaningful So, a seeing as parts of is trends. cooler we're in weather coming more into sales the country,

quarter-to-date So, positive. comps are retail

Samantha Lanman

great. Thank you. That's

Michael Casey

You're welcome.

Operator

Stephen next with to Bank Albert for America. our go question, And we of

Stephen Albert

on question comps. have I co-branded the store First is

very on outlet sense overall on center of headwind some a of interesting. you gave which posing strip how a just some kind is color color to I that that, figure. is versus outlet, could comps give I on if think overall You was wondering the get of store much segment for kind maybe

Michael Casey

outlet best the decline is the about seen we've centers. in XX% comp the came from Let's of stores analysis say,

stores model benefit we those are The nice and open Carter's outlet So, a store exit we're X,XXX-square-foot same the store going outlet as the center. combining That seeing OshKosh ago, old X,XXX-square-foot and OshKosh more We're where to brand stores. in you'd model, leases has – outlet expire, changed. centers Carter's a in the forward, inclined up a stores. those years

of outlet out it year of is, evolution So, is say, year, this If nice our less this than guess XX%. launched will the my will of less in store outlet XX%. made XXXX, XXXX end By was base e-commerce, the when it By we centers. stores of we've be be nearly end the over the XX% than portfolio the years.

will only outlet stores We best long-term. the keep

offline, So, up. we're as legacy more locations outlet to remote the in stores open come them these inclined less some of

So, And a we adjacent wonderful profitability if combining where in nice an responding the consumer are stores seeing in outlet co-branded a lift not sales in we to. center, we're particularly is nice strategy so close seeing benefit opportunity from positively with stores this that markets. exist, does and

Stephen Albert

That's interesting. and potential on question FX I boost. the have And is the – second on

Some websites? against of trend it of to any returning in of seeing customers with currencies. early too a the stores Or US is of wide you currencies, and weakened international bit variety kind your tell? little the of a has to Are some sort reversal US currencies, the border US dollar

Michael Casey

I third through would to some hurricanes disruption the early those we Florida. it's tell quarter rolling say had because with too in all

– that benefit. I So, that see think we a we'll start to expect

We haven't yet. it seen

Stephen Albert

rate in dollar on growth And the fourth quarter. Okay. last SG&A my is question

to think just XQ. relative You Skip bit we Mexican should little guess magnitude how about talked a with the I licensee year-to-date and in it moderation. Hop of about and acquisition

Richard Westenberger

Yeah. to relative I would year-to-date say our it's a slight reduction trend.

and of Mexico addition the the costs into structure. contemplate guidance does cost the Our Hop Skip

Stephen Albert

you. Thank

Richard Westenberger

welcome. You're

Operator

with And Jim Hardt. Monness, we to Chartier go next Crespi,

Jim Chartier

wanted my follow morning. up for question. just taking I Good the question. on to last Thanks

and what it? So, on pace kind you of how could stores co-branded think converted many expect would pursuing you be into stores do

Michael Casey

well when with when through We'll plan stores more now. going We're how – plan on growth think evaluation the XXXX we're XXXX. holidays. an I you share growth share you with through call perform Well, the going through with the share we these and to have to next you more our longer-term see we

Jim Chartier

lift then, assortment the to into expand introduction you stores see? did Carter's mean, Okay. stores. of XXXX the clearly, Brian, to And seemed you of I Hop the beyond? retail be within and do Skip kind there's the opportunities think in what positive then, And Skip Hop

Brian Lynch

anything we we that outperformed certainly before performance, good really space doors XX a that in in tested. the had We put

sure So, to about Skip scrambled where we we in get we have to excited stores that Carter's. all make position a we're could that. the sell in And of Hop

Black stores co-branded Carter's our So, Friday. stores our by and

to about holiday in a very So, place smaller that's all for execute it going We're the it's – season. wanted to we excited be because assortment quickly.

XXXX, assortment. more we meaningful are into a as So, go we planning

on of tiers we've think assortments the based Carter's I stores type got in in US. store the three

growing meaningful part experience. We're be quickly. will the that website a So, the more of

in tab business with really Pleased Our results. good. a is next and the launched carters to July. We oshkosh.com

the then, sales yet, Skip opportunity Hop year I product same at We think brand time on spring. we over engagement. in All good we've plan that's Canadian that have Canadian don't last a had the period Canada as shared, the in stores Mike doing have too. And website. Canadian the the there's well good doubled stores as so our with will as

are Hop. So, lot not it's our responding and a We've our good well of familiar to familiar got are with Skip with opportunity. The brands everyone consumers a that customers in database it. is

the were accelerating. as to sales So, the them brand, wonderful able the are story about tell

Jim Chartier

like the Great. really It investments a lot all investments opportunity Richard, then, And the with and looks XXXX. slide helpful. in finally, are the of growth ending is

year and future. on that initiatives you investments that So, weren't maybe just the of in there's slide curious the about the beyond if foresee some this pace

Richard Westenberger

cycle planning the of middle the now. in we're Jim,

early capital think retail the base store good be like. what plans biggest continues new do continued use of have expansion next around I say next We The growth more to year So, agenda we'll of for to investment year. stores. have looks the

the years, open anything think our for what as on early all would recent front. the that more would think year don't have up but really that's I technology share Are of on completed next rolled the there's we be in be plans. meaningful once question initiatives I there as other we'll significant us? horizon we've

Jim Chartier

do in just in Great. benefit what amount benefit these management lot have XXXX and timing planning, of the of then, any, of IT a in initiatives, you the how beyond? inventory And of the terms and if inventory see benefits seen and you from XXXX assortment planning much,

Richard Westenberger

last years. of we've I'd in omni-channel those of of consumer we're to couple behavior. had just a the benefit around say the initiatives, starting good I'd already significant terms see spending some amount say fairly of

those P&L. are through So, rolling the

pricing, be a late to take through. think investments but systems the that going probably That's XXXX I much those it's us. around are benefit, management, work tools into benefit probably stronger in inventory and going for time XXXX, to forward a to new some for

Jim Chartier

luck. Okay, great. of Thanks. best And

Richard Westenberger

Thank you.

Operator

with next to Macquarie. we go Laurent Vasilescu And

LaurentVasilescu

priorities Good for about Can the on? to out morning. Thank leverage you question. how be the chose taking my another increased would pursue you very much taking for acquisition, you to comfortable recent much if revolver? I want the And you update parse ask revolver. on the

Richard Westenberger

place Well, when facility a years being credit in really larger the much revisions facility the put original to out was borne were revolving company of the just several ago.

are we expanded, So, existing facility Also, marketplace was increasingly just in as our a add grown some it capacity. global. time company the redo has additional and the prudent and to good and

some has facilitate to facility provisions new the so, features some that and additional liquidity United States. And us outside have the

markets. maximum opposed that being to something look for the positive. a If We an we capital be finance the view, or pegged would that's from as the would buy the ratio M&A we to well not we of a to leverage that were facility So, we've significant There's by optimum. point specifically received using that. as identified probably really believe

different opportunity run flow capacity a but want strong generation. balance us. business have to have necessarily substantial leverage, highly anything levered cash lot The been given That's would flexibility, not past, interest given to has to if with say business we pursue sheet, and of lots almost we in the our that the of cash to would We to presented flow pursue more options the extremely its itself. the be

Laurent Vasilescu

expenses I but were was can expenses you the those some Okay, in for around thank in between possibly the that third fourth comment terms dollar and that various parse you if And much. there and the very shifted was quarter. what me correct I'm channels? I think if wrong, the prepared think case, remarks, some

Richard Westenberger

between of specific don't spending business. $X it We've million isolate to $X million across I to would really estimated and I probably segment. it one be know that the

Laurent Vasilescu

few the quarters. much. you you over very margins. is lastly, ask like will thank the to then, for Okay, think the much of I down driven been wanted do How several EBIT International go business by years? China? And And margin for They've about investments that next EBIT that where

Michael Casey

And The a this losses weighed China, we'll million some start-up margin about $X couple years. hope lose by over we're lessen by will things business China We should of good growth of to is The plan. for year. China. then, successful be a portion it the losses next us in this thereafter, down couple in margin year. in of probably be Those breakeven XXXX with if the

year, world. and on the beautiful difficult the Turkey. The weighed – much Beautiful terrorism Carter's in different more past – of other that have there's unique wonderful the of us, retailers over stores. you and Middle have in good some then on their opening stores challenges behalf. dozen couple OshKosh morning Lower very retailers probably a of portion them But thing this We showed in the Richard got parts world. some our up we throughout the prices East, these oil dollar stronger with business

been a of their difficult. reasons there's variety businesses have So, that

that business. All of the wholesale call, International December. going business, of on coming what insight meet possible partner, profitable what are more in us we they these in our think very, forward, is part with but We'll very have partners to

some them. So, start and we're in improvement we'll forward. see stabilization that There's going indications working demand some to with

that weighed we're start from perspective share And potential hopefully, so, going us things we'll margin lessen a with you and, terms the this have margin on hopeful will of past forward. have but some that the what is, more in to year improve of to

Laurent Vasilescu

of much. very you And Thank best luck.

Operator

Wells Ike with to Boruchow next Fargo. go We

Ike Boruchow

of Good what's plan Hi. baked gross and on into missed QX that front? on in I pricing Richard, everyone. you could you margin, congrats for And comment your this, promotion on sorry, I morning, on quarter. if what then guess, the the QX saw

Richard Westenberger

and in some perhaps pricing I'd fourth our modest well. the Yeah. third into had across I third Certainly, continues as intense I'd is a the has quarter, In going to And bit caused the storms. business. quarter doing say same was that's around our improvement realized environment the be say quarter thing the our country affected position. now. expectation would manage as the we promotional the we promotional be warmer-than-seasonal the our competition inventory by to the more say right us weather And probably

Michael Casey

to agreed. QX, fourth in echo quarter, noticed – have Richard's comments, into As we we what happened go

we As we fourth planning better go retailers inventories leaner trying quarter, would into most they're been business. a know and to have run

QX and similar going business as be we to how the hope promotional into So, that year activity we're would our planning that well. last is

Ike Boruchow

Got it.

So, just QX? expecting but what just margin in that to you saw gross in guide, are than you a degree lesser expansion,

Richard Westenberger

QX. guidance an – our margin gross actually expansion of in above assumed reflects It's we what saw

Ike Boruchow

And rate QX. Got more it, one we then, question just okay. using should is model the be for tax

Richard Westenberger

last For the fourth quarter, so tax rate probably versus declines about XXX year. basis points or

Ike Boruchow

Good Thanks it. Got guys. so much. luck,

Richard Westenberger

Thank you.

Operator

Associates. with and go next Steve C.L. King we Marotta to And

Steven Marotta

million year corporate excuse there in that the expenses and and the in versus this the everybody. you what million. you the Can expectations Richard, down morning, in line item roughly year me, $X third press are quarter fourth mentioned takes release, – puts Good talk last to about quarter? $XX.X for the

Richard Westenberger

would probably The we some Those And SAP. the financial benefits line. a in expenses. system I I'd last this say SAP We consulting our to year projects favorability were on had a some we're year, some had we discrete – favorability ago. project. year, the say, are considerable good implementing related to was spending seeing primary fairly healthcare

quarter, fourth spending. expect year-over-year comparable the For we'd reasonably

Steven Marotta

standpoint, help are and speaking year a XXXX, give there? expectations net opening of can't From I fiscal view can know what closure your about store And but next reticent for you about XX,XXX-foot I Okay. a ask. but you're

Michael Casey

store Again, net open some responding portion would more hope portion going it. That openings. Best the forward. model positively best with had very closures. XXX XX to And last shared you, we some envision I be comps store traffic, we've think of will the relative the other we It Consumers probably to or up to models. stores. model will be co-branded of are

closer of to is meaningful taking a stores by not a there opportunity doing at whether opportunity and close so. So, XXX look an we're net or profit, profit where there's more a

Steven Marotta

much. very you Thank

Michael Casey

welcome. You're

Operator

remarks. I over for no turn and any closing ladies you the that, questions we have with gentlemen, further And to Mr. on our Casey, Therefore, back roster. conference will

Michael Casey

Well, forward on on the thank you all joining progress February. to this for us look our morning in call. We updating you again Goodbye.

Operator

ladies this and for conference. todays participation. gentlemen, And your will Thank again, you conclude

now disconnect. may You

Carter's (CRI) 29 Oct 172017 Q3 Earnings call transcript