CRI - Earnings call transcript Q1 2018

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Operator

Welcome to Carter's First Quarter 2018 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 first quarter 2018 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 within 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 measures. 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 measures is is And the

Michael Dennis Casey

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

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Retail our International growth driven was Our by segments. and

launched were new As for planned we given the Carter's but our In expected, earlier brand campaign. spring our year, our sales last lower quarter, first demand wholesale marketing than better than product offerings.

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lost of Bon-Ton this the Us We recapture XX% to and year. about sales Toys expect to "R"

Hop may offset business help half. and of portion new Skip with other Our Amazon the some

lower wholesale assumptions, these than sales year With slightly last this we year. will now be expect

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to Hop this especially rolled more initial out products Skip also during retail year. for Age Up of the back-to-school is the initiatives planned sales Skip product wave this We in are period. meaningfully A year. to last and Our offering growth our Thanksgiving year, expected expanded time contribute Hop

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both in and share segments. the We age one market have number Baby Toddler the

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with integration well Mexico expectations. good and in is our The in business new Our a is performing line to off start. going

Mexico eCommerce expected. to performance year five not model to the over about next sales this through $XX contribute year, to growth the this the delivering sales with China expect Tmall. double is We years. contribute in about sales China The in its million wholesale in million $XX we in good sales is with potential expected

We are that re-evaluating initiative.

our Apparel a continue way, related good start quarter. products weather October our of have offerings. units on and summary, continues About chain product we're what product in from XXXX. costs process this we're and in visibility the supply the expecting assess of know we us. spring costs our XXX growth over proposed International supply It's is China good updates. off In to the year. better source the from sales more to today, We're risk With based list expecting well, the for of of one-third perform April. forecast sourced China. We're on in spring tariffs a We'll we low. to in delivering and been first negotiating are but businesses. July released to good was risk, on this excluded of the for million very Retail on sales those Trump warmer Our imports believe by Administration We'll our

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strength of our in the positioned and young the or apparel. support the No value thank over apparel. around throughout of I presence best-performing working for States, all experience children's retail We website of given employees from consumers best success, benefit brand clock are worldwide young other our Carters.com, to United the provide presence on of closures, to in has children's our the who the are want market shopping the and trust children's earning one brand locations uniquely these store in and to world XX,XXX in apparel.

we our to on presentation this expect growth year. and website. walk will in sales achieve through you earnings good support, now their the With Richard

Richard F. Westenberger

with comments you, materials X income on an Good of Thank the begin today's quarter. morning, today basis. presentation will to page statement on our our of adjusted Mike. my first speak for everyone. Most I'll results GAAP

recorded important and approximate review to GAAP Us our several related evaluate presentation in Toys of quarter the reconciliations $XX and you presentation. our which to earnings liquidation, Please Our "R" was charge in results. results our GAAP to as of results first SG&A. adjusted quarter million an notable release bankruptcy reconciliations was basis these adjustment The most the first includes the

Turning some to of the with page first X highlights quarter.

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end due of to rate reform to year. significantly tax enacted last the was last XX%, legislation effective at lower Our tax U.S. approximately year, compared

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was year. $X.XX, again, XX% first EPS quarter $X.XX up adjusted So, versus last

for page versus a Amazon, X and new Hop, sheet XX% to our Quarter-end Mexico. cash last primarily driven Moving summary initiatives, balance up flow. including of by inventories and year, Skip growth were retail,

year, million, Operating the next comprised primarily flow to a in initiatives. We're quality the inventory digit single elevated capital end, $XX good the is new $XX first range. million In million continued to Debt business reflecting last high. borrowings $XX couple over last quarter, we And of cash cash growth forecasting seasonal this return of to to capital to to increased shareholders. At working mid the again expecting driven our support by levels year inventory year. quarter million to year inventory generate compared believe Our million operating growth $XX was by the $XX we're we of in the quarters, repurchases. range and of dividends remain of $XXX $XXX short-term million our and compared needs $XX will to million. in higher share and in of first returned total to flow shareholders, moderate

business Now X an performance quarter. turning in first segment overview page of our to with the

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Our business. total increased comp driven eCommerce double-digit Retail growth in by U.S. X%, our

to costs. offset On a segment compared closed in reflects technology, the partially Easter We throughout earnings first good mostly affected a X.X% portfolio stores quarter XXXX. XX%. rate We've quarter in by good store fulfillment, for product which of older lower country, of initiative operating eCommerce first locations. the the by in of on Segment closed offset marketing, X.X%, the the range million, the benefit XX% Mike in was in As holiday were performance of sales and transfer progress $XX was results we've XX the outlet discussed margin income last weather year. and which investments planned persistent observed earlier much our optimization with stores, average, of in This cold said, to were call. our our made portion this QX,

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to will of We the speed visits continue to technology behind increase will are We're Several highest management; workforce online, Carters.com. capabilities launch and older productivity. liquidating. year, Later investing productive, most believe we of from store improving our investments the Carter's on sizing And, brand, our expansion certainly, to recapture, growth customer age growth Collectively, areas in accelerate Retail which improve focus looking enhancements to in are adjusted opportunity systems net strong optimize and think will segment management formats. in which this sales these customers believe underway stores operating we and returning wholesale assortment own our store locations also planning U.S. eCommerce we this support store we year, extended we the will earnings initiatives in our with plan for which segments. as and to we our our margins. satisfaction are growth in and and sales such portfolio second which and believe delivery good inventory orders, significant in half

in U.S. planning XX pages we're included photos the year, and digits. XX, Retail new full in mid-single the we've to southern net two of On California. grow co-branded segment stores sales For

this capabilities. demand our of which ability only fulfill or in our be online. recently features out Our informs co-branded quarter. format customers latest on XX, was signage, some to converted may that up first the format to in-store stock to items X% store, in omni-channel our for case, of the available store be In store, comping of page our The Tustin co-branded best-performing continues model, which

the You consumers, quarter, campaign Start" strong equity marketplace including Carter's on campaign, marketplace the help of connection. young marketing. parenting including strengthen in intended to unique relatively the the the is in In reach. brand channel. time, XX, brand families unique positioning the capabilities From terms "With is which of launched brand We journey. campaign Carter's throughout believe with of significant to Carter's first the during page the this our short digitally-focused to the In phases a wholesale create brand has a emotional its emphasizes Moving we ability various children its of with to of achieved an period The the update with the

integrating actively campaign's we're of in channels. wholesale videos. our included one of this So addition campaign to slide partners in link direct to messaging We've with sharing the campaign our elements our a our on initial

to XX, update page our Turning media on an industry-leading presence. with brand's social

Carter's As consumer in in competition. when February, in penetration base significant shopping established our Carter's apparel achieved And recently the choice top competitors. United among over Carter's satisfaction a we quarter, highest milestone we you the our and such XX postings both media on of moms has baby our shared online, Carter's extended market-leading States. young Facebook platforms competitors. This million children's first strong clothing. and her on provide in for leading also followers the young our consider scores position on experience reflects have we among Instagram. the first engagement in-stores Because customer of as social and the the of brand XX our is overall the consumer children's Instagram. a Instagram followers engagement X of position earned with brand and significant we

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

U.S. declined sales X% last to Wholesale net quarter year. in compared First

past of Basics We strong. believe quarter first has these over of wholesale the spring performance the was Little wholesale Replenishment channel at for Overall, are products assortments demand our the been Baby strong. in our performance encouraged the core in the by we year. assortments

positions. and generally AURs improved gross are inventory partners margins wholesale realizing higher Our with

year's the We are launch Little assortment Baby this next preparing the Basics over for several weeks. of annual

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contribution decline Toys of which revised includes the our sales business. of year Bon-Ton, now are Us Hop. Given outlook prior growth. from our low and This sales single the have Full our range net in to we liquidation digit Wholesale net outlook year expected for low outlook single "R" Skip compares forecasted U.S. digit XXXX full to the

Toys share. about planned the the in per "R" For Bon-Ton $X.XX approximately and in represented balance earnings combined, sales Us $XX and million of year,

growth have XX business. is is and balance to our of Basics the day, sales approximately the of in Page growing The meet of of the needs imagery of offering. in recapture that also of objective exposure over families Little few to It's essential earnings across terrific some retail Sears core our Our and the noting newborns. we Baby worth Basics wholesale. our some opportunities to these our half Little wholesale every no features highlight XXXX. products next channels Baby wholesale brand, Carter's virtually with pages

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Skip page XX Hop. with to on update an Turning

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International to Moving and results. page segment XX

our meaningful contributions high Mexico sales from Canada. and top growth business in sales and strong on a we in the in sales by reported single with X.X%. driven weather winter to grew achieved Our currency U.S., Canadian International basis digit stores good Canada comparable our on affected growth digit along component comparable meaningful believe basis. retail Skip of with growth XX%, traffic double a most line International of Canada, the Hop store growth segment QX. Similar constant negatively delivered

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team Our about year, points important plans making net is growth leadership reflecting in channel this benefit International business, in basis our market. the Mexico of to the of in margin mix accelerate Mexico progress developing the last solid acquisition. declined addition Skip segment operating by the XX and margin partially lower versus offset Hop

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in XXXX. Moving XX to good outlook, we to a and continue we expect business page will year our that have

sales to our growth X%. adjusted in and customer about earnings have approximately sales to the for year, grow per of by each outlook bankruptcies, grow light approximately recent We wholesale now share earnings we and X%, XX%. full the expect For moderated net

approximately place in also this year. customers from wholesale summer. reduced take down response liquidation As second year, expected liquidating the over these the volume some the from top-line of mentioned, the assume we we're discretionary assuming in as most lower will of We spending the wind sales. to recapture that We've this half of the retailers recapture half sales will

in For quarter compared of XXXX. million of approximately sales XXXX, forecasting million, to we're the $XXX second of second $XXX net the quarter

far adjusted earlier quarter $X.XX are is $X.XX quarter main year against Easter in be quarter demand retail sales second which holiday, Second to weather, thus and second unseasonably versus cold working quarter second shifted projected absence in EPS Toys The trends the the approximately Us of the volume. into the quarter, in "R" slower with ago. and factors first prolonged planned us the a

we're ready to remarks, questions. these your take With

Operator

with B. Riley go FBR. Okay, we'll Anderson Susan first to

Susan Anderson

Good Nice quarter. on Hi. job the morning.

Michael Dennis Casey

morning, Good Susan.

Susan Anderson

think eCommerce, were are said you second if retail your could quarter wondering initially. how positive Maybe little "R" much the quarter-to-date. are Does Easter if shift. a is bit weather the dig you think And us on the in impact was I versus Toys more guidance. and help about expectations think, could that you I quarter? positive then, I mentioned expecting, comps include second you and I for that they you though guess, comps below that Us

Michael Dennis Casey

the in quarter negative Easter, comps second the we the want expect be slightly because you quarter shift on second in the the we guidance? some to had but unusually are to comment and earlier to clear, year-to-date, weather be comps Richard, in quarter. Just positive cold of the

Richard F. Westenberger

know of given the program annual Little was considerable but launch Toys Yeah. in quarter, the volume, is I'll May. I don't it it Baby Basics "R" in significant. that precisely, out some Susan, Us the second parse

segment, total, are would kind expecting the QX. of We're We terms I are growth be in segment. Those of to growth expecting the mid building business. expecting in in of high-single revenue. Retail blocks say, guidance our in in our revenue We're the Wholesale International to down digits,

Susan Anderson

it. Got

comps eCommerce? to And down, helpful. that's including clarify, so Okay, just

Michael Dennis Casey

supports the first business three expecting for we expect model Slightly for second we've a or Correct, shared past And the quarter. we – better in think we're the as positive the half. with comp, which calls, you in year.

in second we're So the expecting half. comps stronger

Susan Anderson

Got it.

just talk could opportunity exclusive. Walmart just be? Okay, could the and more on Is Hop all the one about to that's you what this then, going Skip be helpful. And in if maybe stores, Walmart

Brian J. Lynch

I'll – we're Skip Sure. excited just really about Hop, overall, the business.

of sales the such year, substantial increase strong is Walmart. growth eCommerce to and TRU do business first we up have in places continue as bankruptcy, quarter. We in all we the about in distribution to this challenge despite going think channels as be was the XX%, the

X,XXX Baby, now U.S. Amazon, the then times Canadian launched. we're stores. Mike and Buy about about in and Buy at presence stores. Target, talked were in year. So two account the selling That's our we Macy's that had last And strong U.S. about Richard We've and in the – we doors new

if We're start far stores year, brand, Walmart, we've that as we the Most worked a – bath less doors, with There's complete we're them stores. then then a summer, little there's of assortment diaper X,XXX to this about bags and year. week, and accessories. six are travel than are I and doors team. recall. in launched their this in As test it's launch later shipped the in week. to in a all last items, in that, are hitting with items several going going later that We're But excited some

worked brand So closely the to of on customer, really tailored the specific the together needs model. we is and Walmart Walmart business them with the

building on with think In the next And out Skip year to over this based on that for expansion excited can way So double we the we're after years five to at performance. time, We believe well by about acquisition, over our achieving Hop the we're multi-brand good there's business profitability. global opportunity potential first continue it. category multi-channel, teams our the goal.

Susan Anderson

Good That good. Great. luck next Thanks, guys. quarter. sounds

Brian J. Lynch

Thank you.

Operator

Oppenheimer. go to next Anna We'll Andreeva with

Anna Andreeva

A couple much. us. from so morning. Good of questions Thanks Great.

lifts much the would see Bon-Ton, you Toys, But of understanding all percentage sales et to cetera. how of Just this challenges guys level those could still of problematic? the Toys, doing at guys on secondly, some still is capture an maybe What closed we seen have additional adjustment First, what say, color And talk the gauge you how ahead. being at about already? trying can of you distribution, maybe And what are derived? you kind your with Wholesale. at recapture to stores XX% specifically then, provide store that's sales? Obviously

Brian J. Lynch

at take answering I'll your shot questions. a

we As business forward. department what XX% we now in the to, of our believe into than is down as less is going far stores. have think, problematic, it's guidance We're case I inserted the

base. account So, good we the feel about

sequential seen that to over account strengthening of the last the I think, note actually few it's seasons. have important base we

then had bookings, digits. If we'd and down single flat started up trend had to you recall, have low bookings, had to bookings we some

Toys the mid single So, year, Us to be I sales actually excluding "R" were the this all digits. accounts, and think, Bon-Ton, expected up of for

in we be fact few sensing going about basically, were the XX% of the it, that, open the The exception going because these to stores are we derive the to with trend majority Wholesale, the open stores are be still – good of of through that a feel and So, summer. retailers. the troubled lift,

the lowest seen tranche about think, in. far, the that doors, that I doors performing doors closing, of we're we've first of XXX XXX so

So, product, they're velocity going to unit now. right continue to they've a high and sell got

this point, the seen doors meaningful of some trend we proximity recapture accounts the in have are of but doors and minimal efforts our TRU key doors. a at So, are close our in positive to that those

the think I earnest will second in So, more in begin recapture the half.

think each And and wholesale was met to identified some we we market digital that closing. things met have there. positive doors based on They've I identified are and units level, each account can wholesale excited stores very doing our team, We and for our market share. and the our have the that amount has as share, our with then Mike eCommerce what think out gone They And that recapture shared, proximity product assumptions key at of their that creatively and we're gain were we with of the marketing opportunity their efforts, with can to I about business, own category a account. say sold.

are So, XXXX, basis, business, year, be and this on predominantly that we we and the that can would second it half an is half, an continue the like but in about annual recapture that of would into way. by clearly, feel unknowns, assumption. of There the

Anna Andreeva

All thanks. right, Best of That's helpful. very luck.

Michael Dennis Casey

you. Thank

Operator

Okay. We'll Fargo. go next Ike Boruchow with Wells to

Nancy Hilliker

is This Nancy, everyone. for Hi, Ike. on

are questions around Our margins.

touch terms year. the little And year, how rest could you SG&A are and think then, about investments also, just in the should spending. the about, in mentioned of the tax the half talk the invested? we second could just transportation you more on if wondering you line, color will So, should What if for whatnot the and the could that And of discretionary a the of margin we for cost impact. the savings changes be of bit expect "R" Us we give also on with gross if Toys you

Richard F. Westenberger

and a some doing good stores wholesale were as the margin "R" be the through we think for channel. very it those should we margin, will operating gross portion think and Toys long-term favorable, online, relates what sales going Us of be actually us. was better in margin be recaptured all-in account own to our profitable than which to is Nancy, We outlook because

inventories in manage very margin inventory trying outlook, Our our gross efficiently. We're has for prudent buys. good. more our in been general, We're being to

will into the some and analytics bear that this hope fruit the next year think, start to in and retail, adding I year. tools technology particular, we in later we're

for fuel line mentioned, place that. contracts any would particularly assortments, costing or product we're which do process reasonably of not costs swings a as I Mike the factor outlook sight concerned have second we're about towards think us spring half. in transportation, so have We the of there's cost, protects better in costs in moment. Our on if at That's XXXX in the our we'll transportation

In direct rate rate the be SG&A, has A do in SG&A that increase to from Those lot the business an in expecting with to SG&A terms overall of high the coming of year. channels. – tend the are growth higher this we businesses.

continuing business. lowest savings, modest year. shipping. our that and earmarked A of across are areas performance the we the make brand We're wholesale investments some marketing technology. component expedited company this We of have the to of going the more couple SG&A tax investment in for on with That's to

a in forecast. the back that assumptions investing of and shipping really of top-line our business. historic in bit marketing trimmed relation in made say revisions I those those some in would order on to for amounts have we drive we're still We us to the in areas

Nancy Hilliker

Thank you.

Richard F. Westenberger

welcome. You're

Operator

We'll with associated (USA), regards "R" little my the Us, Toys receivables? charges Thanks these detail taking in Laurent Are Laurent XQ morning. to Vasilescu are. Macquarie charges a for - go on million what Vasilescu. Inc. question. $XX.X With Capital next with more these Okay. Good provide can you

Richard F. Westenberger

Yes, are. Capital - They Macquarie (USA), are. they Vasilescu Laurent Inc.

Okay.

Richard F. Westenberger

Yeah.

Michael Dennis Casey

can shake out And provide gross you then year-over-year? margins, on should on my where directional margin question, any Okay. XQ Wonderful. thoughts possibly gross second

Richard F. Westenberger

color forecasting probably That's second Vasilescu - expansion it. we're in extent Inc. quarter. Macquarie (USA), Well, margin that I'll the Capital gross the Laurent of provide in on the

helpful. a Thank sense shook last Very how on And us was Us, XXXX? on standpoint to but year out some "R" And the how some Could possibly Toys directional just Maybe know of quarter on you. quantified Okay. you then for compares. Bon-Ton Toys "R" revenue then, don't Bon-Ton. from Us, if big give thoughts you get first I business? it, the

Michael Dennis Casey

a Less year. million small. Capital Macquarie Laurent - $XX last relatively Inc. than business (USA), Vasilescu Small,

"R" Okay. quarter, And year for for by Toys Us maybe? then last

Michael Dennis Casey

sure business. Oh, Macquarie of "R" Laurent was I not Us some but The two quite $XXX about about of them quarter, it I'm Toys $XX by got Inc. (USA), - Capital portion last year have Vasilescu an million. million contributed

out four And on helpful. mentioned China, any that business. then Very Okay. your out wholesale re-evaluating the on years? And over thoughts shake some I on then lastly, think where parse could updated China China next further? thoughts you you Can

Michael Dennis Casey

China think a still big is us. opportunity We for

United XX portion low China. the every to is four online about with being relatively been portion XX%. brand to The born number about some relative children has it's States. in brand You've building. of built the of about United awareness That's The Carter's the year business but children the bigger Tmall. million of the Still times in got awareness, States,

to about So sales comparable I'd now $XX this to last year. just year. forecasting for say we're million that in it's China context,

heavily We has wholesale been since in fall sales to doing started model Our weighted of eCommerce. we've XXXX. the China. launched business in That

they'd rate partner store growth slowing be wholesale far fair been best And to focusing we'll would near door expected, think the on it's our up but so the curve do experience and the I opened learning Our of help would productivity. stores. say, term. smarter The them steeper about they improving XX for our say I to it's suggest partner, that than

growth you'll that expect We Tmall, wholesale revisit through see retail and arrangement. the more we'll

$XX through keep some We portion of million good $XXX we to progress. the next informed we'll forecasting were year, $XX going As a wholesale. that you was opportunity. be move years less on come million; still of It's through the million five to than might our it over

we'll the Thank a of best Vasilescu the very So consumer, do better expectations. Macquarie to what's Capital important you and Inc. to meeting consumers' much and exploring market, - understanding Laurent continue the doing luck. job best our (USA),

Michael Dennis Casey

you. Thank

Operator

America. We'll go next to Heather Balsky with Bank of

Heather Balsky

my taking for you question. Thank Hi.

seeing? thinking talk originally your what adjustment The is previously? discretionary quickly, comment you planned about what And the exactly for you that you I levels, guess spending? – are can were first, regarding Just in guidance

Richard F. Westenberger

million shipping Well, spending. brand invest to we we have areas to the addition of last on call discretionary our primarily, eCommerce. expedited that areas said $XX couple in other scaled had hoping areas in Those marketing were around that a are of back, we and in

by situation back We in we we have that as a they over, under be some the responded have great organization, and discretion when those have historically is will well. things this expect case and the scaling that top-line pressure,

Heather Balsky

Okay. – – was Well, the it's talking factored because I Oh, guess, in you're it – expenses? to it but was was with earnings. comment sales, so regards

need. them that? the to question your And it. partners a with you're and closer mass then, management lot and to what other working of I'm stores tighter hearing you're around retailers is with how seeing Got inventory regards we're department kind Okay. and ordering with from curious

Michael Dennis Casey

seen of slowed model in It for We've very it – for healthier much years on our us. actually I recent wholesale I – a that's and created part. good business, initiative growth a rate that in been their them think but the has has

unique in have a apparel. children's we So position

much dive you creates sold than The healthier. And at wholesale major products as "R" in recent at with more retailer of what of Toys recent I growth call, a a doing on is last wonderful with year our this years. I've chase business less on realization, shared the And customers healthier seen every years model. them. with do is better mode. in for More a our a them are opportunity This inventory, less seeing Us young we're it, price bankruptcy margins, higher been, in experience in week. We has that into That's they're deep major look children's insight every apparel. clearance. seeing have We

X of XX that's our portion Us sweet to XX% apparel about age Some in of segment. Toys That's spot, Carter's are brand. more sales the the or "R"

business last year. for good retailers good opportunity and a that Toys that's the very margin has Toys portion direct And sales very And an why so of us. Us the some more us, for capture or in had Us customer our now historically have other been to "R" million $XXX "R" customer

and I they've in So recent new their actually capabilities, our of inventory leadership. of in because improved has the part cases say would improved some technology, years, in in invested health management They've business brought wholesale initiative. in that

bullish more been actually than years. recent we've in on model we're wholesale the So

Heather Balsky

much. very you Thank

Michael Dennis Casey

welcome. You're

Operator

And next we'll with Cowen. Kernan to John go

John Kernan

for Thanks taking my question. guys. morning, Good Hi.

Michael Dennis Casey

Pleasure.

John Kernan

So in sales I just wanted to walk guidance little bit detail. through the a more

recapture You think half plan said Bon-Ton the bankruptcy. of I to Toys Us you recap you'll – "R"

at the guidance I it's $XX year-over-year. million sales I look roughly think if cut,

the year? there Thank did give you is So International incremental an reduction us you. some to guidance for segment? other And the

Richard F. Westenberger

"R" Bon-Ton. the the in Toys also off additional we so John, the reduction to an have made We've to for year. made revenue, certainly far we're revision and given start that just planned Us

with quarter. quarter, have now are Mike but into be We've second seen first the the Retail what will in so there on far. a experienced we weakness, as business. flow extended through those in seen turn we've mentioned, Canada. continuing U.S. We've some believe, in effect, starting we So weather the basis warmer it given issues weather, to in Things

digit balance you're guidance for full to the the the International of we be revenue that's getting range. likely full in year. will So the what seeing up the mid-single in positive for expect X% year,

John Kernan

just then question, relative Obviously, elevated Thanks. sales. And a little Okay. one inventory. to on last

commented year? that the to give through is getting can related just gross in and Hop level down without us But your I a think we margin Mexico. lot inventory pressures significant confidence it the you rest as you of Skip of go that

Richard F. Westenberger

Sure.

up would Mexico. Joys, so Skip – end first or excluded business, up roughly XX% If if new at about the quarter. including the It at Simple Hop, look the X%, of you the be positioned you about

is just new that businesses. of some anniversarying So purely

a customer the mentioned, high. as in Basics overall, quality very think, was Us particular assortment. Toys of is I strong I Baby "R" Little our

have. If highest core heavy our which annual think you It's of – program going inventory, It's you of We going be that assortments. that. last want to beginning part is on for we're to an next inventory, inventory that's margin the at to are the our (XX:XX) just year. the

the be So of for homes of that and quarters. we're down over couple there'll lot we here think expecting next that a work inventory, to

I'm at concerned not particularly So about inventory position moment. the

John Kernan

Got of it. Best Thank you. luck.

Richard F. Westenberger

you. Thank

Operator

Quintiliano next Pamela we'll with to go Okay, SunTrust.

Pamela Mia Quintiliano

question. my Thanks for Great. taking so much

Regarding historically, weather, you when less the when a been there's fashion when in turns? there anomalies way see we're lost the about weather, component? the the Or sales weather more to the Thank thinking do is demand basics think pent-up and about about you. just

Brian J. Lynch

these we XXX% a about replacement. Yes, got summer, year after – mom's do actually the spring that. that see think children, their fact wardrobe a about young When you

even weather here just Atlanta, So – cold this we've had to in spring weekend. starting this arrive where has

as last that basically young wore of mom turns, spring the a to company, the historically and she's our at garments expect got do summer. weather child we out, XXX% replace year comes when happens that because in So

expect So a be thing. would that we to good

in international areas stronger have performance some the where the weather to the particularly stores. to return turning, And to We see is South. have in started customers continued also

hoped. the of and we'd have as you good, apple we but a an warm with so you again, Easter, a not great So is Easter had – at get if wasn't that we When the earlier what the bites decent trend. do Easter, see Easter the weather weather turning weather then two with

would that here demand the when have elevated gets we warmer we weather So spring. would this expect

Pamela Mia Quintiliano

think month a a Thank had to it's ago $XXX, you that, up if a weather to Is if amount spending there of follow your income that? it think now so – versus the were you. any customer, level now the difference? allocating spending of to regardless certain that they're now Or And think about been they $XX do warm? and way there's because spend just there's on spring, for do you $XX

Brian J. Lynch

Yeah.

to She needs she fulfill. I think that has do yet. she that has that hasn't had to

that many something is the on impact weather with disproportionate expect would a apparel. here years over when is spend that the company, weather has young That do I children's turns. happened the So she traditionally has

So out when goods. and it she those comes has she turns to replace

Pamela Mia Quintiliano

Excellent. Thank Best of luck. you much. very

Operator

Okay. Goldman with to Schultz We'll next Bill go Sachs.

Bill Schultz

guys. for thanks me Thanks, fitting in,

question a of the of guidance. sort kind Just on math-related full-year

reduction of projection year, if based for just this XXXX, the million. sales your your So your just a decrementals in discretionary back reduction to is a would guidance, to spend? sense a decremental reverse you're in sort million operating of which sort the offset $XX $XX discretionary in if on it. sort obviously like you're margin. want around of cutting And engineer blow that EBIT reduction the it's – implied spending with I some quick profit I math something of be high the like some doing it's about get kind Why And cushioning of EPS like XX%

Richard F. Westenberger

guidance, our Well, if over we initial operating called you Bill, had for recall a year roughly comparable income year.

I kind really flow also amount. issues through that certain at other of related of the of a the we're historic does customers, the with with significant us. mentioned it now And impacting loss to as start the year, that's these issues facing so And that wholesale given

So you mix have a issue.

present is at higher-margin in of business. some what the in we're of lower seeing And business growth we've than margin the terms lost that

the mix portfolio. going But But be fit spending, are businesses our them over That's margin to the new to those decrement the high some right are have we've to we our why over you shortfall forecasting with income And are adding to Now, of added discretionary point, to very year. we're now the some a certain offset year think pieces effect. your we of of together. how going kind rest operating we're time.

Bill Schultz

I you're a a right which way? point just capturing the so And of retail a of guidance at be about sales account, capturing thinking guess some of sales to that this the sales sort own wholesale as question a in rather market the then well, year inflates you're recaptured that follow-up at than of those I bit? built Am retail sort going some are some that: your into sort doors, your is sales of of assumption Assuming to for

Michael Dennis Casey

capture the Yes, some portion retail otherwise stores to Toys of will "R" our would've expect sales gone we that Us.

Bill Schultz

Thanks, Understood. guys.

Operator

we'll And with go ISI. Omar next to Evercore Saad

Omar Saad

my question. taking for you Thank

around the channels ask sense I or panic Are retailers that's shifts coming control evolution, one does your of as a and calendar partners are kind The it pretty late, recurring start to in starting And the feel weather wholesale other promote some speaking and to soft-line the the to last under given inventory space turn? first of something warm late starts it's seeing been whether weather heavily? is that to the what's theme in your kind you spring, broadly marketplace? years? the wanted of and few more the Or in

Michael Dennis Casey

I'd under control. say more

We seen with a weather well. brands day the see turning, Brian different when we've country haven't in the major in to the see brands. years, as the our is we for have that of visibility turns, But consistently of the where performance change see As can sales starting turn. our said, weather surge our we business we experience that yet. we're over you meaningful to the visibility business, a the we're retailers the all And demand parts just to seen and where doing have And trend. every

still left, season. there's and spring the season So, summer plenty of

more we parts improve to continue country. of the the to more comes expect weather to So warmer business as

Omar Saad

doesn't And given like panicking late the - seem this the are it channels point, just at start

Michael Dennis Casey

view. No. They not. with are That's consistent our

Omar Saad

ask I could too. follow-up, if then and Okay, a

mentioned there? the come guys sounds briefly, tourists those someone weak It been channels, just might in dollar any on think now. Do I the it has to while have starting update your the thoughts like outlet back. you be for a

Michael Dennis Casey

Yeah, through they in been are. the has roof. Business Florida

we than better parts to is with border of business see, borders, where we've shared country the Canadian starting you it we're to – Mexican been. the stores the – So has refer other as much them border

demand the international up. is So picking

Omar Saad

it. Thanks luck. lot, guys. Thanks. Good Got a

Michael Dennis Casey

Thanks very much.

Operator

next Okay. Janet Research. We'll go JJK to with Kloppenburg

Janet J. Kloppenburg

everyone. morning, Good

Michael Dennis Casey

morning. Good

Janet J. Kloppenburg

in we've trends many Just Florida results the question or My though I even heard was first cold saw confidence players because warm, pretty good California, it guess on where assume that markets, giving in other outlook, markets you say in to that is some you business it quarter. that good. there a were from was the clarify

Michael Dennis Casey

our with was consistent experience. That

Janet J. Kloppenburg

to I next a this I Great. wondering I hearing going pricing a were that starting other I'm of feel retailers was then pressure side know Okay. the wanted from was wanted but right. just sure that to that AUC make you is of lot any you and year, up, And to things? year have because ask I cotton on tailwind if

Michael Dennis Casey

it's early Well, on too XXXX. comment to spring

through fall. visibility We have

Janet J. Kloppenburg

Yeah.

Michael Dennis Casey

costs our teams spring in slightly over lower visibility those Asia We'll our And in July. but now are have to year, XXXX. costs year were negotiating more

are We see next we'll over assuming the years that five inflation. some to start modest

that But recent been with inflation in experience years every Our expect realization. we're we consistently to inflation cost product and has purposes, in modest year. modeling price better for assuming offset product lower costs

Janet J. Kloppenburg

this "R" Thanks. to the business in improve? the starts is starting it And your will own on both have accounts to you retail Great. do books everybody see second little you on for Toys out, think So will that – "R" looking at just the then Us a start in orders? question you of Great. with come the just questions. on they two Us, wholesale quick that are may and also, Bon-Ton wholesalers? your recapture wholesale more When of impact and your now what business And sales recapture, liquidation Toys order fall wholesale see to that terms

Michael Dennis Casey

starting So of the Us. recapture Toys get are sales we're that customers, the some to and indication say part would portion expectations demand on indications lost question, our "R" those first wholesale to of with of now I the to consistent XX% an of from our

So second that we in terms more of demand, will think half-weighted. of it timing be

expect closing our in apparel. we margin, half. be from summer. more of we'll to And was demand through Keep high see some will Us "R" and Toys of customers with good some stores stores business the the the portion So is wholesale the mind, our Us replenishment. did in start half we in "R" portion, baby the This a of second Toys then

shopped those shopping consumers So the are we to Target, at as stores, Toys website, sales. in Kohl's, now our Macy's, otherwise "R" who at be Us see as the will would register's ringing, able our have lift

Janet J. Kloppenburg

Right.

Michael Dennis Casey

day. every trends replenishment the measure we So

children in the lift And able so great families are that so sales essentials, be to liquidations I the retail our frequency, and in the product, we'll with is wholesale not retail significant. been impact stores, on everyday these seen say channels. of we've see would of buy young with terms both our And the say liquidation, it's I would interestingly, store some in

the in stores those after has we've closed, have importantly, More a in sales lift areas store where the store seen the nice closed.

the in It'll portion some but "R" big we Us of $XXX million more young of children's I to So, thing view to this closure understand it's disruptive, be the very sales apparel. or near-term were opportunity Toys morning, a long-term. think doing wonderful positively capture they

We are brand. the leading

by to of the We "R" have sales children's Toys Us. realized recapture the in largest the We're in any been company have positioned market share that young otherwise apparel United would well States.

Janet J. Kloppenburg

good quarter. to say congratulations Yeah, forgot I and on I a agree,

really You guys well. did

Michael Dennis Casey

very Thanks much. Thank you.

Janet J. Kloppenburg

Thanks. quarter. Excellent

Operator

appears the It like to I'd questions. time, further there this turn are Casey. Mr. At back no conference to

Michael Dennis Casey

you We update much. We'll well, on call your again us progress on interest questions morning. July. you in your for business. very everybody. appreciate Yeah, thank our this and Goodbye the Thanks in joining our

Operator

And We this participation. thank for concludes call. today's you your

disconnect. now may You

Michael Dennis Casey	Carter's, Inc.
Richard F. Westenberger	Carter's, Inc.
Brian J. Lynch	Carter's, Inc.
Susan Anderson	B. Riley FBR, Inc.
Anna Andreeva	Oppenheimer & Co., Inc.
Nancy Hilliker	Wells Fargo Securities LLC
Laurent Vasilescu	Macquarie Capital (NYSE:USA), Inc.
Heather Balsky	Bank of America Merrill Lynch
John Kernan	Cowen & Co. LLC
Pamela Mia Quintiliano	SunTrust Robinson Humphrey, Inc.
Bill Schultz	Goldman Sachs & Co. LLC
Omar Saad	Evercore Group LLC
Janet J. Kloppenburg	JJK Research

Carter's (CRI) 26 Apr 182018 Q1 Earnings call transcript