CRI - Earnings call transcript Q3 2018

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Operator

Welcome to Carter's Third Quarter 2018 Earnings Conference Call.

On the call today we have 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 todays prepared remarks, we will take questions as time allows. Carter's issued its third 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

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

Michael Casey

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

we presentation website, share like to our on thoughts you. the walk on you I'd some business our with Before through

during third sales As reported segment, have saw third over to growth plan Comps an for We demand in trending less in retail in weeks is growth the cooler the effectively our in our down Labor Labor respect were that retail thought our shortfall But the not Labor value have possible. not this was had messages our Day up our shortfall X%. our retail did in and now best ahead quarter with by significantly. our of communicate our was X%. the XX% suggests our trends weekend of Day traffic of with to through growth comps had in Day seeing product expected analysis we the strength proposition. With demand we're lowered improved new our over pricing fourth fall We to the expectations. XX% our nearly comp up higher Our planned in and the better conversion decline followed Labor product that offerings during our largest marketing lower were comps Thankfully occurred our from than unusual sales promotion quarter business. and the all with traffic In competitive. driven comps realization, very plan. performance did performed rates strong quarter, up the holiday and quarter morning, [ph] Day holiday, customers lower weighed XX% holiday on achieve the international In Weather the performance followed objectives, has price sale, than quarter, holiday quarter stores trends we by replenishment offerings. the Day, that of turned Labor we weeks line end of double-digit third and our stronger the currently traffic stores, our our

fourth comps stores to [ph] the and quarter X% in quarter continue co-branded Our growth our date. stores third performing double-digit with be to best up

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least our and co-branded be Together models. provide to relative more store we XX% return to XXXX, our grown store stores stores our productive with most are year, by portfolio. Beginning these portfolio. stores dual-branded to of investment stores other XX% Our the mix stores, our the stores XXX on open at of this plan our have of our about highest over side-by-side improving to co-branded

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are multi-brand customers. customers our Our most valuable

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year. planned capabilities next in We e-commerce Mexico also launch to

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the going risks product new Some the cost and forward we're tariffs. to assessing exposure rising are of

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percentage less Just point every at unit cost. for than in our product the increase $X.XX to context, costs

we value related material from to earlier consumers. XXXX imposed So significant believe even a be objectives. expected we with imports are have or on on impact Tariffs not our XXXX this year will growth to offering the price increases, China

to said, those Our China, a given recent this will opportunities and excluded exposure years, we countries. were is been negotiations. continue to monitor product cost and the from categories In other situation lower tariffs. reducing largely imports in That fluid we've our trade

tariffs reduce pursue enacted, reduce risk price to than impact apparel, the to plan year. next of we Given on China tariffs spending additional additional higher increases If and increases. will we beginning further are our help of to cost mitigate the planned additional exposure

in July growth during weather. to on In in Consumer transitions we terms intentionally highly and the business of were forecasting third forecast quarter. dependent cautious difficult guidance, in is demand our seasonal

the risk of in in in and early historically sales fourth which company. weather our forecast the not largest did country Our September The in the parts the July weather lower quarter. month is other contemplate of unusually hot is the Northeast for

nine go year. this We to have weeks

may downside pent-up third product given we good fourth than a each in very our Carter's outperforming for in tempered the cooler baby demand there offerings currently number we're seeing outfitting. years, our be Historically believe we've fall have one is Given we quarter quarter, is and our for what have seasonal believe during experience changes more upside surge We're good. our holiday our as in that's fourth quarter. demand brand objectives we currently business. weather in sleepwear. growth forecasts. seen in forecast, the weather Currently seen apparel for growth and demand the turns In our recent what is and year,

cooler higher quantities five market share the product are weather Both turns purchased categories and holidays. nearest end as have during in our the year We of competitors. times

strong seeing playwear, holiday We to a response added this are to our the Carter's also including larger our brand sizes year.

challenges world homestretch to start strong consecutive for have in XXth record Age new we a gain To investments best known the of want expect be multi-brand in of to share. I'm in sales our a In young past year. strengthen We despite on of we made and two sales source to children's outperform multi-channel, the own this growth. all needs young no I serve ahead. children's our in this apparel. business of grateful year and apparel. the our our and positioned focused profitability year a strengthened years other We and best brand year. We summary, who young uniquely provides best our the our the growth in what are thank with Our and are the knowledge Up of in brands children. year, off success a Initiative business or model company has their market to believe will performing employees of significant the the is in finish brands commitment our to strong us delivering and families to are of of for reach we the

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

Richard Westenberger

Thank charge materials GAAP-basis results of model. million statement GAAP these quarter. of the and periods. related in everyone. $X.X $X.X I'll an begin year's in a Note results for adjusted X speak results included charges on net This my exclude today's related our QX charges results our page Most basis. Last will GAAP our third that year's costs with morning Good of on you, China adjusted to Mike. principally our QX comments income restructuring included acquisitions. to million, today business both store to changes presentation

of included earnings our include you basis review of our on to presentation presentation. I the and X. release Our Today's to results reconciliations this evaluate year-to-date basis GAAP GAAP encourage you adjusted information is P&L as results. page

in X.X% in X segment, The Sears on slight and year. by driver million. third to to Turning declined were wholesale with year's the $XX of retail results to weighed Discontinued our page sales some "R" our year, this lower our these sales customers last Us, last in highlights Toys and sales third to compared principal quarter Consolidated decrease growth this quarter. of segment. sale net international offset Bon-Ton three was approximately

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adjusted to margin higher changes was reflects X, This by shipping our in down margin. points basis comparable third gross efficiencies. compared income XX adjusted the last page roughly Adjusted business, mix customer to year. offset quarter and XX.X%, with beginning within sourcing year-over-year. and our wholesale Royalty P&L on was Moving costs for freight somewhat e-commerce gross

adjusted last rate year. was SG&A XX.X% third compared Our the XX.X% of quarter in to

capacity, few past our we've new over we've agenda, diverse delivery to omni investments our channel infrastructure As as of e-commerce growing in as marketing, retail strong calls, capabilities, previous investment stores, and had and years. enterprise. particularly the support in retail in invested company well articulated and businesses a support technology on speed We've distribution

believe years investments, to in ahead drive the company. they full and benefit We productivity enable all the our help capabilities across will and have of the not quarters these greater but business of yet seen

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was last million million versus $X Third other year interest million about $XX Interest to was in borrowings market compared than net interest and and a higher rates third to higher the last quarter quarter higher expense expense due year, year. $X ago.

XX.X% the effective Tax of to at Legislation rate tax XX.X% declined a third last Our benefit U.S. Reform reflecting year the end from year. quarter passed ago, of

count compared declined our Our X% to average share driven last to by year, repurchase activity. share

the Through year. year-to-date EPS about our So Page quarters grew again, adjusted first quarter sales bottom from XXXX, was were and on of X, over line year. EPS comparable adjusted third a $X.XX three results. down adjusted the last X% last summarizes $X.XX, net X%

balance a available sheet liquidity cash approximately with totaling with We of X, on cash the revolver ended summary with page our and borrowing quarter and our on strong to hand $XXX Turning flow. million. capacity

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the expected, including As initiatives digits high up the our quality for new a across growth believe receipts of ago. currently we the hand with inventories higher timing present, business, inventory over on At several inventory. reasons, net replenishment higher overall single is and inventory baby of year were good inventories

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year. a million capital Our for spend approximately now bit projecting has expenditures moderated this and outlook to we're $XX

capital total million share to continue of $XXX shareholders returned in and $XXX against we We of of three to comprised million a return our have execute quarters, first Through million agenda. $XX repurchases the in dividends.

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provided Our consolidated businesses, adjusted Adjusted The drivers profitability first for wholesale operating in quarter. in were cover third some in for XX.X% quarters which year's of compared more of segment results detail. reference business XX.X% U.S. to this your decrease page XX. retail I’ll have margin was and been last on lower three XXXX our the

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your questions. we’re remarks added these to With

Operator

[Operator first McShane sir. Instructions] from you, Thank question from Citi. Kate comes Our

Kate McShane

you. question. for Good morning. Hi. taking Thanks Thank my

Michael Casey

Good morning.

Kate McShane

"R" the forward was a on you start still you what any spoke again, see us sales million would you maybe us Toys of us if when I through there originally told captured demand environment include has us on of overhang. Can to the recapture, to you you out walk of in you then we to you what quarter? your million causing see? July. liquidation when like the third was through recapture update Us you wondering improve, $XX And subject, think just you achieve walk expect towards outlook and does could from "R" additional the had pull could the been XXXX that's Us, the some during same the $XX Toys And last

Michael Casey

So we plan close that correct. to of about in of is million after had We to that lost put we your make recollection million all Us about "R" $XX we of Toys of and - context, $XX stores. balance the year million were planned we Bon-Ton heard just their probably $XX shipments

of as largely of about have of sight So million million we a by least half demand. of largely through was felt July at we on million July had and through driven recaptured additional we we additional demand mix that, assumed though and line probably wholesale – $XX $XX about $XX the The wholesale. from to going be

up ahead $XX you or year, $XX an $XX significant two got had we million. in probably rounding million we the - so, that. Then the I'm line we've today months to about here of of a So us. we're additional million balance know very picked about Through of sight of

to We $XX balance the expect of million. have the

that In was probably an We to seen as we for forecast comps million would was of the which had us more a XX%, down very in Day, disappointed we’ll think than we a say Labor holiday, Labor Day number, confidence that that performance. we XX%. up Day business, second so that million. the performance. some recover analysis about the were to be we level the hoped our our bigger during only Labor to our suggest about the terms I've what were customers. in disappointed the promotion with were up in Day comps least those going recapture Rest if that that we high So our our impactful. probably ship other then had Day at would Friday I promotion, in Labor very to the had in I and over but were weeks It's the that followed And that were shared felt to performance million would is comps holiday. $XX exclude up the the planned Black two with holiday we around portion for important quarter, Labor we be X% that though you $XX of - $XX X% had you assured,

consumer in in fall has than And they what holiday. to saw the starting this we've over outstanding. our so seen October been did embrace And the Labor is when that's it demand warm we the what from cold to in spring turns, from and the surge a So performance weather over our recent we then business and holiday collections warm, to Day turns see weeks. much more the we've for in When in cold years. and product offerings seen the

That the in got So the to continue weeks large is balance us. to seen of been we've what We very, assume through business has nine good. we've said, going ahead recent year. of leaps don't very want very

- we're the that with we even to short fourth came not we're we do quarter, So up realized our third in determined quarter. that

So these the tempered confidence a level we've forecasts. forecast where high in have level to a we

Kate McShane

question period? Okay. comment, message if mentioned think think just more competitive - time usual I in up Day Great. especially more why one you I had really you pivoted just proposition, value having remarks, what could prepared about that bit. the conveying the the known think up little around already And was Were than messaging follow in good do your Labor a I the you ask as do this wasn’t marketing brand your value. you that just it because competitors wondered is

Michael Casey

always [ph] can we Well, say competitive. that

the promotion was to our the retrospect, I think of not heavily product the weighted too I offering. and strength think to marketing message in

are changes saw over Day. responded what after consumer So made And those to it. some we Labor the of that we the

Kate McShane

Okay. Thank you.

Michael Casey

You're welcome.

Operator

Thank you.

Fargo. Ike Our Wells next with Boruchow question comes from

Ike Boruchow

first at the for gross tying is some your months to on on understanding seems needed ago, I guess, little but margin the it QX are kind to couple be than leverage, inventory ending on you're QX the walk kind pressure kind is you're you then you and of given and you us gross maybe a outlook a bit little maybe a margin. the morning, Hey. sales you Could Two more everyone. question the last thought. of heavy to to are now promotion that’s questions, of you QX know, that SG&A of holiday markdown meaningful and Good have just looking relative through more your margin implying curious Richard, bit outlook? like some expecting below, going thoughts relative Just maybe

Richard Westenberger

to relates the pressure I business, think They're of largely there it anything. Well, we've year-over-year as Okay. a margin. more trends that few gross are today seen in the points than

gross we've an and been through we So One quarter very loss you margin the have in lost what customer wholesale. there probably Within and retail They that wholesale, mix, coming variable. high growth very been change costs. some from time some has of the units. end the clearance, Bon-Ton we costs issue. that. is of margin of business lower And Bon-Ton. some a issue the and a moved volume, we and quite probably has effect structure That's for have got of by of less quite e-commerce The with the That businesses, just the inventory faced more which are number the we bit Toys within are in "R" some minor made good in shipping margin although growing higher they to good fulfillment us. of progress had not businesses TRU the margin was with same just is of the at Us

in same we D.C. enjoyed distribution had the So efficiencies Braselton, haven't quite our that we've

per gross - margin to chain, that sure I'd they some to those did affected international has of to units in Hop margins seeing think lift in demand efficiencies a of buy upside to better in all we that rapid in the on to margin coming well. margins a as Skip are year transaction consumers driving tend make supply get pace the a efficiencies expedited our I ago. the And investing from in well more than expecting which Canada. slowdown say shipping we're orders other some coming consumers more in year-over-year We're the nice are rate. through and we're as

Ike Boruchow

gross line? your more margin with expectations what say QX are you detail on can the Richard And on for

Richard Westenberger

continue a relative third I got to QX margin of we'll say I QX the retail Well, that we modest going the that where have from we sales higher pressure to to nice enjoy proportion would year-over-year some quarter. do expect in serial rate. left

Ike Boruchow

know, are years? the same digits and are guess single I taking wholesale, that next low good given better guys the topline next way, US place, growth obviously question, different I'm and algorithm comps the year you growth long just now view on or you on are Got you've - to of you prior able know, type us as things are product growth just guess the it. curious there's some and And costs quarter-to-date. are a the then in margins do to it got the direct your having just breadcrumbs you guess had year business inflationary. sourcing I balance I last thinking kind business know, differently, how of said that you you about of to international

Michael Casey

Well, we'll more. know

we We have balance that margin felt took our through disappointed developing done have terms we��ll more lost do the and Toys the our But come this next past to and would and We work as and balance back. though a business both of customer plan the point in And better. step high - lot the year. year XXXX and very revised to our a board we year sales have to But assumptions February. we Us retail We of margin. "R" in those forward. in with Richard's the review topline is were third we now profitability. between we’ll probably two continue we'll year. possible in we’ll our big margin going operating a with growth plans of is in quarter, our envision to that and out good long-term growth We'll and But have going year our year. growth a plan share expansion you to We're have early and the forward those relative are this have of misses this good that

we'll more share and through be on today growth to more to ‘XX you. XXXX. the premature So for with specific It's have

Ike Boruchow

Great. Thanks, Mike.

Michael Casey

Thank you.

Operator

you. Thank

B. Anderson Our next comes with Susan from Riley FBR. question

Susan Anderson

you like fourth just figure how was to Hi. of weather-related fourth I guess, changed question. from other guess maybe miss quarter original such I out Good do maybe thanks expectation And your guess, follow-up Us? trying Ike's versus morning top I'm my from question it bit to think pull-forward I little I seems for taking line a about demand the a "R" guide. then the better. quarter, factors what's quarter. in as much because on on ask some for Toys third wanted is

was So the Us But come on business of seems the front, down loss Toys margin - or like known. it "R" Bon-Ton like bit. a that's the

kind if That just, talk be of, outlook? could maybe what's changed great. within So would margin you Thanks. about that

Richard Westenberger

have As big cautious X%. We've And a been that it to the just healthy fourth we Day topline fourth to I quarter relates that our quarter, dose today. volume X% with X% roughly would or for closer of that. growth which is is implied about period. be seen the being talked moderated shortfall guidance to think Labor a We've there from

As in weeks is very, at our cautious outlook. very more business are being bit very a these Mike said for coming moment, we're high us, strong the but

change don't the dramatic know On in front, outlook I that there. a our there's margin

lower topline of to for the in good most margin us. business attracts business outlook that which think of retail is we're profit taking the out most where I change of

bit labor margins. I shipping some on think margins the they, the we a I we is in cautious shipping we're mentioned factors shipping and to seeing are investment costs weighing costs, related which higher on expedited are seeing

Michael Casey

blanket weekend, Day, how we're days keep mind, Labor unusually weather third we're in New Day Labor in to quarter, it the pull after played know, is You a question the much it in was And sleepers, York be Day happen the more forward. role we Labor did, selling high.

marketing things would Little for message the up the are we third impact in quarter. against domestic are demand. Toys international year-over-year half, but of in they we've not than demand that we trends weather understandable of Carter’s things than The it seen lower. It demand. growth was other We up, though felt international "R" that Baby say in good our it's was us, demand, replenishment we've e-commerce first the Us. again, in as and was domestic But the And what in half worked the Other look trends - was lower growth I'd had mark. we other Basics. replenishment the demand core referenced double-digit had Good, good impact. growth rate excluding So missed retrospect the an less the weather, have in had expected than the

those other the customers, both get store from just Us seen timing we've away not store good we the sale. for. the replenishment and "R" of the trend Toys as had trends good sales replenishment closures, further in With we in And own our better been, the in had hoped as have

product Toys basketfuls a with of that people in trends see those sales. pull forward "R" starting is product, So There and our loading product, their - store was better demand Us are we're were so children up there's question. no to outgrowing closures, of

Susan Anderson

about. That's just if one Maybe Okay. And then follow-up. you helpful. could talk

there's you in across about baby the If I young baby And guess, heavy you think do pretty category. well. feel that, see bit maybe sales any? little pressure talked inventory you I doing with a But then and kids, size-up lost initiative the like both you've

Michael Casey

so very well, did Amazon our Wal-Mart’s, is good The business there.

to elevate We the TRU have good offset baby business in accounts, other just didn't situation. them enough

we put does put Births our on down, are baby But to watch pressure So that. business. goal overcome the to so - continue that that. that is

the to growth our and on efforts continue customers core of sure business in down with on make focus our wholesale to our continue company. direct So drive double we channel our and to we that

about business that. marketing think press grow baby with I you showed our we've to and we we digital be serious customers many that continue we'll and to and we we're efforts in Kohl's invested to continue the successful presentation many We've that at think very know, had.

marketing feel with relationship Carter’s by second our of well-received a phase of to old $XX the most of the of of was million extend The came launched Age the campaign. about by we terms kind July to segment retail initiative. In about was You the their product business QX sizes. our and the grew Line XX Up, and From year we customer. way sales that as X With bigger both Kid from good In launch that the in It Start that And it customers.

now a recall that in does if So opportunity from represent $XX garnering we're few for that company. strategy size, one million added years sales and you ago, initiative. our size date that a [ph] about significant We

that over opportunity can sizes, adding million to of address XX, So year few and for the point market age XX each fully XX an and is we X old $XXX that a company. to share of

feel and share, incremental our grow well. that continue So with we've to this on that make and continue we got Age but as good to we're going to strengthen business which sure we Up and about good we’re to feel about baby going focus opportunity we that

Susan Anderson

nice so Great. much. Thanks That's luck quarter. Good helpful.

Michael Casey

Thank you.

Operator

Thank you.

next Balsky Your question comes with America. from Heather Bank of

Heather Balsky

Hi, for good morning. question. Thank my you taking

Michael Casey

Good morning, Heather.

Heather Balsky

Morning.

share. So How is pass your a year promotional? quarter-to-date? think more to environment And ability do about to to key has environment willingness if promote how price aggressively the expressed the competitor you get drive does promotional through next pretty a

Richard Westenberger

number large say we're trying time seeing I’d promotional. a good wasn't By improve good I would less the of end be that but margins recall inventory the focused at on Sure. the our I say can't it management, and a it realization, is customers price on improve sell sell-through, continues to fewer when promotional, every year-over-year to retailer clearance rack. buying with of brands. season our better having units,

good the continue improve So noisy get it retailer But of trying know of sales. we is messaging. in be to the - to every will their profitability terms

just cost. we're forward, us and shared you looking of I with every for represents point increases So $X.XX product, increase would modest price unit cost price going like-for-like percentage the modest context, less increases in and at what than as as characterize for a

our than substantially points do - average less we it's price are So everything $XX.

inflationary spike would XXXX in XX% for did growth all are those our that prices. tariff. cotton we reason say improved issue about cotton good challenge very to imports recovering comparable from to that we an as topline exposure a consumer, what a crisis So from the cost had at and passing be China pricing think we would we that that back in I we with to job that - and and the that the to year that increases subject by that $X.XX cotton during normal the about the looked during will saw along tariffs some unit crisis not of good be the the even

what's with a think handle I price have So possible the on increases. we

offering. Our has continued strengthen product to focus be the to

Michael Casey

Our quality brands for value. and are known great

But competitive. transportation were oil prices up. will up, be up, cotton We prices were prices are

margins. sense of of to into terms all what for us continue we've makes to improve try so our that And taken consideration in to

‘XX. So that's plan our game spring for

Heather Balsky

margin Are they, with about window back guess growth Us, And there longer some wholesale gross the to your you. offsets Toys from partners. the Thank "R" because of forward? you coming no lower that mix think your How the I - shift? opportunities margin do in I guess and going

Michael Casey

Just was that the large to is "R" reasons Us very be richest-margin business, a was by clear. The margin one for why and Toys customer a us, of high have. product baby we categories baby

customers other range broader of have larger selection the of playwear, ranges. size So a the

baby offering. more go up it of – So the the the margin the product the as bigger the doesn’t you have rich child, garment, fabric, structures the bigger

have margins We with good the customers. other

initiatives so of margin driving And around is a number there management. inventory

China a Amazon. in Skip up with profitable Mexico In new Hop, we our businesses have model We’re going scaling more forward.

its prices great lever, forward. our pressures, sourcing modestly. some these to new but Our to going plan the products up doing the biggest as we markets pricings we take team And source of is job see not lever, exploring inflationary

Heather Balsky

Okay. Thank you.

Michael Casey

You’re welcome.

Operator

Thank you.

Our comes Laurent from Macquarie from Group. next Vasilescu question

Laurent Vasilescu

it comes the anticipate for if play? how – gross any China you to with charge. other to a I of few we percentage out little million And regard effects that next sourcing I wanted forget P&L regards charges that the tariffs go and questions. Can much margin can out, what come if on called my China revenues parse thank down $X.X can of but in lastly, Can you Morning. And to rate bit into into up you to dive SG&A. into follow the then taking quarters? out maybe - with over you

Michael Casey

Sure.

other comment me Rich - then China. China, will the question on with respect let address me to your and Let

the in to than So the we has look units it's product. China. been of from, XX% that great drive China decision terms our at about source - today safety, our quality, execution reliability. The where from n things we total source place source And we a less when of our

and You can for never doesn't cost. is go the of shows some but world up, lower the component cost, a much good, parts it do last to

look which, based That and in said, Bangladesh, many suppliers the year, to been China, we're only they're four you those Indonesia. past of against China with working an we Vietnam, are thankfully do our not exposure but exceptionally for, things So place know, based we've - that to in been good business. we have over has this tariffs, Cambodia

So products. they're helping us necessary world explore other of from the to possibility China where if shifting produce the production parts of they

doing them So handle can these XX company. in the the volume beauty be this we And past move. places if the That's suppliers over have business deep product. to developed years. unit for past We've year we've to working great of relationships flexibility our Asia explore with with to the need other that been source our

Richard Westenberger

margin this elsewhere the have severance, employees opportunities to China. market, as employee The in related for market charge world. million, take was a we that same the our roughly we It's had business inventory of lot $X relates China. own that it with China staffing And about recorded we're million was that we've took. don't provisions it don't to thinking requirements to so in on for think to this see million And or specifically, unique the then we to inventory additional so in about we're new on labeled market going that $X.X the gross is $X.X model that

$X I to the to some related a of could next we do a - couple that think a million provisions So cost. additional possible over envision and of material million I it's couple inventory would company. to the severance. be those have couple wouldn't quarters related

Laurent Vasilescu

inventory quarter? terms the Very rate out of one was Thank in the shift of then think for Okay. slides the growth of you receipt. it's number? of end helpful. And the called Could what's that And growth there inventory fourth I what you. a timing XX%, then of quantify in that anticipated the

Richard Westenberger

think the be making toward good year I Amazon bring X% up really our where said inventories we that of end X% that. sort loaded we We're by year, to The at or front the of inventories end. At was Wal-Mart businesses be retail will at and progress end I XX% there I hope specific Target QX. say of they've few performing are chosen exclusive in at end some programs in then are to would as And brands programs all early. said well. that

we're that of are there. number or up If a the the points mentioned year percentage few X% So taking I've inventory growth. factors up is X%, some that end additional probably

Laurent Vasilescu

one last if Okay. then Very And helpful. could maybe I squeeze question.

fourth Can the and remind the of fourth of was level terms year's us double-digit In to cadence then quarter? guidance quarter? the last quarter-to-date, for you maybe that comps the monthly X% for possibly high comparing what

Richard Westenberger

year and We [ph], was fourth well. quarter up was last October X.X the November about X.X X.X had at quarter. X.X finished The as December about for we

Laurent Vasilescu

helpful Thanks of And best Very very much. Okay. luck.

Michael Casey

very much. Thanks

Operator

Thank you.

Our next question comes from Hardt. & Jim Chartier from Crespi Monness,

Jim Chartier

- to impact lower so a ago years taking couple I understand of just the morning. Thanks for my similar sale, international the had potential of the Good you dynamic. you a know, wanted questions.

saw to this consumer that from overseas percentage So XXXX, to time and does your direct what last come today compare sales how impact? XXXX we the of

Michael Casey

sales. international So you’re talking about

So – go ahead…

Jim Chartier

year through consumer international to in business? So direct

Michael Casey

when sales… it ago geez launched - the international we e-commerce Oh, years

Jim Chartier

out in XXXX, in exposure us saw yeah, what And you exchange know direct guys we your for business curious is consumer rates call. much was the to international you and similar, a broke to just it I more So XXXX, change dramatic on your spending?

Michael Casey

At a least, has – higher around on it its – demand demand is - demand, ago. so domestic than around much exposure, around it's international years growing the But the it little That's XX%. e-commerce faster its was XX%. as

Richard Westenberger

- outline in Jim, quarter about in down represented the our XX%. been QX. international about XX% in about where is It of And year-to-date the quarter it XX% has our of business

Jim Chartier

impact some stores or And still and in Okay. in destinations. higher stores well? then in those ’XX, your open as impact tourist I an back believe ’XX. Are you are outlet you saw seeing of any those stores again volume

Michael Casey

Yeah, a little bit.

Richard Westenberger

are. we Yeah,

Jim Chartier

sure And not this… I Okay. I then am miss

Michael Casey

I are to saw, customers. large With the think, Florida international the I stores contemporary announcement

It the with I the wasn't line was think meaningfully in different. performance I generally think chain. year-to-date,

Jim Chartier

on on then to China, I'm this, And but tracking for said And not if loss – Okay. terms okay, a of is sorry. then you sure in China what XXXX?

Michael Casey

million. $X Of

Jim Chartier

expect and the And when for to you agreement do finalize new China? business kind of model

Michael Casey

it a the to hope We place. got hope new year. for year next we've the in We model balance in finalize early

Jim Chartier

Okay. Thanks. luck. And best of

Michael Casey

All very Jim. right, much. Thanks

Operator

you. Thank

question Jay next Sole UBS. with from Our comes

Jay Sole

you. Great. Thank

trend. Mike Can stores I know, from the some of much different the the doesn't that’s so stores? centers? that performance outlets that’s you just seem overall business your wanted Because been understand called you there. been help know, on - the different weaker you performance why created unique discussion other you it has like to your is the us and as What other from about You that retail malls up know, in retail outlet has follow outlet probably of maybe

Michael Casey

really reasons outlet renewal. and end to our that, co-branded XX, be know, to e-commerce minutes But these thumb brand. last centers to to there's lease Well, of success chain of outlets XXX, Mall, own rule remotely the I so, for XXX for historically stores these considerably relative I And cases closing terms you profitable Mills, the them. in we're stores years consumer in our But so success of located in exceptionally good more just And Sawgrass of were come XXX some the analysis probably drive a outlet or outlets ago, there's us. XX as Orlando, good saw, been had up centers opening with think have those the to experience, a that they good our center. business, stores for outlet in with that underperformed centers, good have the are us. the And we’ve outlet I those some Dolphin stores of really might and we the closer the think tending portion fewer

look the sense up consumer. looking and stay rents. by much a And loves the to it tell significantly results consumer at But do to putting in we we brands think stores reinvested, where stores, attractive location. I closer energy for have off freshen that's renew shopping these would us. new put of better to do need better convenient when the it convenience to very and It's we it we're years make decision past a we're we're co-branded our lowering loves property the to leases, a owner to. exit doesn't we the don't declining in decide The increasingly concluding it we we So what to one would pointing, make whole centers two the outlet make for co-branded those arrows into experience these to the us

these of up closing stores so center, come a we as be for outlet them. will the renewal - these outlets number And

Jay Sole

Got it.

Richard up follow margin if quarter. Okay. That’s in operating maybe this we interesting. can segment And super adjusted the on retail

last you margin the on margins think like e-commerce technology, marketing called the been possible drivers? brought what Because sort quarter? out And of, bigger of pretty think quarters out, this have you I three a similar know, basis? to expenses, to I on spending fulfillment was few parse much that the in and on the that those is impact what year-over-year

Richard Westenberger

that parse Well, know, them detail. don't I out I'll precise in

the the the variability testing shipping all campaign is retail in those higher. portion are of of costs, on source are I do I higher. shipments weighing of we gets spending some this to we point. this orders, for marketing as spending at of margins expedited of think new some on affected the e-commerce inefficiency costs segment this that the includes so additional fulfillment retail brand on the And think those drove are the are which e-commerce that allocated the and that a the in more that factors marketing margin were that quarter, mentioned I expenses

Jay Sole

Okay. Got much. it. Thank so you

Michael Casey

Thank welcome. you. You’re

Operator

our to concludes I’ll the That turn you. for remarks. Mr. Casey call. call to Thank over like closing now time the back for

Michael Casey

you. thank again business. in the your morning. in Thank and thoughtful progress on call for Okay, We you us forward all you interest look Appreciate Good-bye. on our joining updating February. this our your questions

Operator

and concludes teleconference. gentlemen, today's this Thank you. Ladies

disconnect. You may now

Carter's (CRI) 25 Oct 182018 Q3 Earnings call transcript