CRI - Earnings call transcript Q2 2024

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Operator

Welcome to Carter's Second Quarter Fiscal 2024 Earnings Conference Call.

On the call are Michael Casey, Chairman and Chief Executive Officer; Richard Westenberger, Chief Financial Officer and Chief Operating Officer; Kendra Krugman, Chief Creative and Growth Officer; and Sean McHugh, Treasurer. Please note that today's call is being recorded. I'll now turn the call over to Mr. McHugh.

Sean McHugh

morning, good and you, everyone. Thank second We today. earnings earlier XXXX issued our release quarter The call for our materials release presentation and today's website ir.carters.com. Investor at are Relations on available

the statements Before note about company's outlook items we are that such begin, statements. forward-looking as

non-GAAP could filings factors from in release posted presentation and statements, the discussion forward-looking results time our will see financial After the you these will also Mike. on contained this we of actual various materials now to referenced find that earnings call. measurements a to cause materials, our today's For most the will reconciliations please of vary during those take allows. recent turn remarks, prepared website. In over questions SEC call as I and

Michael Casey

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

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

sales saw Our forecast. in our sales were with line Wholesale in the second the We growth good in in quarter. our quarter U.S.

Our sales U.S. were expected. Retail lower than and International

in meaningfully record quarter planned than were higher second profit margin. a gross by driven Earnings the

spending, a to no borrowings, trended we which $X over better lower the interest liquidity. planned, growth lower income for in curtail position, the through quarter. than continue We ended with costs and quarter June higher operating cash Cash inventories, flow enabled net seasonal billion in

repurchases dividends share enabled million to $XX and cash the be this over focus our continued flow preservation to shareholders margin Our through and on first distributed year. in half

good our summer our collections summer the XX%. and for were our outfitting first holiday including down half, up to Americana X%. the In new a quarter, saw children earnings second Sales offerings, [indiscernible]. themed their per were share picnics product we For response

Planet best-selling Our styling included fabrications. and our have elevated Little and PurelySoft each new collections products

Baby and were comparable our offerings Toddler last year. product Sales to of

product offerings. discretionary we the those start Our lower, selling the quarter and more were to playwear in nature the slow spring reflects sales believe of which earlier

second U.S. the demand quarter, in our In and higher earlier segment. Wholesale we saw

Wholesale Our was growth in driven our exclusive brands. by

from one-stop cycle, the diapers, we one can mass inflationary children's of purchase choosing consumers channel are ease and During location. formula with at this apparel baby benefiting convenient retailers where groceries, they shopping

the children's these an of unparalleled competitive apparel supplier largest to young retailers. advantage Carter's as has

We with second We benefit flagship brand store in Carter's to also our saw support believe retailers. store quarter. the and of growth needs strategies seeing our the unique of tailored the club we're department

of Baby our Our purchase and best-performing wholesale be Baby in share apparel mix Baby sales. our apparel has sales segment have continues the North a America. consolidated a age apparel less is of of largest apparel XX% over high to Carter's discretionary Baby apparel, contributes and

essential which double-digit saw sales wholesale We towels, products wash high-margin better in than clots, second sell-throughs Replenishment core the of were the our replenishment sales Baby bodysuits, in including blankets bibs, growth and our quarter, reflect planned. sleepwear.

We will expect of the growth for year. be good of a the in replenishment balance source sales us

Sales rates. in in to were the conversion due segment traffic and lower U.S. quarter our Retail

quarter in earlier got with Our a to slow than that April second off the and Recall lower were points holiday comparable the arrival quarter, expected. sales a our XX% in weather. warmer late start of few down Easter

sales trend in lower up are sales the July warmed weather June, month-to-date and XX% in our and traffic. improved. As May to comparable due down

we demographics. In by in little consumer or lack U.S. but spending. surprising, in macro type is X% Retail a variation sales find What by variation slowdown on sales variation in performance, suggests the Our the sales very saw comparable quarter, we quarter. comparable of in interesting not believe, our The based down in the XX%. were sales store E-commerce we second were region. down store

household Over difference to in sales on comparable our based incomes. X-point X- a store saw X the past years, we

over $XXX,XXX, to incomes second Our household annual stores points to this X located spread of better quarter X- or in comped in than That X-point markets incomes year. narrowed less. with meaningfully household the $XX,XXX with markets

It's $XXX,XXX or paycheck those It's that are reported paycheck. living consumers to income Walmart. been that higher shopping more nearly of reported annual States are incomes XX% also been now United in at now more of the of consumers with

that believe shopping are shift Mine of with We of we benefiting preference year Child from this in growth our brand. the

this and comping were from sales stores. the about down are $XXX period stores about Comparable about first newer opened Our EBITDA. X% XXXX post-pandemic million in to the contribute and since $XX million opened sales are this better half in year older year. stores Stores in expected than in

long of are our investment of provide other in stores stores purchased We plan acquisition. as stores continue source opening as in continue our unit and economics to our of young plan new customer are declining #X families Nearly for with children. is XX% Most children's closing expire. stores stores centers are convenience in off-mall to low-margin opportunities. as the leases We to attractive relative apparel

dropped March. in our in have in months. level a conditions second consumer in market quarter March the in other by believe our X its the of had since confidence slowdown July, Since Bought this last reported update April, demand. not weakened retailers Confidence sales to comparable Index XXXX. Consumer level had a best in lowest to We year peaked July We seen

thrift pricing. We items, we very key bottom quarter, in-season on competitors our aggressive engage below to pricing the XX% not by race did this with about level in on our saw second store the promotions In pricing.

seen lift comparable would to we consumers volume. a was the believe to quarter, Had unit discounts quarter pricing those last Our matched year. deep second in we the don't corresponding in in have we

contributor down our XX% earnings. the to quarter sales Canada and largest second is the in international were sales International

believe in home quarter. East in on inflation comped retail In X% sales down our second sales and Canada. wholesale meaningful and growth of in We were our Brazil weighing customers in Middle the and in saw lower in comparable Our quarter. sales the Canada spending discretionary retail Mexico, is low-rate we our a double-digit repricing mortgages to the

strength continues to of source chain in Our our business. a be supply

this shipping on-time our year. customers excellent product team and wholesale balance for our has chain been supply to of the negotiated lower costs Our

times turmoil Africa. Sea and previous caused lead factored to of related the rerouting longer Red around forecast. costs our We into has The costs those South higher ships higher

Our cost revised costs Asia. XX% over provisions routes from additional forecast period higher and down freight peak surcharges year. of Southeast we're reflects inbound higher those Inclusive for provisions, forecasting this

the this to This the the months We to confidence sales To morning, announced less certain. living lingering previous the is X are The and in of revision to Retail reflects cost elevated moderated has rate earnings. concerns to largely segment. past consumer extent, our date, likelihood about declining and for revisions the The expected. lesser a extent remain annual and our we our believe over reductions our forecasts not forecast inflation. trend inflation International a U.S. of in interest year segment

this the We and forecast you with we consistent are forecasting with wholesale U.S. shared in growth earnings year, sales in our April.

most Wholesale our segment is business. of U.S. Our profitable the component

We our complementary brands. are the are largest label retailers retailers to to brands traffic supplier to largest North of offerings these We apparel young believe the their and drivers in America. are which private product children's provide

by marketing of comparable on capabilities. and We and price be strength forecasted in the this a U.S. certain key we beginning to believed In half year. in with our driven April, second product points of fall new holiday the retail growth items sales improvement offerings, improvement our that return would lower

We better more but April may envisioned the it market continue time these related we will performance, to enable than strategies given to in headwinds, believe see benefits. take

in our product be on is improve year. offerings those to point pricing lower XX% on products. stores to forecast, and to prices assumed our price To about would of last comparable opening in traffic U.S. The half. In websites, the adjustments previous our half we second focus our of plan we second retail the price

Our forecast that of on about price impact annual income. mid-single-digit is assumes a revised our adjustment operating price $XX The million decrease.

brand our marketing marketing customer second traffic the we the improvement support saw brand are half. additional To and for an in quarter, acquisition. $XX second we and million In strategy, in an increased that in further providing investments

lower months reflect our summary, Wholesale our first will achieved in In $XX and forecast International segment, revised to in In traffic sales. our earnings brand International half In and million invest traffic expect given we improve websites. environment, we the the to plan objectives weaker-than-expected we we we have Canada lower price which annual stores earnings and sales by marketing, our and macro revised to adjustments ahead, targeted annual forecast. our

under consolidated since families have under sales inflation where because levels we and young Our discretionary have spending possible. reduced pressure those XXXX in have financial children, pressure been ramped that to we been with raising historic up their serve believe

through best-selling in market its challenging Carter's historic to to position brand way help plan a this the cycle is apparel. use We young children's period. inflationary national and strengthen leading our down as working

our unparalleled the capabilities value fundamentals. on our style focused to new relationships customer of elevate marketing of through presence multichannel offerings, market Our product reach plan growth are our leverage the strategies our the brands. deepen extend We and to and

With we our business strategies, conditions growth these to we which believe model ability to and the to cash the strengthen generation, when strength will growth have flow improve. return high-margin of invest in resources market our

joined In our Peterson with retailers. new of executives press Head senior who winning Technology. our is of is Carter's. background their Head Retail. Both the our leadership were release this X because of new recruited Allison Sagi morning, new of Raghu leaders we have provided experiences

and perspectives Raghu on expertise opportunities component We extensive our e-commerce have we expect will experience, to Allison to benefit strengthen of believe that retail help from performance. fresh which our business. very profitable their strengthen and

for first the this our and the thank in to will of walk I through on all want us Richard to presentation our commitment of our the their to half website. our contributions year. results help At performance improve time, balance their employees

Richard Westenberger

basis have second second we've Mike. Thank our first results. prior and X, quarter non-GAAP second half summary items half. year's and adjusting X or everyone. We morning, the adjustments had a P&Ls half. On our On to you, in year for Page we included Pages GAAP no and of first this quarter X, first minor quarter Good

Turning to X. Page

guidance relative We our for we have the on second which our April. a performance shared the last in quarter, summary of to call

Sales our product. in were range. Our consolidated Wholesale than result as better line net higher forecasted of earlier a had planned for were U.S. we sales business demand largely our seasonal than in planned, and with

outperformance and lower-than-planned Retail which in U.S. moment. in a in discuss Wholesale sales further offset International, The I'll

guided, gross above which operating were both and of tax rate. a performance, Our EPS had we good profitability, margin and was effective a where lower lower result spending income

quarter, exclusive overall by our brands $XXX performance. U.S. quarter year-over-year our portion driven On Wholesale the U.S. second and segments lower last million in were in Retail Net year. International Page in X sales business. and growth the some the sales of down had X% versus highlights of that posted We

per earnings was count by share grew operating year, growth expansion versus X% a million, lower $XX lower sales, lower income, rate interest our year. income margin. lower good representing effective of last operating tax with in these share net last And average driven in growth XX%, expense a On our operating and over and

page, have for next our On consolidated the we quarter. the P&L second

margin This input costs, represented in points. million was driven gross lower inbound net expansion increase freight several of rates the channel. year-over-year record company. and to gross gross for XX.X% the by or sales rate lower factors, off-price the basis margin including The Our quarter on performance in sales was product XXX the $XXX in margin lower

second repeat offset because reserve inventory pack through in included inventory. sold last and These benefit higher hold year's largely That were we by partially not and last provisions, from as a this benefits were which year, excess benefit than reductions quarter. did year

was $XX the year-over-year Spending quarter. lower million in

our spending the had and for higher stores teams as spending in possible. lower lower for good store costs. the provisions a we performance-based volume-related related outlook quarter, Our new to to had on as year. and pulling where revised job distribution expenses back payroll freight In quarter, given the well continue primarily compensation do We higher

position, X% last income basis. of interest costs somewhat mentioned, net earned FX-related which our over XX margin year given of points strong were expansion basis our and more a about adjusted line, and last million million higher costs. year. was operating interest less on by $XX As in income cash the represented than offset other We Below $X growth

XX.X%, rate we what effective was year. was which April points tax than and about forecasted XXX Our had back below basis in lower last

expectations of to full income lower represent our the for adjusted to the of relative we proportion the to earnings have business now outside of expect United earned income we balance the year, U.S.-based States. our be a As year for

to of adjustment full year reflect effective quarter's included year, the an Second tax expecting full rate outlook. for revised about effective we're an tax this XX%. And rate

reflecting Our average about share share than benefit lower repurchases. of was last count X% year, the

$X.XX, were adjusted the second line, share bottom last the earnings on in growth of representing year. quarter over So per XX%

on the X% next with half down net our to on and business. lower and about first U.S. our decreased profitability, pages, first or in traffic $XX On only information first operating sales sales performance, EPS our year-over-year slightly adjusted attributable focus half half half XX% sales X Retail of the we've about With included on million income our decrease lower grew was XX%.

the us second declined Wholesale the Turning a sales quarter, said, business operating XX. segment well as business the the were in the of grow last with and quarter our sales versus I've $X expenses the In $XX tracking lower majority sales U.S. to our Retail to summary on as U.S. for this growth lower of by quarter, Page results accounted million U.S. retail segment business second decrease. for in quarter. second in income year, corporate as and in lower allowed profitability million profitability

information start, Page U.S. lower The segment was demand are slow slow also for the volume of we've that about consumer business to retail, some In demand. Easter warmer off much our performance. On arrive year, got talked into some the XX, the have contributing pulling occurred additional which to this in Spring extensively weather country, our on quarter a factors quarter outfitting. we March affected first weather in holiday to

the declined quarter. second XX% comparable in Overall, to sales

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increased and the which driver planned. Profitability the X% transportation up brands from was had to within Sales better off-price channel last than wholesale. the of result The earlier costs. as majority The be in related sales continues year, was U.S. the the our exclusive wholesale the sales brands product business Wholesale portion quarter, growth, the favorable nicely products lower costs, sales seasonal in for customers. upside to star quarter in selling of we over to lower a demand our exclusive in the of and chargebacks other was and quarter

in pressures the Canada, seen U.S. are In which many XX%. down were sales International, In we've of same macro demand affecting the

to consumers commented, business, demand lower higher to Canada ongoing and and in In are there. inflation in interest shipment the due Mike Middle rates. under International pressure in higher As our East Wholesale changes sales given declined the timing conflicts due

pricing. the in to new and offset growth benefit and in growth second gross with as in retail International sales Mexico of down lower profit the and in quarter. comparable and sales Profitability the continue of good benefited stores helped see volume sales lower costs was quarter XX% both lower slightly the We transportation in margins impact product

business segment your half is reference. XX our for performance Page Information first on included on

sheet cash highlights. Page flow and now balance to Turning some and XX

the remains ended Our and into good inventory strong. liquidity sheet very with the quarter balance in second substantial heading shape is half. We

with is we was than generated inventory at we our last were year and $XX hold as greater hold and last cash pack that a operating half at time than of through inventory, in of excess ago which a this pace of year high the inventory. reducing flow when cash the first $XX We we year. generation year's pack higher million in inventory absent nearly this sold held Quality over and million less

half store continue and overall remodels with cash on the to liquidity center in technology distribution first representing have investing $XX initiatives. stores, spending enabled of CapEx Our new million, and business strong and and flow us

distributed We the through and of $XX our the half to in repurchases. shareholders also year first million dividends share

progress turn to Kendra growth Now our an over strategies. the I'll our and for call on update product with

Kendra Krugman

Thank you, Richard.

both which market, consumer share our Mike enable our insights in focus #X our remain We children's transformative to grounded this April. in will young of from the grow priorities in and we North on believe strategies we position. us apparel As focused tomorrow's America mentioned, new X customers maintained are outlined current parents. These

Our priority is market-leading first style value. deliver and to strategic

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Richard Westenberger

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the lower in growth Full are of Page Retail to Wholesale. in full $X.XXX the U.S. expectations with range for sales billion On net International revised U.S. summarized our year forecasted in expected expected here. now and sales and year billion XX, $X.XXX are

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On profitability, $XX range $X.XX in we're $X.XX. and to in $XX assuming million adjusted the range the million to adjusted of EPS operating of income

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

Operator

question first from with Sole comes Our Jay Instructions] [Operator UBS.

Jay Sole

said not just doing be others? -- price make? why little can Mike, I what assortment you're decreases us us on the of in you it and Wholesale And bit planning you to some give Can on I'm Richard in Are versus just to was wondering tell a retail. products plan Retail? more think the they if part you detail going on that

then, Richard, it would help us like in be gross to you you be expect that if margin lower much how year-over-year, QX, great. give And some on can

Michael Casey

of got the So had very holidays market on fourth things year-over-year selling clearly it pricing, would that our Day, been some pricing that we store get sell of the saw like -- we July, beat some for kind $X.XX. typically quarter aggressive Memorial that pricing. competitors saw of It's comparable in the are level we a thrift on our $X, pricing. to we T-shirt of for Those see unusual we

as I they pricing drive it that just reflects though retailers to to traffic that think needed those the have stores. helped the to

the units first through continues are, half the to to issue. driven and but having we're We negative more units the in exclusive sold by we brands. traffic be So significantly sold by fewer comps traffic. consumer our direct The large,

But pricing it kind aggressive. it's function down be second and the we saw half where are quarter in dirty decided where second of of more shopping. a So when the the in we to people got

to sharper We're the to million if Probably point we price on saw second getting $XX have half move price it it get just be opening relates points. of most, points $X, $XX So adjustment had $X product price offerings at market where profitability. that down to the of that a lower. the some million on half on break our something might about $X And $X. we or little just to talking sharper was

the us of performance a half million to relative our on $XX So this place. the better see in It just sharper getting takes price it to guidance giving the if we're points, is improves trend morning.

of with The $XX just make up backed we is other half get the inventory. million sure don't

So that's focus. the

We to make capacity business. have the We're investment. high-margin the a

the below for margin for of marketing. feel still make We'll It's need but resources to margin We a the standards good to price investments, have we though both have these make in and as double-digit in single-digit we brand year, margins, operating high our year. the the investments.

We drive felt as were underinvested traffic. in marketing to brand though we

to million We're the spend to the incremental started marketing or tested performance and started can not see whether have it to we that the we the in acquisition brand trend of in traffic. an some additional see change going the impact. or when some in in second marketing had not customer brand planned it in spent previously the of we half. see both an quarter, whether $XX to to investments We So on a second distorts

a costs wholesale when the product it team half decided on chain get supply would lower. We our for product get always so they we some was first margin Wholesale lower we in were the prices customers -- pricing, negotiated because of say, lower -- benefit. sharper the as have, I will our cost,

flow Some and through. of it product we we put better let benefits into it some product -- of

pricing think for comparable to in the be be our think on models are slightly lower. Wholesale lower. second will so And And half will product I Wholesale costs our I

just it's of product reduction of better that good So function pricing. into a some reinvesting cost

Richard Westenberger

the about say. decreases, basis points, to activity gross we're in despite third price product The transportation expecting a quarter margin of XX expansion a -- would I third margin, on year-over-year XX factors be guidance And planning decline we're would half bit good Retail the lower higher us largely the The by work start are costs, and in second lower quarter. in off-price against that driven to Wholesale, throughout Jay, costs.

we capacity such Mike to related peak higher some of coming mentioned, year. this earlier surcharges as So and are kind seeing

of to States. us, their effect and don't some United trying getting Those fall. products are the here affect of get to others that going try ahead tariffs tariffs into to early get importers in this are kind are but Some

bit So freight, starts a of a a good a reverse which headwind. has to bit, guy become been

as down throughout XX we're reducing in not benefit year-over-year. the year. this half we forecasting year, But the progress a second also, basis made on third reserves last and balance, That's XX inventory. releasing We of points quarter between

Operator

question comes with Evercore ISI. from next Warren Cheng Our

Warren Cheng

difference little bit seeing Wholesale. I you're and wanted on to dive the a in between retail

trends in seems it retail. down the So like slowed really

insights comp second over like here. difference. a really for discretionary You Any in dynamic you think this on slowdown seeing It category demand points. outlook. haven't the lowered half about looks to that trying just the replenishment seen your by I'm channel or Is Wholesale. true we're XX

Michael Casey

saw volume the up exclusive United million fewer Again, half, I decline function people share X It's the are we than unit went down with the Yes. double units where a in Warren, we you, million volume in shopping. X%. our the direct-to-consumer. in brand, more But in Unit direct-to-consumer units, was would units first X sold of States.

was those saw may improve marketing. for we're traffic, we second in trends, $XX that we're risk half. the weakness our in Retail in trends help million the reflecting the into half the continue traffic in our the largely the traffic in price, million revised To first forecast So year, $XX business, investing

say are well, -- under people where retailers least doing a channel probably shopping And given business portion think retailers pressure. shift these our The especially seeing days. I off-price some would function channel are data we're that is They're the I are the data, retail at down some saw a well. think I is of it's X%. specialty market the So mass where I market doing retail the

Warren Cheng

exciting stores a they'll come Can question really on of they And here. you e-com give pretty you team. give what and addition continues step more aboard? back a diagnostic experience the to focused to persistently their as be Can and Allison little us channel on here. why to the on then It's about another and hear lag the little just Raghu go

Michael Casey

Sure.

this tracking decline people experience, all our cosmetics, e-commerce that And different on. business still high business. our for of XX things apparel scope analysis, item out kids, very comes margin, component a weekly line there's agents, been mid-teens. We've Citi e-commerce was spending mid-teen spend in has been consistently it's all consistent categories. So different a a a down with online very spend the kind But apparel demand. has fastest-growing, highest-margin years many is of of online food, money including dog been broader And pure-play purchases profitable purchases,

were some buying got of of And some you function a my, unsolicited I that In business you years. it thinking say, stock kind Geez for the I wasn't for kind e-commerce is a marketing shopping. that years to experience. open something. consumer X.X with think up we've I or still tracking inclined our past think that of text, going just consumer if And of e-mail, pulling So a sale, less to a stimulus. do and But there's years an you the got And even is I'm back. "Oh it's to e-mail, been past, of text responsive to the

buy units to in it's you're time shopping you go you -- online. in and So you like X buy X don't ours, they every thing get Amazon, go to not shipped you X or

fewer $XX of just consumer We Again, of and stores, nature By provide a it's better transaction. with stores that's during -- of in this that see type people during traffic this cycle. comparison just issue. transaction So a the behavior behavior this. making part the immediacy it's inflationary

to You're really need, needed closer when buying shopping only it's and needed. what's

stores provide so immediacy. And

That up You has units need. lower. But per transaction. you to can one our stayed our there, has what stores stores per go transaction consistent. X and average is about The of pick the units been even in traffic beautiful

Just -- visits. seeing fewer we're

But about in conversion those that who same, half. was least the transaction, rate, the the our visit AUR at the the first is experience average

Operator

Our Wells Fargo. Ike question Boruchow with comes from next

Irwin Boruchow

to Richard, margins margin, I'm XX% closer points. literally guide, saying year they're the that you're in down that be gross on gross gross half basically margin the guide does basis need if to QX, down market more imply taking Question to Mike, the XX% like to QX? to in get Because for flattish on maybe the but gross substantially the comparable, back are too down you XXX for

just So actual it be again, am overthinking I it could kind up little gross through a of the Is comparable? plan. us the -- bit? walk mean still I margin

Richard Westenberger

mentioned releases works spot guy good a us in quarter. more What apply than transportation inventory say we're not factors the product quarter, We which against that fourth that which the to costs basis on Ike, or I do quarter, specifically, ago, so through I XXX-some be gross higher you're start inventory dramatically. to have the the the fourth the against In No, points reasonably fourth year-over-year. through I dramatic cost comparison margin are repeat. fourth a higher quarter. third say, mix costs, to inbound us that year declining again those forecasts us expecting is in would quarter works would terms of have

So in of decrease I that about say, margin, is gross would related. half mix

affected our revisions we're That's the channel. Wholesale say, growth I very So outlook, good least outlook. the would planning by consistent. Wholesale is to our The in been

as is on Wholesale, great fall, the good very in have quarter well. more a for excess So growth line of it fourth more just quarter. fourth reflects which channel we versus and those had planned clearing year-over-year of winter do in quarter takes, some response planned will now margin units our a retail anticipate kind off-price the are quarter, but the planned strong we is of margin in fourth Those puts That in gross severe decline in bookings. fourth we QX? not And to always in gross bit activity that

Irwin Boruchow

of with XXX more Or the points just doing math, to more now in just right quarter? headwind pricing Is place that's back like I'm a the in is more decline quick you're like quarter. to offsetting if going quarter kind it roughly fourth guidance the weighted of million, $XX guys the fourth half. And you it basis like you good the kind third than have into the of and in that

Michael Casey

the promotional would holiday over big will and we certainly is be more say plan would holidays. holidays. likely we be next Labor the promotional more the year-end I The Day, is over then

Irwin Boruchow

too Got initial how kind on of just into you any guys freight's next we costs visibility it. And right early then, are Obviously, AUC thinking but product next guys a now? year, whatever -- Mike, But you the at looking freight costs just while. or early, don't thoughts have probably now. product very it's maybe overall based for renegotiate topical on about early year and

Michael Casey

for points. X were negotiated freight quarter Just memory We data those year of through next the inbound somewhere second increases and costs around rate say, X%.

you We futures, good current And cotton at cotton are trending couple the good. negotiations. The -- are lower from the the the look rate those of cotton or so. crops of experts outcome the the X than update prices. with pleased futures in a we're Atlanta, last of weeks So here if had

outlook the -- as of key costs input the outlook on for is one So the us favorable. the currently

more have of XXXX we'll the early. of better October, visibility So costs. first In it's half product to part

cotton, outlook have do we freight, the a to of what living but for is cotton-based currently the is we visibility most on -- So futures and and cotton good.

Operator

comes with question Tom from Nikic next Wedbush. Our

Tom Nikic

What just wanted ask doors mean, I little stores. is stores about bit that that's the it comments to a I different? XXXX the it more resilient older since than those are outperformance Are about guess, opened is maturity relative like curve? I cohort the better in attribute the New what estate, would so newer, that stores? real going of York you the they're just, they through they're

Michael Casey

Yes.

in draws cotenancy, In patterns. traffic better to centers, open whole So in a better strategy Tom, better real to center, cases, new it's the new, the people many center. anything estate that is

focus are economics good real attractive. long where our as unit we the continue opportunities is estate So find to as

customer very brand. We will like are stores. new in stores. of our open Stores We believe source best stores. the #X We acquisition, to continue of expression

stores see where full Wholesale believe we'll close the our customers. the Rarely stores. of side, XX% customers early on We stores flip and because stores inspire our store of continue take are do they to flow our our I the the close into Wholesale cash brand, expression we positive. our

expected that close So up event to lease the we before the the rarely do we signed going we kick clauses leave not way the we store perform rarely is out do take in a expires. the of early. that Rarely advantage to store

we're So freshen up even made and stores up, this XX a to up year, we to the open close assuming to going be XX-year to it leases because is opportunity of year stay, period. year came XX, after as this the come look what have close initially into at XX we'd what we stores investment kind this would

real opportunities legacy continue will and stores based we open estate the are what the and on what stores are stores. the So on close patterns traffic to

Operator

comes with Paul Citi. next Our from Lejuez question

Kelly Crago

Kelly for Paul. is on This

decrease? one XX% mid-single-digit Just of net is adjustments on retail. is of the product that Is in all? the that a question impact Or assortment it price pricing it getting the

Michael Casey

would $XX, of on probably T-shirts $X.XX. there's of make changes X consumers our Where or -- on consumer Yes, X% items, portion a selling Kelly, point because you you and no about items will $X.XX it of net it's don't So the where shorts key be some X adjustment for make strapped, right? the said will that's some $X.XX for T-shirt. opting be competitors opening the -- being price shortage if -- to

be prices on will to $X.XX, we respond in sharper get won't going what's -- market. the insurance but T-shirts on but to the Our

Kelly Crago

was curious adjustment investments to Got more these be them a Or you of I weakness more believe then do price And as it. temporary reflecting you're just the if permanent? consumer? viewing the

Michael Casey

say, But long-term pressure. doing think under half that's consumer strategy. in first in We're -- a temporary. is and right good the we were that as world because what our now it objectives. do I with lowering view less term. live short the We very don't we half It's prices some currently we -- first achieved promotional, to would the We profit need we financial

price improving the through unit margins, on beauty in the So pre-pandemic second terms quarter, largely gross in of we've management. buys. to profit made the buying improving bets realization, significant making do of improving picking the inventory inventory offering, period record that. being through continue progress Largely smarter, on margin buys, just -- smart since the the smart product the We'll

But approach we're different take the a half. doing we're second to going to

cost do just perhaps reduction. significant probably We a it. it's was to Our lean we initial the reaction said time have to

need stores attract brand, on websites. let's in to sharper traffic to to brand people get more invest Let's drive where and we to more our and points marketing the price

the adjustments I temporary. So pricing view as

Kendra Krugman

growing also, of in on in Kelly, getting of on our best bucket bucket, the investing price prices the well. sharper we're the other side price assortment spectrum the as opening are penetration we price in also the while

range can So our where on premium and we grow products, probe our more have of price -- and pricing.

is a that margin side. So offset on the other

Kelly Crago

that of you plans the it. a initial Got weakness as in and any moving year? some seeing next you're kind business store curious, retail And towards more sort about opening think just of traffic or share closing you're given just seeing traffic your -- on thoughts shift wholesale

Michael Casey

of Just couple a reactions.

Amazon, Target, got So young go we've brand and the and best-selling when thrilled there. to consumers apparel we're Walmart kids to they

people sell So shopping at market presence. got on That's multichannel the unit an what customers. terms wholesale as of business. We've more We other volume in unparalleled I directly decreases to consumers picked look direct-to-consumer. up the didn't of at we than the our unit the beauty our

us more So the store to of you wherever presentation sight of early next of to share a We've And get year, line shopping going estate openings. in have And brands. our exist got earlier with those real We're opportunities. we meaningful back in for opportunities many pursuing year we'll a a point, how that are way. that terms as again, the we consumers in later strong stores into XXXX. if

centers to good there's in more good But our and stores patterns. where continue we good is consumers. traffic -- open to co-tenancy, plan stores where and open reach good center

good age Baby these and apparel ranges Toddler sales. of we Toddler. business, represented shopping focused largely older call of as developing what stores a been But younger XX% new to models on we've convenience with over we're and a and the family seeing have early the that and sales We Baby our older carry is strength to readouts. an child. of going are Baby our which Best some we're So that store

So core The will brands, we're those of weakness were portion the was think I Keep on last be those components most -- productive Baby of we're the formats. in Toddler testing next quarter, our in our and comparable apparel store in formats ranges. the of the new brands. a new -- focus mind, to in older stores year second to our and sales good year.

Kelly Crago

squeeze And just here. X it. if I Got could more in

in half brand I stores growth Did think the the comment your that about how exclusive in earlier a Carter's see Carter's you department you the should grow growth in the back about year? think made flagship the and versus flagship Carter's And -- just brands. Carter of presentation of brand QX? we the

Michael Casey

So flagship department the to Carter's stores brand sold and largely retailers. club

had with a be tailored us smart Babies"R"Us. So we've their they trying the with part, got Babies initiative that success million and strategies. Babies"R"Us, used was to us. the referenced on Kendra some Kohl's customer the which customer with to for Sephora $XXX high-margin replicate for move

good club the the department So some big those off-price channel. we're There's strategies see retailers, store to store another initiatives. traction opportunity with with the for we're starting tailoring and and

the because I no them. and customers of a gotten for down And product. in good us very there wholesale think for shortage about XX% channel first we challenge our to clean the on sure off-price for it's off-price only asking us I've a unit volume in our was margin we're good half, the inventory. But margin is calls make want from more

strategy another pursuing opportunity. good to for good that our off-price tailor and we're that's channel is a So that for the business.

Operator

today's portion does Ladies of the turn gentlemen, back I'd this like and over to Casey any call Mr. Q&A conference. for closing conclude to the remarks.

Michael Casey

in morning. for our forward Thank very you this October. look much. you progress joining We to updating us all Goodbye. on you Thank

Operator

conclude today's this gentlemen, presentation. and Ladies does

day. You and wonderful have may now disconnect, a

Carter's (CRI) 26 Jul 242024 Q2 Earnings call transcript