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Carter's (CRI) Lined Up for Q4 Earnings: Key Things to Note

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Carter's, Inc. (CRI - Free Report) is likely to witness declines in the top and bottom lines when it reports fourth-quarter 2020 numbers on Feb 26. The Zacks Consensus Estimate for earnings has remained stable over the past 30 days at $2.74 per share, which however indicates a decrease of 2.5% from the figure reported in the prior-year period. The company, which designs, markets and sources branded childrenswear, delivered an earnings surprise of 17.4% in the last reported quarter and has a trailing four-quarter earnings surprise of 28.3%, on average.

The Zacks Consensus Estimate for revenues is pegged at $1,044 million, suggesting a decline of 5.1% from the prior-year quarter’s reported figure. Nonetheless, the rate of top-line decrease is likely to be better than the previous quarter, wherein Carter's net sales dropped 8.3%.

Key Factors to Note

Carter’s has been bearing the brunt of pandemic-led declines in store traffic. The resurgence in the number of coronavirus cases in several areas of the country has made consumers more cautious, which led to reduced store traffic. Further, stores which would usually gain from tourism activities have been facing huge traffic declines. Management on its last earnings call stated that it expects underperformance from these stores until tourism resumes to pre-pandemic levels. These factors are likely to have negatively impacted Carter’s performance in the quarter under review.

Carters, Inc. Price, Consensus and EPS Surprise

Carters, Inc. Price, Consensus and EPS Surprise

Carters, Inc. price-consensus-eps-surprise-chart | Carters, Inc. Quote

Nonetheless, soft store sales have been largely compensated by robust e-commerce sales. The company’s e-commerce business is performing well, with stores fulfilling 24% of online orders. Management expects the company’s stores to keep playing a vital role in facilitating e-commerce orders, per the last earnings call.
 
Moreover, Carter’s revamped website with improved products, convenient shopping options and enhanced checkout experience has been aiding online sales. In the third quarter, the company witnessed sturdy e-commerce demand in the wholesale channel to the tune of more than 40%, with its top wholesale customers recording triple-digit growth in online demand. That said, online sales are expected to have exceeded $1 billion in 2020 with increasing demand for products online, particularly baby, sleepwear and playwear products. These trends bode well for the fourth quarter as well.

That being said, the company has been encountering a spike in freight charges imposed by inbound and outbound carriers due to rising online orders and limited capacity. Increased freight charges are likely to have weighed on fourth-quarter earnings to the tune of roughly $2 million.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Carter's this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Carter's currently has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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