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Solid Demand, Online Show to Aid Carter's (CRI) Amid High Cost

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Carter’s (CRI - Free Report) looks well poised on the back of favorable demand for products and services. The company has been leveraging cost-management initiatives, price realization and productivity-improvement efforts. In addition, fewer promotions led to the sixth consecutive quarter of gross margin expansion in third-quarter 2021. The top line was aided by growth across retail and international segments. Going ahead, management expects robust demand across all channels.

CRI remains focused on strengthening e-commerce capabilities through investments to speed up deliveries. The e-commerce business has been performing well, driven by expanded omnichannel facilities, including curbside pickup, same-day pickup, buy online and pickup at store and ship from store along with easy access to a broad array of online products when shopping in stores. As a result, Carter’s e-commerce penetration in the United States is anticipated to grow 40% in 2021, suggesting a rise from less than 32% in 2019. International e-commerce sales are expected to exceed $100 million in 2021.

Driven by solid international demand and improved price realization, management raised its 2021 guidance. The company now anticipates yearly sales of $3.45 billion, which is expected to represent 98% of the pre-pandemic levels. Adjusted earnings are envisioned to be $7.57, suggesting a rise from the last year’s reported figure of $4.16 million.

Carter’s issued an upbeat fourth-quarter view, with sales expected to be $1,025 million. Adjusted earnings are envisioned to be $2.00 per share, with an adjusted operating income of $127 million. It also noted that it has kickstarted the fourth quarter on a solid note.

Consequently, shares of this Zacks Rank #3 (Hold) company have gained 1.5% in the past three months compared with the industry’s 2.9% growth.

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Yet, Carter’s has been witnessing elevated costs stemming from higher spending on compensation provisions, brand marketing and technology initiatives. Management also noted that higher freight charges, particularly air freight, are likely to remain deterrents. It projects adverse COVID-19 impacts, including supply-chain headwinds, inflation, and production and transportation delays, in the times ahead.

Direct costs, including health and safety-related expenses stemming from the COVID-19 crisis, remain a concern. Management anticipates incurring costs related to additional protective equipment and cleaning supplies of $3.7 million in 2021. The company is likely to incur $0.2 million of pandemic-related costs in the fourth quarter, which includes expenses such as additional protective equipment and cleaning supplies. The company expects $2.5 million of restructuring costs for 2021.

Bottom Line

We believe that strategic initiatives, solid online show and high demand are likely to drive growth further. Also, a VGM Score of B and a long-term earnings growth rate of 31.3% drive optimism on the stock.

Stocks to Consider

We have highlighted some better-ranked stocks from the broader Consumer Discretionary space such as Steven Madden (SHOO - Free Report) , Crocs (CROX - Free Report) and Whirlpool Corporation (WHR - Free Report) .

Steven Madden currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 41.9%, on average. Shares of SHOO have rallied 21.1% in the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Steven Madden’s sales and earnings for the current financial year suggests growth of 50% and 170.4% from the year-ago period, respectively. The Zacks Consensus Estimate for 2021 earnings is pegged at $2.35 per share, indicating an increase of 11.9% in the past 30 days.

Crocs currently carries a Zacks Rank #3. The company has a trailing four-quarter earnings surprise of 41.6%, on average. Shares of CROX have gained 22.8% in the past three months.

The Zacks Consensus Estimate for Crocs’ sales and earnings per share for the current financial year suggests growth of 34.6% and 30.2%, respectively, from the year-ago period. The Zacks Consensus Estimate for 2021 earnings is pegged at $7.59 per share, indicating an increase of 9.7% in the past 30 days.

Whirlpool Corporation, a Zacks Rank #3 stock, has a trailing four-quarter earnings surprise of 14.8%, on average. The WHR stock has gained 5.4% in the past three months.

The Zacks Consensus Estimate for Whirlpool’s sales and earnings per share for the current financial year suggests growth of 0.9% and 12.5%, respectively, from the year-ago period. The Zacks Consensus Estimate for 2021 earnings is pegged at $26.38 per share, indicating an increase of 0.9% in the past 30 days.


In-Depth Zacks Research for the Tickers Above


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Whirlpool Corporation (WHR) - free report >>

Crocs, Inc. (CROX) - free report >>

Carter's, Inc. (CRI) - free report >>

Steven Madden, Ltd. (SHOO) - free report >>