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Carter's (CRI) Q4 Earnings & Sales Beat on Solid Holiday Season
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Carter's, Inc. (CRI - Free Report) reported fourth-quarter 2021 results, wherein the bottom and top lines beat the Zacks Consensus Estimate. Results gained from solid demand, robust holiday season, sales growth in the retail, wholesale, and international segments, and improved price realization. A few structural changes, including compelling product offerings, shut down of low-margin stores, better inventory management, improved marketing efforts and enhanced price realization, also contributed to quarterly growth.
The company continued to witness a healthy demand from a few of its largest customers like Target, Amazon and Walmart. On the flip side, headwinds related to air freight, technology and performance-based compensation acted as deterrents.
Shares of the company have gained 16.5% in a year compared with the industry’s growth of 1.4%. Also, CRI jumped more than 10% on Feb 25, which might be attributable to the solid performance during the holiday season, which, in turn, boosted the top line.
Image Source: Zacks Investment Research
Q4 in Detail
Carter’s reported fourth-quarter 2021 adjusted earnings of $2.31 per share, surpassing the Zacks Consensus Estimate of $2.03. However, the figure fell 6.1% from $2.46 reported in the prior-year quarter.
Net sales increased 7.3% year over year to $1,062.1 million and beat the Zacks Consensus Estimate of $1,025 million. The uptick can be attributable to growth across the retail, wholesale and international segments. Favorable currency movements of $3.3 million aided top-line growth. On a comparable basis, sales advanced nearly 11% year over year.
Segmental Sales
Sales at the U.S. Retail segment rose 3% year over year to $602.9 million, driven by improved traffic across store and online.
The U.S. Wholesale segment’s sales rose 9% to $317.2 million, owing to strength in core brands, which somewhat offset the lack of availability of products, higher air freight and transportation costs.
The International segment witnessed 25% growth in revenues to $142 million in the fourth quarter, driven by strong demand, particularly in Canada and Mexico.
Margins
The gross profit rose 5.8% year over year to $492.8 million while the gross margin contracted 70 basis points (bps) to 46.4% due to elevated transportation costs, higher air freight and ocean container charges.
Adjusted SG&A expenses rose 10.5% to $361.1 million in the quarter due to higher spending on compensation provisions. As a percentage of sales, SG&A expenses expanded 100 bps to 34%.
This Zacks Rank #4 (Sell) company’s adjusted operating income declined 5.2% year over year to $137.9 million in the reported quarter. The adjusted operating margin contracted 170 bps to 13% in the quarter under review due to higher transportation costs, the release of inventory reserves in the last year and a rise in compensation, which somewhat offset the strong demand and improved price realization.
Balance Sheet & Shareholder-Friendly Moves
Carter’s ended the fourth quarter with cash and cash equivalents of $984.3 million, net long-term debt of $991.4 million, and shareholders’ equity of $950.2 million. In 2021, the company provided a cash flow of $268.3 million for operating activities.
In the fourth quarter, Carter’s board returned $214.1 million via share repurchases and dividends. It bought back 1.9 million shares worth $189.1 million, while it paid out dividends of $25 million in the said quarter. As of Jan 1, 2022, it has $302 million remaining under its existing share repurchase plan.
Management also hiked its quarterly dividend by 25% to 75 cents, payable Mar 18 of shareholders’ record as of Mar 8. CRI also announced a new share repurchase plan of $1 billion.
Driven by the solid quarterly results, management issued the 2022 view, which seems encouraging. The company anticipates sales growth of 2-3%, with growth across all segments. Adjusted earnings are likely to rise 12-14% year over year, while adjusted operating income is expected to increase 4-6%.
For first-quarter 2022, net sales are expected to be $740-$750 million, down from $787 million reported in the prior-year quarter. Adjusted earnings are likely to be $1.25-$1.35, down from $1.98 reported in the prior-year quarter. Adjusted operating income is expected to increase $85-$90 million, which compares unfavorably with $128.5 million reported in the prior-year quarter.
The view includes impacts of supply-chain headwinds and the shift of the Easter holiday season to the second quarter. However, improved price realization and continued market recovery are likely to aid.
For the first half of 2022, the company projects net sales of $1,550-$1565 million. Adjusted earnings are expected to be $3.05-$3.25 million, down from $3.64 reported in the first half of 2021. Adjusted operating income is forecast to be $195-$205 million, down from $239 million reported in the first half of 2021.
Delta Apparel currently flaunts a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 95.5% on average. The DLA stock has gained 9.4% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Delta Apparel's current financial year’s sales and earnings per share suggests growth of 11.9% and 10.1%, respectively, from the year-ago period's reported numbers.
World Wrestling presently sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 75.5%, on average. Shares of WWE have rallied 21.6% in a year.
The Zacks Consensus Estimate for World Wrestling’s current financial-year sales and earnings suggests growth of 16.5% and 11.3% from the year-ago period’s reported numbers, respectively.
Oxford Industries currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 96.7%, on average. Shares of OXM have gained 15.1% in the past year.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and earnings suggests growth of 51.9% and 523.8%, respectively, from the year-ago period's reported numbers.
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Carter's (CRI) Q4 Earnings & Sales Beat on Solid Holiday Season
Carter's, Inc. (CRI - Free Report) reported fourth-quarter 2021 results, wherein the bottom and top lines beat the Zacks Consensus Estimate. Results gained from solid demand, robust holiday season, sales growth in the retail, wholesale, and international segments, and improved price realization. A few structural changes, including compelling product offerings, shut down of low-margin stores, better inventory management, improved marketing efforts and enhanced price realization, also contributed to quarterly growth.
The company continued to witness a healthy demand from a few of its largest customers like Target, Amazon and Walmart. On the flip side, headwinds related to air freight, technology and performance-based compensation acted as deterrents.
Shares of the company have gained 16.5% in a year compared with the industry’s growth of 1.4%. Also, CRI jumped more than 10% on Feb 25, which might be attributable to the solid performance during the holiday season, which, in turn, boosted the top line.
Image Source: Zacks Investment Research
Q4 in Detail
Carter’s reported fourth-quarter 2021 adjusted earnings of $2.31 per share, surpassing the Zacks Consensus Estimate of $2.03. However, the figure fell 6.1% from $2.46 reported in the prior-year quarter.
Net sales increased 7.3% year over year to $1,062.1 million and beat the Zacks Consensus Estimate of $1,025 million. The uptick can be attributable to growth across the retail, wholesale and international segments. Favorable currency movements of $3.3 million aided top-line growth. On a comparable basis, sales advanced nearly 11% year over year.
Segmental Sales
Sales at the U.S. Retail segment rose 3% year over year to $602.9 million, driven by improved traffic across store and online.
The U.S. Wholesale segment’s sales rose 9% to $317.2 million, owing to strength in core brands, which somewhat offset the lack of availability of products, higher air freight and transportation costs.
The International segment witnessed 25% growth in revenues to $142 million in the fourth quarter, driven by strong demand, particularly in Canada and Mexico.
Margins
The gross profit rose 5.8% year over year to $492.8 million while the gross margin contracted 70 basis points (bps) to 46.4% due to elevated transportation costs, higher air freight and ocean container charges.
Adjusted SG&A expenses rose 10.5% to $361.1 million in the quarter due to higher spending on compensation provisions. As a percentage of sales, SG&A expenses expanded 100 bps to 34%.
This Zacks Rank #4 (Sell) company’s adjusted operating income declined 5.2% year over year to $137.9 million in the reported quarter. The adjusted operating margin contracted 170 bps to 13% in the quarter under review due to higher transportation costs, the release of inventory reserves in the last year and a rise in compensation, which somewhat offset the strong demand and improved price realization.
Balance Sheet & Shareholder-Friendly Moves
Carter’s ended the fourth quarter with cash and cash equivalents of $984.3 million, net long-term debt of $991.4 million, and shareholders’ equity of $950.2 million. In 2021, the company provided a cash flow of $268.3 million for operating activities.
In the fourth quarter, Carter’s board returned $214.1 million via share repurchases and dividends. It bought back 1.9 million shares worth $189.1 million, while it paid out dividends of $25 million in the said quarter. As of Jan 1, 2022, it has $302 million remaining under its existing share repurchase plan.
Management also hiked its quarterly dividend by 25% to 75 cents, payable Mar 18 of shareholders’ record as of Mar 8. CRI also announced a new share repurchase plan of $1 billion.
Carter's, Inc. Price, Consensus and EPS Surprise
Carter's, Inc. price-consensus-eps-surprise-chart | Carter's, Inc. Quote
Outlook
Driven by the solid quarterly results, management issued the 2022 view, which seems encouraging. The company anticipates sales growth of 2-3%, with growth across all segments. Adjusted earnings are likely to rise 12-14% year over year, while adjusted operating income is expected to increase 4-6%.
For first-quarter 2022, net sales are expected to be $740-$750 million, down from $787 million reported in the prior-year quarter. Adjusted earnings are likely to be $1.25-$1.35, down from $1.98 reported in the prior-year quarter. Adjusted operating income is expected to increase $85-$90 million, which compares unfavorably with $128.5 million reported in the prior-year quarter.
The view includes impacts of supply-chain headwinds and the shift of the Easter holiday season to the second quarter. However, improved price realization and continued market recovery are likely to aid.
For the first half of 2022, the company projects net sales of $1,550-$1565 million. Adjusted earnings are expected to be $3.05-$3.25 million, down from $3.64 reported in the first half of 2021. Adjusted operating income is forecast to be $195-$205 million, down from $239 million reported in the first half of 2021.
Stocks to Consider
Some better-ranked stocks from the Consumer Discretionary sector are Delta Apparel (DLA - Free Report) , Oxford Industries (OXM - Free Report) and World Wrestling Entertainment .
Delta Apparel currently flaunts a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 95.5% on average. The DLA stock has gained 9.4% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Delta Apparel's current financial year’s sales and earnings per share suggests growth of 11.9% and 10.1%, respectively, from the year-ago period's reported numbers.
World Wrestling presently sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 75.5%, on average. Shares of WWE have rallied 21.6% in a year.
The Zacks Consensus Estimate for World Wrestling’s current financial-year sales and earnings suggests growth of 16.5% and 11.3% from the year-ago period’s reported numbers, respectively.
Oxford Industries currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 96.7%, on average. Shares of OXM have gained 15.1% in the past year.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and earnings suggests growth of 51.9% and 523.8%, respectively, from the year-ago period's reported numbers.