Carter’s Inc. (CRI Quick QuoteCRI - Free Report) has been reeling under macroeconomic pressures, such as inflation and currency translation, for a while now. Due to this, demand from both retail and wholesale consumers decreased in the first quarter of 2023. However, the business is well-positioned to reap rewards in the future owing to its focus on e-commerce and online sales.

E-commerce Remains High-Margin Business

Carter’s is leaving no stone unturned to strengthen its e-commerce capabilities and speed up deliveries through investments. The company’s solid e-commerce business continued in first-quarter 2023, driven by expanded omnichannel facilities, including curbside pickup, same-day pickup, buy online and pickup at store and shipping from store.

This, along with easy access to a broad array of online products when shopping in stores, bodes well. Also, e-commerce continues to be one of its highest-margin businesses. Notably, sales on the company’s app have grown to represent about 1/4 of all U.S. e-commerce sales. Strength in its loyalty and private label credit card programs also bodes well.

Carter’s has the highest rated online platform for young children's apparel. The company is focused on opening high-traffic centers that provide convenience for online shoppers and enable the same-day pickup of digital purchases. CRI’s mobile app is also performing well.

Management continues to enhance its app with current efforts focused on building more sophisticated personalization capabilities. Carter’s is also testing same-day delivery with Shipt, a first-of-its-type collaboration in young children's apparel.

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Inflation, Y/Y Comparison Pose as Headwinds

Carter’s has been facing headwinds that is denting the company’s margins for a while now. Despite the earnings and sales beat in first-quarter 2023, both metrics fell year over year.

Results were hurt by tough year-over-year comparisons, along with the impact of inflation. As a result, the company gave a bleak view for 2023. It expects net sales of $3 billion compared with $3.20 billion in the previous year. Also, it expects bottom line to decline year over year in 2023.

Wrapping Up

Although inflation impacts remain concerning in the near term, we believe that solid online show and recovery in consumer confidence and market conditions will aid this Zacks Rank #3 (Hold) stock. A Value Score of B also reflects the company's inherent strength.

In the past three months, shares of CRI have declined 14.5% compared with the industry’s 3.2% fall.

3 Stocks Looking Red Hot

Here, we have highlighted three better-ranked stocks, namely Skechers U.S.A., Inc. (SKX Quick QuoteSKX - Free Report) , Crocs, Inc. (CROX Quick QuoteCROX - Free Report) and PVH Corp. (PVH Quick QuotePVH - Free Report) .

Skechers U.S.A., Inc. designs, develops, markets and distributes footwear for men, women, and children. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Sketchers’ current financial year sales and earnings suggests growth of 7.8% and 31.9%, respectively, from the year-ago reported numbers. SKX has a trailing four-quarter earnings surprise of 18.8%, on average.

Crocs, Inc. is one of the leading footwear brands with its focus on comfort and style. It currently has a Zacks Rank of 2 (Buy). CROX has a trailing four-quarter earnings surprise of 19.6%, on average.

The Zacks Consensus Estimate for Crocs’ current financial year sales and earnings suggests growth of 13.2% and 5.7%, respectively, from the year-ago reported numbers.

PVH Corp. specializes in designing and marketing branded dress, shirts, neckwear, sportswear, jeanswear and related products. It currently carries a Zacks Rank of 2. PVH has a trailing four-quarter earnings surprise of 23.4%, on average.

The Zacks Consensus Estimate for PVH’ current financial year sales and earnings suggests growth of 3.7% and 11.8%, respectively, from the year-ago reported numbers.