[PPT] - F our th Quar te r 2016 Busine ss Upda te F E BRUARY 23, 2017 PowerPoint Presentation

SLIDE 1

F

ur

th Quar te r 2016

Busine ss Upda te

F E BRUARY 23, 2017

SLIDE 2

2

F

urth Qua rte r / F

isc a l 2016 Hig hlig hts

$ in millio ns, e xc e pt E PS

Ne t Sa le s Adjuste d E PS*

2015 2016 $1.40 $1.79 2015 2016

* Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on pages 34 - 37.

Q4 Highlights*

Ne t sale s +8% le d by double digit gr
wth in U.S.

Re tail and Inte r national busine sse s

Adjuste d ope r

ating mar gin e xpansion of +170bps, r e fle c ting solid gr

ss mar

gin impr

ve me nt
Adjuste d E

PS gr

wth of +28%

+8% 15.2%

f

Net Sales

F isc al 2016 Highlights*

Ne t sale s +6%
Adjuste d ope r

ating mar gin 13.5% (+20bps)

Adjuste d E

PS +11%

$367 million r

e tur ne d to shar e holde r s thr

ugh

divide nds and shar e r e pur c hase s

+28%

$867 $934

Q4 Ne t Sa le s Adjuste d E PS*

2015 2016 $4.61 $5.14 2015 2016

+6% +11% F ull Ye a r

$3,014 $3,199

SLIDE 3

Q4 2015 Car te r 's Re tail Car te r 's Whole sale OshKosh Re tail OshKosh Whole sale Inte r national Q4 2016

+8%

$41.7 $3.1 $16.3 ($5.6) $12.2 $934.2 $866.5

Re tail1 Comp +5.8% Re tail1 Comp +5.4%

Sto re s $8.8 e Co mme rc e 7.5

$ in millio ns

Canada Re tail Comp1,2 +10.9%

Sto re s $22.0 e Co mme rc e 19.6 3

F

urth Qua rte r 2016 Ne t Sa le s

Gr

wth vs. 2015

+12% +1% +14% (34% ) +13% +8% OshKo sh +8% Car te r ’s +7%

1Retail Comp is defined as the combination of store and eCommerce comparable sales. 2Calculated in local currency.

Note: Results may not be additive due to rounding.

T

ta l U.S. Re ta il

T

ta l Sa le s Gro wth +12.3%

Co mpa ra b le Sa le s +5.5%

Sto re s $8.8 e Co mme rc e 3.2 Who le sa le 0.2

Int’l +13%

Constant Cur r e nc y

+13%

+8%

SLIDE 4

4

F

urth Qua rte r 2016 Adjuste d Re sults*

$ in millio ns, e xc e pt E PS

* Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on pages 34, 35, and 38. Note: Results may not be additive due to rounding.

Q4

% of

Q4

% of

2016

Sale s

2015

Sale s

Ne t sa le s

$934.2

$866.5

8%

Gro ss pro fit

410.5

43.9%

363.5

42.0%

13%

Adjuste d SG&A*

280.1

30.0%

257.8

29.7%

9%

Ro ya lty inc o me

(11.5)

(1.2%)

(11.4)

(1.3%)

1%

Adjuste d o pe ra ting inc o me *

142.0

15.2%

117.1

13.5%

21%

Inte re st a nd o the r, ne t

6.9

0.7%

5.1

0.6%

37%

Inc o me b e fo re ta xe s

135.0

14.5%

112.0

12.9%

21%

Inc o me ta xe s

46.3

5.0%

38.9

4.5%

19%

Adjuste d ne t inc o me *

$88.7

9.5%

$73.2

8.4%

21%

Adjuste d dilute d EPS*

$1.79 $1.40 28%

We ig hte d a ve ra g e sha re s o utsta nding

49.2

51.9

(5% )

Adjuste d EBITDA*

$160.8

17.2%

$136.3

15.7%

18% I nc r ea se / (Dec r ea se)

SLIDE 5

5

F

urth Qua rte r 2016 Adjuste d SG&A*

Q4 2015 Re tail Mar ke ting Distr ibution & F r e ight Othe r , ne t Q4 2016

$3.3 $0.1 $280.1 $257.8 $16.2 $2.7

+9%

29.7%

f

Ne t Sale s 30.0%

f

Ne t Sale s

Hig he r sa le s vo lume 71 ne t ne w sto re s (54 U.S., 17 Ca na da ) a nd e Co mm g ro wth I nve stme nts to suppo rt g ro wth *Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on page 35.

$ in millio ns

SLIDE 6

Inve ntory +4% vs. L

Y princ ipa lly due to busine ss g rowth

Re c ord fre e c a sh flow – $281 million
I

nc re a se re fle c ts hig he r ne t inc o me , fa vo ra b le c ha ng e s in ne t wo rking c a pita l, a nd lo we r c a pita l e xpe nditure s

Sig nific a nt c a pita l re turne d to sha re holde rs in

fisc a l 2016 – $367 million in sha re re purc ha se s a nd divide nds

Re turne d o ve r $1.1 b illio n to sha re ho lde rs

sinc e 2013

Additio na l $30 millio n in sha re

re purc ha se s in Q1 2017 q ua rte r-to -da te

Qua rte rly divide nd inc re a se d to $0.37 pe r

sha re (+12% ) be g inning Q1 2017

$ in millio ns

Balanc e She e t

(a t Q4 e nd)

Ba la nc e She e t a nd Ca sh F lo w

6

Cash F low

(F isc a l Ye a r)

1 Non-GAAP measure.

Note: Results may not be additive due to rounding.

Re tur n of Capital

(F isc a l Ye a r)

2016 2015 Ca sh $299 $381 Ac c o unts Re c e iva ble 202 208 Inve nto ry 488 470 Ac c o unts Pa ya ble 158 158 L

ng -T

e rm De bt 580 579 2016 2015 O pe ra ting Ca sh F lo w $369 $308 Ca pita l Expe nditure s (89) (103) F re e Ca sh F lo w

1

$281 $204 2016 2015 Sha re Re purc ha se s $300 $110 Divide nds 66 46 T

ta l

$367 $156

SLIDE 7

Busine ss Se gme nt Pe r for manc e

7

SLIDE 8

8

F

urth Qua rte r Adjuste d Busine ss Se g me nt Pe rfo rma nc e *

$ in millio ns

* Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on page 35. Note: Results may not be additive due to rounding.

(a ) I nc lude s U.S. sto re s a nd e Co mme rc e re sults. (b ) I nc lude s U.S. who le sa le sa le s o f Carte r's, Child o f Mine , Just One Yo u, a nd Pre c io us F irsts. (c ) I nc lude s inte rna tio na l sto re s, e Co mme rc e , a nd who le sa le sa le s. Adjuste d o pe ra ting inc o me inc lude s inte rna tio na l lic e nsing inc o me . (d) Se e re c o nc ilia tio n o f re po rte d (GAAP) re sults to a djuste d re sults.

2016 2015 2016 2015 2016 2015 Ca r ter 's R eta il (a ) 393 $ 352 $ 42 $ 74 $ 64 $ 10 $ 18.9% 18.3% Ca r ter 's Wholesa le (b) 286 283 3 62 60 2 21.8% 21.2%

To ta l Cart e r's 680 635 45 137 124 12 20.1% 19.6%

OshKosh R eta il (a ) 135 118 16 11 9 2 8.2% 7.2% OshKosh Wholesa le 11 16 (6) 3 4 (1) 23.5% 21.6%

To ta l OshK

sh

145 135 11 14 12

1

9.3% 9.0%

I nter na tiona l (c ) 109 97 12 22 16 6 20.1% 16.5%

To ta l b e fo re c o rpo ra te e xpe nse s 934 867 68 172 153 20 18.5% 17.6%

Cor por a te expenses (d) (31) (35) 5 (3.3% ) (4.1% ) T

ta l (d)

934 $ 867 $ 68 $ 142 $ 117 $ 25 $ 15.2% 13.5% Net Sa les Adjusted Oper a ting I nc om e (L

ss)*

Adjusted Oper a ting Ma r g in* $ Gr

wth

$ Gr

wth

SLIDE 9

9

F

urth Qua rte r Hig hlig hts – Ca rte r’ s Who le sa le

Q4 2015 Q4 2016

Ope ra ting I nc o me Ne t Sa le s

$283 $286 $60 $62

Sa le s g ro wth re fle c ts hig he r shipme nts o f fa ll pro duc t

a nd the b e ne fit o f in-so urc ing c e rta in pre vio usly lic e nse d pro duc ts, pa rtia lly o ffse t b y lo we r Spring shipme nts

F

ull ye a r 2016: +2% sa le s g ro wth

Se g me nt o pe ra ting ma rg in impro ve me nt re fle c ts lo we r

pro duc t c o sts a nd supply c ha in e ffic ie nc ie s

2017 o utlo o k:
Spring 2017 b o o king s: do wn mid-sing le dig its
F

a ll 2017 b o o king s: do wn mid-sing le dig its vs. L Y

U.S. Who le sa le (Ca rte r’ s + OshK
sh) full ye a r ne t sa le s:

do wn lo w-sing le dig its

Se g me nt Ne t Sa le s & Ope ra ting Inc ome

$ in millio ns Se g me nt Ma rg in 21.8%

Sa le s +1%

Se g me nt Ma rg in 21.2%

SLIDE 10

Q4 2015 Q4 2016

10

F

urth Qua rte r Hig hlig hts – Ca rte r’ s Re ta il

Q4 2015 Q4 2016

Sto re s e Co mme rc e

$85 $105 $267 $289 $393 $352

Se g me nt Ope ra ting Inc ome

Str
ng Re tail c omp: +5.4% (+5.7% c omp Q4 2015)

Stor e s

Ne t sa le s +8%
Sto re Co mp: +0.1%
Re fle c ts inc re a se d de ma nd fro m do me stic c o nsume rs,
ffse t b y lo we r de ma nd fro m inte rna tio na l c o nsume rs
Side -b y-Side & Co -b ra nde d 1 sto re s c o mpe d po sitive ly
Q4 e nding sto re c o unt: 654*
495 Sta nd-a lo ne
159 Dua l-b ra nde d (140 Side -b y-Side , 19 Co -b ra nde d*)

e Comme r c e

Stro ng sa le s pe rfo rma nc e (+21.7% c o mp)
Q4 ne t sa le s 27% o f re ta il se g me nt sa le s (vs. 24% L

Y)

Se gme nt Ope r ating Mar gin

Ope ra ting ma rg in impro ve me nt re fle c ts stro ng e r g ro ss

ma rg in, o ffse t in pa rt b y hig he r distrib utio n a nd ma rke ting e xpe nse s

$ in millio ns

18.3%

f

Ne t Sale s 18.9%

f

Ne t Sale s T

tal

Sale s +12% Re tail Comp +5.4% $64 $74

Se g me nt Ne t Sa le s

*See store count reconciliation on page 39. Note: Results may not be additive due to rounding.

1Co-branded results reflect combined Carter’s and OshKosh performance in converted locations.

SLIDE 11

11

U.S. Re ta il – I nte rna tio na l Co nsume r De ma nd

We b e lie ve the re c e nt impro ve me nt in inte rna tio na l c o mps wa s a ffe c te d b y sig nific a nt stre ng the ning o f the U.S.

Do lla r fo llo wing the U.S. pre side ntia l e le c tio n

We a ke ning o f the Me xic a n Pe so vs. the U.S. Do lla r (-10.3% fo llo wing the U.S. e le c tio n) wa s a ke y drive r o f the

ne g a tive Q4 inte rna tio na l sto re s c o mp

I

mpa c t to b ric k a nd mo rta r sto re s c o ntinue s to b e mo re sig nific a nt tha n e Co mme rc e

L

a rg e st c o ntrib uto rs to impro ve d inte rna tio na l e Co mme rc e de ma nd: Bra zil (+87%), Arg e ntina (+33%), Russia (+43%), Ukra ine (+42%)

Q4 2016 inte rna tiona l c omp lowe r tha n Q3 2016, but sig nific a nt improve me nt ove r 1H 2016

Q4 U.S. Re tail Compar able Sale s

Dome stic Dome stic Int’l Int’l T

tal

T

tal

1.0% (10.1% ) (0.1% ) 27.8% 8.7% 22.7%

Store s

e Comme r c e Inte r national Consume r Compar able Sale s vs. L Y

(17.7% ) (17.4% ) (17.8% ) 1.2% (1.5% ) Q4- 15 Q1- 16 Q2- 16 Q3- 16 Q4- 16 T

tal U.S.

Re tail 5.5%

SLIDE 12

12

Carte r’ s Dire c t Ma rke ting

SLIDE 13

13

Carte r’ s Dire c t Ma rke ting

SLIDE 14

14

F

urth Qua rte r Hig hlig hts – OshK
sh Re ta il

Q4 2015 Q4 2016

Sto re s e Co mme rc e

$28 $35 $91 $99 $135 Q4 2015 Q4 2016 $9 $11

$ in millio ns

T

tal

Sale s +14% Re tail Comp +5.8%

Se g me nt Ne t Sa le s Se g me nt Ope ra ting Inc ome

7.2%

f

Ne t Sa le s 8.2%

f

Ne t Sa le s

$118

Str
ng Re tail c omp: +5.8% (+4.0% c omp Q4 2015)

Stor e s

Ne t sa le s: +10%
Co mp sa le s de c line d (0.6%)
Re fle c ts lo we r de ma nd fro m inte rna tio na l

c o nsume rs, o ffse t in pa rt b y impro ve d de ma nd fro m do me stic c o nsume rs

Side -b y-Side & Co -b ra nde d 1 sto re s c o mpe d po sitive ly
Q4 e nding sto re c o unt: 297*
138 Sta nd-a lo ne
159 Dua l-b ra nde d (140 Side -b y-Side , 19 Co -b ra nde d*)

e Comme r c e

Stro ng sa le s pe rfo rma nc e (+25.9% c o mp)
Q4 e Co mme rc e sa le s 26% o f re ta il se g me nt sa le s

(vs. 23% L Y)

Se gme nt Ope r ating Mar gin

I

nc re a se in o pe ra ting ma rg in re fle c ts stro ng e r g ro ss ma rg in,

ffse t in pa rt b y inc re a se d ma rke ting spe nd a nd ne w sto re

e xpe nse s

*See store count reconciliation on page 39. Note: Results may not be additive due to rounding.

1Co-branded results reflect combined Carter’s and OshKosh performance in converted locations.

SLIDE 15

15

OshKo sh Dire c t Ma rke ting

SLIDE 16

16

OshKo sh Dire c t Ma rke ting

SLIDE 17

Stor e Mode l

Co -b ra nde d fo rma t
Othe r
Sma lle r
Mo re pro duc tive
Gre a te r ROI
Ne w sto re b uild-o ut

a nd re mo de l c o st re duc tio ns

Dual- br and 20%

17

U.S. Re ta il Sto re Po rtfo lio

T he Composition

f Our

Stor e Por tfolio Continue s to Shift Stor e Pe r for manc e Initiative s Single - br and 100% 2016* 2011 E nhanc e Custome r E xpe r ie nc e

Re wa rding Mo me nts

lo ya lty pro g ra m

Omni-c ha nne l

c a pa b ilitie s

Ne w sto re s in mo re

c o nve nie nt lo c a tio ns

I

mpro ve in-sto c ks a nd lo c a lize a sso rtme nts

T e c hnology Inve stme nts T

Impr
ve Pr
duc tivity
Wo rkfo rc e ma na g e me nt
Asso rtme nt pla nning &

b uying

I

nve nto ry a llo c a tio n

Pric e o ptimiza tio n

Dual- br and 42% 2021 (Pr

je c te d)

Single - br and 58% Single - br and 80%

*See store count reconciliation on page 39.

SLIDE 18

18

Co -b ra nde d Sto re – L

uisville , K

Y

(o pe ne d July 2016)

SLIDE 19

19

Side -b y-Side sto re – L a Ha b ra , CA

(o pe ne d Oc to b e r 2016)

SLIDE 20

20

F

urth Qua rte r Hig hlig hts – I

nte rna tio na l

Q4 2015 Q4 2016

Sto re s Who le sa le e Co mme rc e

$34 $34 $54 $63 $109 $97

Se g me nt Ne t Sa le s

Q4 2015 Q4 2016 $13 $9

$ in millio ns

16.5%

f

Ne t Sale s 20.1%

f

Ne t Sale s T

tal

Sale s +13% $16 $22

Se g me nt Ope ra ting Inc ome

Ne t Sale s

Solid Inte r

national se gme nt gr

wth
Re po rte d a nd c o nsta nt c urre nc y ne t sa le s: +13%
Ca na da Re ta il c o mp: +10.9% (+14.6% c o mp Q4 2015)
Canada Stor

e s

Ne t sa le s +16%
Sto re c o mp +6.9%
Ope ne d 17 ne t ne w sto re s in fisc a l 2016
e Comme r

c e

Ne t sa le s +34%, drive n b y g ro wth in Ca na da (+61.1%

c o mp) a nd China

Whole sale
Ne t sa le s +1%: re fle c ts inc re a se d de ma nd in Ca na da

a nd ne w who le sa le b usine ss in China , o ffse t b y lo we r de ma nd fro m o the r inte rna tio na l pa rtne rs due to the stre ng the ning o f the U.S. Do lla r

Se gme nt Ope r ating Mar gin

Ope ra ting ma rg in impro ve me nt re fle c ts stro ng e r g ro ss

ma rg in, sto re e xpe nse le ve ra g e , a nd distrib utio n e ffic ie nc ie s, pa rtia lly o ffse t b y China who le sa le sta rt up c o sts

Note: Results may not be additive due to rounding.

SLIDE 21

21

Ne w Sto re Ope ning – Bra ndo n, Ca na da

(o pe ne d De c e mb e r 2016)

SLIDE 22

22

China Q4 Sto re Ope ning – Be ijing

Be ijing

1,500 sq . ft.
Ope ne d

De c e mb e r 2016

SLIDE 23

F ull Ye ar Pe r for manc e

SLIDE 24

2016 Hig hlig hts

24

Ma inta ine d le a ding ma rke t sha re in the U.S. (17.8%) a nd e xpa nde d

sha re in Ca na da b y +280b ps to 18.9%1

I

ntro duc e d ne w c o -b ra nde d sto re fo rma t in U.S.

Ope ne d 54 ne t ne w sto re s in the U.S. (64 o pe ning s a nd 9 c lo sing s)

a nd 17 in Ca na da *

L

a unc he d who le sa le b usine ss in China

E

xte nde d OshKo sh pro duc t o ffe ring to inc lude size 14

Stre ng the ne d o ur o mni-c ha nne l c a pa b ilitie s
I

nc re a se d dire c t so urc ing mix to 47% (vs. 39% L Y)

F inanc ial Re sults Ke y Mile stone s

28th c o nse c utive ye a r o f sa le s g ro wth: +6% vs. L

Y

Co ntinue d a djuste d o pe ra ting ma rg in e xpa nsio n: +20 b ps to 13.5%
Ac hie ve d re c o rd a djuste d o pe ra ting inc o me $431 millio n
Re c o rd a djuste d E

PS $5.14, +11%

Re c o rd o pe ra ting a nd fre e c a sh flo w
Re turne d $367 millio n to sha re ho lde rs

1 Source: the NPD Group/Consumer Tracking Service for the 12-months-ending December 2016 vs. 2015, all channels of distribution for ages 0-7. Please note that NPD revised its Fashion

Consumer Tracker methodology in the U.S., effective with the most recent data release for annual 2016 and restated 2015 data. NPD data cited in prior communications and SEC filings are based on an alternate methodology no longer employed by NPD and are not comparable to current year presentation. *See store count reconciliation on page 39.

SLIDE 25

25

F isc a l 2016 Adjuste d Re sults*

$ in millio ns, e xc e pt E PS

* Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on pages 36-38. Note: Results may not be additive due to rounding.

Fisc a l Fisc a l 2016 2015

Ne t sa le s

$3,199.2

$3,013.9

6%

Gro ss pro fit

1,379.1

43.1%

1,258.0

41.7%

10%

Adjuste d SG&A*

990.6

31.0%

901.1

29.9%

10%

Ro ya lty inc o me

(42.8)

(1.3%)

(44.1)

(1.5%)

(3% )

Adjuste d o pe ra ting inc o me *

431.4

13.5%

401.0

13.3%

8%

Inte re st a nd o the r, ne t

30.5

1.0%

24.7

0.8%

24%

Inc o me b e fo re ta xe s

400.9

12.5%

376.3

12.5%

7%

Inc o me ta xe s

139.7

4.4%

132.7

4.4%

5%

Adjuste d ne t inc o me *

$261.1

8.2%

$243.6

8.1%

7%

Adjuste d dilute d EPS*

$5.14 $4.61 11%

We ig hte d a ve ra g e sha re s o utsta nding

49.2

51.9

(5% )

Adjuste d EBITDA*

$499.1

15.6%

$465.0

15.4%

7%

% of Sa les % of Sa les

I nc r ea se / (Dec r ea se)

SLIDE 26

26

F isc a l 2016 Ne t Sa le s

Gr

wth vs. 2015

+9% +2% +11% (24% ) +12% +6%

F isc al 2015 Car te r 's Re tail Car te r 's Whole sale OshKosh Re tail OshKosh Whole sale Inte r national F isc al 2016

+6% $102.9 $20.7 $39.2 ($15.9) $38.5 $3,199.2 $3,013.9

Re tail1 Comp +3.3% Re tail1 Comp +3.1%

Sto re s $20.4 e Co mme rc e 18.7

$ in millio ns

Canada Re tail Comp1,2 +8.4%

Sto re s $52.3 e Co mme rc e 50.6

Constant Cur r e nc y

+14%

+6% OshKo sh +5% Car te r ’s +5%

1Retail Comp is defined as the combination of store and eCommerce comparable sales. 2Calculated in local currency.

Note: Results may not be additive due to rounding.

T

ta l U.S. Re ta il

T

ta l Sa le s Gro wth +9.4%

Co mpa ra b le Sa le s +3.1%

Sto re s $24.6 e Co mme rc e 11.4 Who le sa le 2.5

Int’l +12%

SLIDE 27

F isc a l 2016 Adjuste d Busine ss Se g me nt Pe rfo rma nc e *

27

$ in millio ns

* Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on page 37. Note: Results may not be additive due to rounding.

(a ) I nc lude s U.S. re ta il sto re s a nd e Co mme rc e re sults. (b ) I nc lude s U.S. who le sa le sa le s o f Carte r's, Child o f Mine , Just One Yo u, a nd Pre c io us F irsts. (c ) I nc lude s inte rna tio na l re ta il, e Co mme rc e a nd who le sa le sa le s. Adjuste d o pe ra ting inc o me inc lude s inte rna tio na l lic e nsing inc o me . (d) Se e re c o nc ilia tio n o f re po rte d (GAAP) re sults to a djuste d re sults.

2016 2015 2016 2015 2016 2015 Ca r ter 's R eta il (a ) 1,254 $ 1,151 $ 103 $ 202 $ 199 $ 3 $ 16.1% 17.3% Ca r ter 's Wholesa le (b) 1,128 1,108 21 250 232 18 22.2% 21.0%

To ta l Cart e r's 2,383 2,259 124 452 432 21 19.0% 19.1%

OshKosh R eta il (a ) 402 363 39 10 12 (2) 2.6% 3.3% OshKosh Wholesa le 50 66 (16) 11 13 (2) 21.8% 20.2%

To ta l OshK

sh

452 429 23 21 25

(4)

4.7% 5.9%

I nter na tiona l (c )(d) 365 326 39 59 49 10 16.2% 15.0%

To ta l b e fo re c o rpo ra te e xpe nse s 3,199 3,014 185 533 506 27 16.7% 16.8%

Cor por a te expenses (d) (101) (105) 3 (3.2% ) (3.5% ) T

ta l (d)

3,199 $ 3,014 $ 185 $ 431 $ 401 $ 30 $ 13.5% 13.3% Net Sa les Adjusted Oper a ting I nc om e (L

ss)*

Adjusted Oper a ting Ma r g in* $ Gr

wth

$ Gr

wth

SLIDE 28

28

Ac q uisitio n o f Skip Ho p

SLIDE 29

29

Skip Ho p Ac q uisitio n - Hig hlig hts

Str ate gic Rationale Re c e nt F inanc ial Pe r for manc e

Globa l life style bra nd for fa milie s with young c hildre n. F
unde d in 2003.
Offe rs ke y e sse ntia ls tha t a re re - ima g ine d a nd diffe re ntia te d from a de sig n a nd func tion pe rspe c tive
Produc t c a te g orie s inc lude : dia pe r ba g s, ba c kpa c ks, tra ve l a c c e ssorie s, home g e a r, a nd ha rdline s

for pla y/ me a l/ ba th time

Curre ntly distribute d in 5,000 doors in the U.S. a nd in 60+ c ountrie s

Company Bac kgr

und

 Yo ung c hildre n’ s a ppa re l o r re la te d pro duc ts  T

ra c k re c o rd o f g ro wth; stro ng fo rwa rd pro spe c ts

 Go o d ma na g e me nt te a m willing to re ma in with us po st-a c q uisitio n  I

mme dia te ly a c c re tive to e a rning s

T

ra nsa c tion me e ts our M&A c rite ria

2016 Ne t Sa le s ~$86 million1
Close produc t a dja c e nc y – ke y e sse ntia ls for pa re nts, ba bie s a nd toddle rs
Co mple me nts Ca rte r’ s stro ng c o re a ppa re l b usine ss
Dive rsifie s pro duc t b a se with the a dditio n o f b a b y / c hildre n’ s ha rdline s
Strong c onsume r proposition – “Must Have s Made Be tte r

”

Re c o g nize d b ra nd na me in ma rke tpla c e
Pro duc t de ve lo pme nt / inno va tio n ‘ DNA’
Growth opportunitie s
Who le sa le c ha nne l - g ro wth with e xisting a nd ne w c usto me rs
Ne w pro duc t inno va tio n
Sa le s o f Skip Ho p pro duc ts o n c a rte rs.c o m a nd in o ur sto re s
I

nte rna tio na l e xpa nsio n

1Unaudited

L ink to Skip Hop ove rvie w vide o:

https:/ / yo utu.b e / _vI 1K CJA7Q0

SLIDE 30

30

Cha ng e s to Re po rte d Busine ss Se g me nts

Ca rte r’s Re ta il

(sto re s/ e Co mme rc e )

Ca rte r’s Whole sa le
OshKosh Re ta il

(sto re s/ e Co mme rc e )

OshKosh Whole sa le
Inte rna tiona l

Se g me nt Re porting Cha ng e s

U.S. Re ta il
U.S. Whole sa le
Inte rna tiona l

F

rme r Se g me nts

Ne w Se g me nts T iming

Ne w re porting be g ins in Q1 2017
Prior ye a r pe riod se g me nt da ta will be re c a st to c onform to ne w

re porting c onve ntion

SLIDE 31

31

2017 Outlo o k

Q1 2017 F isc al Ye ar 2017

Ne t sale s down low- single digits to Q1 2016
F
re c a sting g ro wth in U.S. Re ta il a nd

de c line s in U.S. a nd I nte rna tio na l Who le sa le b usine sse s

Adjuste d E

PS appr

ximate ly $0.80 to $0.85

(vs. $1.05 L Y)

Re fle c ts lo we r ne t sa le s a nd inc re a se d

inve stme nts in the Co mpa ny’ s g ro wth a g e nda

Ne t sale s gr
wth of appr
ximate ly 4% to 6%
Adjuste d E

PS gr

wth of appr
ximate ly 8% to 10%

(vs. $5.14 L Y)

Guida nc e re fle c ts a ntic ipa te d Skip Ho p

b e ne fit (a ppro xima te ly $90 millio n ne t sa le s, e a rning s c o ntrib utio n no t sig nific a nt)

Stor

e ope nings / c losur e s

U.S.: ~62 ne w sto re s (31 Co -b ra nde d,

17 Side -b y-Side ,14 Ca rte r’ s Sta nd-a lo ne ); ~11 c lo sure s

Ca na da : ~15 ne w sto re s; ~2 c lo sure s
Ope r

ating Cash F low appr

ximate ly

$325 to $350 million

CapE

x appr

ximate ly $100 million

SLIDE 32

tha nk yo u.

32

SLIDE 33

a ppe ndix

SLIDE 34

34

F

urth Qua rte r Re c o nc ilia tio n o f Ne t I

nc o me Allo c a b le to Co mmo n Sha re ho lde rs

(a ) I n a dditio n to the re sults pro vide d in this e a rning s re le a se in a c c o rda nc e with GAAP, the Co mpa ny ha s pro vide d a djuste d, no n-GAAP fina nc ia l me a sure me nts tha t pre se nt the info rma tio n a b o ve e xc luding $1.6 millio n a nd $0.6 millio n in a fte r-ta x e xpe nse s fro m the se re sults fo r the fisc a l q ua rte rs e nde d De c e mb e r 31, 2016 a nd Ja nua ry 2, 2016, re spe c tive ly.

Basic numbe r o f c o mmo n share s o utstanding 48,824,395 51,460,090 Dilutiv e e ffe c t o f e quity aw ards 422,205 460,432 Dilute d numbe r o f c o mmo n and c o mmo n e quiv ale nt share s o utstanding 49,246,600 51,920,522

F isc a l Q ua rte r End De c e mbe r 31, 2016 Ja nua ry 2, 2016

We ig hte d-av e rag e numbe r o f c o mmo n and c o mmo n e quiv ale nt share s o utstanding : $ in tho usands, e xc e pt E PS

De c e mbe r 31, 2016 Ja nua ry 2, 2016 De c e mbe r 31, 2016 Ja nua ry 2, 2016

Basic ne t inc o me pe r c o mmo n share : Ne t inc o me 87,117 $ 72,600 $ 88,736 $ 73,198 $ Inc o me allo c ate d to partic ipating se c uritie s (686) (613) (698) (618) Ne t inc o me av ailable to c o mmo n share ho lde rs 86,431 $ 71,987 $ 88,038 $ 72,580 $ Basic ne t inc o me pe r c o mmo n share $1.77 $1.40 $1.80 $1.41 Dilute d ne t inc o me pe r c o mmo n share : Ne t inc o me 87,117 $ 72,600 $ 88,736 $ 73,198 $ Inc o me allo c ate d to partic ipating se c uritie s (681) (609) (693) (613) Ne t inc o me av ailable to c o mmo n share ho lde rs 86,436 $ 71,991 $ 88,043 $ 72,585 $ Dilute d ne t inc o me pe r c o mmo n share $1.76 $1.39 $1.79 $1.40

F isc a l Q ua rte r Ende d As re po rte d o n a G AAP Ba sis As a djuste d (a )

SLIDE 35

35

F

urth Qua rte r Re c o nc ilia tio n o f Re po rte d to

Adjuste d E a rning s

$ in millio ns, e xc e pt E PS

Note: Results may not be additive due to rounding.

(a ) Co sts a sso c ia te d with the Co mpa ny’ s dire c t so urc ing initia tive , to inc lude se ve ra nc e a nd re lo c a tio n. (b ) Adviso ry fe e s inc urre d in c o nne c tio n with a nno unc e d Skip Ho p tra nsa c tio n.

Corpora te

% o f

Gross

% o f % o f

Opera ting

% o f

Net Diluted Opera ting

to ta l

F

urth Qua rter of F

isc a l 2015 Ma rg in

sa le s

SG&A

sa le s

Inc ome

sa le s

Inc ome EPS Expenses

net sa les

As reported (GAAP) $363.5

42.0%

$258.7

29.9%

$116.2

13.4%

$72.6 $1.39 ($36.4) (4.2%)

Am o rtiza tio n o f tra d ena m es

(1.0)

1.0 0.6 0.01 1.0

As a djusted $363.5

42.0%

$257.8

29.7%

$117.1

13.5%

$73.2 $1.40 ($35.5) (4.1%) $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0500 Seg ment Reporting Corpora te

% o f

Gross

% o f % o f

Opera ting

% o f

Net Diluted Opera ting

to ta l

F

urth Qua rter of F

isc a l 2016 Ma rg in

sa le s

SG&A

sa le s

Inc ome

sa le s

Inc ome EPS Expenses

net sa les

As reported (GAAP) $410.5

43.9%

$282.6

30.3%

$139.4

14.9%

$87.1 $1.76 ($33.1) (3.5%)

Direc t so urc ing initia tive (a )

(0.2)

0.2 0.1

0.2

Ac q uisitio n rela ted c o sts (b )

(2.4)

2.4 1.5 0.03 2.4

As a djusted $410.5

43.9%

$280.1

30.0%

$142.0

15.2%

$88.7 $1.79 ($30.5) (3.3%) c hec k $0.0000 ($0.0290) $0.0290 $0.0180 ($0.0030) $0.0000 Seg ment Reporting

SLIDE 36

Basic numbe r o f c o mmo n share s o utstanding 49,917,858 51,835,053 Dilutiv e e ffe c t o f e quity aw ards 457,849 499,583 Dilute d numbe r o f c o mmo n and c o mmo n e quiv ale nt share s o utstanding 50,375,707 52,334,636

F isc a l Ye a r Ende d De c e mbe r 31, 2016 Ja nua ry 2, 2016

We ig hte d-av e rag e numbe r o f c o mmo n and c o mmo n e quiv ale nt share s o utstanding :

36

F isc a l 2016 Re c o nc ilia tio n o f Ne t I nc o me Allo c a b le to Co mmo n Sha re ho lde rs

(a ) I n a dditio n to the re sults pro vide d in this e a rning s re le a se in a c c o rda nc e with GAAP, the Co mpa ny ha s pro vide d a djuste d, no n-GAAP fina nc ia l me a sure me nts tha t pre se nt the info rma tio n a b o ve e xc luding $3.1 millio n a nd $5.8 millio n in a fte r-ta x e xpe nse s fro m the se re sults fo r the fisc a l ye a r e nde d De c e mb e r 31, 2016 a nd Ja nua ry 2, 2016, re spe c tive ly.

$ in tho usands, e xc e pt E PS Basic ne t inc o me pe r c o mmo n share : Ne t inc o me 258,106 $ 237,822 $ 261,147 $ 243,641 $ Inc o me allo c ate d to partic ipating se c uritie s (2,049) (2,184) (2,073) (2,238) Ne t inc o me av ailable to c o mmo n share ho lde rs 256,057 $ 235,638 $ 259,074 $ 241,403 $ Basic ne t inc o me pe r c o mmo n share $5.13 $4.55 $5.19 $4.66 Dilute d ne t inc o me pe r c o mmo n share : Ne t inc o me 258,106 $ 237,822 $ 261,147 $ 243,641 $ Inc o me allo c ate d to partic ipating se c uritie s (2,035) (2,167) (2,059) (2,221) Ne t inc o me av ailable to c o mmo n share ho lde rs 256,071 $ 235,655 $ 259,088 $ 241,420 $ Dilute d ne t inc o me pe r c o mmo n share $5.08 $4.50 $5.14 $4.61

De c e mbe r 31, 2016 Ja nua ry 2, 2016 De c e mbe r 31, 2016 Ja nua ry 2, 2016 F

ur F

isc a l Q ua rte rs Ende d As re po rte d o n a G AAP Ba sis As a djuste d (a )

SLIDE 37

37

F isc a l 2016 Re c o nc ilia tio n o f Re po rte d to Adjuste d E a rning s

$ in millio ns, e xc e pt E PS

Note: Results may not be additive due to rounding.

(a ) Co sts a sso c ia te d with the Co mpa ny’ s dire c t so urc ing initia tive , to inc lude se ve ra nc e a nd re lo c a tio n. (b ) Adviso ry fe e s inc urre d in c o nne c tio n with a nno unc e d Skip Ho p tra nsa c tio n. (c ) Re va lua tio n o f c o nting e nt c o nside ra tio n lia b ility a sso c ia te d with the Co mpa ny’ s 2011 a c q uisitio n o f Bo nnie T

g s.

Interna tiona l

% o f

Corpora te

% o f

Gross

% o f % o f

Opera ting

% o f

Net Diluted Opera ting

seg m ent

Opera ting

to ta l

F isc a l 2015 Ma rg in

sa le s

SG&A

sa le s

Inc ome

sa le s

Inc ome EPS Inc ome

net sa les

Expenses

net sa les

As reported (GAAP) $1,258.0

41.7%

$909.2

30.2%

$392.9

13.0%

$237.8 $4.50 $47.0 14.4% ($110.9) (3.7%)

Am o rtiza tio n o f tra d ena m es

(6.2)

6.2 3.9 0.08

6.2

Reva lua tio n o f c o nting ent c o nsid era tio n (c )

(1.9)

1.9 1.9 0.04 1.9

As a djusted

$1,258.0

41.7%

$901.1

29.9%

$401.0

13.3%

$243.6 $4.61 $48.9 15.0% ($104.6) (3.5%) c hec k $0.0000 ($0.0110) $0.0110 $0.0120 $0.0100 $0.0000 ($0.0610) Interna tiona l

% o f

Corpora te

% o f

Gross

% o f % o f

Opera ting

% o f

Net Diluted Opera ting

seg m ent

Opera ting

to ta l

F isc a l 2016 Ma rg in

sa le s

SG&A

sa le s

Inc ome

sa le s

Inc ome EPS Inc ome

net sa les

Expenses

net sa les

As reported (GAAP) $1,379.1

43.1%

$995.4

31.1%

$426.6

13.3%

$258.1 $5.08 $59.2 16.2% ($106.2) (3.3%)

Am o rtiza tio n o f tra d ena m es

(1.7)

1.7 1.1 0.02

1.7

Direc t so urc ing initia tive (a )

(0.7)

0.7 0.5 0.01

0.7

Ac q uisitio n rela ted c o sts (b )

(2.4)

2.4 1.5 0.03

2.4

As a djusted $1,379.1

43.1%

$990.6

31.0%

$431.4

13.5%

$261.1 $5.14 $59.2 16.2% ($101.4) (3.2%) c hec k $0.0000 $0.6720 ($0.6720) ($0.4320) ($0.0100) $0.0000 ($0.6580) Seg ment Reporting

SLIDE 38

38

Re c o nc ilia tio n o f Ne t I nc o me to Adjuste d E BI T DA

$ in millio ns

Note: Results may not be additive due to rounding.

(a ) Co sts a sso c ia te d with the Co mpa ny’ s dire c t so urc ing initia tive , to inc lude se ve ra nc e a nd re lo c a tio n. (b ) Adviso ry fe e s inc urre d in c o nne c tio n with a nno unc e d Skip Ho p tra nsa c tio n.

De c e mb e r 31, 2016 Ja nua ry 2, 2016 De c e mb e r 31, 2016 Ne t inc o me 87.1 $ 72.6 $ 258.1 $ Inte re st e xpe nse 6.7 6.5 27.0 Inte re st inc o me (0.1) (0.1) (0.6) Ta x e xpe nse 45.3 38.5 138.0 De pre c ia tio n a nd a mo rtiza tio n 19.2 18.8 73.4

E BI T DA 158.3 $ 136.3 $ 496.0 $

$0.0000 # ($0.0) ($0.0410)

Adjustm ents to E BI T DA

Dire c t so urc ing initia tive (a ) 0.2 $

$

0.7 $ Ac q uisitio n re la te d c o sts (b ) 2.4

2.4

Adjusted E BI T DA 160.8 $ 136.3 $ 499.1 $

$0.0290 $0.0110 ($0.0130)

Fisc a l Ye a r Ende d Fisc a l Qua rte r Ende d

SLIDE 39

39

Sto re Co unt Da ta

U.S. Ca r ter 's Sta nd- a lone U.S. OshKosh Sta nd- a lone U.S. Side- by- Side For m a t U.S. Co- br a nded For m a t Ca na da Co- br a nded For m a t T

ta l R

eta il Stor es Stor e c ount a t Ja nua r y 3, 2015

480 149 51 — 124 804 Ope ning s 34 3 31 — 23 91 Clo sing s (4) (6) — — — (10) Co nve rsio ns to dua l-b ra nde d fo rma ts (13) (2) 15 — — —

Stor e c ount a t Ja nua r y 2, 2016

497 144 97 — 147 885 Ope ning s 23 1 30 10 17 81 Clo sing s (4) (5) — — — (9) Co nve rsio ns to dua l-b ra nde d fo rma ts (21) (2) 13 9 — (1)

Stor e c ount a t Dec em ber 31, 2016

495 138 140 19 164 956

Sing le- br a nd Dua l- br a nd

SLIDE 40

40

F

rwa rd-lo o king Sta te me nts a nd Othe r I

nfo rma tio n

Re sults pro vide d in this pre se nta tio n a re pre limina ry a nd una udite d. T his pre se nta tio n sho uld b e re a d in c o njunc tio n with the a udio b ro a dc a st o r tra nsc ript o f the Co mpa ny’ s e a rning s c a ll, he ld o n F e b rua ry 23, 2017 whic h is a va ila b le a t www.c a rte rs.c o m. Also , this pre se nta tio n c o nta ins fo rwa rd-lo o king sta te me nts within the me a ning o f the sa fe ha rb o r pro visio ns o f the Priva te Se c uritie s L itig a tio n Re fo rm Ac t o f 1995 re la ting to the Co mpa ny’ s future pe rfo rma nc e , inc luding , witho ut limita tio n, sta te me nts with re spe c t to the Co mpa ny’ s a ntic ipa te d fina nc ia l re sults fo r the first q ua rte r o f fisc a l 2017 a nd fisc a l ye a r 2017, o r a ny o the r future pe rio d, a sse ssme nts

f the Co mpa ny’ s pe rfo rma nc e a nd fina nc ia l po sitio n, a nd drive rs o f the Co mpa ny’ s sa le s a nd e a rning s g ro wth. Suc h sta te me nts a re

b a se d o n c urre nt e xpe c ta tio ns o nly, a nd a re sub je c t to c e rta in risks, unc e rta intie s, a nd a ssumptio ns. Sho uld o ne o r mo re o f the se risks

r unc e rta intie s ma te ria lize o r no t ma te ria lize , o r sho uld unde rlying a ssumptio ns pro ve inc o rre c t, a c tua l re sults ma y va ry ma te ria lly

fro m tho se a ntic ipa te d, e stima te d, o r pro je c te d. Ce rta in o f the risks a nd unc e rta intie s tha t c o uld c a use a c tua l re sults a nd pe rfo rma nc e to diffe r ma te ria lly a re de sc rib e d in the Co mpa ny’ s mo st re c e ntly file d Annua l Re po rt o n F

rm 10-K

a nd o the r re po rts file d with the Se c uritie s a nd E xc ha ng e Co mmissio n fro m time to time unde r the he a ding s “Risk F a c to rs” a nd “F

rwa rd-L
o king

Sta te me nts.” I nc lude d a mo ng the risks a nd unc e rta intie s tha t ma y impa c t future re sults a re the risks o f: lo sing o ne o r mo re ma jo r c usto me rs, ve ndo rs, o r lic e nse e s, due to c o mpe titio n, ina de q ua te q ua lity o f the Co mpa ny’ s pro duc ts, o r o the rwise ; fina nc ia l diffic ultie s fo r o ne o r mo re o f the Co mpa ny’ s ma jo r c usto me rs, ve ndo rs, o r lic e nse e s, o r a n o ve ra ll de c re a se in c o nsume r spe nding ; fluc tua tio ns in fo re ig n c urre nc y e xc ha ng e ra te s; o ur pro duc ts no t b e ing a c c e pte d in the ma rke tpla c e , due to q ua lity c o nc e rns, c ha ng e s in c o nsume r pre fe re nc e a nd fa shio n tre nds, o r o the rwise ; ne g a tive pub lic ity, inc luding a s a re sult o f pro duc t re c a lls o r

the rwise ; fa ilure to pro te c t the Co mpa ny’ s inte lle c tua l pro pe rty; va rio us type s o f litig a tio n, inc luding c la ss a c tio n litig a tio n b ro ug ht

unde r va rio us c o nsume r pro te c tio n, e mplo yme nt, a nd priva c y a nd info rma tio n se c urity la ws; a b re a c h o f the Co mpa ny’ s c o nsume r da ta b a se s, syste ms, o r pro c e sse s; the risk o f slo w-do wns, disruptio ns, o r strike s a lo ng the Co mpa ny’ s supply c ha in, inc luding disruptio ns re sulting fro m fo re ig n supply so urc e s, the Co mpa ny’ s distrib utio n c e nte rs, o r in-so urc ing c a pa b ilitie s; unsuc c e ssful e xpa nsio n into inte rna tio na l ma rke ts o r fa ilure to suc c e ssfully ma na g e le g a l, re g ula to ry, po litic a l a nd e c o no mic risks o f the Co mpa ny’ s e xisting inte rna tio na l o pe ra tio ns, inc luding ma inta ining c o mplia nc e with wo rldwide a nti-b rib e ry la ws; a nd a n ina b ility to o b ta in a dditio na l fina nc ing o n fa vo ra b le te rms. All info rma tio n is pro vide d a s o f F e b rua ry 23, 2017. We unde rta ke no o b lig a tio n to pub lic ly upda te o r re vise a ny fo rwa rd-lo o king sta te me nts, whe the r a s a re sult o f ne w info rma tio n, future e ve nts, o r o the rwise .