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

F our th Quar te r 2016 Busine ss Upda te F E BRUARY 23, 2017

F o urth Qua rte r / F isc a l 2016 Hig hlig hts $ in millio ns, e xc e pt E PS Q4 F ull Ye a r Ne t Sa le s Adjuste d E PS* Ne t Sa le s Adjuste d E PS* +6% +11% +8% +28% $3,199 $3,014 $5.14 $1.79 $934 $4.61 $867 $1.40 15.2% of Net Sales 2015 2016 2015 2016 2015 2016 2015 2016 Q4 Highlights* F isc al 2016 Highlights* • Ne t sale s +8% le d by double digit gr owth in U.S. • Ne t sale s +6% Re tail and Inte r national busine sse s • Adjuste d ope r ating mar gin 13.5% (+20bps) • Adjuste d ope r ating mar gin e xpansion of +170bps, • Adjuste d E PS +11% r e fle c ting solid gr oss mar gin impr ove me nt • $367 million r e tur ne d to shar e holde r s thr ough Adjuste d E PS gr owth of +28% • divide nds and shar e r e pur c hase s 2 * Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on pages 34 - 37.

F o urth Qua rte r 2016 Ne t Sa le s $ in millio ns +8% Int’l +13% Car te r ’s +7% OshKo sh +8% $12.2 $934.2 $16.3 ($5.6) $3.1 $41.7 Sto re s $8.8 $866.5 Sto re s $8.8 e Co mme rc e 3.2 e Co mme rc e 7.5 Who le sa le 0.2 Sto re s $22.0 e Co mme rc e 19.6 Canada Re tail 1 Re tail Re tail 1 Comp Comp 1,2 Comp +5.8% +10.9% +5.4% T ota l U.S. Re ta il T o ta l Sa le s Gro wth +12.3% Co mpa ra b le Sa le s +5.5% 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 +14% (34% ) +13% +8% Gr owth vs. 2015 +12% +1% 1 Retail Comp is defined as the combination of store and eCommerce comparable sales. Constant +13% +8% 2 Calculated in local currency. Cur r e nc y 3 Note: Results may not be additive due to rounding.

F o urth Qua rte r 2016 Adjuste d Re sults* $ in millio ns, e xc e pt E PS I nc r ea se / Q4 % of Q4 % of (Dec r ea se) 2015 2016 Sale s Sale s Ne t sa le s $866.5 $934.2 8% Gro ss pro fit 363.5 410.5 13% 43.9% 42.0% Adjuste d SG&A* 257.8 280.1 9% 30.0% 29.7% Ro ya lty inc o me (11.4) (11.5) 1% (1.2%) (1.3%) Adjuste d o pe ra ting inc o me * 117.1 142.0 21% 15.2% 13.5% Inte re st a nd o the r, ne t 5.1 6.9 37% 0.7% 0.6% Inc o me b e fo re ta xe s 112.0 135.0 21% 14.5% 12.9% Inc o me ta xe s 46.3 38.9 19% 5.0% 4.5% Adjuste d ne t inc o me * $73.2 $88.7 21% 9.5% 8.4% 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 51.9 49.2 (5% ) Adjuste d EBITDA* $136.3 $160.8 18% 17.2% 15.7% * Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on pages 34, 35, and 38. 4 Note: Results may not be additive due to rounding.

F o urth Qua rte r 2016 Adjuste d SG&A* $ in millio ns +9% $0.1 $2.7 $280.1 $3.3 $16.2 $257.8 30.0% of 29.7% Ne t Sale s of Ne t Sale s Q4 2015 Re tail Mar ke ting Distr ibution & F r e ight Othe r , ne t Q4 2016 71 ne t ne w sto re s I nve stme nts Hig he r sa le s (54 U.S., 17 to suppo rt vo lume Ca na da ) a nd g ro wth e Co mm g ro wth *Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on page 35. 5

Ba la nc e She e t a nd Ca sh F lo w $ in millio ns 2016 2015 • Inve ntory +4% vs. L Y princ ipa lly due to busine ss g rowth Ca sh $299 $381 Ac c o unts Re c e iva ble 202 208 • Re c ord fre e c a sh flow – $281 million Balanc e She e t - I nc re a se re fle c ts hig he r ne t inc o me , (a t Q4 e nd) Inve nto ry 488 470 fa vo ra b le c ha ng e s in ne t wo rking Ac c o unts Pa ya ble 158 158 c a pita l, a nd lo we r c a pita l e xpe nditure s L o ng -T e rm De bt 580 579 • 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 2016 2015 - Re turne d o ve r $1.1 b illio n to sha re ho lde rs O pe ra ting Ca sh F lo w $369 $308 Cash F low sinc e 2013 (F isc a l Ye a r) Ca pita l Expe nditure s (89) (103) - Additio na l $30 millio n in sha re 1 re purc ha se s in Q1 2017 q ua rte r-to -da te F re e Ca sh F lo w $281 $204 • Qua rte rly divide nd inc re a se d to $0.37 pe r sha re (+12% ) be g inning Q1 2017 2016 2015 Re tur n of Sha re Re purc ha se s $300 $110 Capital (F isc a l Ye a r) Divide nds 66 46 T o ta l $367 $156 1 Non-GAAP measure. 6 Note: Results may not be additive due to rounding.

Busine ss Se gme nt Pe r for manc e 7

F o urth Qua rte r Adjuste d Busine ss Se g me nt Pe rfo rma nc e * $ in millio ns Adjusted Oper a ting Adjusted Oper a ting Net Sa les I nc om e (L oss)* Ma r g in* $ $ 2016 2015 Gr owth 2016 2015 Gr owth 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 o sh 145 135 11 14 12 9.3% 9.0% 1 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 ota l (d) $ 934 $ 867 $ 68 $ 142 $ 117 $ 25 15.2% 13.5% (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. * Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on page 35. 8 Note: Results may not be additive due to rounding.

F o urth Qua rte r Hig hlig hts – Ca rte r’ s Who le sa le $ in millio ns Se g me nt Ne t Sa le s & Ope ra ting Inc ome $286 $283 Sa le s +1% Se g me nt Se g me nt Ma rg in Ma rg in 21.2% $60 $62 21.8% Q4 2015 Q4 2016 Ope ra ting I nc o me Ne t Sa le s • 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 o sh) full ye a r ne t sa le s: do wn lo w-sing le dig its 9

F o urth Qua rte r Hig hlig hts – Ca rte r’ s Re ta il $ in millio ns Str ong Re tail c omp: +5.4% (+5.7% c omp Q4 2015) • T otal Se g me nt Ne t Sa le s Sale s $393 +12% Stor e s $352 • Ne t sa le s +8% $105 $85 • Sto re Co mp: +0.1% Re tail Comp - Re fle c ts inc re a se d de ma nd fro m do me stic c o nsume rs, +5.4% o 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 $289 • Q4 e nding sto re c o unt: 654* $267 - 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 Q4 2015 Q4 2016 Sto re s e Co mme rc e Stro ng sa le s pe rfo rma nc e (+21.7% c o mp) • Se g me nt Ope ra ting Inc ome Q4 ne t sa le s 27% o f re ta il se g me nt sa le s (vs. 24% L Y) • $74 $64 gin Se gme nt Ope r ating Mar Ope ra ting ma rg in impro ve me nt re fle c ts stro ng e r g ro ss • 18.9% ma rg in, o ffse t in pa rt b y hig he r distrib utio n a nd 18.3% of ma rke ting e xpe nse s of Ne t Sale s Ne t Sale s Q4 2015 Q4 2016 *See store count reconciliation on page 39. Note: Results may not be additive due to rounding. 10 1 Co-branded results reflect combined Carter’s and OshKosh performance in converted locations.

U.S. Re ta il – I nte rna tio na l Co nsume r De ma nd 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 Inte r national Consume r Compar able Sale s vs. L Y Q4 U.S. Re tail Compar able Sale s 27.8% Q4- 15 Q1- 16 Q2- 16 Q3- 16 Q4- 16 22.7% 1.2% 8.7% 5.5% (1.5% ) 1.0% (0.1% ) Dome stic Int’l T otal T otal U.S. Re tail (10.1% ) Dome stic Int’l T otal (17.4% ) (17.7% ) (17.8% ) Store s e Comme r c e • 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%) 11

Carte r’ s Dire c t Ma rke ting 12

Carte r’ s Dire c t Ma rke ting 13