Third Quarter 2017 Business Update October 26, 2017
Third Quarter 2017 Results (GAAP Basis) $ in millions, except EPS Q3 % of Q3 % of Increase/ 2017 Sales 2016 Sales (Decrease) Net sales $948.2 $901.4 5% Gross profit 403.8 375.5 8% 42.6% 41.7% SG&A 283.5 255.3 11% 29.9% 28.3% Royalty income (10.4) (10.7) (3%) (1.1%) (1.2%) Operating income 130.7 130.9 (0%) 13.8% 14.5% Interest and other, net 7.2 6.7 8% 0.8% 0.7% Income before taxes 123.5 124.2 (1%) 13.0% 13.8% Income taxes 41.0 43.4 (5%) 4.3% 4.8% Net income $80.8 $82.5 8.7% 9.0% 2% Diluted EPS $1.71 $1.60 7% Weighted average shares outstanding 47.8 50.0 (4%) EBITDA $153.1 $148.4 3% 16.1% 16.5% Note: Results may not be additive due to rounding. 2
Third Quarter 2017 Highlights $ in millions, except EPS Adjusted Net Sales Operating Income* Adjusted EPS* ( Adjusted Operating Margin ) +5% +6% $948.2 $1.70 $1.61 $901.4 $131.4 $131.2 9.5% 10.0% of 9.6% of 14.6% 13.8% Net Sales 10% of Net Sales of of Net Sales of Net Sales Net Sales Net Sales 2016 2017 2016 2017 2016 2017 • Achieved net sales & earnings objectives despite significant impact of hurricanes & warm weather • Net sales $948 million (+5%) - Growth led by U.S. Retail and International businesses - Meaningful contribution from Skip Hop • Adjusted EPS $1.70 (+6%) 3 * Results are stated on an adjusted basis; see reconciliation to GAAP on pages 26 and 27.
Third Quarter 2017 Net Sales $ in millions +5% $18.6 $4.2 $948.2 $32.3 $901.4 Wholesale $10.4 Stores 4.9 eCommerce $24.6 eCommerce 3.3 Stores 7.7 Q3 2016 U.S. Retail International U.S. Wholesale Q3 2017 +5.2% +7.7% +17.6% -1.1% Growth vs. 2016 Constant Constant Currency Currency +14.5% +4.8% 4
Third Quarter 2017 Adjusted Results* $ in millions, except EPS Increase / Q3 Q3 % of % of (Decrease) 2016 2017 Sales Sales Net sales $948.2 $901.4 5% Gross profit 404.2 375.5 8% 42.6% 41.7% Adjusted SG&A* 283.4 254.8 11% 29.9% 28.3% Royalty income (10.3) (10.7) (3%) (1.1%) (1.2%) Adjusted operating income* 131.2 131.4 (0%) 13.8% 14.6% Interest and other, net 7.2 6.7 8% 0.8% 0.7% Income before taxes 124.0 124.7 (1%) 13.1% 13.8% Income taxes 41.8 43.6 (4%) 4.4% 4.8% Adjusted net income* $82.2 $81.1 1% 8.7% 9.0% Adjusted diluted EPS* $1.70 $1.61 6% Weighted average shares outstanding 47.8 50.0 (4%) Adjusted EBITDA* $153.5 $148.9 3% 16.2% 16.5% * Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on pages 26, 27 and 33. 5 Note: Results may not be additive due to rounding.
Third Quarter 2017 Adjusted SG&A* $ in millions +11% $1.4 $283.4 $10.4 $16.8 $254.8 New stores $10.8 eCommerce volume 3.3 Technology 2.1 29.9% of 28.3% Net Sales of Net Sales Q3 2016 Retail Acquisitions Other, net Q3 2017 Investments in new stores, Businesses Higher distribution/freight omni-channel & other retail acquired in 2017 expenses and marketing technology, and higher (Skip Hop, Mexico) investments; lower eCommerce volumes corporate IT costs 6 *Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on page 27.
Comprehensive Investment Agenda Braselton distribution center capacity expansion 2017 • • eCommerce Website refresh & Skip Hop tab 2017 • • Mobile App 2017 • • New point of sale system enabling: 2015 - 2017 • • ‒ Buy online, ship to store ‒ In store access to full online assortment Omni-channel Improved integrated digital loyalty program 2017 • • ( Rewarding Moments ) Inventory management 2017 • • Retail Assortment planning 2017 • • Technology & Price optimization 2017 • • Process Workforce management system 2017 - 2018 • • New product lifecycle management system 2013 - 2019 • • Hong Kong direct sourcing operations Initiated 2012; now ~50% of FOB • • Enhanced Enterprise SAP financial systems 2015 - 2016 • • Capabilities New demand planning system 2016 • • Asia distribution center capacity 2016 • • China 2015 - 2017 • • Skip Hop 2017 New Business • • Development Simple Joys / Amazon 2017 • • Mexico 2017 • • 7
Balance Sheet and Cash Flow $ in millions 2017 2016 • Inventory +10% vs. LY; Skip Hop and Mexico contributed 8 percentage points Cash $105 $141 to YOY growth Accounts Receivable 286 271 Balance Sheet (at Q3 end) Inventory 610 553 • Increase in debt balance reflects short term borrowings to support seasonal Accounts Payable 194 155 working capital needs, acquisitions, and Long-Term Debt 687 581 return of capital initiatives • Free cash flow improvement reflects lower 2017 2016 capital expenditures Operating Cash Flow $118 $117 Cash Flow (Q3 YTD) • Returned $204 million to shareholders Capital Expenditures (52) (71) through share repurchases and dividends Free Cash Flow 1 $66 $45 through first three quarters of 2017 • Returned $1.5B to shareholders through 2017 2016 share repurchases and dividends since Return of beginning of 2007 Share Repurchases $151 $239 Capital (Q3 YTD) Dividends 53 50 Total $204 $289 1 Non-GAAP measure. 8 Note: Results may not be additive due to rounding.
Business Segment Performance
Third Quarter 2017 Adjusted Business Segment Performance* $ in millions Adjusted Operating Adjusted Operating Income* Margin* Net Sales $ $ Growth Growth 2017 2016 2017 2016 2017 2016 U.S. Retail (a) $ 454 $ 422 $ 32 $ 59 $ 51 $ 8 12.9% 12.0% U.S. Wholesale (b) 370 374 (4) 79 86 (7) 21.3% 23.0% International (c) 125 106 19 17 20 (3) 13.5% 18.5% Total before corporate expenses 948 901 47 154 156 (2) 16.3% 17.3% Corporate expenses (23) (25) 2 (2.4%) (2.8%) Total $ 948 $ 901 $ 47 $ 131 $ 131 $ - 13.8% 14.6% (a) Results include U.S. stores and eCommerce. (b) Results include Carter's, Child of Mine, Just One You , Precious Firsts, Skip Hop, and Simple Joys . (c) Results include international stores, eCommerce, and wholesale. * Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on page 27. 10 Note: Results may not be additive due to rounding.
Third Quarter Highlights – U.S. Retail $ in millions Total Q3 retail comp +2.6% Segment Net Sales • Sales $454 Believe comp performance adversely impacted by store • +8% $422 closures related to hurricanes in Texas, the Southeast, and Puerto Rico $125 $100 Retail Good consumer response to omni-channel initiatives • Comp Stores +2.6% • Net sales +2% $329 $322 • Store Comp: (3.2%) - Co-branded format comp +3.3% • Q3 ending location count: 821 1 - 608 Stand-alone Q3 2016 Q3 2017 - 213 Dual-branded (154 Side-by-Side, 59 Co-branded) Stores eCommerce eCommerce Segment Operating Income* Continued strong sales performance (+25% vs. LY) • $59 Q3 net sales 27% of Retail segment sales (vs. 24% LY) • $51 Segment Operating Margin +90 bps operating margin improvement reflects lower 12.9% • 12.0% product costs and growth in eCommerce, partially offset of of by store expense deleverage Net Sales Net Sales Q3 2016 Q3 2017 * Results are stated on an adjusted basis, a non-GAAP presentation; see reconciliation to GAAP on page 27. 11 1 See store count reconciliation on page 35.
Co-branded Store – Alpharetta, GA (Converted Q3 2017) 12
Launch of Carter’s Mobile App 13
Carter’s Instagram Snapshot 14
OshKosh Instagram Snapshot 15
Skip Hop – Holiday 2017 16
Skip Hop at Macy’s 17
Third Quarter Highlights – U.S. Wholesale $ in millions Segment Net Sales & Operating Income* $374 $370 -1% Segment Segment Margin Margin $86 $79 23.0% 21.3% Q3 2016 Q3 2017 Operating Income Net Sales • Sales performance reflects lower shipments of seasonal products, mostly offset by the benefit of the Skip Hop acquisition - Skip Hop contributed $16 million to net sales - Ex- Skip Hop , net sales down 5%, in line with seasonal bookings • Segment operating margin reflects higher inventory charges (related to hurricane relief product donations), increased bad debt provisions, and addition of the Skip Hop business, partially offset by improved product margins • 2017 outlook: - U.S. Wholesale full year net sales (including Skip Hop ): up low single digits • Spring 2018 outlook (ex- Skip Hop ): bookings comparable to 2017 * Results are stated on an adjusted basis, a non-GAAP presentation; 18 see reconciliation to GAAP on page 27.
Recommend
More recommend
