Carter's, Inc. (CRI) Bundle
Understanding Carter's, Inc. (CRI) Revenue Streams
Understanding Carter's, Inc. Revenue Streams
As of 2024, Carter's, Inc. reported consolidated net sales of $1.98 billion, reflecting a decrease of 4.9% compared to the previous year. This decline was largely attributed to reduced traffic and demand in U.S. retail, lower sales to wholesale customers, and decreased international sales.
Breakdown of Primary Revenue Sources
The company's revenue streams can be categorized into three primary segments: U.S. Retail, U.S. Wholesale, and International sales.
| Segment | Net Sales (2024) | Net Sales (2023) | $ Change | % Change |
|---|---|---|---|---|
| U.S. Retail | $950.9 million | $1.02 billion | $(71.1 million) | (7.0%) |
| U.S. Wholesale | $756.0 million | $767.2 million | $(11.2 million) | (1.5%) |
| International | $277.5 million | $298.6 million | $(21.1 million) | (7.1%) |
| Total Consolidated | $1.98 billion | $2.08 billion | $(103.3 million) | (4.9%) |
Year-over-Year Revenue Growth Rate
In terms of year-over-year revenue growth rates, the company experienced declines across all segments:
- U.S. Retail: Decreased by 7.0%
- U.S. Wholesale: Decreased by 1.5%
- International: Decreased by 7.1%
Contribution of Different Business Segments to Overall Revenue
The contribution of different business segments to the overall revenue for the fiscal year 2024 is as follows:
| Segment | Contribution to Revenue |
|---|---|
| U.S. Retail | 47.9% |
| U.S. Wholesale | 38.1% |
| International | 14.0% |
Analysis of Significant Changes in Revenue Streams
The significant changes in revenue streams highlight the following trends:
- The U.S. Retail segment faced a decrease in net sales due to lower traffic in both retail stores and eCommerce channels, impacted by macroeconomic conditions.
- The U.S. Wholesale segment also saw a slight reduction in sales, primarily due to lower seasonal demand and decreased average selling prices.
- International sales were adversely affected by changes in foreign currency exchange rates, leading to a significant decline in net sales.
A Deep Dive into Carter's, Inc. (CRI) Profitability
Profitability Metrics
In analyzing the profitability metrics of the company, we will focus on gross profit, operating profit, and net profit margins, as well as trends over time and comparisons with industry averages.
Gross Profit, Operating Profit, and Net Profit Margins
For the third quarter of fiscal 2024, consolidated gross profit decreased by $20.4 million, or 5.4%, to $356.0 million, resulting in a gross margin of 46.9%, which is a decrease of 60 basis points compared to the same period in the previous year.
Consolidated operating income for the same period fell by $16.4 million, or 17.5%, to $77.0 million, with an operating margin of 10.2%, down 160 basis points from the prior year. The net income also saw a decrease of $7.8 million, or 11.8%, to $58.3 million, with diluted net income per common share decreasing by 9.0% to $1.62.
| Metric | Q3 2024 | Q3 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Gross Profit | $356.0 million | $376.4 million | ($20.4 million) | (5.4%) |
| Gross Margin | 46.9% | 47.5% | (60 bps) | |
| Operating Income | $77.0 million | $93.4 million | ($16.4 million) | (17.5%) |
| Operating Margin | 10.2% | 11.8% | (160 bps) | |
| Net Income | $58.3 million | $66.1 million | ($7.8 million) | (11.8%) |
| Diluted EPS | $1.62 | $1.78 | ($0.16) | (9.0%) |
Trends in Profitability Over Time
When looking at the trends, the company has experienced a downward trajectory in profitability metrics over the past fiscal year. The gross profit margin decreased from 47.5% in Q3 2023 to 46.9% in Q3 2024, while the operating margin fell from 11.8% to 10.2%.
Furthermore, net income has not only declined from $66.1 million to $58.3 million but also reflects the challenges faced in maintaining profitability amid macroeconomic pressures affecting consumer demand and sales.
Comparison of Profitability Ratios with Industry Averages
Comparatively, the industry average gross margin for retail companies is typically around 40% to 50%, indicating that the company's gross margin of 46.9% is within a competitive range. However, the operating margin of 10.2% is below the industry average, which can be around 12% to 15% for similar retail businesses.
Analysis of Operational Efficiency
The selling, general, and administrative (SG&A) expenses for the third quarter of fiscal 2024 were $284.7 million, which is a decrease of $4.0 million, or 1.4%, from the previous year. However, as a percentage of consolidated net sales, SG&A expenses increased to 37.5%, up 100 basis points from 36.5%.
The increase in SG&A as a percentage of sales indicates challenges in managing costs effectively amidst declining sales figures, which can impact overall profitability. The operational efficiency is further reflected in the adjusted operating income, which decreased from $93.4 million to $77.0 million.
Overall, while gross profit margins remain relatively strong, the operational efficiencies and cost management strategies will be critical for improving profitability metrics moving forward.
Debt vs. Equity: How Carter's, Inc. (CRI) Finances Its Growth
Debt vs. Equity: How Carter's, Inc. Finances Its Growth
The financial structure of a company is crucial for understanding its growth and stability. Carter's, Inc. has a mix of debt and equity financing that reflects its operational strategy and market conditions.
Overview of Debt Levels
Carter's, Inc. reported a total long-term debt of $500 million as of September 28, 2024. This figure represents a decrease from $556.8 million in the previous fiscal year. The effective interest rate on this debt stood at 6.13%, slightly down from 6.17% year-on-year.
Short-term debt is part of the company’s revolving credit facility, which has been utilized to manage cash flow effectively. The recent financial statements indicate a decline in short-term borrowings, reflecting prudent financial management amid fluctuating market conditions.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Carter's, Inc. is currently at 1.08. This ratio is slightly above the industry average of 1.00, indicating a higher reliance on debt financing relative to equity. This positioning allows the company to leverage its capital structure to fund growth initiatives while maintaining a balance that is acceptable within its industry.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In the recent fiscal year, Carter's, Inc. did not issue new debt; rather, it focused on managing existing debt and optimizing its capital structure. The company’s credit rating has remained stable, reflecting its solid operational performance and cash flow generation capabilities. The firm has been rated Baa2 by Moody's, indicating a moderate credit risk.
Balancing Between Debt Financing and Equity Funding
Carter's, Inc. maintains a balanced approach to financing its operations. In the first three quarters of fiscal 2024, the company returned $137.9 million to shareholders through dividends and share repurchases, comprising $87.3 million in cash dividends and $50.5 million in share buybacks. This strategy showcases the company’s commitment to returning value to shareholders while managing its debt levels effectively.
| Financial Metric | Value |
|---|---|
| Total Long-term Debt | $500 million |
| Debt-to-Equity Ratio | 1.08 |
| Effective Interest Rate | 6.13% |
| Cash Dividends Paid | $87.3 million |
| Share Repurchases | $50.5 million |
| Credit Rating | Baa2 |
Assessing Carter's, Inc. (CRI) Liquidity
Assessing Carter's, Inc. Liquidity
Current Ratio: As of September 28, 2024, the current ratio is approximately 1.7, calculated from current assets of $1.18 billion and current liabilities of $691.5 million.
Quick Ratio: The quick ratio stands at 1.2, derived from quick assets (current assets less inventories) of about $570 million against current liabilities of $691.5 million.
Analysis of Working Capital Trends
Working capital as of September 28, 2024, is reported at $488.5 million, reflecting a decrease from $500 million at the end of fiscal 2023. This indicates a tightening liquidity position, attributed to rising inventories and accounts payable.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 28, 2024 | $1,180 | $691.5 | $488.5 |
| December 30, 2023 | $1,200 | $700 | $500 |
Cash Flow Statements Overview
Operating Cash Flow: For the first three quarters of fiscal 2024, cash provided by operating activities was $11.3 million, a significant decline from $205.8 million in the same period of fiscal 2023.
Investing Cash Flow: Net cash used in investing activities totaled $39.6 million in fiscal 2024, compared to $42.5 million in fiscal 2023, reflecting reduced capital expenditures.
Financing Cash Flow: Cash used in financing activities was $145.1 million, down from $206.6 million in fiscal 2023, primarily due to decreased payments related to the secured revolving credit facility.
| Cash Flow Activity | Q3 2024 (in millions) | Q3 2023 (in millions) |
|---|---|---|
| Operating Cash Flow | $11.3 | $205.8 |
| Investing Cash Flow | ($39.6) | ($42.5) |
| Financing Cash Flow | ($145.1) | ($206.6) |
Potential Liquidity Concerns or Strengths
As of September 28, 2024, the company holds approximately $175.5 million in cash and cash equivalents, providing a buffer against liquidity constraints. However, the decrease in operating cash flow signals potential challenges ahead, particularly amid ongoing macroeconomic pressures that may affect consumer demand.
Furthermore, the company has $844.3 million available for future borrowing under its secured revolving credit facility, indicating a robust capacity to access additional liquidity if necessary.
Is Carter's, Inc. (CRI) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio provides insight into how much investors are willing to pay per dollar of earnings. As of the latest data, the P/E ratio is calculated as follows:
- Current stock price: $51.05
- Trailing twelve-month earnings per share (EPS): $3.41
- P/E Ratio = $51.05 / $3.41 = 15.0
Price-to-Book (P/B) Ratio
The P/B ratio compares the market value of the company's stock to its book value:
- Market value per share: $51.05
- Book value per share: $27.00
- P/B Ratio = $51.05 / $27.00 = 1.89
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
This ratio assesses the company's valuation relative to its earnings before interest, taxes, depreciation, and amortization:
- Enterprise Value (EV): $1.2 billion
- EBITDA for the last twelve months: $171.5 million
- EV/EBITDA Ratio = $1.2 billion / $171.5 million = 7.0
Stock Price Trends
The stock price over the last 12 months has shown the following trends:
| Date | Stock Price |
|---|---|
| September 2023 | $55.20 |
| December 2023 | $52.50 |
| March 2024 | $50.00 |
| June 2024 | $48.00 |
| September 2024 | $51.05 |
Dividend Yield and Payout Ratios
The dividend yield and payout ratios provide insights into the company's return to shareholders:
- Annual dividend per share: $2.40
- Current stock price: $51.05
- Dividend Yield = $2.40 / $51.05 = 4.69%
- Payout Ratio = Annual Dividend / EPS = $2.40 / $3.41 = 70.4%
Analyst Consensus on Stock Valuation
Analyst ratings provide an aggregated view of market sentiment regarding the stock:
- Buy: 5 analysts
- Hold: 8 analysts
- Sell: 2 analysts
The consensus rating is currently a Hold based on the number of analysts' ratings.
Key Risks Facing Carter's, Inc. (CRI)
Key Risks Facing Carter's, Inc. (CRI)
Understanding the risk landscape for Carter's, Inc. is crucial for potential investors. The company faces a variety of internal and external risks that can impact its financial health.
Industry Competition
The retail industry, particularly in children's clothing, is highly competitive. Carter's competes with both established brands and new entrants, which can lead to price wars and margin erosion. In the third quarter of fiscal 2024, the U.S. Retail segment net sales decreased by $71.1 million, or 7.0%, reflecting the impact of lower traffic and demand amid intense competition.
Market Conditions
Macroeconomic factors, including inflation and changing consumer spending behaviors, pose risks. Decreased demand was noted in the company's international businesses, with net sales falling $21.1 million, or 7.1%, primarily due to unfavorable foreign currency impacts and consumer spending constraints.
Regulatory Changes
Changes in regulations can affect operational costs and compliance requirements. The company has to navigate various regulations in the retail space, including labor laws and environmental regulations, which can lead to increased operational expenses and potential liabilities.
Operational Risks
Operational efficiency is critical, and any disruptions in the supply chain can have severe consequences. For instance, the company faced $83.3 million in cash flow issues due to a slower inventory sell-through. Additionally, the average cost per unit sold has fluctuated, impacting gross margins.
Financial Risks
The company has seen fluctuations in interest expenses and net income. For the first three quarters of fiscal 2024, interest expenses decreased by 12.1% to $23.2 million. However, net income also fell by $7.8 million, or 11.8%, to $58.3 million. These financial metrics highlight the delicate balance the company must maintain in managing its debt and operational costs.
Mitigation Strategies
Carter's has implemented various strategies to mitigate these risks, including focused marketing efforts and strategic pricing adjustments. The company plans to invest approximately $65 million in capital expenditures in fiscal 2024 for retail store openings and remodels.
Summary of Financial Performance
| Financial Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Consolidated Net Sales | $758.5 million | $791.7 million | -4.2% |
| Gross Profit | $356.0 million | $376.4 million | -5.4% |
| Operating Income | $77.0 million | $93.4 million | -17.5% |
| Net Income | $58.3 million | $66.1 million | -11.8% |
| Effective Tax Rate | 17.5% | 22.5% | -500 bps |
Investors should closely monitor these risk factors as they assess the company's financial health and future growth potential.
Future Growth Prospects for Carter's, Inc. (CRI)
Future Growth Prospects for Carter's, Inc. (CRI)
Analysis of Key Growth Drivers
The company's growth prospects are driven by several key factors:
- Product Innovations: Continued expansion of exclusive brands, including the Little Planet brand, is expected to capitalize on consumer demand trends.
- Market Expansions: The company plans to open approximately 14 new retail stores while closing 6 in fiscal 2024, enhancing its market presence.
- Acquisitions: While specific acquisitions were not detailed, strategic partnerships to enhance distribution and product offerings are ongoing.
Future Revenue Growth Projections and Earnings Estimates
For fiscal 2024, the company projects consolidated net sales to be approximately $1.98 billion, reflecting a decrease of 4.9% compared to the previous year. However, strategic initiatives are expected to stabilize and eventually increase revenue in subsequent years.
Future earnings estimates suggest a gradual recovery with projected earnings growth of around 5% annually as market conditions improve and consumer demand rebounds.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company has implemented several strategic initiatives:
- Brand Marketing Investments: Increased spending on brand marketing aims to enhance consumer engagement and brand loyalty.
- International Growth: Expansion in retail stores, particularly in Mexico, has shown positive sales growth, contributing to the international segment's performance.
- Supply Chain Optimization: Investments in logistics and distribution facilities aim to reduce costs and improve efficiency, thereby enhancing profitability.
Competitive Advantages that Position the Company for Growth
Carter's, Inc. benefits from several competitive advantages:
- Strong Brand Recognition: The company holds a leading position in the children's apparel market, which drives customer loyalty.
- Diverse Product Range: A broad assortment of products across various brands allows for capturing different market segments.
- Operational Efficiency: Recent improvements in cost management have led to a decrease in average cost per unit sold, enhancing profit margins.
| Financial Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Consolidated Net Sales | $758.5 million | $791.7 million | (4.2%) |
| Consolidated Gross Profit | $356.0 million | $376.4 million | (5.4%) |
| Operating Income | $77.0 million | $93.4 million | (17.5%) |
| Net Income | $58.3 million | $66.1 million | (11.8%) |
| Basic EPS | $1.62 | $1.78 | (9.0%) |
As of September 28, 2024, the company reported cash and cash equivalents of approximately $175.5 million, providing a solid liquidity position to support future growth initiatives.
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Article updated on 8 Nov 2024
Resources:
- Carter's, Inc. (CRI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Carter's, Inc. (CRI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Carter's, Inc. (CRI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.