Carter’s, Inc. (CRI) has demonstrated strong performance in the second quarter of 2024, driven by its robust business strategies. The company’s success can be attributed to a combination of factors, including effective pricing actions, streamlined inventory management, and a focus on delivering compelling product offerings.
Carter’s has implemented strategic pricing adjustments to address market conditions and enhance profitability. The company saw improved price realization and profit margins in the second quarter, driven by the strength of its product offerings, lower inbound freight rates, and optimized inventory management. Carter’s focus on essential core products, coupled with a compelling value proposition reflected in average retail price points around $11, has made the company an attractive option for budget-conscious consumers. Its pricing strategy, which emphasizes competitive pricing across its brands, has proven effective in maintaining market competitiveness.
The company’s recent launches, including the Oshkosh back-to-school line, premium fashion denim and bottoms, and its newest sustainable brands, Little Planet and PurelySoft, have received positive customer feedback. Management anticipates investing an additional $50 million in pricing and marketing initiatives in the second half of 2024, which is expected to contribute approximately $40 million to annual operating income.
Despite the ongoing impact of inflation on consumer spending, Carter’s witnessed improvements in demand trends within its wholesale segment in the second quarter. The company’s leaner inventories with wholesale customers have contributed to growth in U.S. Wholesale sales. The reported quarter saw heightened demand in the U.S. Wholesale segment, particularly for exclusive brands, with double-digit growth in replenishment wholesale sales. Carter’s robust supply chain continues to strengthen its business, mitigating the effects of lower product costs for the remainder of 2024. Management projects strong growth for its U.S. Wholesale business in 2024.
Carter’s, which shares space in the market with Wolverine (WWW), Skechers (SKX), and Steven Madden (SHOO), prioritizes efficient cost management and operational improvements. The company has experienced a notable expansion in its margin rates, driven in part by lower inbound freight rates, which have significantly contributed to improved margins. In the second quarter, gross margin expanded by 150 basis points (bps) due to lower product input costs, a decline in inbound freight rates, and reduced sales to the off-price channel, partially offset by inventory provisions. The adjusted operating margin increased by 70 bps to 7%.
These margin improvements have positively impacted Carter’s bottom line. In the second quarter, Carter’s reported adjusted earnings of 76 cents per share, exceeding the Zacks Consensus Estimate of 45 cents and representing an 18.8% increase from earnings of 64 cents per share in the prior-year quarter.
Looking ahead, Carter’s anticipates lower product costs for the remainder of 2024, which are expected to enhance product offerings, sharpen price points, and further improve profitability. The company forecasts inbound freight costs to decline by more than 20%.
Other Notable Apparel Companies
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Wolverine (WWW)
has made significant strides in its transformation plan, enhancing consumer engagement through innovative marketing campaigns and expanding its global presence. Its strategic initiatives emphasize consumer-centricity with investments in talent acquisition, consumer insights, and innovation. This approach enhances brand loyalty, fosters product innovation, and drives long-term growth by meeting evolving consumer demands. With a consistent focus on product innovation and market positioning, Wolverine is well-positioned for continued growth and increased market share.*
Skechers (SKX)
’s diversified portfolio of footwear, emphasizing comfort-based products and leveraging a multi-brand strategy, continues to yield positive results. The company is investing in global infrastructure, including retail stores, e-commerce platforms, and distribution centers. It continues to expand its direct-to-consumer segment and bolster international sales growth. Skechers also plans to open new stores, further enhancing its omnichannel capabilities. Its top line jumped 7.2% year over year, backed by a 6.9% rise in international sales and a 7.7% increase in domestic sales in the second quarter of 2024.*
