Carter's Q2 Revenue Miss Estimates As Macroeconomic Factors Affect Demand

Carter's Inc CRI reported a second-quarter FY23 sales decline of 14.3% year-on-year to $600.20 million, missing the analyst consensus of $603.51 million.

Macroeconomic factors, including inflation, higher interest rates, higher consumer debt levels, and risk of recession, negatively affected demand from consumers and wholesale customers. 

Lower sales were driven by declines in the U.S. Retail, International, and U.S. Wholesale segments of 15%, 8%, and 17%, respectively. U.S. Retail comparable net sales declined by 15.9%.

Gross profit decreased 11.8% Y/Y to $291.89 million, with a profit margin of 48.6%.

Adjusted operating margin contracted 450 basis points to 6.3%, and adjusted operating income for the quarter plunged 49.7% to $37.9 million.

The company held $174.5 million in cash and equivalents as of July 1, 2023. Operating cash flow for six months totaled $209.2 million.

Adjusted EPS of $0.64 beat the analyst consensus of $0.53.

As of July 27, 2023, the total remaining capacity under the company's previously announced repurchase authorizations was approximately $701 million.

Outlook: Carter's revised FY23 sales outlook from $3 billion to $2.95 billion-$3 billion (consensus $3 billion) and adjusted EPS guidance from $6.15 to $5.95-$6.15 (consensus $5.92).

For Q3, CRI expects net sales of $770 million - $790 million (consensus $789.07 million) and adjusted EPS of $1.45 -$1.55 (Street view $1.75).

Price Action: CRI shares are trading higher by 0.07% at $74.78 on the last check Friday.