Carter's Q3 Earnings: A Closer Look

Carter's, Inc. (NYSE: CRI), the largest branded marketer in North America of apparel exclusively for babies and young children, recently reported its third quarter fiscal 2024 results. The company's adjusted operating margin stood at 10.2% compared to 12.2% in the same period last year. This change can be attributed to several factors, including increased investments in pricing and marketing, as well as a challenging macroeconomic environment.

Carter's invested $40 million in competitive pricing and $10 million in additional brand marketing in the second half of the year. These investments helped improve U.S. Retail sales trends, with better conversion rates, transactions, unit volume, and new customer acquisition compared to the first half of the year. However, the company's adjusted operating margin was impacted by higher selling, general, and administrative expenses (SG&A) as a percentage of sales, primarily due to lower volume-related expenses and reduced provisions for performance-based compensation.

Carter's U.S. Retail and International segments' performance contributed to the adjusted operating margin change compared to the previous year. The U.S. Retail segment saw better-than-planned sales driven by strong product offerings, pricing, and brand marketing strategies. However, the International segment's sales were lower than last year, primarily due to slower cooler weather apparel sales in Canada and lower wholesale shipments to the Middle East and Europe.

In the upcoming quarters, Carter's expects its adjusted operating margin to be impacted by continued economic uncertainties, including inflation and heightened promotional activity. The company plans to use this down cycle to strengthen its leading market position by elevating the style and value of its product offerings, improving marketing capabilities, and leveraging its unparalleled multi-channel market presence.

In conclusion, Carter's Q3 earnings snapshot highlights the company's strategic initiatives to navigate the challenging macroeconomic environment. While the adjusted operating margin decreased compared to the previous year, the company's investments in pricing and marketing have shown positive effects on U.S. Retail sales trends. Carter's remains committed to strengthening its market position and returning to growth when market conditions improve.