April 7, 2021 – Market Screener – Dear Fellow Shareholders, 2020 began as a year of great optimism for Carter’s. In February 2020, we reported our 31st consecutive year of sales growth and a record level of cash flow for fiscal year 2019. With mid-single digit growth in sales through February 2020, the new year was off to a strong start and expected to be another good year of growth for us.

By mid-March, a global pandemic and national emergency had been declared, and the lives of people throughout the world were disrupted. In the months that followed, we worked to keep our employees and our store customers safe from the virus. We temporarily closed all of our stores for several weeks, reduced spending, negotiated lower product costs, and improved liquidity. We significantly reduced our exposure to excess inventories caused by temporary store closures. And by curtailing inventory commitments, we were able to improve price realization and gross profit margins last year.

When the pandemic hit, we accelerated the execution of new capabilities to support the same-day pickup of eCommerce orders in our stores, curbside pickup and the direct shipment of eCommerce orders from our stores. We developed new ways to partner remotely with our wholesale customers, leveraged our investments in digital product imagery, and secured higher bookings for our beautiful product offerings in 2021. We also engaged more deeply and effectively with consumers through social media, building a virtual community of families with young children.

During the pandemic, we added over two million new eCommerce customers in the United States. With the support of our wholesale customers, the online sales of our brands exceeded $1 billion in 2020. Through exceptional working capital management, together with the support of our landlords, suppliers and lenders, we achieved a record level of operating cash flow of $590 million and ended 2020 with a strong balance sheet, including $1.8 billion of liquidity.

Our Vision and Focus

Carter’s is the largest branded marketer of young children’s apparel in North America. Our brands are sold in over 20,000 store locations, on the largest eCommerce platforms and through international wholesale relationships in over 90 countries. We believe no other company in the world can match our market presence and success in branded childrenswear.

Our vision is to be the world’s favorite brands in young children’s apparel. To achieve this vision, we are focused on providing the best value and experience in young children’s apparel, extending the reach of our brands, and improving profitability. Our growth plan is built on four key strategies:

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