Carter’s Executives Talk About 1st Quarter 2021 Kids Business

May 3, 2021 – The Motley Fool – Welcome to the Carter’s First Quarter 2021 Earnings Conference Call. On the call today are Michael Casey, Chairman and Chief Executive Officer; Richard Westenberger, Executive Vice President and Chief Financial Officer; Brian Lynch, President; and Sean McHugh, Vice President and Treasurer. [Operator Instructions] Carter issued its first quarter 2021 earnings press release earlier this morning.

Michael D. Casey — Chairman & Chief Executive Officer

Thanks very much. Good morning, everyone. Thank you for joining us on the call. Before we walk you through the presentation on our website, I’d like to share some thoughts on our business with you. Carter’s is off to a very good start this year. First quarter sales and earnings are meaningfully better than we had planned with growth in each of our retail, wholesale, and International segments. We saw a surge in demand for our brands in March in the weeks leading up to Easter with consumers responding very positively to the strength of our product offerings and compelling value proposition. We also believe we realized a significant benefit from the unprecedented government stimulus, supporting families with young children.

Thankfully, the benefits from the $1.9 trillion stimulus package will continue this summer, providing families as much as $300 a month for children under the age of six in the second half this year and as much as $8,000 in tax credits from child care next year. With continued progress with vaccinations, we believe we may see a more meaningful recovery from the pandemic this year. Accordingly, we have raised our sales and earnings forecasts for 2021.

In terms of sales trends, we got off to a good start in January with strong demand for our new spring product offerings. We lost ground in February with winter storms in important markets, including Texas. Sales in March were significantly better than planned. Historically, given the seasonality of our business, our sales in March are more than January and February sales combined, it’s typically the largest month of sales and earnings contribution in the first half of our year.

Sales in March were up nearly 60% compared to last year. It is the strongest demand in March that we have seen in the past five years. Our second quarter sales are also off to a good start as warmer weather continues to arrive in more parts of the country and consumers are more comfortable getting out to shop. Despite lingering COVID related restrictions, we saw a good demand for our brands over the Easter holiday shopping period. Last year, all of our stores were closed in the United States in the weeks leading up to Easter. A more meaningful comparison is to Easter in 2019 compared with the Easter holiday shopping period in 2019, our retail sales were up 10%, driven by strong demand for play wear, the earnings on those sales were up over 30%, driven by improved price realization.

Our retail segment was the largest contributor to our first quarter sales and earnings. eCommerce continues to be our fastest growing highest margin business. Recall that we began to see a surge in online demand in March last year as stores closed in the early days of the pandemic. In the first quarter this year eCommerce penetration grew to 40% of our retail sales, up from 37% last year and 30% in 2019. Over the years we’ve invested significantly in the online experience for our brands. We improved the presentation of our product offerings, search capabilities, site navigation, ease of outfitting, and simplicity of checkout.

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