ATLANTA (AP) â¿¿ Carter's Inc., which makes namesake and OshKosh B'gosh brand children's clothes, said Thursday net income rose 15 percent, but adjusted results were nearly flat and the company a weak outlook for the rest of the year.

Shares fell nearly 8 percent in afternoon trading.

Net income for the quarter ended July 3 rose 15 percent to $19.1 million, or 32 cents per share, from $16.6 million, or 28 cents per share. However, excluding year-ago items such as costs related to cutting staff and closing facilities, net income was flat.

Revenue was also nearly flat at $327 million from $326.3 million last year.

Analysts surveyed by Thomson Reuters, on average, predicted net income of 32 cents per share on revenue of $340.6 million.

Revenue from Carter's brand edged up less than 1 percent to $263.7 million, while OskKosh B'gosh brand revenue fell nearly 1 percent to $63.3 million.

Revenue in stores open at least one year fell 4.3 percent at Carter's stores and fell 4.9 percent at OshKosh stores.

Revenue at stores open at least a year is a key indicator of a retailer's performance because it excludes growth at stores that open or close during the year.

Mass channel revenue, or revenue sold via discount stores such as Walmart and Target, fell 12 percent to $38.8 million as Walmart reduced floor space for the company's Child of Mine brand clothes.

Carter's CEO Michael D. Casey said he expects sales to grow in the second quarter but to be offset by higher industrywide supply chain costs.

The company expects net income up 10 percent from 2009 earnings per share of $2.15, implying earnings of $2.37 per share. Analysts expect net income of $2.60 per share.

RBC Capital Market analyst Howard Tubin, however, said the guidance could be too cautious.

"It seems to us that management has assumed a lot of 'bad' in their guidance for the fall season and it could prove conservative," Tubin said.

Carter's, based in Atlanta, added that in the spring of 2011 it is bracing for product costs to rise "meaningfully" from current levels, as commodity, labor and transportation costs all increase.

Shares fell $1.99, or 7.7 percent, to $24.02 during midday trading. The stock has traded between $19.17 and $34.24 during the past 52 weeks.

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