After hitting a 52-week high in August, shares of Carter's (CRI) , at close to $88, are down about 2%. At the current valuation, this is an attractive entry point. This baby could go higher.
Apparel makers have seen their share prices wrecked by the strong dollar, the decline in department store sales and fewer international tourists. But apparel maker Carter's makes clothing for infants and young children and should be able to shake off most of those factors. Carter's operates the Carter's brand and OshKosh.
On Oct. 28, Carter's reported earnings per share of $1.61, 6 cents lower than the consensus. Sales of $901.4 million were up 6.1%. Operating margins fell 80 basis points to 14.6%.
Carter's retail same-store sales fell 4.1% as the company transitioned to fall apparel and sell through was limited because of unseasonably warm weather. The company ended the quarter with 636 stores, of which 440 branded stores and 196 outlet stores. Side-by-side stores (Carters and OshKosh represent 20% of the store base.)
Inventory was up 8% due to the addition of new stores and business growth. Carter's brand sales were up 5%, OshKosh was up 6% and the international business rose 12%.
Adjusted net income was $81.1 million, up 9% and adjusted EBITDA rose 16.5% to $148.9 million. Selling, General Administrative expenses rose 11%, primarily due to the additional of 110 net new stores.
The fastest-growing part of Carter's business is e-commerce. OshKosh saw double-digit sales growth and a 34.8% comp in e-commerce. E-commerce is now 22% of OshKosh's business. Carter's rolled out a direct relationship with Amazon (AMZN) for a full-line Carter's branded store.