Carter’s, Inc. CRI has been executing robust business strategies, leading to commendable performance. The company has capitalized on its pricing strategy, embraced efficient inventory management, and refined product offerings. Management’s focus on curating a trend-right merchandise assortment, establishing deeper customer relationships through marketing initiatives, expanding into international markets, and vigilant expense control have all contributed to the company’s success.
Analysts are increasingly optimistic about the company. The Zacks Consensus Estimate for 2024 sales and earnings per share (EPS) currently stands at $3 billion and $6.41, reflecting year-over-year growth of 2.6% and 7.4%, respectively.
Reflecting its strength, the company’s shares have surged by 7.5% against the industry’s 2% decline over the last three months. Supported by a Value Score of B, Carter’s maintains its position as a strong Zacks Rank #2 (Buy) company.
A Closer Look
Carter’s has embarked on a significant pricing strategy, effectively aligning with market conditions to bolster profitability. Notably, in the third quarter of 2023, the company witnessed improved price realization and profit margins, attributed to superior product offerings, lower ocean freight rates, and enhanced inventory management. This approach not only bolstered cash flow but also augmented overall financial performance.
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A strategic focus on essential core products, especially in inflationary markets, coupled with an attractive value proposition, where the average retail price points stand at around $11, positions Carter’s favorably for budget-conscious consumers. The company’s pricing strategy involves keeping its brands competitively priced, usually within $1 or $2 of private label brands, a tactic that has proven effective in maintaining market competitiveness.
Despite grappling with inflation and the subsequent decline in consumer spending, Carter’s wholesale segment has shown signs of improvement in demand trends. Since the beginning of 2023, the wholesale segment has benefited from leaner inventories with wholesale customers, resulting in higher-than-planned demand for the fourth consecutive quarter in the third quarter of 2023. Notably, the U.S. wholesale segment witnessed a 4.1% year-over-year sales increase in the third quarter.
Furthermore, Carter’s has witnessed a significant expansion in margin rates, partially driven by lower ocean freight rates, which contributed significantly to a 228 basis points gross margin expansion in the third quarter. Additionally, reduced inventory levels in the third quarter played a role in bolstering gross margin. These developments underscore the company’s commitment to effective cost management and operational improvements. Looking ahead, Carter’s anticipates lower product costs, which are expected to strengthen its product offerings and enhance price points, thereby improving profitability.
To summarize, given the numerous positive developments, Carter’s emerges as a compelling investment opportunity.
Exploring Alternatives
Other top-ranked companies include Royal Caribbean (RCL), lululemon athletica (LULU), and Ralph Lauren (RL).
Royal Caribbean boasts a Zacks Rank #1 (Strong Buy) currently, with a trailing four-quarter earnings surprise averaging 28.3%. The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates increases of 13.7% and 38.1%, respectively, from the previous year.
lululemon athletica, known for its yoga-inspired athletic apparel, holds a Zacks Rank of 2 at present. The Zacks Consensus Estimate for the company’s current financial-year sales and EPS suggests growth of 18.4% and 23.7%, respectively, from the corresponding figures of the previous year, with a trailing four-quarter earnings surprise of 9.2%, on average.
Ralph Lauren, a footwear and accessories dealer, holds a Zacks Rank of 2 at present. RL has a trailing four-quarter earnings surprise averaging 18%, with the Zacks Consensus Estimate for the company’s current financial-year sales and EPS indicating growth of 1.4% and 13.1%, respectively, from the previous year’s figures.
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Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
Ralph Lauren Corporation (RL) : Free Stock Analysis Report
lululemon athletica inc. (LULU) : Free Stock Analysis Report
Carter’s, Inc. (CRI) : Free Stock Analysis Report
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