Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Are you seeing that same difference hold up in April? And are you seeing a difference in open air versus enclosed malls again for the month of April?
A: April was not a good month for us. Given the shift in Easter, we knew there would be a shift in Easter. We didn't realize just how the consumer behaved -- react to the cooler weather and the shift in the Easter holiday. But I'd say our comps in the first week of April were down over 30%. Second week improved to down 17%. I think the third week was down 7%. And I think this past week was just slightly negative.
Q: And your guidance implies close to the double-digit growth in wholesale in the second half. I think that's a little higher than you're thinking in February. But I think you also flagged that you're still seeing some conservative orders from some of your partners. Can you just parse it out in a little more detail where things have been a little bit better or worse for February?
A: Definitely better. But the outlook for wholesale is definitely better. The replenishment has been good. The demand for seasonal goods has been good. And to your point, I would say across the board, we deal with the best retailers in the world. Many of them have been in here in Atlanta, looking at the new spring product recently spring '25. Product recently, the relationships are excellent. But the common thing, better retailers, including Carter's, are running much leaner on inventories.
Q: My question is, is the trends that you've seen over the last 90 days, has that caused you to think about maybe leaning on promotions a little bit more as a lever to drive traffic into your stores? Obviously, you had this goal and you've been very successful driving gross margin improvement. But just given the trends, especially what you're seeing in April, how do you feel about maybe trying to maintain a little bit more market share in your stores by maybe do a little bit more promotion?
A: Yes, Jay, I would say we were a bit more promotional in retail than we had planned. The prices were down about 4% in the first quarter in retail, largely driven by the new Everyday Value pricing strategy and the consumers responded to it. We had about a 5% lift in unit volume in the first quarter. I would say our plan in the balance of the year, pricing will be probably down low single. It won't be down to the mid-single digits that we had in the first quarter.
Q: Just curious if you can talk about the March, April period that you mentioned. In the week period, I think you said down 11%. Can you talk about the sellout trends that you're seeing in your wholesale partners? And specifically, what are you seeing at the big 3, Target, Walmart, Amazon versus the rest of your partners in that wholesale channel in terms of sell-out, did they see the same sort of big deceleration in April?
A: So I would say, I won't comment on any retailers or wholesale customers specifically. Paul, what I would say is that what we saw in the early weeks of April, business generally was sluggish with spring selling, whether it was direct-to-consumer or over the counter at many of our wholesale customers. Spring started out slow. But as more parts of the country are warm enough, trends are improving.
Q: I just wanted to ask about margins. So obviously, you had really good gross margin expansion in Q1 and there's cotton and some product cost benefit that you're seeing. I guess, kind of when I run through the model and you said leverage on SG&A for the back half and given where the revenues are and leverage on SG&A, it implies that there's much less gross margin expansion in the second half of the year.
A: Yes. Sure, Tom. I would say the first half and the second half are a bit different in character. In the first half, we've had the year-over-year favorability still from the transportation, the ocean transportation rates being favorable. That reverses a bit to Mike's point, we're looking more towards low single-digit increases in those rates with the new contracts, which are effective kind of now.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
