Carter's, Inc. CRI has been doing well, thanks to its robust business strategies. The company is benefiting from the success of its pricing strategy, inventory management efforts and improved product offerings. Management is focused on creating a trend-right merchandise assortment, deepening relations with customers via marketing, expanding international markets and efficiently controlling expenses.

Buoyed by such strengths, shares of this apparel and related products dealer have gained 13% against the industry’s 9.8% decline over the past three months. A VGM Score of A further adds strength to this current Zacks Rank #3 (Hold) company.

Delving Deeper

Carter's has made significant efforts in pricing to address market conditions and enhance profitability. The company is seeing improved price realization and profit margins primarily due to the strength of its product offerings and lower ocean freight rates, along with better inventory management. This approach not only improved its cash flow but also supported its overall financial performance.

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The company has been focused on essential core products, especially in the inflationary markets. This focus, coupled with a compelling value proposition, wherein average retail price points are around $11, makes Carter's an attractive option for budget-conscious consumers. The company’s pricing strategy involves keeping its brands competitively priced, usually within $1 or $2 of private label brands, which has proven effective in maintaining competitiveness in the market.

Although Carter’s has been witnessing the impacts of inflation and consequently reduced consumer spending, the demand trends in the wholesale segment have been showing improvement. Its wholesale segment has been gaining from leaner inventories with wholesale customers since the start of 2023. As a result, CRI experienced higher-than-planned demand in its wholesale business for the fifth consecutive quarter in the fourth quarter of 2023.

Looking ahead, Carter's anticipates lower product costs, which are expected to enable it to strengthen its product offerings and sharpen price points, thereby improving profitability. Management envisions an improved demand trend and a better macroeconomic landscape as the year progresses, with sales and earnings increases weighted to the second half. CRI anticipates continued conservative inventory commitments by wholesale customers and gross margin expansion on lower ocean freight rates and product costs, and higher margin retail sales.

For 2024, Carter’s expects a low single-digit increase in net sales to $3 billion compared with $2.95 billion reported last year. It envisions mid-single-digit growth year over year in adjusted operating income and adjusted earnings per share (EPS) for the year. Notably, it reported an adjusted operating income of $328 million and adjusted EPS of $6.19 in 2023.

Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for 2024 sales and EPS is currently pegged at $3 billion and $6.40, respectively. These estimates show corresponding growth of 1.4% and 3.4% year over year. To wrap up, Carter’s seems to be a decent investment bet given all the aforementioned positives.