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Carter's Inc - Fundamental Investment Case

Research

Publication Date: 26 Nov 2018 - By Robert Prather By Robert Prather
Actionable
Differentiated

Equity Fundamental Equity USA Consumer

Qualitative Concerns

  • Amazon, Target, Walmart, Macy’s and many others that Carter’s sells through are creating private label brands of their own.
  • The number of retail subscription box offerings has exploded offering the consumer convenience and pressuring traditional brands.
  • CRI consistently lags the shipping demands of the consumer and those offered by others.
  • The long-term headwind of declining birth rates continues to pressure the industry.
  • Estimates rely heavily on recapturing lost volume from recent customer bankruptcies.

Fundamental Concerns

  • Underneath a seemingly stable top line, volumes are negative and price growth continues to decelerate.
  • eCommerce growth is driving positive total comparable sales growth but retail SSS remains negative.
  • Gross margins remain intact, but EBIT margins have already started falling from increased cotton prices, store closures, ecommerce expenses and shipping costs.
  • Receivables and inventory are both starting to trend in the wrong direction, cash flow yield has come down slightly, and net debt is growing.
  • Valuation is in line with or above historical averages.

 

Carters

Source: VR Fundamental

Pages: 55

Released: 26 Nov 2018

Unlock for 35 credits

The Author

Robert Prather

Equity Analyst

Industrials, Consumer, Telecom & Media, Technology

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London, United Kingdom

info@reachx.co
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