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Carter's posts slight drop in 4Q profit

February 29, 2012
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ATLANTA—Carter's Inc., a marketer of clothes for babies and children, said Wednesday that its fourth-quarter profit edged down, as the effects of higher cotton prices offset a jump in sales.

For the quarter ended Dec. 31, the company reported net income of $34.8 million, or 59 cents per share, compared with $34.9 million, or 60 cents per share, in the same quarter in 2010.

Excluding charges related to the acquisition of Bonnie Togs, a Canadian children's apparel retailer, and other one-time items, the Atlanta company said its adjusted earnings came to 63 cents per share.

Analysts, on average, expected adjusted earnings of 44 cents per share, according to a FactSet poll.

Revenue rose 22 percent to $606.6 million from $495.3 million, as retail sales jumped 26 percent to $206.3 million.

Analysts expected lower revenue $580.4 million.

Domestic sales of Carter's branded items rose 14 percent to $442.4 million, while U.S. OshKosh B'gosh sales increased 11 percent to $110 million. International sales jumped from $8 million to $54.3 million, boosted by the acquisition of Bonnie Togs and higher wholesale sales.

The company said its results continued to be hurt by exceptionally high cotton prices, but said it expects those prices to fall in the second half of the year.

For the full year 2011, Carter's reported net income of $114 million, or $1.94 per share, down from $146.5 million, or $2.46 per share, in 2010. Revenue rose to $2.11 billion from $1.75 billion.

The company said it expects costs for its spring 2012 products to be up about 15 percent from year-ago levels, as a result of higher cotton, labor and other costs, while fall product costs are expected to be down about 10 percent as cotton prices are expected to fall.

Carter's warned that it expects its first-quarter profit to come in below year-ago levels.

Carter's projected an adjusted first-quarter profit of between 38 and 43 cents per share on a sales increase of between 11 percent and 13 percent. Based on the company's first quarter 2011 sales of $469 million, the sales guidance implies sales for the current quarter of between $520.6 million and $530 million.

Analysts polled by FactSet expect earnings of 51 cents per share on $537.5 million in revenue.

For the full year, Carter's said it expects an adjusted profit of between $2.40 and $2.50 per share on a sales increase of between 8 percent and 10 percent. Based on the company's 2011 results, the guidance implies 2012 sales of $2.28 billion and $2.32 billion.

Analysts, on average, expect 2012 earnings of $2.34 per share on $2.34 billion in revenue.

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