Carter’s, Inc., the largest branded marketer in the United States of apparel exclusively for babies and young children, today reported its fourth quarter and fiscal 2014 results.

“We saw good demand for our brands in the final months of the year,” said Michael D. Casey, Chairman and Chief Executive Officer. “We believe our focus on providing the best value and experience in young children’s apparel enabled us to achieve our 26th consecutive year of sales growth and a record level of profitability in 2014. We’re encouraged by consumers’ response to our new Spring product offerings, and we’re expecting good growth in sales and earnings in 2015.”

53rd Week

The Company’s fiscal year ends on the Saturday nearest the last day of December, resulting in an additional week of results every five to six years. Accordingly, the fourth quarter of fiscal 2014 included 14 weeks, compared to 13 weeks in the fourth quarter of fiscal 2013. Fiscal year 2014 included 53 weeks, compared to 52 weeks in fiscal 2013. The additional week in fiscal 2014 contributed $44.1 million in consolidated net sales. The additional week's contribution to net sales by business segment in 2014 are as follows:

Foreign Currency

The appreciation of the U.S. dollar relative to the Canadian dollar and Japanese yen negatively affected the Company’s reported net sales and earnings in fiscal 2014. The effects of changes in foreign currency exchange rates (FX) on net sales in fiscal 2014 compared to fiscal 2013 are as follows:

Adjustments to Reported GAAP Results

In keeping with the Company's historical practice of discussing the results of its business operations excluding items that it believes are not indicative of underlying business performance, the following adjustments have been made to the Company's reported (GAAP) results:

Consolidated Results

The discussion of results below is presented on an adjusted basis where noted.

Fourth Quarter of Fiscal 2014 (14 weeks) compared to Fourth Quarter of Fiscal 2013 (13 weeks)

Consolidated net sales increased $99.6 million, or 12.9%, to $869.2 million. The net sales increase reflects growth in all business segments.

Changes in foreign currency exchange rates in the fourth quarter of fiscal 2014 compared to the fourth quarter of fiscal 2013 negatively impacted consolidated net sales in the fourth quarter of fiscal 2014 by $5.8 million, or 0.8%. On a constant currency basis, consolidated net sales increased 13.7% in the fourth quarter of fiscal 2014.

Net income in the fourth quarter of fiscal 2014 increased $25.8 million, or 60.5%, to $68.6 million, or $1.29 per diluted share, compared to $42.7 million, or $0.78 per diluted share, in the fourth quarter of fiscal 2013. Adjusted net income in the fourth quarter of fiscal 2014 increased $14.4 million, or 25.7%, to $70.6 million, compared to $56.2 million in the fourth quarter of fiscal 2013. Adjusted earnings per diluted share in the fourth quarter of fiscal 2014 increased 29.8% to $1.32, compared to $1.02 in the fourth quarter of fiscal 2013. The growth in adjusted earnings per diluted share reflects sales growth, improved price realization, and expense leverage that were partially offset by higher product costs.

Fiscal 2014 (53 weeks) compared to Fiscal 2013 (52 weeks)

Consolidated net sales increased $255.2 million, or 9.7%, to $2.9 billion. This increase reflects growth in both Carter’s segments, the OshKoshretail segment, and the Company's international segment.

Changes in foreign currency exchange rates in fiscal 2014 compared to fiscal 2013 negatively impacted consolidated net sales in fiscal 2014 by $16.0 million, or 0.6%. On a constant currency basis, consolidated net sales increased 10.3% in fiscal 2014.

Net income in fiscal 2014 increased $34.3 million, or 21.4%, to $194.7 million, or $3.62 per diluted share, compared to $160.4 million, or $2.75 per diluted share, in fiscal 2013. Adjusted net income in fiscal 2014 increased $15.0 million, or 7.6%, to $211.5 million, compared to $196.5 million in fiscal 2013. Adjusted earnings per diluted share in fiscal 2014 increased 16.6% to $3.93, compared to $3.37 in fiscal 2013. The growth in adjusted earnings per diluted share reflects sales growth, improved price realization, and expense leverage that were partially offset by higher product costs.

Cash flow from operations in fiscal 2014 was $282.4 million compared to $209.7 million in fiscal 2013. The increase was driven by higher net income and favorable changes in net working capital.

Carter’s Retail Segment Results

Fourth Quarter of Fiscal 2014 (14 weeks) compared to Fourth Quarter of Fiscal 2013 (13 weeks)

Carter’s retail segment sales increased $46.4 million, or 15.7%, to $341.7 million. Carter’s direct-to-consumer comparable sales increased 3.5%, comprised of eCommerce comparable sales growth of 18.3% and a comparable retail store sales decline of 0.1%. The comparable sales metric for the 14 weeks ended January 3, 2015 utilizes a comparable 14 week period of the prior year.

Fiscal 2014 (53 weeks) compared to Fiscal 2013 (52 weeks)

Carter’s retail segment sales increased $133.0 million, or 13.9%, to $1.1 billion. Carter’s direct-to-consumer comparable sales increased 3.7%, comprised of eCommerce comparable sales growth of 26.1% and a comparable retail store sales decline of 1.0%. The comparable sales metric for the 53 weeks ended January 3, 2015 utilizes a comparable 53 week period of the prior year.

As of the end of the fourth quarter of fiscal 2014, the Company operated 531 Carter’s retail stores in the United States.

Carter’s Wholesale Segment Results

Fourth Quarter of Fiscal 2014 (14 weeks) compared to Fourth Quarter of Fiscal 2013 (13 weeks)

Carter’s wholesale segment sales grew $28.5 million, or 10.5%, to $300.4 million, reflecting growth across all Carter’s brands.

Fiscal 2014 (53 weeks) compared to Fiscal 2013 (52 weeks)

Carter’s wholesale segment sales increased $46.5 million, or 4.5%, to $1.1 billion, reflecting growth in a majority of the Company’s top accounts.

OshKosh Retail Segment Results

Fourth Quarter of Fiscal 2014 (14 weeks) compared to Fourth Quarter of Fiscal 2013 (13 weeks)

OshKosh retail segment sales increased $17.0 million, or 17.8%, to $112.6 million. OshKosh direct-to-consumer comparable sales increased 6.8%, comprised of eCommerce comparable sales growth of 17.4% and a comparable retail stores increase of 4.0%. The comparable sales metric for the 14 weeks ended January 3, 2015 utilizes a comparable 14 week period of the prior year.

Fiscal 2014 (53 weeks) compared to Fiscal 2013 (52 weeks)

OshKosh retail segment sales increased $45.8 million, or 15.8%, to $335.1 million. OshKosh direct-to-consumer comparable sales increased 7.3%, comprised of eCommerce comparable sales growth of 27.4% and a comparable retail store sales increase of 3.3%. The comparable sales metric for the 53 weeks ended January 3, 2015 utilizes a comparable 53 week period of the prior year.

As of the end of the fourth quarter of fiscal 2014, the Company operated 200 OshKosh retail stores in the United States.

OshKosh Wholesale Segment Results

Fourth Quarter of Fiscal 2014 (14 weeks) compared to Fourth Quarter of Fiscal 2013 (13 weeks)

OshKosh wholesale segment sales increased $0.4 million, or 1.8%, to $20.9 million.

Fiscal 2014 (53 weeks) compared to Fiscal 2013 (52 weeks)

OshKosh wholesale segment sales decreased $1.4 million, or 1.8%, to $73.2 million.

International Segment Results

Fourth Quarter of Fiscal 2014 (14 weeks) compared to Fourth Quarter of Fiscal 2013 (13 weeks)

International segment sales increased $7.3 million, or 8.5%, to $93.6 million, principally driven by growth in the Company’s Canadian businesses.

Changes in foreign currency exchange rates in the fourth quarter of fiscal 2014 as compared to the fourth quarter of fiscal 2013 negatively impacted international segment net sales in the fourth quarter of fiscal 2014 by $5.8 million, or 6.7%. On a constant currency basis, international segment net sales increased 15.2%.

The Company’s former retail operations in Japan, which the Company substantially exited in the first quarter of fiscal 2014, contributed $3.8 million to segment sales in the fourth quarter of fiscal 2013.

Canadian comparable retail store sales declined 4.6%, reflecting the discontinuation of Bonnie Togs legacy private label brands in 2014 and lower store traffic. The comparable sales metric for the 14 weeks ended January 3, 2015 utilizes a comparable 14 week period of the prior year.

Fiscal 2014 (53 weeks) compared to Fiscal 2013 (52 weeks)

International segment sales increased $31.2 million, or 10.9%, to $316.5 million, reflecting growth in the Company’s Canadian businesses and higher wholesale sales outside the U.S.

Changes in foreign currency exchange rates in fiscal 2014 as compared to fiscal 2013 negatively impacted international net sales in fiscal 2014 by $16.0 million, or 5.7%. On a constant currency basis, international segment net sales increased 16.6%.

The Company’s former retail operations in Japan contributed $4.4 million in net sales in fiscal 2014, compared to $15.9 million to segment sales in fiscal 2013.

Canadian comparable retail store sales declined 3.4%, reflecting the discontinuation of Bonnie Togs legacy private label brands in 2014 and lower store traffic, which more than offset growth in the combined sales of Carter’s and OshKosh branded products. The comparable sales metric for the 53 weeks ended January 3, 2015 utilizes a comparable 53 week period of the prior year.

As of the end of the fourth quarter of fiscal 2014, the Company operated 124 retail stores in Canada.

Dividends

During the fourth quarter of fiscal 2014, the Company paid a cash dividend of $0.19 per share totaling $10.0 million. The Company paid cash dividends totaling $40.5 million in fiscal 2014.

On February 18, 2015, the Company’s Board of Directors authorized a 16% increase ($0.03 per share) to the quarterly cash dividend, to $0.22 per share for payment on March 20, 2015, to shareholders of record at the close of business on March 10, 2015.

Future declarations of quarterly dividends and the establishment of related record and payment dates will be at the discretion of the Company’s Board of Directors based on a number of factors, including the Company’s future financial performance and other considerations.

Stock Repurchase Activity

During the fourth quarter of fiscal 2014, the Company repurchased and retired 244,800 shares of its common stock for $19.3 million at an average price of $78.96 per share. During fiscal 2014, the Company repurchased and retired 1.1 million shares for $82.1 million at an average price of $73.84. Year-to-date through February 25, 2015, the Company has repurchased and retired a total of 23,100 shares for $1.9 million at an average price of $83.52 per share. All shares were repurchased in open market transactions pursuant to applicable regulations for open market share repurchases.

As of February 25, 2015, the total remaining capacity under the Company’s previously-announced repurchase authorizations was $183 million.

2015 Business Outlook

For fiscal 2015, the Company projects net sales to increase approximately 5% over fiscal 2014 and adjusted diluted earnings per share to increase approximately 10% to 14% compared to adjusted diluted earnings per share of $3.93 in fiscal 2014. This forecast for fiscal 2015 adjusted earnings per share excludes anticipated expenses of approximately $6 million related to the amortization of the acquired tradenames discussed above, approximately $1 million related to the Bonnie Togs acquisition, and other items the Company believes to be non-representative of underlying business performance.

For the first quarter of fiscal 2015, the Company projects net sales to increase approximately 3% over the first quarter of fiscal 2014 and adjusted diluted earnings per share to be comparable to adjusted diluted earnings per share of $0.73 in the first quarter of fiscal 2014. This forecast includes the anticipated adverse impact of approximately $15 million in net sales related to delayed inventory receipts due to the backlog of cargo containers at West Coast ports. This forecast for first quarter fiscal 2015 adjusted earnings per share excludes anticipated expenses of approximately $2 million related to the amortization of the acquired tradenames discussed above, approximately $0.5 million related to the Bonnie Togs acquisition, and other items the Company believes to be non-representative of underlying business performance.