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Carter’s Could Reverse Q1 Sales Decline With Stores Opening This Week

Carter’s Inc. will join some of its retail peers in reopening stores in locations where coronavirus countermeasures have been relaxed, the company said in its Q1 earnings report on Tuesday.

In a Nutshell: The childrenswear retailer said it believes the company has “sufficient liquidity” to withstand the disruption caused by the virus, pointing to a new agreement it made with lenders to waive financial maintenance covenants for the remainder of the fiscal year.

Under this plan, executed under its wholly-owned subsidiary The William Carter Company, Carter’s Inc. will also be able to pursue additional unsecured financing if necessary.

Families with young children were “meaningfully disrupted” by the virus, according to Carter’s Inc. CEO and chairman Michael D. Casey, who anticipates that disruption will affect the company’s growth for the year.

Casey said some stores will begin reopening this week, potentially improving sales, which fell into freefall in the first quarter.

Sales: Right up to early March, Carter’s sales were consistent with growth objectives, Casey said, but sales dropped precipitously when stores closed in the middle of the month. The company recorded $654 million in net sales, down 12 percent over the comparable period and below the Wall Street estimate of $674.9 million.

Retail sales in the U.S. decreased by $56.3 million or 14.9 percent to $320.7 million, driven mainly by store closures, although Carter’s said comparable sales metrics were not a meaningful assessment of its business in Q1.

The company’s wholesale segment fared somewhat better, falling 8.4 percent to $253.1 million. Internationally, retail revenue decreased by 7.9 percent to $81.6 million, partially as a result of delayed wholesale shipments by the pandemic.

Earnings: Due to massive disruption caused by the virus, including $42.2 million in inventory provisions related to excess inventory, a $17.7 million goodwill impairment charge and a $20.2 million tradename impairment charge, Carter’s Inc. reported an adjusted loss per diluted share of 81 cents.

CEOs Take: Casey said big-box essential retailers have helped keep sales afloat while its own stores remained shuttered.

“Thankfully, Carter’s has remained open for business, and continues to support the demand for our brands through our extensive e-commerce capabilities, both direct-to-consumer, and through the major retailers,” Casey said. “We also have the benefit of demand from some of our largest customers, including Target and Walmart, whose stores have remained open.”