Carter's, Inc. (CRI) Earnings Call Transcript & Summary

Good morning. My name is Lisa and I will be your conference operator today. At this time, I would like to welcome everyone to the Carter's, Inc. Annual Shareholders Meeting. [Operator Instructions] I would now like to turn the call over to Mr. Mike Casey. Go ahead, sir.

Thanks very much. Good morning, everyone. Thank you for joining us on the call. Welcome to our first virtual shareholders meeting. Like so many other meetings over the past 9 weeks, we're taking steps to keep everybody healthy, and we decided this format for our meeting would enable everyone to join us remotely and safely. On the call with us this morning are our Board of Directors and our leadership team. Others joining us are Todd Stroup, our audit partner from PricewaterhouseCoopers; and Elizabeth Noe, our legal counsel with Paul Hastings. James Hagan of Broadbridge Financial Solutions (sic) [ Broadridge Financial Solutions ] is also on the call with us this morning, Mr. Hagan will serve as the inspector of election and will tally the votes for us today. We've received an affidavit of mailing from Broadridge. It indicates that notice of today's meeting was given on or about the 3rd of April 2020 to each shareholder of record as of the 23rd of March 2020. Mr. Hagan has confirmed that holders of approximately 94% of the issued and outstanding shares of our common stock entitled to vote are present virtually or by proxy at this meeting. Based on this report, I attest that proper notice of the meeting has been given, a quorum is present and the meeting has been properly convened. The polls are now voting -- now open for voting online. There are 3 proposals submitted for shareholder approval this morning. The first proposal is the election of 12 directors nominated by our Board of Directors. Those directors are Hali Borenstein, Amy Brinkley, Giuse Buonfantino, Bruce Cleverly, Jevin Eagle, Mark Hipp, William Montgoris, Richard Noll, Gretchen Price, David Pulver, Thomas Whiddon and me. Each of us would serve until the next annual meeting in 2021 or until our earlier resignation, death or removal. The second proposal is a nonbinding advisory vote on the compensation of our named executive officers. And the third proposal is the ratification of board's appointment of PricewaterhouseCoopers as our company's independent accounting firm for 2020. Additional information on each of these proposals is provided in our proxy statement. Every shareholder who owned their shares on the record date is entitled to vote on today's proposals. Any shareholder participating online, who has already voted or given their proxy does not need to vote again. Any shareholders joining us online who have not already submitted a proxy and wish to vote their shares may do so now by clicking on the Vote Here button on your screen. [Voting]

While those votes are being cast, I'd like to share some thoughts on our business with you. As you may know, 2019 was a very good year for our company. It was our 31st consecutive year of sales growth last year. We achieved record sales, earnings per share and cash flow. Our Carter's brand also strengthened its position as the market leader in young children's apparel with twice this year of our nearest competitor. 2020 was expected to be another good year for us. Through early March, we were seeing mid-single-digit growth in sales, and our forecasts at that time suggested we were on track to achieve our growth objectives this year. In mid-March, we began to see sales decline as consumers reacted to the various media reports that raised the awareness of the risks of COVID-19 and the related precautions that were needed. In the days that followed, for the safety of customers and store employees, our store operations were suspended. Thankfully, Carter's has remained open for business. We're supporting the demand for our brands through our vibrant e-commerce operations, both direct-to-consumer and through our wholesale customers, including Amazon. As the leader in young children's apparel, we also have the unique benefit of doing business with Target, Walmart, Costco, Sam's and other retailers whose stores have remained open. Our brands have the broadest distribution of children's apparel in the United States. Prior to store closures related to the pandemic, our brands were sold through about 17,000 store locations in the United States. Our analysis suggests that nearly 50% of those store locations have remained open. Thankfully, some of our largest customers who closed stores over the past 9 weeks, like Kohl's and Macy's, are now beginning to reopen. We too have begun reopening our beautiful Carter's and OshKosh stores. We expect to have over 60% of our stores open by the end of this month, and over 80% of our stores are scheduled to reopen by the end of July. Last week, we completed a very successful bond offering. We issued $500 million in senior unsecured notes. Though our forecast suggested that we had ample liquidity to overcome the effects of lower sales and earnings attributed to the global pandemic, we thought it prudent to add some level of protection and liquidity given the uncertainty in the timing and extent of the market recovery. Over many years, children's apparel has proved to be a more resilient market in economic downturns. Children's apparel is a less discretionary and very affordable purchase. Carter's is known for its strong value proposition. Our average price points for apparel are less than $10. We offer the essential everyday basics for families with young children. Many of our products are bought in multiple quantities to enable easy dressing for children in their early years of life. We expect consumers will do more of their shopping online in the months and years ahead. Carter's is one of the largest online retailers of young children's apparel, second only to Amazon. With the support of Amazon and our other wholesale customers, we expect the online sales of our brands to exceed $1 billion this year. And as we move through the balance of the year, we will update you on our progress as the market and Carter's recovers from the effects of the global pandemic. Polls are now closed for voting. Mr. Hagan has shared the preliminary voting results with me. Based on these results, I'm happy to report that the shareholders voting today through the virtual meeting portal or by proxy have elected Hali Borenstein, Amy Brinkley, Giuse Buonfantino, Bruce Cleverly, Jevin Eagle, Mark Hipp, William Montgoris, Richard Noll, Gretchen Price, David Pulver, Thomas Whiddon and me to serve until the next annual meeting in 2021. Our shareholders have approved the compensation of our named executive officers, and they have approved the ratification of our Board's appointment of PricewaterhouseCoopers as our company's independent accounting firm for 2020. These preliminary voting results are subject to final tabulation and certification by the inspector of election. We will report the final voting results in a Form 8-K filed with the Securities and Exchange Commission within 4 business days. I'd like to thank you all for joining us this morning and for your investment in Carter's. The business of this meeting has been completed, and the meeting is now adjourned. And at this time, we'd be more than happy to address any questions you have about our business.

[Operator Instructions] And there are no questions at this time.

Okay. Well, thank you. thank you all very much for joining us early this morning. We will update you again on our progress in July. And until then, best wishes to you and to all of your families. Good bye, everyone.

This does conclude today's conference, you may now disconnect.