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

Good morning. Thanks, everyone, for joining us. We're very pleased to be joined this morning by the Carter's team. With us today, we have Chairman and CEO, Mike Casey; CFO and COO, Richard Westenberger; Chief Creative and Growth Officer, Kendra Krugman; and Sean McHugh, VP of IR and Treasurer. [Operator Instructions] With that, I'll kick it over to Mike for some opening remarks, and then we'll dive in. Mike?

Okay. Warren, thanks very much. Good morning, everybody. Thanks for making time to get together. We've got some brief opening remarks, hopefully, helpful to you. We're going to leave plenty of time for your questions. As you may know, Carter's is the largest branded marketer of young kids apparel in North America, own 2 of the iconic brands in kids apparel, Carter's and OshKosh B'Gosh, both brands have served the needs of multiple generations of families with young children. We own the largest share of a $32 billion market, apparel market for young children, newborn everything you need for a newborn to about a 10-year-old child. We have the #1 market share in the United States, #1 market share in Canada and Mexico, we have reasonably -- we have the #1 market share in baby apparel in Brazil. It's been a growing business for us. We sell essential core products, the must-have products that families buy in quantities, multiple quantities well before a child comes into the world, Bonnie suits, wash clothes, towels, bibs, blankets, all the essential core products purchased frequently in those drilling months and years of life. We are the largest specialty retailer focused on young children's apparel directly managing over 1,000 stores in North America. We're also the largest supplier of young children's apparel to the largest retailers in North America, Target, Walmart, Amazon, Kohl's, Macy's, Penneys, Costco, CMs, T.J. Maxx, Ross Stores, Marshalls, so anywhere kids apparel is sold in a meaningful way, you'll likely see a strong presentation of our brands. Our brands are sold in over 90 countries and through the most successful websites for kids apparel throughout the world. Last year, together with our wholesale customers, we had over $1 billion of online purchases of our brands. Prior to the pandemic, very strong performance. We had 31 consecutive years of sales growth, long track record of growth with top quartile operating margins and strong cash flow generation. That strong cash flow profile of our business is what we attracted 3 different very successful private equity firms to our business over the past 30 years. Over the past 10 years, we've generated nearly $3 billion in free cash flow and returned about $2.5 billion to our shareholders through share repurchases and in dividends. Last year, sales over $2.9 billion, our operating income over $300 million. We had double-digit operating margins in each of our U.S. wholesale, U.S. Retail and International segments, had over $0.5 billion in operating cash flow and ended the year with over $1 billion in liquidity. So financially strong company. In the years ahead, we expect that our growth will be driven by, among other things, store openings, we believe in stores. We like stores, nearly 70% of kids apparel is purchased in stores. Our stores are the highest source -- our highest source of new customer acquisition and provide a convenient alternative to shopping in the big box retailers. We believe our stores enable the success of our e-commerce business. When we open up a store, e-commerce in that market goes up, when we close a store, e-commerce in that market goes down. Our highest value customers shop both in our stores and online. It's what we call omnichannel customers. So our omnichannel customers, the annual spend from omnichannel customers who shop both in stores and online spend more than twice the single-channel customers. We believe our growth in sales going forward will also be driven by our exclusive brands, which are sold through Target, Walmart and Amazon. We believe our exclusive brands are traffic drivers to these retailers. Wherever you're shopping, you expect to see the national brands and Carter's is the best-selling national brand in kids apparel. Our brands are providing product offerings which are complementary to their private label brands. In international markets, we expect our growth will be driven by our investments in new omnichannel capabilities, technology, which is enabling good growth in Canada and Mexico. Expansion through our wholesale partner, Riachuelo, in Brazil in growth with other wholesale customers who are representing our brands in many parts of the world, including Latin America, the Middle East and Asia. We expect that our profitability in the years ahead will be driven by a higher mix of margin-rich omnichannel sales, a better mix of higher-margin stores. We've been closing a lot of low-margin stores in this kind of post-pandemic period, will have a greater concentration of our wholesale business with fewer, stronger and growing retailers. We expect our profitability will also be driven by improved pricing and inventory management capabilities. For those who have followed us over the years, we've made significant improvement in price realization from the prior to the pandemic through this year, largely through new pricing and inventory management capabilities. Profitability has been driven more effective, more impactful brand marketing, and given the strong cash flow profile of business, profitability will be driven by the continued return of capital through share repurchases. So just in summary, Carter's is the best-selling brand in kids apparel. It's the market leader in young kids apparel. We have unparalleled relationships with the largest retailers of young kids apparel. Our brands are sold through over 20,000 points of distribution throughout the world. We have multiple brands, multiple distribution channels, multiple levers to enable growth. We believe we're well positioned to benefit from the market recovery in the years ahead. We made some forward-looking statements this morning. There are risks inherent in our business, and those risks are disclosed in our SEC filings. So let me pause there, and we'll open up the meeting to your questions.

Thanks, Mike. There's a lot to dig into there. First, maybe let's just start high level. I wanted to start with a diagnostic of the health of your consumer. So your view in April, a little bit different than your view in February. What are the latest thoughts there? And any changes since weather has normalized a little bit since we last spoke in April?

Yes. So consumer -- our target consumer is under pressure. These are young women and men earlier in their careers, late 20s, early 30s. Time in your life is just starting a family. It's [indiscernible] for me, time in your life will be more paycheck to paycheck, right? Just a typical where you are in your stage of life. That target consumer is under pressure. We have historic inflation, right? You got to -- when these kids were growing up, there are probably as adults now saying, what's inflation? And why is gas $450 a gallon. And why are strawberries $6 a pack? In recent months, you've heard this reference I never in my 30 years with Carter's never heard references to the cost of shelter. Cost of shelter, meaning rents up and housing costs are up. And it's like how does -- there was a big headline in the Wall Street Journal in recent months. The American dream of home ownership is kind of elusive to people just starting out. So the consumer is under pressure, our business is under pressure because the consumer is under pressure. Actually, I think it's -- we referenced weather earlier this year, only in the context of the macro pressure on the consumer, what we're seeing in consumer behavior, they're shopping when needed and only when it's needed, right? So if I remember the April earnings call, I think it was about 40 degrees that morning in New York. And you're not thinking T-shirts and shorts. Even though you had an early Easter, you always want an early Easter, right? But if an early Easter coincides with cold weather, you'd say I don't need the T-shirts and shorts yet. I'll wait until the weather turns. That's why I think we're seeing a distortion in our performance from stores versus e-commerce. E-commerce used to be, you'd get a text, you'd get it an e-mail, you've got a good sale, you've got [indiscernible] do I need them? So I see we're seeing a less response to kind of the marketing stimulus. By comparison, though, when you need the pajamas, you're going to swing by the store. Stores provide immediacy. Right? And we're seeing on our -- the average transaction with us online used to be close to $70 right? That's a big stock up. It's not like Amazon, you're going to get one pair of pajamas. But in answer, I need body suits, I need wash clothes, towels, bibs, blankets, like something will be loading up. By comparison, the average transaction in our store is closer to $45 versus the $70 again, because it's -- given where our stores are, I'm going to get it when I need it, and I'm only -- and I'm not going to shop ahead of schedule. In your reference February versus April, in February, the world looked much different in February. In February, the headlines were inflation is under control, gas prices are coming down. Food price is still -- there was a little bit of optimism that there might be at least 1, 2 or more rate cuts, you roll forward just 8 weeks to April. It was inflation unexpectedly went up. There was a commentary there may not be any rate cuts this year. Gas prices were going up in April relative to where -- so just those headlines, those experiences, our target consumer, you have a weekly reminder when you go to fill up at the gas tank, that things are not as good as they were before the pandemic period, right? And when you go to the grocery store, I mean, and I go a [indiscernible] just buy. If you look at the [indiscernible] blueberries are $6 a pack. I didn't know they're -- anyways, whatever you're making, why is even Walmart, Walmart has been talking about they're seeing a higher mix of household incomes over $100,000. Why? People -- even if you're making a good buck, you're swinging over to Walmart. Why? It's one-stop shopping. You can get your groceries, diapers, formula and kids apparel. So they're going to do everything they can to hold on to that better consumer that wasn't shopping there before. So I don't think it's a Carter's issue. I think it's a macro issue. Even Home Depot recently surprisingly said it has 6 consecutive quarters of comp decline. And they're saying that consumer -- seeing fewer consumers making those big ticket, kitchen remodelings, bathroom remodelings because of the weather, people are less inclined to be shopping for the things they normally buy in April because just they can wait, they're going to wait. They didn't need it, they'll wait until the weather turns. So I think it's more -- it's less weather, it's more of the macro pressure on the consumer, they're shopping closer to need and they're buying fewer things because they've got other pressure.

Got it. Okay. And that's a really good state of the union for the category. If we maybe just focus on retail, and I feel like there's more transformation happening in all aspects of the retail business than any time in recent memory. First, can we talk about the store reimagined projects? There's a couple of new formats you're testing there? How are they different than what we've seen before? Why are these the right formats for today? And then just your latest thoughts on the potential for a broader rollout of those concepts.

Kendra, thoughts?

Sure. Yes, we have a lot of efforts underway, really driving home our value and our style perceptions with our consumers. So one of those initiatives is around our store experience. We have a handful of store tests in progress, and we are seeing a lot of green shoots here. So we have -- we almost a year ago now flipped all of our side-by-side stores. Those are our largest format stores to be more consumer-centric. So we moved those stores from being kind of brand oriented to being size segment oriented, which is a much better shopping experience for our consumers. Early reads on that are a nice trend change in that store group. It was a store group that was suffering a little bit, and now we are rightsizing that. So that feels really good. We also are going after a more premium customer, we're seeing a lot of traction on our best consumer on our best product, on our best store experiences. So we are really leaning in hard now to a better baby experience. We have what we call a best of baby store format that we are testing and the early reads of that are excellent, and we will continue to roll out more of those doors as the year goes on and as we look to the future. In addition to that, we have our Little Planet brand. We have shop-in-shops that we're testing. We are looking at making that even a bigger priority in terms of Little Planet destinations. So we have a few more things cooking that we look forward to sharing with you as the year goes forward.

Great. And then just following up on that, maybe I'll loop Richard into this one. You've been engaging in this fleet optimization exercise. You've been opportunistically swapping out these weaker traffic locations for stronger. There's only 10 net openings this year, but I think that understates the sales lift from this exercise. How should we think about the new component -- sorry, the new store component of the algorithm as we consider both the fleet optimization and these new concepts that you're rolling out?

Sure. Well, I'll start and Kendra can offer her thoughts as well. We're fans of stores, just in general, 70% of the category is purchased in stores. So for all of the predictions over the years that e-commerce was going to take over the world and stores were going to become irrelevant. We always thought that, that was overdone, that thought. So we have continued to open stores. We've had a store closing program, part of this fleet optimization, older locations, we very rarely would close the store before it reaches its natural lease expiration. And I think just through the pandemic, we closed around 140 stores. We have plans to your point, wanting to close another 30 stores or so this year. And if you have a store that's kind of had its best day, I think our inclination is to move on, find the center where the consumer has moved too, migrated their shopping behavior. We're still seeing good opportunities. And importantly, we're still seeing good returns on investment in those stores. It's probably the most measurable thing we have to allocate capital to. We know the capital that goes into the stores, we know the operating costs, we know the margin structure. So we're very rigorous in measuring the performance of our new stores, but we're still seeing these good opportunities. So our plans over the next years -- the next 5 years, probably inclusive of this year to open about 280 stores and over that time period closed about 80 stores. So the net number inclusive of this year is to add about 200 stores to wind up with around 1,000 stores. We're around 800 or so here in the U.S. today. That's the vision. And that's what we're executing to. And hopefully, we're going to now incorporate some of these learnings from the reimagination project that Kendra has been leading for us because there's always opportunity to improve the productivity of our store base to try new things. We are spending more on our models as well. So we'd like to -- and we're seeing some really green shoots to use Kendra's term around increased productivity by doing more remodeling activity. And I think that lessens the need and the dependence on new stores, if we can improve the productivity of the existing store base.

And all right, I would just add, our new stores not only are they continue to be profitable for us, which we've always realized they do perform better than our older fleet. So they're outperforming the chain army source as well. So that's an important thing that we continue to look at.

Part of the strategy, just final thought on that is -- there's a number of smaller markets where the closest stores like 50 miles away. So our real estate team is being very surgical, where are there certain real estate opportunities that we attract a customer that we didn't have with the brand wasn't accessible. So there's a -- a peer was talking about in the -- going forward, what's the small market strategy, how do we fill in certain gaps in the market. We -- we've got stores from Maine to Hawaii. We're wildly distributed up in Canada with #1 market share, we're expanding the presence in Mexico. We're in the early days of expanding the presence of the brand in Mexico. I think you'd be hard pressed to find another brand. I mean, we had an international partners in here recently. And they're Latin America, Middle East sitting between a fellow from Russia and Argentina. They're opening up Carter's stores throughout the world. I'm trying to think, can you think of another brand that you have these people opening up and some of these individually small businesses collectively better part of a $70 million, $80 million business, very high-margin business. But there's something about the Carter store. What we learned through these relationships is there is an absence of a brand in baby apparel as strong as Carter's worldwide. We didn't -- even when we launched the U.S. website years ago, you have 45% of the demand on our U.S. website came from outside of the United States. Number one was China, followed by Brazil, Argentina, if I remember it might have been Mexico before we opened up a book of -- before we acquired our licensee in Mexico, so there's something special about the Carter's brand and baby apparel is over 50% of what we do for a living. It's been much more and it's been consistently good for us. It's the more -- because we've got beautiful babies coming in the world every day, right, and the best-selling brand baby apparel is Carter's. So it's -- and then if we put toddler together, baby and toddler is over 80% of our apparel sales. So it's I think that's why we've weathered the storm. Again, wherever the consumer is going, if more people are going to Target, Walmart and Amazon, that's okay, we're there. We've got the best-selling brands at those retailer, international brands at those retailers. If you are swinging away from specialty retail in this cycle, it's fine. We'll continue -- you're in a down -- there's good cycles in retailers down cycles. We're working our way through a down cycle. You take advantage of the down cycle and you get to certain things and you're more aggressive improving things that perhaps should otherwise be if we were in kind of an up cycle of retail.

That's really good insight. And maybe just to wrap up the discussion on the retail side before we move to wholesale. This question is probably for Richard again. If I look at the guidance, you're looking for a return to positive comps in the second half. It's a pretty big inflection from where you're at now. I think the first half outlook is around negative mid-singles. We've touched on a lot of these initiatives that are going to help drive that. Can you just put those in context? How do those layer on which of those are the most material as we get into the second half year?

Well, everything here in the company starts with product. And I think the improved bookings, the higher bookings that we have in hand for the second half of the year reflects the strong response to the improvements in the product assortment, which Kendra and her team have led for us. So customers responded very positively. I think also, for the most part, our customers had a fairly strong holiday season in 2023 that the buyers at these retailers tend to be a bit of historians and so they're basing the future on their most recent season, and so they had a good second half of the year. It starts with the response to the good product that has been developed. I think coming into the year, and these commitments for the second half of this year were made by these wholesale customers late last year, which I think reflects to Mike's point, when we came into the year, there was a fair amount of optimism around that the year would show an improving trend as we move through 2024. We'll see if that completely plays out. But we're through the period, I think, of sort of significant destocking that we saw with our wholesale customers, that said, everyone is still being very conservative, very stingy with their inventory commitments. No one wants to get ahead of their skis in this kind of environment. But given where they were operating in the last couple of few years, I think there was an opportunity to modestly step up their commitments. The growth will be led for us in the second half by our exclusive brands. That is where the momentum has been within our Wholesale segment. Those are the retailers that are winning with consumers, and I think the bookings are kind of tracking to that as well.

Got it. Okay. Yes. So that was -- the question I had on the wholesale side, there's also a little bit of an inflection in the second half. How much of that is underpinned by order book? And you talked a little bit about last year's destocking exercise. Is there a need for your retailers to restock here? Just any further detail on that second half inflection would be useful.

Well, I think a year ago, these retailers were continuing to manage what was going on with consumer demand in response to inflation. I think you can only be a retailer with cutting inventory for so long. At some point, you have to have the newness, the freshness and the assortment. The seasons do change. That's always an inflection point in our business as it is for them as well. I just think the commitments were made with a rising sense of optimism coming into the year. And they had to refresh their assortments, so yes.

I think 2/3 of what we are forecasting in the second half for the fall and winter, again, for everybody's benefit, we have the fall and winter bookings in hand. Spring '25 is still -- the bookings are still coming in. We'll give you a good update next month on how spring '25 has been booked and start -- some of that starts to ship at the tail end of the fourth quarter. But the demand for fall and winter has been good. And it's -- and so we're forecasting mid-single-digit growth kind of in the book bookings, so 2/3 is the seasonal bookings. The balance is replenishment. So it's the automatic replenishment, so that the fixtures fill. So you want to make sure all those fixtures, whether it's the brand walls in Target and Walmart or the fixtures at Kohl's, the bodysuits, wash clothes, towels, all the everyday essentials. You always want to make sure those things are in stock as an empty fixture is not a good experience for the consumer. So as the register is ringing, it sends a signal to us, send us more 5-packs, send us more 4-pack PJ. So more of the auto replenishment product, which will also benefit from in the second half we expect is just the timing of shipments. So I think a year ago, because they were so lean, and they said, hey, if you got product, I think the first quarter was the sixth consecutive quarter where we saw earlier than expected demand from our whole wholesale customers. Why? They're running lean. And if you're selling through it, you're saying you've got something new bring it in because anytime you bring something new, consumer spots the new color stories, new prints, new fabrications and it gets the register ringing. And what we shared with you in April is we're assuming that some of that kind of early demand might be behind us. It's hard to predict because we have start ship dates and because they were running lean for 6 consecutive quarters, hey, we need some new products. We're assuming that we'll benefit in the second half that some of the stuff that came early, just not going to come early because they got to a steady state. Everybody in this post pandemic period saying where is the consumer? What do we buy? We don't -- we want to be conservative. We want to -- we'd rather chase -- and when you're chasing, chasing is a much healthier model. The margins are better, the sell-throughs are better, the price realization is better, we've got less on the clearance rack, so we're assuming that some timing of shipments will go into the second half on top of the really good -- I can't remember a quarter when we were talking about mid-single-digit growth in bookings. So it just -- it's kind of like it's a production period, right? We had the 100-year storm in 2020. Everybody came roaring back in '21, and then the consumer hit the brakes mid-2022 with inflation. So, again, you got -- had this little bit of a roller coaster in consumer behavior. And I think what we're sensing is perhaps we're getting to a little bit of a more stable, stable environment, not a robust environment, perhaps the best you can describe is maybe it's a more stable environment going forward, starting in the second half.

That's really useful insight. Speaking of stabilization, your AUR is stabilizing a little bit this year. You had some really strong increases in the last 4 years. You've made the decision to invest a little bit in sharper price points on some key items. Can you talk a little bit about what drove that decision, the impact it's having. And then as we look forward at AUR, what's the outlook for AUR going forward?

Sure, Kendra, happy to take it? Do you want to?

Yes. Sure. So driving improved price messaging, I would say, to ultimately get more price clarity with our consumer is really an important aspect of our value equation. And I think we've done that a few ways. One of them was through an everyday value program. So we rolled that out in February. It is going to the right price in a clearer, more concise way and hitting it earlier on in the season. So that was a new strategy, it's comping up against a more high-low strategy on the same item. So on the half in the first half, that had an impact to our AUR. But really, we hope that it's ultimately going to drive in the intention of it, is to drive unit velocity and credibility over time in our pricing strategy. Additionally, we have a percent of our typical ticket, which is our traditional model in a high-low model we are hitting the right price sooner, meaning we're going to go to a slightly deeper discount earlier on. So ultimately, you sell through more of the product and avoid more units going to clearance. So both of the Everyday Value program and kind of hitting the right price sooner with a percent off are intended to drive more price clarity, but also get credibility in our value equation with our consumers as we move forward.

So it's trying to be responsive to the high percentage of the people in the country. You've seen this study is 2/3 of the American -- adult Americans are living paycheck to paycheck. So it's trying to be responsive to that more price-sensitive consumer, so just to give you a tangible example, typically, if we brought a T-shirt in they would say, $10 and you sell a certain amount of $10. And then you go now to next stage is 25% off right? And so you'd be selling for $7.50. Then you go 40% off, it would be $6. What Kendra and her team said, why don't we just get to -- why don't we just -- instead of going to this kind of steady promotion level, establishing price than having some level of promotion than a next level, what's the right volume price? If it's $6, say it's $6, if you have a sale, go to $5. And the objective is to sell more at that high volume price, you have less on the clearance rack at the end of the season. Right? And so just to be responsive, we're seeing this kind of barbell kind of approach to demand for our brands. Again, we sell all the essentials, the [indiscernible] right, the body suits, wash clothes, towels, all those essentials that you have to buy in multiple quantities. Those early months and what. We just want when she comes in, you just want to make sure that the value equation is crystal clear that you've gotten to the market price and it's a basket starter. And when she fills out in that basket says, "what else do you got?" She is like I feel like I got a good deal, I see a $10, then $7.50, then hey, I see it at $6 or $5. What else do you have here? The barbell is interestingly, that is the highest price point products we have are some of our best selling. So Kendra and team launched this beautiful brand Little Planet. Better fabrications, better textures, it doesn't have a big fire engine across the front of it, right? So we have plenty of that. But if you want something a bit more elevated, something more special, so our collections, PurelySoft is another beautiful brand in baby, kind of a baby sleepwear and we got new textures coming. These things are priced significantly, either double 50% to 100% more than everything else we do for a living. But what we realize we have a much less price-sensitive consumer as well. So what Kendra and her team are doing more so in going and you heard her talking about in the second half, we'll have a higher mix of more of the elevated product more -- [indiscernible] is more like fashion for us. So we've always played fashion with risk, right? But it's tasteful. It's not like blink, it doesn't have, it's not the a shade of blue. It's just -- it's tasteful. It's consistent with the brand point of view for both Carter's and OshKosh. How do we turn that dial, understanding that there is a consumer looking for something better. And so Kendra will be sharing with you in July, some good work we've done in some of our stores where we're not only elevating the product offering, but also elevating the brand experience. We have a store that Kendra and our Head of Canada saw recently very good performing Carter's store. We're also saying, should we put a Little Planet store in here because that brand is doing so well, and we've expanded the product offering where what's the very best of Carters, what's the very best of our brand, so testing and learning new store models because although the vast majority of the country is under some financial pressure, there is a percentage of the consumer who's looking for a better experience and a better, better product offering. And we're encouraged that some of our highest price point product offerings are some of our best-selling product offerings.

And I would say on that extreme end, we are able to probe on price a little bit there. So where we're getting more value conscious and very crystal clear on the price value equation on the good product, on that best product, we were able to probe a little bit more lean our mix that way and also charge a little bit more for those products.

Got it. Great. That's very exciting. So maybe just another higher-level question, Mike. If I just look at the retail mix, it continues to shift back away from store -- sorry, away from e-comm back to stores. I know that's not specific to you. Do you think that's just some more post COVID normalization that's still lingering? Is it new competition or new consumer behavior? Maybe just the shift away from e-comm, how persistent you think that will be?

So e-commerce continues to be -- it used to be our fastest-growing, highest-margin business. Still is one of our highest margin business. It's a margin-rich business. And our penetration, e-commerce penetration in total retail is about 33%. And the market's only at 28%. And so we're far outperforming the market. It's just not the 36% or 37% it was last year. And so stores provide immediacy. If the consumer is shopping closer to need and only buying what's needed and not as responsive as they were in the years past to some of the marketing stimulus, the stores provide convenience. At the end, you can put your hands on, you could see, "Hey, do I like the fabric? Do I like the color, do I like the fit?" Again, those are some things that you can't fully appreciate. And again, if you're going to be spending money. You want to make sure you know exactly what you're getting. The beauty of our e-commerce business, our return rates are like 4%, because no one gets a white body suit [indiscernible] what I thought it was, right? I mean the fit has probably been the same fit for the past 50 years. So you have multiple generations, very familiar with the quality of the brand, the value of the brand, the snaps don't fall off, you put it through the watcher, I think people write me letters to say they bought a Carter's sweater 40 years ago, and they got multiple generations of the family that enjoyed that big sweater. I don't know how many brands get those kind of letters. So it just I think we're going to weather the storm better than most. And -- but the store actually -- we're actually okay with the mix. It's under pressure. E-commerce is under pressure. If we were looking at that Citi credit card data, where they published those spending categories every week, and they got dog food on there, they got cosmetics, but they also have a line item called online pure-play apparel, all ages, including kids, our performance is fully aligned with what's going on in the market. And if there was a distortion, I'd say, hey, there's something fundamentally wrong. That said, we've had no shortage of people inside the company, outside of the company. Is there something wrong with the plumbing? Is it that they are competitive? Is the experiences -- and which when you dig deeper in these down cycles, it's going to -- the experience is going to be far better than it would otherwise have been if business conditions were better. But we're okay with the consumer. We used to say, where do you want the next incremental dollar? You want it in the stores given the high fixed cost, right? And again, you can't fully appreciate why the stores, we are often asked, why is Carter's doing so well and one of your nearest competitors called [indiscernible] is a fraction of what it used to be. All you got to do is go on our stores, go in our stores, go in their stores. That answers -- that answers most of the questions. It's a fundamentally different far superior shopping experience and we love our big box retailers. It's a beautiful business for us, right? We want to be the alternative. We want to provide an alternative. You go into our stores, someone's greeting you, what are you looking for? Who are you shopping for, age, gender, the child, what's the occasion. Let me show you all the best things. And you get it. Most of our stores are in open air strip centers, you can get in, get out, convenience. It's convenience. It's convenience, the very best experience you'll have with our brands will be in our stores.

That makes a lot of sense, right? Out of all the companies I cover, I think it makes a lot of sense for Carter's to be a holistic ecosystem with both retail -- a strong retail and wholesale presence. I know on our last couple of minutes here, I just want to throw one audience question in. Is there a need to further invest in price here? What's the outlook for AUR? And is there a view on who's taking share in the category and the retail side?

Yes. So on pricing, we have, in the first quarter, we -- with this everyday value strategy, I think the pricing was down about 4%, very good response in the store, less so online, but very good, particularly in babies. So we did make some investment in price. You got to keep in mind, our primary competitor is private label. As we moved up on price, private label moved up on price. We have good people every day, looking, are we competitive? Are we competitive? We get a view on it every week. Were we -- pandemic, no pandemic for all of our years working together, we are -- are we competitive? Where are we? We are the leader and the consumer expects to pay a reasonable premium for the national brand, whether it's paper towels or bottled water, you will pay more for the national brand and Carter's is the best-selling national brand. So we'll continue to make sure that we are competitive on price. We have made investments where we need and even with the product cost reductions this past year, we took some of that product cost reduction, elevated the benefits and are getting paid for it. Again, we got good bookings for the second half from Wholesale. This is from Walmart, Target. I mean, these people are very savvy. They're the best in the business. If our pricing wasn't right, they wouldn't buy it. right? So we -- the beauty of our business, we do business with everybody. We got a book of business nobody's got with Walmart, Target, Amazon, no one's got these relationships. So we have more insight on what are the winning strategies in kids apparel far more so than anybody -- anybody. So our #1 objective is to provide the best value and experience in kids apparel. And that's been the strategy for many years.

Great. I think we're up on time here. Super insightful. As always, Mike, Richard, and Kendra. Thanks everyone -- thanks for taking the time to speak with us. Thanks, everyone, in the audience for listening. We'll end it there. Thank you.

Our pleasure. Thanks for joining this morning. Thanks for hosting us. Thank you all very much.