Carters Inc (NYSE: CRI)

Sector: Consumer Cyclical Industry: Apparel Retail CIK: 0001060822
Market Cap 1.14 Bn
P/B 1.32
P/E 12.84
P/S 0.40
ROIC (Qtr) 5.54
Div Yield % 7.41
Rev 1y % (Qtr) -0.08
Total Debt (Qtr) 1.18 Bn
Debt/Equity (Qtr) 1.36

About

Carters Inc, or CRI, is a major player in the children's apparel industry in North America. The company boasts two of the most reputable brand names in this market - Carter's and OshKosh B'gosh, along with Skip Hop, a leading brand in the young children's lifestyle segment, Little Planet, a brand focused on organic fabrics and sustainable materials, and exclusive Carter's brands developed for Amazon, Target, and Walmart. Carters Inc operates in the children's apparel market, with its main business activities revolving around the design, production,...

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Price action

Investment thesis

Bull case

  • Robust free cash flow of 91.97M exceeds capital expenditure of 59.19M by 1.55x, indicating strong organic growth funding capability.
  • Tangible assets of 1.97B provide robust 17.78x coverage of other current liabilities 110.91M, indicating strong asset backing.
  • Operating cash flow of 151.16M fully covers other non-current liabilities 75.23M by 2.01x, showing strong long-term stability.
  • Robust tangible asset base of 1.97B provides 3.12x coverage of working capital 632.09M, indicating strong operational backing.
  • Retained earnings of 874.36M provide strong 7.88x coverage of other current liabilities 110.91M, indicating earnings quality.

Bear case

  • Operating cash flow of 151.16M barely covers its investment activities of (59.19M), with a coverage ratio of -2.55, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 184.19M against inventory of 656.15M, the 0.28 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 151.16M provides thin coverage of dividend payments of (76.08M) with a -1.99 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Operating earnings of 144.68M show weak coverage of depreciation charges of 54.83M, with a 2.64 ratio indicating high capital intensity and potential reinvestment needs.
  • Retained earnings of 874.36M provide limited buffer against comprehensive income items of (28.11M), which is -31.11x, indicating elevated exposure to market risks.

Peer comparison

Companies in the Apparel Retail
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 TJX Tjx Companies Inc /De/ 175.80 Bn 34.34 2.98 13.19 Bn
2 ROST Ross Stores, Inc. 58.85 Bn 28.21 2.67 5.19 Bn
3 LULU lululemon athletica inc. 25.43 Bn 14.61 2.30 1.76 Bn
4 BURL Burlington Stores, Inc. 18.26 Bn 32.57 1.63 5.94 Bn
5 GAP Gap Inc 10.00 Bn 11.75 0.65 5.52 Bn
6 URBN Urban Outfitters Inc 7.11 Bn 14.53 1.18 1.18 Bn
7 ANF Abercrombie & Fitch Co /De/ 6.17 Bn 11.82 1.19 1.13 Bn
8 BOOT Boot Barn Holdings, Inc. 5.78 Bn 27.75 2.79 0.67 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.78 1.35
EV to Cash from Ops. EV/CFO 12.77 8.18
EV to Debt EV to Debt 1.64 4.33
EV to EBIT EV/EBIT 13.34 -60.97
EV to EBITDA EV/EBITDA 9.78 6.53
EV to Free Cash Flow [EV/FCF] EV/FCF 20.99 22.99
EV to Market Cap EV to Market Cap 1.69 2.06
EV to Revenue EV/Rev 0.68 1.11
Price to Book Value [P/B] P/B 1.32 3.23
Price to Earnings [P/E] P/E 12.84 195.16
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 1.17 0.88
Dividend Payout Ratio % Div Payout % (Qtr) 85.00 12.58
Dividend per Basic Share Div per Share (Qtr) 2.10 0.36
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 83.20 16.33
Interest Coverage Int. cover (Qtr) 4.66 13.58
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -3.79 -5.40
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 4.93 89.63
Dividend Growth (1y) % Div 1y % (Qtr) -33.33 1.25
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -55.48 13.95
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -46.22 -16.93
EBIT Growth (1y) % EBIT 1y % (Qtr) -55.32 10.85
EBT Growth (1y) % EBT 1y % (Qtr) -61.21 6.10
EPS Growth (1y) % EPS 1y % (Qtr) -60.79 10.94
FCF Growth (1y) % FCF 1y % (Qtr) -66.87 -129.32
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -3.41 -1.75
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.15 1.40
Cash Payout Ratio Cash Payout (Qtr) 0.36 0.06
Cash Ratio Cash Ratio (Qtr) 0.37 0.38
Current Ratio Curr Ratio (Qtr) 2.26 1.59
Debt to Equity Ratio Debt/Equity (Qtr) 1.36 1.31
Interest Cover Ratio Int Coverage (Qtr) 4.66 13.58
Times Interest Earned Times Interest Earned (Qtr) 4.66 13.58
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 7.00 2.72
EBIT Margin % EBIT Margin % (Qtr) 5.11 -1.70
EBT Margin % EBT Margin % (Qtr) 4.01 -2.76
Gross Margin % Gross Margin % (Qtr) 46.80 40.52
Net Profit Margin % Net Margin % (Qtr) 3.10 -4.02