Carter's has built a big business catering to little ones. Operating through its William Carter Company, it's the largest US branded marketer of apparel exclusively for babies and young children. Primary products include newborn layette clothing, sleepwear, and playwear. It markets its items under the Carter's and OshKosh B'Gosh brands, as well as private labels Child of Mine, Just One You, Genuine Kids, and Precious Firsts. While Carter's sells products online and as a wholesaler via 17,000 department and specialty stores, it also operates some 530 Carter's and OshKosh stores nationwide and 65 stores in Canada thanks to its 2011 acquisition of Bonnie Togs. Carter's was established in 1865 by William Carter.
Mergers and Acquisitions
Carter's extended its reach northward into Canada and added an international segment to its business as a result of the company's 2011 $98 million purchase of Bonnie Togs, a Canadian specialty retailer of children's apparel and accessories. Bonnie Togs had been Carter's principal licensee in Canada since 2007.
Effective October 2011 the company operates its business through five segments: Carter's wholesale, Carter's retail, OshKosh retail, OshKosh wholesale, and international. Following its Bonnie Togs purchase, Carter's realigned its reportable segments to include a new international segment to house its Canadian operations, existing international wholesale business, and royalty income from its international licensees.
During and since the economic downturn Carter's revenues have steadily climbed. The company's 2011 net revenue rose more than 20% (or $2.1 billion) compared to 2010. Carter's contributes the noteworthy increase to a 13% boost in wholesale sales in the US due to an 8% increase in units shipped and a 5% increase in price per unit in 2011 vs. 2010. Additionally, the company logged a nearly 23% increase in retail sales in 2011 thanks to higher sales from new store openings, online sales, and comparable store sales. During the same reporting period, net income decreased some 22% for the manufacturer, attributed to a 15% increase in selling, general, and administrative (SG&A) expenses, including its purchase of Bonnie Togs. The company's bodysuits, pajamas, blanket sleepers, newborn gowns, bibs, towels, washcloths, and receiving blankets are core apparel products that it considers to be consumer staples. To boot, Carter's products -- and the health of its business -- are supported by a favorable birth rate. The manufacturer is banking on its 2011 acquisition of Bonnie Togs, as well, to ultimately provide a network of some 160 stores in Canada that contribute total annual revenues of more than $200 million by 2016. In 2011 the manufacturer sold more than 278 million units of products in the US under the Carter's, Child of Mine, Just One You, and Precious Firsts names, representing an increase of some 11% from 2010. Carter's top 10 baby and sleepwear products generated about 65% of net sales for that segment in 2011.
The company has developed a reputation for producing high-quality clothing for children -- from the cradle through the early school years. The Carter's brand and private-label collections made for mass-market customers offer apparel in newborn through children's size 7. These lines mostly consist of cotton essentials, such as bodysuits and pajamas, and collectively typically account for about two-thirds of revenues. Besides apparel, Carter's licenses bedding, toys, furnishings, baby gear, and gifts that are sold through mass merchandisers. The OshKosh brand, acquired in 2005, has extended the company's product range from newborns through children size 12. Known for its rugged playclothes, including overalls and T-shirts, OshKosh items are marketed at higher price points than the company's traditional Carter's branded products. The company is working to boost its revenues further through expansion of its retail and outlet store operations. In 2011 it opened more than 50 net new Carter's stores and plans to open about 60 during fiscal 2012. Across its OshKosh chain, the company opened three stores in 2011 and shuttered 13. During 2012, it made plans to close another 13 and only open about five. That's a shift from adding about 30 new Carter's stores and 10 new OshKosh locations in both 2010 and 2009. The company's financial performance during the past several years supports the notion that children's clothing is more resistant to decline, compared to other segments of the apparel industry. While parents may opt to cut spending related to their own wardrobes, they are still buying clothing for their growing youngsters, even if they trade down to lower-cost brands or shop through off-price outlets.
Carter's primarily operates in the US but has gained a foothold in Canada by acquiring its longtime international licensee there. As a result, the manufacturer also boasts a growing retail presence across the nation and into Canada. Across its portfolio, the company's apparel and accessories are sold in more than 50 countries worldwide.
Sales and Marketing
The company's brands compete in the $22 billion children's apparel market for children newborn to age 7. Carter's enjoys the #1 branded position and a 14% market share; OshKosh has a 2% market share. Because the company uses a variety of distribution channels, it's able to market its products to a more diverse range of consumers and geographic regions.Wal-Mart sells its Child of Mine line, while Target offers the Just One You and Precious Firsts brands; the two retailers generate about 15% of sales.
Berkshire Fund VII, L.P. owns nearly 16% of the company.
Carter's has been slashing expenses to increase profits. The company cut about 25% of the workforce at OshKosh's headquarters in 2009 and relocated remaining positions to its other offices. It later sold the office in Oshkosh, Wisconsin. Also that year, Carter's shuttered a distribution center in Barnesville, Georgia. Cost control is important for Carter's, as spikes in cotton prices pinch profits. – less