Q4 2024 Carter's Inc Earnings Call and Business Update

February 25, 2025

Professor Chief Financial Officer, and Chief operating Officer, Kindrick, Routeman, Chief Creative and growth Officer, and Sean Mchugh Treasurer. Please note that today's call is being recorded I will now turn the call over to Mr. Mchugh.

Sean Mchugh: Thank you and good morning, everyone. We issued our fourth quarter 2024 earnings release earlier today.

Welcome to Carter's first quarter fiscal 2024 earnings conference call on the call are Richard Weston broker Chief I'm, Sorry, interim Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer, Kindred Kirkman, Chief Creative Officer and.

Sean Mchugh: The release and presentation materials for today's call are available on our Investor Relations website at IR Dot Carter's Dot com.

Sean Mchugh: Note that statements on today's call about items, such as the Companys outlook and plans are forward looking statements.

Sean Mchugh Treasurer. Please note that today's call is being recorded I will now turn the call over to Mr. Mchugh.

Sean Mchugh: For a discussion of factors that could cause actual results to vary from those contained in the forward looking statements. Please see our most recent SEC filings and the earnings release and presentation materials posted on our website.

Thank you and good morning, everyone. We issued our fourth quarter 2024 earnings release earlier today.

The release and presentation materials for today's call are available on our Investor Relations website at IR Dot Carter's Dot com.

Sean Mchugh: In these materials you will also find reconciliations of various non-GAAP financial measurements referenced during this call.

Sean Mchugh: After today's prepared remarks, we will take questions as time allows.

Note that statements on today's call about items, such as the company's outlook and plans are forward looking statements.

Sean Mchugh: I will now turn the call over to Richard Thank.

Richard Thank: Thank you Sean good morning, everyone. Thank you for joining us this morning.

A discussion of factors that could cause actual results to vary from those contained in the forward looking statements. Please see our most recent SEC filings in the earnings release and presentation materials posted on our website.

Richard Thank: Before I cover our fourth quarter results I wanted to take a moment and acknowledge the news, which we announced earlier this year that Mike Casey had decided to retire from Carter's after 30 plus years with the company and more than 16 years as our CEO.

In these materials you will also find reconciliations of various non-GAAP financial measurements referenced during this call.

Richard Thank: I know I speak for our board of directors and our thousands of employees in thanking Mike for his years of service to Carter's and his many contributions to our company.

After today's prepared remarks, we will take questions as time allows.

Richard Weston: I'll now turn the call over to Richard.

Speaker Change: Thank you Sean good morning, everyone. Thank you for joining us this morning.

Richard Thank: As noted in our press release. This morning, our board has initiated an external search to identify a permanent CEO for Carter's the board has been active in this task and we look forward to introducing our new leader once the search process has been completed.

Speaker Change: Before I cover our fourth quarter results I wanted to take a moment and acknowledge the news, which we announced earlier this year that Mike Casey had decided to retire from Carter's after 30 plus years with the company and more than 16 years as our CEO.

Speaker Change: Before Kendra NII walk through our presentation materials I would like to share some overall thoughts on our business with you.

Speaker Change: I know I speak for our board of directors and our thousands of employees.

Speaker Change: Our fourth quarter performance was stronger than we had forecasted with sales and earnings above the high end of the guidance, which we provided on our last earnings call. This past October.

Speaker Change: Thank you Mike for his years of service to Carter's and his many contributions to our company.

As noted in our press release. This morning, our board has initiated an external search to identify a permanent CEO for Carter's the board has been active in this task and we look forward to introducing our new leader once the search process has been completed.

Speaker Change: While Q4 was stronger than expected our outlook for 2025 profitability is expected to be more challenging for reasons that we will cover with you. This more.

Speaker Change: <unk>.

Speaker Change: In Q4 consumer confidence rose after the noise of the presidential election subsided in early November.

Before Kendra and I walked through our presentation materials I'd like to share some overall thoughts on our business with you.

Speaker Change: Our sense is that the industry experienced favorable holiday selling and a positive end to the year.

Speaker Change: While our results for full year, 2024, where not everything we had hoped for coming into the year. There are a number of positives to point to across the business. As a reminder, we're focused on three fundamental areas, which include elevating the style and value of our product offerings.

Speaker Change: While Q4 was stronger than expected our outlook for 2025 profitability is expected to be more challenging for reasons that we will cover with you. This morning.

Speaker Change: In Q4 consumer confidence rose after the noise of the presidential election subsided in early November and our sense is that the industry experienced favorable holiday selling and a positive end to the year.

Speaker Change: Improving our marketing capabilities and effectiveness.

Speaker Change: And leveraging our unparalleled multichannel market presence.

Speaker Change: On product, our core baby and toddler apparel offerings, which represent roughly 80% of our total apparel business continued to be the best performing and most consistent part of our assortment.

Speaker Change: While our results for full year 2020 for it we're not everything we had hoped for coming into the year. There are a number of positives to point to across the business. As a reminder, we're focused on three fundamental areas, which include elevating the style and value of our product offerings.

Speaker Change: After years of several years of declining share we grew our share of both the baby and toddler markets in the U S. In 2024.

Speaker Change: Improving our marketing capabilities and effectiveness.

Speaker Change: As we will discuss this morning in reaction to what we saw in the marketplace, particularly in the latter part of the first half we took significant action in the second half to increase the value and price competitiveness of a portion of our product assortment.

Speaker Change: And leveraging our unparalleled multichannel market presence.

Speaker Change: These actions drove a meaningful lift across several important retail performance metrics and contributed to stabilization of unit volume overall.

Speaker Change: After years of several years of declining share we grew our share of both the baby and toddler markets in the U S. In 2024.

Speaker Change: On style are higher priced and elevated product offerings, including little planet purely soft in licensed product has continued to perform very well and we believe these products are attracting a new segment of consumers to our business.

Speaker Change: In marketing, we brought new personalization capabilities online this past year, which we believe are driving incremental sales and helping to deepen relationships with our customers.

Speaker Change: These actions drove a meaningful lift across several important retail performance metrics and contributed to stabilization of unit volume overall.

We also rebranded and relaunched our loyalty program in 2024.

Speaker Change: On style are higher priced and elevated product offerings, including little planet purely soft in licensed product have continued to perform very well and we believe these products are attracting a new segment of consumers to our business.

Speaker Change: Over 90% of our U S retail sales are transacted through our loyalty program.

Speaker Change: Through our wholesale business, we worked with the largest retailers of children's apparel in the country.

Speaker Change: We achieved record sales of our exclusive brand products in 2024, leveraging the clear consumer shift to the mass channel attracted by the value and convenience, which these retailers offer.

Speaker Change: We also rebranded and relaunched our loyalty program in 2024.

Speaker Change: Outside the United States, our Canadian business, which holds the largest market share in that country had a good fourth quarter as did our business in Mexico, where consumers continue to respond well to the new store and online capabilities, which we have developed.

Speaker Change: Over 90% of our U S retail sales are transacted through our loyalty program.

Speaker Change: Through our wholesale business, we work with the largest retailers of children's apparel in the country.

Speaker Change: Now turning to some more details of our fourth quarter performance and the presentation materials posted on our website.

Speaker Change: On pages, two and three of the materials. We've included our GAAP basis, P&L for the fourth quarter and full year.

Outside the United States, our Canadian business, which holds the largest market share in that country had a good fourth quarter as did our business in Mexico, where consumers continue to respond well to the new store and online capabilities, which we have developed.

Speaker Change: On the next page, we have a summary of our non-GAAP adjustments. The most significant adjustments both in the fourth quarter and for the full year was $30 million noncash pre tax charge related to the impairment of the Oshkosh B'gosh brand trade name.

Speaker Change: Now turning to some more details of our fourth quarter performance and the presentation materials posted on our website.

Speaker Change: We reduced the value of the Oshkosh trade name as part of our year end assessment of the values of intangible assets on our balance sheet.

Speaker Change: On pages, two and three of the materials. We've included our GAAP basis, P&L for the fourth quarter and full year.

Speaker Change: Our lower near term outlook for sales and profitability for Oshkosh resulted in a reduced value of the trade name versus its previous carrying value.

On the next page, we have a summary of our non-GAAP adjustments the most significant adjustment in the fourth quarter and for the full year. It was a $30 million noncash pre tax charge related to the impairment of the Oshkosh B'gosh brand trade name.

Speaker Change: This morning, I'll speak to our results on an adjusted basis, which excludes these adjustments.

Speaker Change: On page five we have summarized our performance relative to the expectations. We shared on our last earnings call in late October.

Speaker Change: We reduced the value of the Oshkosh trade name as part of our year end assessment of the values of intangible assets on our balance sheet.

Speaker Change: As I said, we met or exceeded the objectives, we set forth for the fourth quarter. Both in sales in total and in each of our business segments and in profitability.

Speaker Change: Lower near term outlook for sales and profitability for Oshkosh resulted in a reduced value of the trade name versus its previous carrying value.

Speaker Change: We have some overall highlights of our fourth quarter performance on page six our consolidated net sales of $860 million were up slightly over last year.

Speaker Change: This morning, I'll speak to our results on an adjusted basis, which excludes these adjustments.

Speaker Change: On page five we have summarized our performance relative to the expectations. We shared on our last earnings call in late October.

Speaker Change: Fourth quarter was our largest quarter of the year, representing about $100 million more in sales than our volume in the third quarter.

Speaker Change: As planned we had strong year over year growth in our U S wholesale business, which was offset by lower sales in U S retail and slightly lower sales in international due to the negative impact of currency exchange rates.

Speaker Change: As I said, we met or exceeded the objectives, we set forth for the fourth quarter, both in sales and total and in each of our business segments and in profitability.

Speaker Change: We have some overall highlights of our fourth quarter performance on page six our consolidated net sales of $860 million were up slightly over last year.

Speaker Change: Fourth quarter adjusted operating income was $115 million, representing a 13, 4% adjusted operating margin.

Speaker Change: And adjusted EPS was $2 39, tenths down 13% from last year.

Speaker Change: Fourth quarter was our largest quarter of the year, representing about $100 million more in sales than our volume in the third quarter.

Our fourth quarter adjusted P&L is on page seven.

Speaker Change: On the $860 million in net sales our gross margin was 47, 8% down 90 basis points from last year.

Speaker Change: We invested approximately $30 million in the fourth quarter and more competitive pricing on a portion of our assortments in U S retail.

Speaker Change: Fourth quarter adjusted operating income was $115 million, representing a 13, 4% adjusted operating margin.

Speaker Change: Call that we made a similar roughly $24 million investment in the third quarter.

Speaker Change: And adjusted EPS was $2.39 down 13% from last year.

Speaker Change: The impact of these lower prices on gross margin was largely offset by lower product costs in the quarter. The balance of the decline in gross margin was due to higher year over year freight rates and a higher mix of wholesale sales versus last year.

Speaker Change: Our fourth quarter adjusted P&L is on page seven.

Speaker Change: On the $860 million in net sales our gross margin was 47, 8% down 90 basis points from last year.

Speaker Change: We invested approximately $30 million in the fourth quarter and more competitive pricing on a portion of our Assortments and U S. Retail recall that we made a similar roughly $24 million investment in the third quarter the.

Speaker Change: Spending was up 5% over last year, we had higher costs related to new stores marketing charitable, giving and professional fees.

Speaker Change: These increases were offset by a significant reduction in variable compensation costs about $10 million versus last year.

Speaker Change: As mentioned operating income was $115 million.

Speaker Change: Below the line net interest expense was comparable with last year.

Speaker Change: Year over year, we incurred additional costs of approximately $2 million related to unfavorable movements in foreign currency exchange rates.

Speaker Change: <unk> spending was up 5% over last year, we had higher costs related to new stores marketing charitable, giving and professional fees. These increases were offset by a significant reduction in variable compensation costs about $10 million versus last year.

Speaker Change: Our effective tax rate in the quarter in the quarter was 18, 8% versus 22, 8% last year. The decrease was driven by a higher proportion of income generated outside the United States and the impact of the changes in foreign currency exchange rates, specifically, the strengthening U S dollar relative to the Mexican peso.

Speaker Change: As mentioned operating income was $115 million.

Speaker Change: Below the line net interest expense was comparable with last year.

Speaker Change: Again, all this nets down to adjusted EPS in the quarter of $2 39.

Speaker Change: Year over year, we incurred additional costs of approximately $2 million related to unfavorable movements in foreign currency exchange rates.

Speaker Change: Our business segment results are summarized on page eight.

Speaker Change: Our effective tax rate in the corner in the quarter was 18, 8% versus 22, 8% last year. The decrease was driven by a higher proportion of income generated outside the United States and the impact of changes in foreign currency exchange rates, specifically, the strengthening U S dollar relative to the Mexican peso.

Speaker Change: The decline in our consolidated adjusted operating income of $21 million was driven by lower profitability in U S retail and higher corporate expenses.

Speaker Change: Driving the increase in corporate expenses were higher charitable, giving and higher costs related to health insurance and consulting.

Speaker Change: Offsetting these increases were as Ive said lower provisions for variable compensation, which are tied to our performance.

Speaker Change: Again, all this nets down to adjusted EPS in the quarter of $2 39.

Speaker Change: Our business segment results are summarized on page eight.

Speaker Change: Now turning to some additional perspective on our business segment results beginning with U S retail on page nine.

Speaker Change: The decline in our consolidated adjusted operating income of $21 million was driven by lower profitability in U S retail and higher corporate expenses.

Speaker Change: As we first told you on our second quarter call last July we made a decision to make some meaningful investments in the second half and our U S retail business in order to improve our performance from what we experienced in the first half specifically, we invested $65 million $55 million in lower pricing and $10 million in additional brand marketing.

Speaker Change: Driving the increase in corporate expenses were higher charitable, giving and higher costs related to health insurance and consulting.

Speaker Change: Offsetting these increases were as I said lower provisions for variable variable compensation, which are tied to our performance.

Speaker Change: Now turning to some additional perspective on our business segment results beginning with U S retail on page nine.

Speaker Change: In the first half we had a high single digit decline in our U S retail comparable sales and actually through July we were running down about 10%.

Speaker Change: As we first told you on our second quarter call last July we made a decision to make some meaningful investments in the second half and our U S retail business.

Speaker Change: We saw the marketplace for children's apparel had become significantly more promotional in response to weak consumer demand as the effects of inflation continued to affect families with young children.

Speaker Change: In order to improve our performance from what we experienced in the first half specifically, we invested $65 million $55 million in lower pricing and $10 million in additional brand marketing.

Speaker Change: And building inventory positions across the industry.

Speaker Change: As a result, we felt that some portion of our product assortments were not priced as competitively as they needed to be given what consumers were seeing in the marketplace on approximately 20% of our assortment products, which are the most comparable to our consumers would find at other retailers, we lowered prices by one to $2.

Speaker Change: In the first half we had a high single digit decline in our U S retail comparable sales and actually through July we were running down about 10%.

Speaker Change: We saw the marketplace for children's apparel has become significantly more promotional in response to weak consumer demand as the effects of inflation continued to affect families with young children.

Speaker Change: In both the third and fourth quarters, we saw an increase in the unit velocity of these items.

Speaker Change: And building inventory positions across the industry.

About $20 million of the overall second half investment in pricing related to these key item basket charters.

Speaker Change: As a result, we felt that some portion of our product assortments were not priced competitively if they needed debates given where consumers were seeing in the marketplace on approximately 20% of our assortment products, which are the most comparable to our consumers would find at other retailers, we lowered prices by one to $2.

Speaker Change: Overall, we've seen good stabilization of unit volume in U S. Retail units were up were down about 6% in the first half and were up 2% in the second half and up 4% in the fourth quarter.

Speaker Change: We also made an investment in brand marketing to improve new customer acquisition and retention.

Speaker Change: In both the third and fourth quarters, we saw an increase in the unit velocity of these items.

Speaker Change: We saw an improvement in both customer acquisition and retention rate improvement in these metrics is important because we believe they are key drivers of future comparable sales.

Speaker Change: About $20 million of the overall second half investment in pricing related to these key item baskets charters.

Speaker Change: Our fourth quarter retail comps represented a continued improvement from what we posted in the third quarter and a meaningful improvement over the 9% decline in the first half.

Speaker Change: Our retail and marketing teams also successfully developed compelling promotional events during the quarter, especially during the key black Friday selling period.

Speaker Change: We also made an investment in brand marketing to improve new customer acquisition and retention.

Speaker Change: We saw an improvement in both customer acquisition and retention rates improvement in these metrics is important because we believe they are key drivers of future comparable sales.

Speaker Change: Which we achieved a positive 5% comp.

Speaker Change: Part of the second half pricing investment was made in support of these key market share events.

Speaker Change: Our fourth quarter retail comps represented a continued improvement from what we posted in the third quarter and a meaningful improvement over the 9% decline in the first half.

Speaker Change: In the first half of 2025, we will have some residual impact of carrying forward the lower prices from the second half of last year pricing in retail is expected to then be more comparable in the second half.

Speaker Change: Our retail and marketing teams also successfully developed compelling promotional events during the quarter, especially during the key black Friday selling period.

Speaker Change: At this point, we believe we've taken the action we need to on pricing continuing to lower prices is not envisioned to be a component of our longer term strategy. Obviously, we will keep an eye on the competitive environment in this regard.

Speaker Change: Which we achieved a positive 5% comp.

Speaker Change: Part of the second half pricing investment was made in support of these key market share events.

Speaker Change: I am encouraged by the impact of these pricing and marketing investments have had on attracting consumers back to our retail business. Our customer accounts were up in Q4 and the three engagement is critical for our long term growth, but these gains have come at a significant impact to our profitability, while we plan to maintain competitive pricing and utilized targeted promotions to drive consumer engagement.

Speaker Change: In the first half of 2025, we will have some residual impact of carrying forward. These lower prices from the second half of last year pricing in retail is expected to then be more comparable in the second half.

Speaker Change: At this point, we believe we've taken the action we need to on pricing continuing to lower prices is not envisioned to be a component of our longer term strategy. Obviously, we'll keep an eye on the competitive environment in this regard.

Speaker Change: Our primary focus is on enhancing our product assortments and improving our marketing initiatives as well as other strategies to grow market share and improve profitability.

I'm encouraged by the impact of these pricing and marketing investments have had on attracting consumers back to our retail business our customer counts were up in Q4 and the three engagement is critical for our long term growth, but these gains have come at a significant impact to our profitability, while we plan to maintain competitive pricing and utilize targeted promotions to drive consumer engagement.

Speaker Change: On pricing in recent years, we've made progress in adding greater sophistication to our approach, including the use of technology.

Speaker Change: I see a significant forward opportunity to use price more strategically, especially when considering the diversity of our product assortment brand portfolio and the geographic breadth of our store portfolio.

Speaker Change: Our primary focus is on enhancing our product assortments and improving our marketing initiatives as well as other strategies to grow market share and improved profitability.

Speaker Change: Fortunately, we have a creative and innovative team, which is leaning into multiple levers other than just price to drive the business some of which we've begun to see some good progress. These include our merchandising and product presentation initiatives in store and meaningful enhancements to our online and mobile app experiences.

Speaker Change: On pricing in recent years, we've made progress in adding greater sophistication to our approach, including the use of technology.

Speaker Change: On page 10, we summarize the fourth quarter performance in our wholesale and international businesses.

Speaker Change: U S wholesale had a strong quarter as planned with year over year sales growth of 7%.

Speaker Change: Fortunately, we have a creative and innovative team, which is leaning into multiple levers other than just price to drive the business some of which we began to see some good progress. These include our merchandising and product presentation initiatives in store and meaningful enhancements to our online and mobile app experiences.

Speaker Change: Approximately $8 million of sales in the quarter represented a timing benefit that certain product launches, which occurred in the third quarter last year moved into fourth quarter. This year.

We had strong growth in sales to our exclusive brand customers catching up very strong full year performance in this part of our business as I said earlier exclusive brand sales reached a record level in 2024.

Speaker Change: On page 10, we summarized our fourth quarter performance in our wholesale and international businesses.

Speaker Change: U S wholesale had a strong quarter as planned with year over year sales growth of 7%.

Speaker Change: Sales were lower to department store customers, continuing the trend we've seen there.

Speaker Change: We were in a low excess inventory position for much of the year, which led to lower sales to the off price channel, which were down over 50% in 2024.

Speaker Change: Wholesale continues to be a very profitable part of our business with an operating margin over 20% in the fourth quarter.

Speaker Change: We had strong growth in sales to our exclusive brand customers capping a very strong full year performance in this part of our business as I said earlier, our exclusive brand sales reached a record level in 2024.

Speaker Change: Our international businesses delivered good performance in the fourth quarter, our retail businesses in Canada, and Mexico had strong performance.

Speaker Change: Sales were at lower to departments of our customers continuing the trend we've seen there.

Speaker Change: Canada posted a 6% comp and Mexico delivered an 8% increase in comps.

Speaker Change: We weren't allow excess inventory positioned for much of the year, which led to lower sales to the off price channel, which were down over 50% in 2024.

Speaker Change: The stronger U S. Dollar has negatively affected our international segment results offsetting growth in local currency in the quarter we.

Speaker Change: Wholesale continues to be a very profitable part of our business with an operating margin over 20% in the fourth quarter.

Speaker Change: We believe the stronger U S dollar will be a headwind in 2025 as well.

Speaker Change: We summarize some highlights of our full year performance on page 11.

Speaker Change: Our international businesses delivered good performance in the fourth quarter.

Speaker Change: Our full year net sales were $2 8 billion down 3%.

Speaker Change: Retail businesses in Canada, and Mexico had strong performance.

Speaker Change: Canada posted a 6% comp and Mexico delivered an 8% increase in comps.

Speaker Change: The majority of the decline was related to lower sales in our U S retail segment.

Speaker Change: Full year operating income was $287 million.

Speaker Change: The stronger U S. Dollar has negatively affected our international segment results offsetting growth in local currency in the quarter.

Speaker Change: Down 13% as a result of lower sales gross margin for the year was up 60 basis points and spending was well controlled increasing 1% over 2023, while still supporting investments in our retail businesses and in marketing.

Speaker Change: We believe the stronger U S dollar will be a headwind in 2025 as well.

Speaker Change: We summarize some highlights of our full year performance on page 11.

Speaker Change: Full year, EPS was $5 81 down 6% versus last year.

Speaker Change: Our full year net sales were $2 8 billion down 3%.

Speaker Change: The majority of the decline was related to lower sales in our U S retail segment.

Speaker Change: We've summarized some balance sheet and cash flow highlights on page 12, our balance sheet is in good shape.

Speaker Change: Full year operating income was $287 million.

Speaker Change: Year end inventories were down 6% versus last year and the quality of inventory entering the new year is high with less carryover fall winter product than a year ago.

Speaker Change: Down 13% as a result of lower sales gross margin for the year was up 60 basis points and spending with well controlled increasing 1% over 2023, while still supporting investments in our retail businesses and in marketing.

Speaker Change: We have substantial liquidity, both cash on hand, and availability under our credit facility and it was a good year for cash generation, we generated nearly $300 million in operating cash flow, which supported continued investment in the business and the return of meaningful capital to our shareholders.

Speaker Change: Full year, EPS was $5 81 down 6% versus last year.

Speaker Change: We've summarized some balance sheet and cash flow highlights on page 12, our balance sheet is in good shape.

Speaker Change: Kendra will now take us through an update on our product and marketing initiatives.

Speaker Change: Year end inventories were down 6% versus last year and the quality of inventory entering the new year is high with less carryover fall winter product is that a year ago.

Speaker Change: Thank you Richard.

On page 14.

Speaker Change: Here at Carter's our customer is at the heart of everything we do and we know this next generation consumer is increasingly more style focused diverse and digitally meetings she demands both value and convenience.

Speaker Change: We have substantial liquidity above cash on hand, and availability under our credit facility and it was a good year for cash generation, we generated nearly $300 million in operating cash flow, which supported continued investment in the business and the return of meaningful capital to our shareholders.

Speaker Change: That in mind, we continue to lean into our customer centric strategy to enable our return to growth. These efforts are organized around our three areas of focus noted on page 15 product delivering incredible style and value marketing acquiring new customers and deepening our relationship with existing consumers.

Speaker Change: Kendra will now take us through an update on our product and marketing initiatives.

Kendra: Thank you Richard.

Speaker Change: Starting on page 14.

Speaker Change: Eric Carter's our customer is at the heart of everything we do and we know this next generation consumer is increasingly more style focused diverse and digitally natives she demands both value and convenience.

Speaker Change: And leveraging our unparalleled brand reach with more than 20000 points of distribution worldwide.

Speaker Change: Our customers rely on us for our expertise in the baby and toddler segment, which is our greatest points of strength and differentiation.

Speaker Change: With that in mind, we continue to lean into our customer centric strategies to enable a return to growth. These efforts are organized around our three areas of focus noted on page 15 product delivering incredible style and value marketing acquiring new customers and deepening our relationship with existing consumers.

Speaker Change: We are America's number one most trusted brands in young children's apparel and to reiterate metric in 2024, we grew our U S market share in baby and toddler apparel helped by a record year with our exclusive brands and Q4 retail growth mbd.

Speaker Change: And leveraging our unparalleled brand reach with more than 20000 points of distribution worldwide.

Speaker Change: Going deeper into our 2025 product strategies.

Speaker Change: Our customers rely on us for our expertise in the baby and toddler segment, which is our greatest point of strength and differentiation.

Speaker Change: We are on a journey to modernize our Assortments, we will drive this by delivering growth through relevant style expanding our house of brands.

We are America's number one most trusted brands in young children's apparel and to reiterate metric in 2024, we grew our U S market share in baby and toddler apparel helped by a record year with our exclusive brands and Q4 retail growth in baby.

Speaker Change: And increasing depth and breadth and strategic segments and categories.

Speaker Change: All of these product strategies will be supported by new capabilities to improve operational efficiency and productivity.

Speaker Change: First and delivering relevant style.

Speaker Change: Going deeper into our 2025 product strategies.

Speaker Change: We know that trends are moving faster than ever from Paris to the playground highlighted on page 16 in our Carter's and Oshkosh brands newness and relevant style are working as we move through the year, we are increasing our investment in trend forward Assortments and also an additional product flows to help drive frequency and increase customer spend and conversion.

Speaker Change: We are on a journey to modernize our Assortments, we will drive this by delivering growth through relevant style expanding our house of brands.

Speaker Change: And increasing depth and breadth in strategic segments and categories.

Speaker Change: All of these product strategies will be supported by new capabilities to improve operational efficiency and productivity.

Speaker Change: Our spring collections feature on trend styles, with new fabrications and trend details.

Speaker Change: First and delivering relevant style.

Speaker Change: Such as our easy to wear linen like fabric and <unk>.

Speaker Change: Many of these beautiful crafted collections are exclusively offered through our retail channels.

Speaker Change: Next moving to page 17, our house of brands delivers customers a range of stylish high quality and brand centric product assortment, while also achieving market leading value and.

Speaker Change: Our spring collections feature on trend styles, with new fabrications and trend details.

Speaker Change: Importantly, our multi brand customers spend three five times more per year than our single brand customer in 2025, we expect our new brands and line extensions to grow nearly 40% in retail sales versus 2024.

Speaker Change: Such as our easy to wear linen like fabric and crochet sweater knits. Many of these beautiful crafted collections are exclusively offered through our retail channels.

Speaker Change: Next moving to page 17, our house of brands delivers customers a range of stylish high quality and brand centric product assortments, while also achieving market leading value.

Speaker Change: Included in that growth, our new purely soft collection shown on page 18 is offered across channels and is expected to be one of our biggest contributors of sales growth this year.

Speaker Change: <unk> loved the ultra soft super stretchy premium fabric as much as they lap purely soft exceptional value.

Speaker Change: Our new limited edition print have been well received and additional retail exclusive drops will flow throughout the year.

Speaker Change: And turning to page 19, little planet are quickly growing and most sustainable brand achieved double digit sales comps in 2020 for this growth was realized through increased velocity broader distribution and additional assortment range, including size extensions into toddler and little Kid the broader <unk>.

Speaker Change: Customers love, the ultra soft Super stretchy premium fabric as much as they lap purely soft exceptional value.

Speaker Change: A new limited edition print have been well received and additional retail exclusive drops will flow throughout the year.

Speaker Change: <unk> range generated strong digital demand in 2024 and is expected to rollout to stores this year.

Speaker Change: We have a history of successfully building and launching brands in our portfolio and early this fall we plan to continue our house brand expansion with another launched through our digital channels in select stores.

Speaker Change: This elevated brand is being developed with the curious toddler in mind, our expectation is that the stylus assortment will provide us an avenue to reach new consumer segment as well as increase the lifetime value of our existing customers.

Speaker Change: <unk> generated strong digital demand in 2024 and is expected to rollout to stores this year.

Speaker Change: We have a history of successfully building and launching brands in our portfolio and early this fall we plan to continue our house of brands expansion with another launched through our digital channels in select stores.

Speaker Change: Moving to page 20.

Speaker Change: Our kids segment has underperformed our total business in part due to a reduction in our assortment offering.

Speaker Change: We've recognized the need to increase our inventory position and its four to 14 size range and are making investments in the back half of 'twenty five with additional depth and breadth in categories like fashion denim girl top active and licensed properties.

Speaker Change: <unk> segment remains an important part of our business and represents the largest segment of the market. We compete in and helps us to better meet the needs of our multichannel customer.

Speaker Change: Moving to page 20.

Speaker Change: Our kids segment has underperformed our total business.

Speaker Change: In part due to a reduction in our assortment offering.

Speaker Change: To help us execute all of our product strategy, we have made and will continue to make meaningful investments in our enabling capabilities.

Speaker Change: One important capability is our new allocation tool.

Speaker Change: This AI enabled technology will help us get the right product assortment into the right stores at the right time.

Speaker Change: The kids segment remains an important part of our business. It represents the largest segment of the market we compete in and helps us to better meet the needs of our multi child's customer.

Speaker Change: We are also leveraging our dynamic demand forecast tool to improve buying an in season sell through management.

Speaker Change: We will begin to realize these benefits in the second half of 2025.

Speaker Change: To help us execute all of our product strategies.

Speaker Change: We have made and will continue to make meaningful investments in our enabling capabilities.

Speaker Change: Additionally, we are transforming our concept to consumer process with the help of outside market leading expert.

Speaker Change: One important capability is our new allocation tool.

This is a comprehensive end to end evaluation that begins with consumer insights runs through the entire product development process and ends with the customer purchase.

Speaker Change: This AI enabled technology will help us get the right product assortment into the right stores at the right time.

Speaker Change: We are also leveraging our dynamic demand forecast tool to improve buying an in season sell through management we.

Speaker Change: Through this process transformation, we are enabling core capabilities across functions with intention to increased productivity improved organizational efficiency and accelerate our go to market timeline to better respond to customer needs.

Speaker Change: We will begin to realize these benefits in the second half of 2025.

Speaker Change: Additionally, we are transforming our concept to consumer process with the help of outside market leading experts.

Speaker Change: Next moving onto our marketing strategies on page 21.

Speaker Change: This is a comprehensive end to end evaluation that begins with consumer insights runs through the entire product development process.

Speaker Change: We are constantly evaluating our media mix and personalization efforts to most effectively and efficiently talk to new and existing customers are.

Speaker Change: And ends with the customer purchase.

Speaker Change: Our AI enabled personalization technology is helping to drive an increase in engagement and retention our annual retention rate is up versus last year. In 2025, we plan to further develop and increase our personalization capabilities across all channels with an emphasis on our mobile channels, where we saw a significant lift in subscribers year over year.

Speaker Change: Next moving onto our marketing strategies on page 21.

Speaker Change: We are constantly evaluating our media mix and personalization efforts to most effectively and efficiently talk to new and existing customers are.

Speaker Change: On page 22.

Speaker Change: Through market research, we know that more than ever before new moms rely on their friends and social media influencers to inform their purchases.

Speaker Change: In response, we continue to shift our marketing investment into social media channels and are reaching entirely new groups of moms through our influence our partnership.

Speaker Change: This was recently brought to life with our innovative Carter's playground experience at New York Fashion week. This playful event, driven leading fashion Influencers and media outlet, who stopped by with their young toxin toe to experience our latest runway inspired trends.

Speaker Change: On page 22.

Speaker Change: Through market research, we know that more than ever before new moms rely on their friends and social media influencers to inform their purchases.

Captured there are many knees and our latest styles to share with their fans generating millions of impressions in less than 24 hours.

Speaker Change: In response, we continue to shift our marketing investment into social media channels and are reaching entirely new groups of moms through our influencer partnerships.

Speaker Change: Turning to page 23, today's style oriented consumer expects the shopping experience as inspiring as the product she is buying.

Speaker Change: This was recently brought to life with our innovative Carter's playground experience at New York fashion week.

Speaker Change: Playful event drew and leading fashion Influencers and media outlet, who stopped by with our young tutsan tow to experience our latest runway inspired trends.

Speaker Change: Creating market leading brand experiences across our channels is a critical component of our marketing strategy.

Speaker Change: As part of this effort, we launched numerous digital experience enhancements in Q4, including upgraded navigation improvements to our search engine optimization, new mobile app discover and deals destinations and a new gifting experience.

Speaker Change: Captured there are many knees and our latest style to share with their fans generating millions of impressions in less than 24 hours.

Speaker Change: Turning to page 23, today's style oriented consumer expects the shopping experience as inspiring as the product she is buying.

Speaker Change: We also continue to innovate and test store experiences and formats to anticipate the evolving needs and expectations of the next generation consumer.

Speaker Change: Creating market leading brand experiences across our channels is a critical component of our marketing strategy.

Speaker Change: Finally, turning to page 24.

Speaker Change: Our product and marketing strategies extend into our wholesale channel to provide a consistent and inspire brand experience.

Speaker Change: We have strong wholesale partners, who help us meet the needs of our customers wherever they are shopping including at target Walmart and Amazon.

Speaker Change: We also continue to innovate and test store experiences and formats to anticipate the evolving needs and expectations of the next generation consumer.

Speaker Change: We're once again collectively our 2020 for record sales were driven by both assortment and inventory expansion.

Richard Thank: And now I'll turn it back to Richard to cover our business assessment and financial outlook.

Speaker Change: Finally, turning to page 24.

Speaker Change: Our product and marketing strategies extend into our wholesale channel to provide a consistent and inspire brand experience we.

Richard Thank: Thank you Kendra turning to page 26.

Richard Thank: For the past several months, we have been engaged in a comprehensive review of our business. We've had some very good outside industry experts, who have helped us in this effort.

Speaker Change: We have strong wholesale partners, who help us meet the needs of our customers wherever they are shopping including at target Walmart and Amazon.

Richard Thank: Let's review validated a long list of positive attributes of Carters, a number of which are summarized on this page.

Speaker Change: We're once again collectively our 2020 for record sales were driven by both assortment and inventory expansion.

Richard Thank: A long successful history as the leader in the young children's apparel market.

Richard Weston: And now I'll turn it back to Richard to cover our business assessment and financial outlook.

Richard Thank: However, as summarized on the next page and as we've noted previously our performance in the past few years since emerging from the pandemic has been more challenging, particularly in our U S retail business.

Richard Weston: Thank you Kendra turning to page 26.

Richard Weston: For the past several months, we've been engaged in a comprehensive review of our business. We've had some very good outside industry experts, who have helped us in this effort.

Richard Thank: There've been a number of external factors, which have affected our business first the overall children's apparel market has not been growing significantly.

Richard Weston: Let's review validated a long list of positive attributes of Carter's number of which are summarized on this page.

Richard Thank: On average since 2019, the young children's apparel market has grown less than 1%.

Richard Weston: We've had a long successful history as the leader in the young children's apparel market power.

Richard Thank: They are also certainly demographic factors that work such as the declining birth rate among Americans.

Richard Weston: However, as summarized on the next page and as we've noted previously our performance in the past few years since emerging from the pandemic has been more challenging, particularly in our U S retail business.

Richard Thank: Shift of consumer shopping behavior in favor of mass channel retailers and the sudden onset of inflation across the economy, which has had a significant impact on our target consumers families with young children.

Richard Weston: There've been a number of external factors, which have affected our business first the overall children's apparel market has not been growing significantly.

Richard Thank: We've also seen the rise of other brands in the market, including the active and athletic oriented brands and the emergence of numerous small digitally native brands.

Richard Weston: On average since 2019, the young children's apparel market has grown less than 1%.

Richard Weston: They are also certainly demographic factors that work such as a declining birth rate among Americans.

Richard Thank: Within our wholesale business, we've seen strong demand for the exclusive brands, which we've developed for Walmart target and Amazon.

Richard Weston: Shift of consumer shopping behavior in favor of mass channel retailers and the sudden onset of inflation across the economy, which has had a significant impact on our target consumers families with young children.

Richard Thank: But just one new child of mine and simple joys brands now account for over 50% of wholesale segment sales.

Richard Thank: This strong exclusive brands demand has been offset though by lower demand from other customers, including some which exited the market entirely disagree.

Richard Weston: We've also seen the rise of other brands in the market, including the active and athletic oriented brands and the emergence of numerous small digitally native brands.

Richard Thank: This group of retailers includes the department stores, which have historically been very good customers for the flagship Carter's brand at good margins.

Richard Weston: Within our wholesale business, we've seen strong demand for the exclusive brands, which we've developed for Walmart target and Amazon.

Richard Thank: On the next page, we have summarized some thoughts on our ambitions and objectives for the business going forward.

Richard Weston: But just one year child of mine and simple joys brands now account for over 50% of wholesale segment sales.

Richard Thank: In a market, which isn't growing significantly it's imperative that we grow through capturing more of the market.

Richard Weston: This strong exclusive brands demand has been offset though by lower demand from other customers, including some which exited the market entirely this.

Richard Thank: We believe the growth of the company will be driven by our direct to consumer business.

Richard Thank: As mentioned, we have a strong historical position in the market our brands are well known and trusted by consumers.

Richard Weston: This group of retailers includes the department stores, which have historically been very good customers for the flagship Carter's brand at good margins.

Carter: Our research shows there is an opportunity to appeal to a broader group of consumers Carter.

Richard Weston: On the next page, we summarize some thoughts on our ambitions and objectives for the business going forward.

Speaker Change: Carter's family of brands in Oshkosh, B'gosh are rich and attributes, which are very important to consumers quality function durability and of course value.

Richard Weston: In a market, which isn't growing significantly it's imperative that we grow through capturing more of the market.

Speaker Change: Our opportunity is to strengthen our appeal with Gen Z consumers increasingly the part of the population, having and raising children.

Richard Weston: We believe the growth of the company will be driven by our direct to consumer business.

Richard Weston: As mentioned, we have a strong historical position in the market our brands are well known and trusted by consumers.

Speaker Change: Additionally, we believe there is a meaningful opportunity to serve consumers, who are driven more by style and less by promotions and price and.

Richard Weston: Our research says there is an opportunity to appeal to a broader group of consumers Carter.

Speaker Change: And we see an opportunity to connect more fully with multicultural consumers.

Richard Weston: Carter's family of brands in Oshkosh, B'gosh are rich and attributes, which are very important to consumers quality function durability and of course value.

Speaker Change: As Ken referenced we're pursuing a house of brand strategy over time, we will develop this strategy further as a way of reaching more of the marketplace, including some consumer segments, which we do not serve today.

Richard Weston: Our opportunity is to strengthen our appeal with Gen Z consumers increasingly the part of the population, having and raising children.

Speaker Change: Little Planet is a very good example of this approach in a relatively short period of time through.

Richard Weston: Additionally, we believe there is a meaningful opportunity to serve consumers, who are driven more by style and less by promotions and price and.

Speaker Change: Through the creativity of our internal design and merchandising teams. We've created what we believe to be the leading sustainability oriented brand in the market, which provides a new and distinct growth path for Carter's.

Richard Weston: And we see an opportunity to connect more fully with multicultural consumers.

Speaker Change: We have a number of product initiatives focused on improving the style and value of our apparel offerings. We have a history of successful brand building at Carter's and we expect to do more of this in the future.

Speaker Change: Little Planet is a very good example of this approach in a relatively short period of time through.

Speaker Change: In retail we are increasingly focused on improving the productivity of our existing store fleet. We stepped up the pace of store Remodels. This past year and have seen a nice lift in sales from these investments.

Speaker Change: While we believe new stores continued to perform well and generate good returns. We think we will be managing a relatively constant number of stores of our current model over the next several years with closures offsetting new and relocated store locations.

Speaker Change: And retail we are increasingly focused on improving the productivity of our existing store fleet. We stepped up the pace of store Remodels. This past year and have seen a nice lift in sales from these investments.

Speaker Change: And we see significant potential in making improvements to our operating model.

Speaker Change: As Ken referenced these include improving our product and brand development processes to be faster nimbler and to respond to changing consumer preferences more rapidly than we do currently.

Speaker Change: We have also begun investing behind this foundational operating model work, which I believe has significant potential to drive our business going forward.

Speaker Change: Wholesale will remain an important part of our strategy our broad distribution through our multichannel business model, which includes our wholesale business is a key advantage for us.

Speaker Change: And we see significant potential in making improvements to our operating model.

Kinder: As Kinder referenced these include improving our product and brand development processes to be faster nimbler and respond to changing consumer preferences more rapidly than we do currently.

Speaker Change: We expect the wholesale customer landscape will continue to evolve our priority and wholesale has always been to develop strong product offerings and partnerships with those retailers winning with consumers.

Kinder: We have also begun investing behind this foundational operating model work, which I believe has significant potential to drive our business going forward.

Speaker Change: Of course, we will continue to pursue opportunities to improve productivity throughout the business and managed spending prudently as we've always done.

Kinder: Wholesale will remain an important part of our strategy our broad distribution through our multichannel business model, which includes our wholesale business is a key advantage for us.

Speaker Change: In terms of our financial outlook for 2025 on page 30.

We're expecting sales in the range of $2.780 billion to $2 billion $855 million.

Kinder: We expect the wholesale customer landscape will continue to evolve our priority and wholesale has always been to develop strong product offerings and partnerships with those retailers winning with consumers.

Speaker Change: Comparable to 2024 net sales at the high end and down about 2% at the lower end of the range.

Speaker Change: Fiscal two fiscal year 2025 will include a 50 <unk> week, which we've estimated to represent net sales of approximately $30 million.

Kinder: Of course, we will continue to pursue opportunities to improve productivity throughout the business and managed spending prudently as we've always done.

Speaker Change: We have provided some perspective unexpected sales by segment as well in U S. Retail, we're expecting sales to be comparable to down mid single digits with comp sales down.

Kinder: In terms of our financial outlook for 2025 on page 30.

Kinder: We're expecting sales in the range of $2 $780 million to $2 $855 million.

Speaker Change: Low single digit to mid single digit we've planned for an improving comparable store sales trend as we move through the year with the second half expected to benefit from an overall improved inventory position and additional progress with our product and promotional strategies.

Kinder: Comparable to 2024 net sales at the high end and down about 2% at the lower end of the range.

Kinder: Fiscal two fiscal year 2025 will include a 50 <unk> week, which we've estimated to represent net sales of approximately $30 million.

Speaker Change: Our U R. U S. Wholesale sales are expected to be in the range of up low single digits to down low single digits and we're planning for full year growth of exclusive brands again in 2025.

Kinder: We have provided.

Kinder: Respective unexpected sales by segment as well in U S. Retail, we're expecting sales to be comparable to down mid single digits with comp sales down.

Speaker Change: And international sales of our planned comparable to up low single digits as we've discussed the stronger U S dollar versus the peso and Canadian dollar.

Kinder: Low single digit to mid single digit we've planned for an improving comparable store sales trend as we move through the year with the second half expected to benefit from an overall improved inventory position and additional progress with our product and promotional strategies.

Speaker Change: Will weigh on the profitability of our business is outside the United States.

Speaker Change: We're planning 2025 operating income in the range of $180 million to $210 million compared to $287 million in 2024.

Kinder: Our U S. Wholesale sales are expected to be in the range of up low single digits to down low single digits and we're planning for full year growth of the exclusive brands again in 2025.

Speaker Change: We have a good handle on the factors, which are contributing to our outlook for lower operating profit, but clearly we're not satisfied with the performance of the business.

Kinder: And international sales are planned comparable to up low single digits as we've discussed the stronger U S dollar versus the peso and Canadian dollar.

Speaker Change: And there are several factors driving our planned operating income in 2025, we expect the gross margin will be down approximately 150 to 200 basis points in 2025.

Kinder: Will weigh on the profitability of our business is outside the United States.

Kinder: We're planning 2025 operating income in the range of a $180 million to $210 million compared to $287 million in 2024.

Speaker Change: Approximately $20 million relates to targeted residual price reductions in retail in the first half as we've discussed.

Speaker Change: Another $10 million relates to changes in customer mix within wholesale.

Kinder: We have a good handle on the factors, which are contributing to our outlook for lower operating profit, but clearly we're not satisfied with the performance of the business.

Speaker Change: About $10 million relates to FX as a result of the stronger U S dollar.

Kinder: And there are several factors driving our planned operating income in 2025, we expect the gross margin will be down approximately 150 to 200 basis points in 2025 approximately.

Speaker Change: And then higher product costs, which includes select investments in additional make higher freight rates and tariffs are estimated to represent collectively about $10 million and higher costs.

Kinder: Approximately $20 million relates to targeted residual price reductions in retail in the first half as we've discussed.

Speaker Change: Where possible for items, such as tariffs and FX, our plan will be to offset some portion with pricing and other actions.

Speaker Change: Overall SG&A for 2025 is planned up very modestly up low single digits.

Kinder: Another $10 million relates to changes in customer mix within wholesale.

Kinder: About $10 million relates to FX as a result of the stronger U S dollar.

Speaker Change: Within SG&A, there is a meaningful year over year increase of approximately $30 million to $35 million, which relates to restoring our variable compensation programs.

Kinder: And then higher product costs, which includes select investments in additional make higher freight rates and tariffs are estimated to represent collectively about $10 million and higher costs.

Speaker Change: Which are tied to performance to a more normalized target level.

Speaker Change: Given our performance in 2024 of these provisions were far less than they have typically been we believe this is an important investment in engaging and retaining our team, but it does disproportionately impact the P&L in 2025.

Kinder: Where possible for items, such as tariffs and FX, our plan will be to offset some portion with pricing and other actions.

Kinder: Overall SG&A for 2025 is planned up very modestly up low single digits.

Speaker Change: This planned refunding of variable compensation represents about three points of SG&A growth year over year.

Kinder: Within SG&A, there is a meaningful year over year increase of approximately $30 million to $35 million, which relates to restoring our variable compensation programs.

Speaker Change: Below the line, we're planning that our effective tax rate will be higher than in 2024 at approximately 23, 5% is typical there are number of moving pieces contributing to this higher rates, including FX higher international tax rates and several compensation related items.

Kinder: Which are tied to performance to a more normalized target level.

Kinder: Given our performance in 2024 of these provisions were far less than they have typically been we believe this is an important investment in engaging and retaining our team, but it does disproportionately impact the P&L in 2025.

Speaker Change: We're planning adjusted earnings per share in the range of $3 20 to $3 80.

Kinder: This planned refunding of variable compensation represents about three points of SG&A growth year over year.

Speaker Change: We're expecting to generate around $200 million of operating cash flow in 2025, and our current forecast for Capex is $65 million up about $10 million over last year.

Kinder: Below the line, we're planning that our effective tax rate will be higher than in 2024 at approximately 23, 5% is typical there are number of moving pieces contributing to this higher rate, including FX higher international tax rates and several compensation related items.

Speaker Change: Half of the increase in Capex relates to the replacement of systems and equipment in our distribution centers, which are intended to improve capabilities and efficiencies going forward.

Kinder: We're planning adjusted earnings per share in the range of $3 20 to $3 80.

Speaker Change: Balance of the increase relates to technology improvements largely in retail and enterprise systems and for new stores in Mexico.

Kinder: We're expecting to generate around $200 million of operating cash flow in 2025, and our current forecast for Capex is $65 million up about $10 million over last year.

Speaker Change: Our expectations for the first quarter are summarized on page 32 <unk>.

Speaker Change: Sales are expected to be down mid single digits versus first quarter last year.

Half of the increase in Capex relates to the replacement of systems and equipment in our distribution centers, which are intended to improve capabilities and efficiencies going forward.

Speaker Change: In U S retail comparable sales our plans down mid to high single digits versus 2024 in part due to a later Easter holiday this year.

We had a good January and retail with sales above plan in the last week or so we've seen some winter weather disruption across the country.

Kinder: <unk> of the increase relates to technology improvements largely in retail and enterprise systems and for new stores in Mexico.

Speaker Change: Quarter to date quarter to date comparable sales in U S. Retail are currently running down about 7%.

Kinder: Our expectations for the first quarter are summarized on page 32.

Kinder: Sales are expected to be down mid single digits versus first quarter last year.

Speaker Change: With e-commerce sales above plan in stores a bit behind.

Speaker Change: March is particularly significant to the first quarter, representing roughly 50% of planned first quarter sales.

Kinder: In U S retail comparable sales are planned down mid to high single digits versus 2024 in part due to a later Easter holiday this year.

Speaker Change: U S. Wholesale is planned down in the high single digits due to lower demand with the department stores and changes in the timing of shipments year over year.

Kinder: We had a good January and retail with sales above plan in the last week or so we've seen some winter weather disruption across the country.

Speaker Change: International sales are down in the mid single digits in part due to the stronger U S dollar.

Kinder: Quarter to date quarter to date comparable sales in U S. Retail are currently running down about 7%.

Speaker Change: Unprofitability, we're planning operating income in the range of 30% to $35 million and adjusted EPS in the range of 45 to 55.

Kinder: E Commerce sales above plan in stores a bit behind.

Kinder: March is particularly significant to the first quarter, representing roughly 50% of planned first quarter sales.

Speaker Change: Similar to our full year outlook, there are a handful of items, which account for the majority of the planned decline in operating income, including the residual targeted price investments in retail.

Kinder: U S. Wholesale is planned down in the high single digits due to lower demand with the department stores and changes in the timing of shipments year over year.

Speaker Change: Lower sales volume and higher inbound freight rates.

Kinder: International sales are down in the mid single digits in part due to the stronger U S dollar.

Speaker Change: Our Q1 effective tax rate is expected to be particularly elevated in the high 20% range here again, a number of factors are at play, but primarily it's due to a negative impact related to stock based compensation.

Kinder: On profitability, we are planning operating income in the range of 30% to $35 million and adjusted EPS in the range of $45 to 55.

Speaker Change: Key risks that we're monitoring include the level of promotional intensity in the marketplace and the outlook for improvement in inflation and consumer sentiment and the impact of these factors have on consumer demand. It's clear from recent headlines that consumers continue to be very concerned about inflation and tariff and the federal reserve is less bullish on further interest rate reductions right now.

Kinder: Similar to our full year outlook, there are a handful of items, which account for the majority of the planned decline in operating income, including the residual targeted price investments in retail.

Kinder: Lower sales volume and higher inbound freight rates.

Kinder: Our Q1 effective tax rate is expected to be particularly elevated in the high 20% range here again, a number of factors are at play, but primarily it's due to a negative impact related to stock based compensation.

Speaker Change: Other risks include the possible implementation of newer higher tariffs further strengthening of the U S dollar and possible higher transportation costs due to industry capacity constraints and continued geopolitical unrest.

Kinder: Key risks that we're monitoring include the level of promotional intensity in the marketplace and the outlet for improvement in inflation and consumer sentiment.

Speaker Change: To reiterate we're not satisfied with the performance of the business our potential is far greater we have considerable brand assets market position and overall resources and our team feels the appropriate urgency to deliver improved performance.

Kinder: And the impact of these factors have on consumer demand. It's clear from recent headlines that consumers continue to be very concerned about inflation and tariff and the federal reserve is less bullish on further interest rate reductions right now.

Kinder: The risks include the possible implementation of newer higher tariffs further strengthening of the us dollar and possible higher transportation costs due to industry capacity constraints and continued geopolitical unrest.

Speaker Change: Like to thank our employees across the company for their dedication and tireless efforts. They continue to approach their work with determination and great passion for our brands and our mission of serving families with young children I'm grateful for their hard work and.

Kinder: To reiterate we're not satisfied with the performance of the business our potential is far greater we have considerable brand assets market position and overall resources and our team feels to be appropriate urgency to deliver improved performance.

Speaker Change: And with those remarks, we're ready to take your questions.

Speaker Change: Thank you.

Speaker Change: Can I ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Speaker Change: One moment, while we compile our Q&A roster.

Speaker Change: I'd like to thank our employees across the company for their dedication and tireless efforts. They continue to approach their work with determination and great passion for our brands and our mission of serving families with young children I'm grateful for their hard work.

Jim carrier: And our first question comes from the line of Jim carrier with.

Jim carrier: Good morning.

Kinder: And with those remarks, we're ready to take your questions.

Speaker Change: Your line is open. Please go ahead.

Thank you.

Jim carrier: Hi, Thanks for taking my question.

Kinder: To ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Speaker Change: Kendrick could you just talk about her.

Speaker Change: How dramatic the change in the inventory assortment will be as you modernize it.

Kinder: One moment, while we compile our Q&A roster.

Speaker Change: And then how do you kind of minimize the risk of maybe alienating.

Speaker Change: Different.

Speaker Change: For consumer.

Jim carrier: And our first question comes from the line of Jim carrier with.

Speaker Change: You bet. Thanks.

Speaker Change: Yeah, that's a great question I think.

Speaker Change: This increase in part your line is open. Please go ahead.

Speaker Change: There's a different answer depending on what segment, we're talking about but in baby in particular, we've been on this journey for a little bit of time and Youre seeing it in the results of our business. This is truly it's not a dramatic change in the baby and toddler segments, we're leaning more into our best categories of business.

Speaker Change: Hi, Thanks for taking my question.

Speaker Change: Kendra could you just talk about how dramatic the change in the inventory assortment will be as you modernize it.

Speaker Change: And then how do you kind of minimize the risk of maybe Haley.

Speaker Change: Collection based product that must have products categories, and then were being more intentional with our good buckets of product category. So your stock up essentials, both in baby and in toddler.

Speaker Change: Different that'd be core consumer I should do that.

Speaker Change: Yes, that's a great question I think.

Speaker Change: There's a different answer depending on which segment, we're talking about but in baby in particular, we've been on this journey for a little bit of time and Youre seeing it in the results of our business. This is truly it is not a dramatic change in the baby and toddler segments, we're leaning more into our best category of the business.

Speaker Change: <unk> is where we have the most opportunity to really push forward and that's where we have not.

Speaker Change: We've not made the changes yet so that's to come and I would say, it's a <unk>.

Speaker Change: <unk> 'twenty shift into more style forward categories versus something that we would say it's more legacy to our brand I don't think it will alienate any existing customers I think it will actually help us retain customers longer to compete more directly with the competition that is moving forward faster than us.

Speaker Change: Collection based products that must have products categories, and then were being more intentional with our good buckets of product category. So your stock up essentials, both in baby and toddler kit is where we have the most opportunity to really push forward and thats, where we have not.

Speaker Change: Great and then what your kind of previous.

Speaker Change: Previously you talked about promotional activity not really driving unit volumes over the last two and a half years.

We've not made the changes yet so that's to come and I would say it's a.

Speaker Change: 20 point shift into more style forward categories versus something that we would say it's more legacy to our brand I don't think it will alienate any existing customers I think it will actually help us retain customers longer to compete more directly with the competition that is moving forward faster than us.

Speaker Change: So kind of whats different in terms of the pricing actions you took in the back half of this year.

Speaker Change: We can.

Speaker Change: Good drawing better unit volumes versus you bought dynamic.

Speaker Change: Dynamic has been the last two plus years.

Speaker Change: Well I think what we saw in the marketplace with just the.

Speaker Change: Great and then Richard previously you talked about.

Speaker Change: Fairly dramatic pricing action that some of our peers and competitors in the industry were engaged in and so where we took action was on those elements of the assortment most comparable to what they were seeing and very easy to compare across our assortments, perhaps less differentiation between our branded product and the private label product and.

Speaker Change: <unk> activity, not really driving unit volumes over the last two and a half years.

Speaker Change: And so kind of whats different in terms of the pricing actions you took in the back half of this year.

Speaker Change: We did drive better unit volumes versus what.

I think it also converged with just a good holiday season, as well, particularly in the fourth quarter I think as I mentioned I think the industry had a good fourth quarter I think I think the consumer had some renewed optimism once once everything around the election settled down and.

Speaker Change: That dynamic has been the last two plus years.

Speaker Change: Well I think what we saw in the marketplace to assist.

Speaker Change: So fairly dramatic pricing action that some of our peers and competitors in the industry were engaged and so where we took action was on those elements of the assortment most comparable to what they were seeing and very easy to compare across our assortments, perhaps less differentiation between our branded product in the private label product and.

Speaker Change: Our team did a good job around putting the actual promotions together the messaging the items that were feed feature of these really are kind of the key items that everyone needs on a continuing basis I think the consumer responded well I think theres a bit of an art to putting these promotions together a lot has to do with how the message and the offer as communicated we are really focused on the key market share events around <unk>.

Speaker Change: I think it also converged with just a good holiday season, as well, particularly in the fourth quarter I think as I mentioned I think the industry had a good fourth quarter I think I think the consumer had some renewed optimism once once everything around the election settled down and I think our team did a good job around putting the actual promotions together the messaging the items that were feet. We're featuring these really are kind of the key items.

Speaker Change: <unk> day around Black Friday.

Speaker Change: Increasingly the consumer seems to wait for those promotions and I think we've put more of our dry powder and energy into those events and it resulted in a nice lift to unit velocity that we saw.

Speaker Change: Great. Thank you sure.

Speaker Change: But everyone needs on a continuing basis I think the consumer responded well I think theres a bit of an art to putting these promotions together a lot has to do with how the message and the offer as communicated we are really focused on the key market share events.

Speaker Change: Thank you and one moment as we move onto our next question.

Speaker Change: Our next question comes from the line of Ike.

Laura: Laura <unk> with Wells Fargo. Your line is open. Please go ahead.

Robert: Hey, this is Robert on behalf.

Speaker Change: Round labor day around Black Friday.

Speaker Change: Increasingly the consumer seems to wait for those promotions and I think we've put more of our dry powder in energy and to those events and it resulted in a nice lift to unit velocity that we saw.

Speaker Change: Quick question, maybe you could talk a little bit more about the challenges on the retail side.

Robert: And when you can expect.

Robert: Comp returned to growth.

Speaker Change: Great. Thank you Sir.

Robert: Hi, Robert Good morning, well I think our principal issue really is driving traffic to the retail business. I think we continue to believe that the experience for consumers in our stores and online as the best in the category, but over a multiyear period really since since emerging from the pandemic as we said in the remarks earlier that has.

Speaker Change: Thank you and one moment as we move on to our next question.

Our next question comes from the line of Ike.

Ike: <unk> with Wells Fargo. Your line is open. Please go ahead.

Robert: Robert on behalf.

Speaker Change: Quick question, maybe you could talk a little bit more about the challenges on the retail side and when you can expect.

Speaker Change: Our challenge and.

Speaker Change: I think thats a combination of things I think it is certainly the architecture of the product offerings themselves. So kendra went through some of the assortment changes that we're making we want to create compelling reasons for folks to come to our direct business clearly since.

Robert: Comp returned to growth.

Robert: Hi, Robert Good morning.

Speaker Change: I think our principal issue really is driving traffic to the retail business I think we continue to believe that the experience for consumers in our stores and online as the best in the category, but over a multi year period really since since emerging from the pandemic as we said in the remarks earlier that has been our challenge and I.

Speaker Change: Since the pandemic and even going into the pandemic I think the mass channel business models were inherently strong I think there's some elegance to the consumer to be able to do all of that one stop shopping in a single trip getting groceries, and housewares and consumables and apparel and one stop that's been a very powerful model. Fortunately, we've got our exclusive brands business that allows us to participate in that channel.

Speaker Change: I'll shift, but increasingly it's around improving the assortment and driving traffic back to our stores I think marketing is an important element of that we did step up marketing in the latter part of 2020 for some of that was brand marketing. Our intention is to build on that over time, we've kind of held that level of investment here in 2025, as we play on the <unk>.

Speaker Change: Since the pandemic and even going into the pandemic I think the mass channel business models were inherently strong I think there is some elegance to the consumer to be able to do all of that one stop shopping in a single trip getting groceries, and housewares and consumables and apparel and one stop that's been a very powerful model. Fortunately, we've got our exclusive brands business that allows us to participate in that channel.

Speaker Change: But I think there is an opportunity one of the one of the key findings coming out of the review that we've been conducting of the businesses that we do under index relative to what some of our peers are spending on brand marketing.

Speaker Change: I'll shift, but increasingly it's around improving the.

Speaker Change: <unk> and driving traffic back to our stores I think marketing is an important element of that we did step up marketing in the latter part of 2020 for some of that was brand marketing. Our intention is to build on that over time, we've kind of held that level of investment here in 2025, as we plan the business, but I think there is an opportunity one of the one of the key.

Speaker Change: I think we're going to let the assortment improvements kind of catch up a little bit with that work in store experiences that we're working on we'll have some of that work catch up a little bit and then my guess is that we'll lean a bit more into marketing overtime, but the fundamental issue in retail really is is traffic I've been really pleased with the conversion results that we see.

Speaker Change: Findings coming out of the review that we've been conducting of the businesses that we do under index relative to what some of our peers are spending on brand marketing.

Speaker Change: Those results are significantly.

Speaker Change: Significantly lifted in the fourth quarter in particular, so consumers once they come.

Speaker Change: Enjoy the experience they like the products that they find and they convert to purchases at a pretty high rate. So that would be my high level summary.

Speaker Change: I think we're going to let the assortment improvements kind of catch up a little bit with that work in store experiences that we're working on we'll have some of that work catch up a little bit and then it my guess is that we'll lean a bit more into marketing overtime, but the fundamental issue in retail really is as traffic I've been really pleased with the conversion results that we see.

Speaker Change: Thank you.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: Our next question is going to come from the line of Chris.

Speaker Change: Chris.

Speaker Change: With Bofa. Your line is open. Please go ahead.

Speaker Change: Those results.

Speaker Change: <unk> lifted in the fourth quarter in particular, so consumers once they come.

Speaker Change: Great. Thanks, guys. Good morning, So Richard can you elaborate on what is giving you the confidence that pricing actions will stabilize as you reach the back half of the year is there something youre seeing in terms of pricing pressures alleviating from your competition and then also what's the level of pricing decline that's embedded in your broader wholesale order book outlook.

Speaker Change: They enjoy the experience they like the products that they find and they converted to purchases at a pretty high rate. So that would be my high level summary.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you and one woman as we move on to our next question.

Speaker Change: Our next question is going to come from the line of.

Speaker Change: Chris.

Speaker Change: With Bofa. Your line is open. Please go ahead.

It's hard to draw a lot of conclusions I think from January and February business. It tends to be a clearance period for us and for the industry. Certainly that's been the result of our kind of year to date sales. So far in 2025, it's really oriented around kind of cleanup clearing activity and kind of cleaning up inventory I think March will tell the tale as it relates to the Easter holiday and some of that import.

Speaker Change: Yeah, Chris at this point it is a planning assumption I think we're going to have to see how we get through the first half part of what drove the price competition that we saw on the marketplace last year was at the industry had a poor spring and it's hard to draw a lot of conclusions I think from January and February business. It tends to be a clearance period for us and for the industry certainly that's been the result of our.

Speaker Change: Spring selling.

Speaker Change: But it's our assumption that.

Speaker Change: We certainly feel like our products are competitively priced.

Speaker Change: It had several years of raising prices and perhaps we were a little slower to kind of recalibrate too.

Speaker Change: Some sharper price points. So I think we've taken the action we have to but obviously, we have to swim in the competitive waters that we find ourselves in and we'll have to evaluate that as we get as we get into the second half, but that's our assumption for now I would say pricing in wholesale is is down modestly and our assumptions for 2025, Thats a combination probably more leaning into some additional product make in <unk>.

Speaker Change: Kind of year to date sales so far in 2025, it's really oriented around kind of clean and clearing activity and kind of cleaning up inventory I think March will tell the tale as it relates to the Easter holiday and some of that important spring selling.

Speaker Change: But it is our assumption that.

Speaker Change: We certainly feel like our products are competitively priced.

Speaker Change: Had several years of raising prices and perhaps we were a little slower to kind of recalibrate too.

Speaker Change: <unk> to improve the assortment, they're much as we're trying to do in the in the retail assortment.

Speaker Change: Great that was very helpful. And then just a quick follow up on your wholesale business specifically your exclusive brand business I think sales were up 20% during the fourth quarter. Obviously strong results is there still an opportunity to add shelf space with your two largest wholesale partners in 2025 and what's the outlook.

For your off price and Department store business within your guidance for the full year.

Speaker Change: <unk> to improve the assortment, they're much as we're trying to do in the in the retail assortment.

Speaker Change: I'll answer the first part of the question regarding shelf space, Yes, we believe that there is still opportunity we are still underpenetrated.

Speaker Change: Particularly Walmart and target and our <unk> segment, so similar products growth categories.

Speaker Change: Growth opportunities for us exist that exist in retail and also does for us in exclusive brands. So I would say we continue to look for opportunities to expand our door count in existing categories as well as with new categories and segments.

Speaker Change: For your off price and Department store business within your guidance for the full year.

Speaker Change: I'll answer the first part of the question regarding shelf space, Yes, we believe that there is still opportunity we are still underpenetrated.

Speaker Change: Yes, Chris the growth in our wholesale segment will be driven by the exclusive brands that continues to be the engine within that part of our business. So that will account for the majority of the growth we do have.

Speaker Change: Particularly Walmart and target and our toddler segment, so similar products growth categories.

Speaker Change: Our growth plan with some of the other segments going from memory clubs, we do have some growth planned in the promotional channel.

Speaker Change: Growth opportunities for us exist that exist in retail and also does for us in exclusive brands. So I would say we continue to look for opportunities to expand those door count in existing categories as well as with new categories and segments.

Speaker Change: Off price sales are expected to be I think roughly comparable they were down about 50% in 2024, I think those will strike a bit more of a normalized level you always have some measure of activity in that off price channel. We do have an upfront component of the business and the promo channel and so that is expected to grow somewhat and then we have the department stores continuing to be planned down which just reflects.

Speaker Change: Our growth plan with some of the other segments going from memory clubs, we do have some growth planned in the promotional channel.

Speaker Change: I think sort of broader issues with their business models at the moment.

Chris: Great. Thank you and good luck you're welcome. Thank you Chris. Thank you one moment as we move on to our next question.

Off price sales are expected to be I think roughly comparable they were down about 50% in 2024, I think those will strike a bit more of a normalized level you always have some measure of activity in that off price channel. We do have an upfront component of the business and the promo channel and so that is expected to grow somewhat and then we have the department stores continuing to be planned down which just reflects.

Speaker Change: Our next question comes from the line of Paul <unk> with Citi. Your line is open. Please go ahead.

Speaker Change: Hi, This is Kelly on for Paul Thanks for taking your question it sounds like you're leaving some flexibility on the level of pricing investments, you're making in U S. Retail this year I guess what metrics are you looking to you with these pricing investments help dictate your strategy as you begin to lap these pricing investments.

Speaker Change: I think sort of broader issues with their business models at the moment.

Chris: Great. Thank you and good luck you are welcome. Thank you Chris. Thank you one moment as we move on to our next question.

Speaker Change: In the second half.

Speaker Change: Our next question comes from the line of Paul <unk> with Citi. Your line is open. Please go ahead.

Kelly I'd say, there's a few things we look at we look at certainly the unit velocity to the previous question. We got we look at whether it's driving store traffic. We look also at the house biometric in terms of whether it's bringing consumers.

Speaker Change: Shopping with us both new customers and retaining the ones that we've had historically relationship with so there's a few things, but we look we look to actually have a return on that investment that it's driving some incremental velocity of the units and.

Speaker Change: The second half.

Speaker Change: Kelly I would say, there's a few things we look at we look at certainly the unit velocity to the previous question. We got we look at whether it's driving store traffic. We look also at the house biometric in terms of whether it's bringing consumers.

Speaker Change: Hopefully with the items that we've taken pricing action on its meant to be the start of the transaction that these are the more basic items, while they're in the store or their online hopefully theyre, adding additional items because of the sharp value of those those baskets starter items, it's our hope that they're adding other elements too.

Speaker Change: Shopping with us both new customers and retaining the ones that we've had historically a relationship with so there's a few things, but we look we look to actually have a return on that investment that it's driving some incremental velocity of the units and.

Speaker Change: The purchase basket as well that's kind of how we're thinking about it.

Speaker Change: Got it and then just a question on both U S retail and U S wholesale kind of flowing through the year. So you would you expect that the comp improvement largely to be back half weighted and I guess, what <unk> talked about sort of what drives that against tougher comparisons and then on the on the wholesale side.

Speaker Change: Hopefully with the items that we've taken pricing action on its meant to be the start of the transaction that these are the more basic items, while they are in the store or their online hopefully theyre, adding additional items because of the sharp value of those those baskets starter items, it's our hope that they are adding other elements too.

Speaker Change: Could you quantify how much the timing shifts impacted <unk>.

Speaker Change: The purchase basket as well that's kind of how we're thinking about it.

Speaker Change: So and how that kind of flows from there as you move past <unk> and how your fall Winter order book Silicon. Thanks.

Speaker Change: Got it and then just a question on both U S retail U S wholesale kind of flowing through the year. So you would you expect that the comp improvement largely to be back half weighted and I guess, what <unk> talked about sort of what drives that against tougher comparisons and then on the on the wholesale side.

Speaker Change: Yes sure on retail we are planning for an improving comp trend across the year and from memory. Our assumption is that we actually got to a positive comp in the fourth quarter in our in our planning assumptions that has a lot to do with just the planned improvements in the merchandize.

Speaker Change: Could you quantify how much the timing shifts impacted <unk>.

Speaker Change: Assortments and also the overall level of inventory. So when we made our inventory commitments for the first half of 2025, which goes back quite a bit of time right now that was in a different pricing environment. That's when we were planning for.

Speaker Change: So how that kind of flows from there as you move past <unk> and how your fall Winter order book Silicon. Thanks.

Speaker Change: Actually growth in AUR much more significant growth in AUR and so.

Speaker Change: Yes sure.

Speaker Change: We are planning for an improving comp trend across the year and from memory. Our assumption is that we actually got to a positive comp in the fourth quarter in our in our planning assumptions that has a lot to do with just the planned improvements in the merchandize.

Speaker Change: There are some pretty well worn history here that tells us that the unit velocity slows when we raise prices and so we had cut back on the inventory by for the first half. So the inventory position is not as optimal in the first half that improves meaningfully as we move into the second half.

Speaker Change: And part of it also is what tender referenced the investment behind the Kid business the bigger the bigger sizes. The older products that are older.

Speaker Change: Older older children that are part of a household one of the interesting aspects of the research that we've done indicates that increasingly our customers do have more than one child, we had made some decisions to cut back.

Speaker Change: That bigger Kid part of the assortment. Some some time ago and I think that had a bit of a disproportionate effect on sales certainly and thats a big business for us.

Speaker Change: And part of it also is what tender referenced the investment behind the Kid business the bigger the bigger sizes. The older products that are older.

Speaker Change: But we have cut back there and increasingly that customers coming and they're looking for solutions not only for our baby and toddler, but theyre looking for solutions for their older child as well. So we're reinvesting back in that kids business, which is fully port $410 million of business for us. It's a meaningful part of the assortment. So all of that gets better in the second half, we think that drives drive some improvement.

Speaker Change: That bigger Kid part of the assortment. Some some time ago and I think that had a bit of a disproportionate effect on sales certainly and thats a big business for us.

Speaker Change: As I mentioned stabilized in the second half as it relates to wholesale bookings we have down.

Speaker Change: Down down slight bookings slightly in the first half and then we're still in the process for the second half so I won't comment on second half bookings.

Speaker Change: We'll have more perspective on that on the call here just in another month or so in April but I would say there continues to be conservatism on the part of the department stores and that's reflected in our kind of placeholder assumptions for bookings the momentum continues to be around the exclusive brands and on the timing shift on Q1, I actually don't recall what that was.

Speaker Change: As I mentioned stabilized in the second half as it relates to wholesale bookings we have.

Speaker Change: Down down slight bookings slightly in the first half and then we are still in the process for the second half so I won't comment on second half bookings.

Speaker Change: Happy to follow up with you on that.

Speaker Change: Got it thank you best of luck.

Kelly: Thank you Kelly.

Speaker Change: And as a reminder, if you would like to ask a question. Please press star one on your telephone.

Speaker Change: And our next question is going to come from the line of William Reuter with Bank of America. Your line is open. Please go ahead.

Speaker Change: Momentum continues to be around the exclusive brands and on the timing shift on Q1, I actually don't recall, what that was Kelly, we're happy to follow up with you on that.

William Reuter: Good morning.

William Reuter: My first question is on sourcing you guys have done a great job of reducing your sourcing from China you are below 5%.

Speaker Change: Got it thank you best of luck.

William Reuter: You continue to source the majority from Asia I was wondering if youre looking at this point about doing any sort of changes to your sourcing it is clearly a pretty uncertain.

Speaker Change: Thank you Kelly.

Speaker Change: Thank you and as a reminder, if you would like to ask a question. Please press star one on your telephone.

Speaker Change: And our next question is going to come from the line of William Reuter with Bank of America. Your line is open. Please go ahead.

William Reuter: Environment in terms of what types of tariffs could be put in place.

Bill: Yes, Bill Thanks for the question I agree with your observation I think our supply chain team has done extraordinary work and reducing.

Speaker Change: Good morning.

William Reuter: My first question is on sourcing you guys have done a great job of reducing your sourcing from China you are below 5%.

Bill: Our dependence on China, and diversifying our sourcing base when I joined the company a number of years ago, we were probably well over 55% of the apparel assortment was sourced in China and China has historically been a great place to have those products made for a lot of different reasons over the years, we started to diversify away from China really because of.

Speaker Change: You continue to source the majority from Asia I was wondering if youre looking at this point about doing any sort of changes to your sourcing it is clearly a pretty uncertain.

William Reuter: The environment in terms of what types of tariffs could be put in place.

Bill: Yes, Bill Thanks for the question.

Bill: The labor cost situation with China had become a bit uncompetitive price wise I think the manufacturing community had wanted to move away from apparel to high Tech and other other industries. What we found interesting was that a number of our apparel suppliers in China built capacity in countries outside of China, So Vietnam, Cambodia, Bangladesh and to your point we're down.

Bill: I agree with your observation I think our supply chain team has done extraordinary work and reducing.

Bill: <unk> sub 5% in terms of the apparel assortment that is that.

Bill: That is now sourced in China, the opportunity continues to be on the fabric side of things. So most of the fabric continues to be processed in China, and then that fabric is sent to those other countries. We have a program that is intended to diversify our and reduce our dependence on China fabric as well. So I would say that's probably the most meaningful thing we continue to move production around as we see.

Bill: The labor cost situation, China had become a bit uncompetitive price wise I think the manufacturing community had wanted to move away from apparel to high Tech and other other industries. What we found interesting was that a number of our apparel suppliers in China built capacity in countries outside of China, So Vietnam, Cambodia, Bangladesh and to your point we're down.

Bill: <unk>, we have a great network of strategic vendor partnerships in those other countries like Bangladesh like Vietnam, Cambodia were continuing to build out those relationships, India has emerged as a significant source for us. So we're building that opportunity I think youll see more production migrating to India over time, but the team has done a nice job I think we have a well diversified.

Bill: <unk> sub 5% in terms of the apparel assortment that is that is now sourced in China. The opportunity continues to be on the fabric side of things. So most of the fabric continues to be processed in China, and then that fabric is sent to those other countries. We have a program that is intended to diversify our and reduce our dependence on China fabric as well so I would say that's probably.

Bill: So sourcing model, there's never any easy days in the supply chain, they're always managing a lot of complexity, but we have reduced our exposure to China pretty pretty considerably.

Bill: The most meaningful thing we continue to move production around as we see opportunities we have a great network of strategic vendor partnerships in those other countries like Bangladesh like Vietnam like Cambodia were continuing to build out those relationships, India has emerged as a significant source for us. So we're building that opportunity I think youll see more production migrating to India over.

Bill: Got it and then just a follow up from me.

Bill: I feel like kids has always represented a big opportunity. It's also incredibly competitive.

Bill: What are you doing this time around it will make it less risky in terms of entering I think you did mentioned youre going to be investing some units. There you clearly have some styles that you're more excited about but.

Time, but the team has done a nice job I think we have a well diversified.

Bill: Sourcing model, there's never any easy days in the supply chain. There are always managing a lot of complexity, but we have reduced our exposure to China pretty pretty considerably.

Speaker Change: How do we think about what's different this time around.

Bill: Got it and then just a follow up for me.

Speaker Change: We are in the very early stages of building that strategy that is totally comprehensive but in the near term getting the right assortment to our right to the right stores is necessary. So that's what you are hearing about in the back half we had an investment in categories of the business that are working for us so that fashion denim is active.

Bill: I feel like kids has always represented a big opportunity. It's also incredibly competitive.

Speaker Change: Active it is a licensed character product categories and licensed sports. So those are all areas that we're extending both our breadth and depth in select stores and online for the back half. So that's one near term indefinite and then going forward, our new concept to consume our process that will be.

Bill: How do we think about what's different this time around.

Bill: In the very early stages of building that strategy that is totally comprehensive but in the near term getting the right assortment to our right to the right stores is necessary. So that's what you are hearing about in the back half we had an investment in categories of the business that are working for us So thats fashion denim.

Speaker Change: Speed up our decision, making and get us closer to market that will help inform our decisions in Canada, particularly in <unk>, where we are going to have to be more reactive to the.

Bill: Active it is our licensed character of product categories and licensed sports. So those are all areas that we are extending both our breadth and depth in select stores and online for the back half. So that's one near term investment and then going forward, our new concept to consume our process that will speed up our decision, making and get us closer to market that will help inform our.

Speaker Change: Consumer trends, so that will help us as we think about 2026 in Florida, but we have a lot of work to do so still in early stages.

Speaker Change: Got it that's all for me thank you.

Thank you Bill.

Speaker Change: Thank you. This concludes the question and ask you a portion of today's conference I will now turn the call back to Mr. Western Burger for his closing remarks alright.

Bill: <unk> and <unk>, particularly in girl, where we are going to have to be more reactive to consumer trend and so that will help us as we think about 2026 and for it but.

Speaker Change: Alright, well. Thank you everyone for joining us. This morning, we look forward to updating you on our progress on our next call. Thank you everyone.

This concludes today's conference call. Thank you for participating and you may now disconnect.

Bill: We have a lot of work to do so is still in early stages.

Bill: Got it that's all for me thank you.

Speaker Change: Thank you Bill.

Richard Weston: Thank you. This concludes the question and ask you a portion of today's conference I will now turn the call back to Mr. Western Burger for his closing remarks.

Richard Weston: Alright, well. Thank you everyone for joining us. This morning, we look forward to updating you on our progress on our next call. Thank you everyone.

Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.

Speaker Change: Okay.

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Speaker Change: Good.

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Speaker Change: Dan.

Speaker Change: Yes.

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Q4 2024 Carter's Inc Earnings Call and Business Update

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