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CARTERS INC - Quarter Report: 2021 July (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the quarterly period ended July 3, 2021
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to __________
Commission file number: 001-31829
CARTER’S, INC.
(Exact name of registrant as specified in its charter)
Delaware
13-3912933
(State or other jurisdiction of(I.R.S. Employer Identification No.)
incorporation or organization)

Phipps Tower,
3438 Peachtree Road NE, Suite 1800
Atlanta, Georgia 30326
(Address of principal executive offices, including zip code)
(678) 791-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common stock, par value $0.01 per shareCRINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes No x
As of July 23, 2021, there were 44,011,080 shares of the registrant’s common stock outstanding.






CARTER’S, INC.
INDEX
Page
Unaudited Condensed Consolidated Balance Sheets as of July 3, 2021, January 2, 2021 and June 27, 2020
Unaudited Condensed Consolidated Statements of Operations for the fiscal quarter and two fiscal quarters ended July 3, 2021 and June 27, 2020
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the fiscal quarter and two fiscal quarters ended July 3, 2021 and June 27, 2020
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the fiscal quarters ended July 3, 2021, April 3, 2021, June 27, 2020 and March 28, 2020
Unaudited Condensed Consolidated Statements of Cash Flows for the two fiscal quarters ended July 3, 2021 and June 27, 2020
Part II. Other Information
Certifications




PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARTER’S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)
July 3, 2021January 2, 2021June 27, 2020
ASSETS
Current assets:
Cash and cash equivalents$1,120,901 $1,102,323 $1,000,581 
Accounts receivable, net of allowance for credit losses of $7,130, $5,940, and $9,242, respectively
163,957 186,512 165,578 
Finished goods inventories, net of inventory reserves of $15,726, $14,206, and $32,092, respectively
619,617 599,262 672,205 
Prepaid expenses and other current assets66,549 57,927 51,180 
Total current assets1,971,024 1,946,024 1,889,544 
Property, plant, and equipment, net of accumulated depreciation of $545,702, $583,980, and $559,142, respectively
231,944 262,345 287,941 
Operating lease assets527,121 593,008 648,505 
Tradenames, net307,768 307,893 308,017 
Goodwill213,195 211,776 208,573 
Customer relationships, net35,777 37,510 38,950 
Other assets29,097 34,024 31,104 
Total assets$3,315,926 $3,392,580 $3,412,634 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$356,826 $472,140 $458,075 
Current operating lease liabilities158,270 185,152 163,665 
Other current liabilities113,240 135,240 80,634 
Total current liabilities628,336 792,532 702,374 
Long-term debt, net990,437 989,530 1,232,649 
Deferred income taxes58,150 52,770 63,850 
Long-term operating lease liabilities484,881 554,497 620,063 
Other long-term liabilities56,618 65,218 60,420 
Total liabilities$2,218,422 $2,454,547 $2,679,356 
Commitments and contingencies - Note 14
Stockholders’ equity:
Preferred stock; par value $0.01 per share; 100,000 shares authorized; none issued or outstanding at July 3, 2021, January 2, 2021, and June 27, 2020
$— $— $— 
Common stock, voting; par value $0.01 per share; 150,000,000 shares authorized; 44,011,080, 43,780,075, and 43,636,176 shares issued and outstanding at July 3, 2021, January 2, 2021, and June 27, 2020, respectively
440 438 436 
Additional paid-in capital31,521 17,752 5,539 
Accumulated other comprehensive loss(27,263)(32,760)(45,045)
Retained earnings1,092,806 952,603 772,348 
Total stockholders’ equity1,097,504 938,033 733,278 
Total liabilities and stockholders’ equity$3,315,926 $3,392,580 $3,412,634 
See accompanying notes to the unaudited condensed consolidated financial statements.
1


CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
Fiscal quarter endedTwo fiscal quarters ended
July 3, 2021June 27, 2020July 3, 2021June 27, 2020
Net sales$746,400 $514,885 $1,533,761 $1,169,357 
Cost of goods sold379,793 284,073 781,524 687,445 
Adverse purchase commitments (inventory and raw materials), net(2,100)(4,703)(8,430)18,134 
Gross profit368,707 235,515 760,667 463,778 
Royalty income, net6,645 3,588 14,108 10,926 
Selling, general, and administrative expenses267,770 218,149 539,697 487,986 
Goodwill impairment— — — 17,742 
Intangible asset impairment— — — 26,500 
Operating income (loss)107,582 20,954 235,078 (57,524)
Interest expense15,295 15,312 30,643 24,176 
Interest income(201)(423)(426)(887)
Other (income) expense, net(723)587 (1,640)5,405 
Income (loss) before income taxes93,211 5,478 206,501 (86,218)
Income tax provision (benefit) 21,608 (2,678)48,702 (15,680)
Net income (loss)$71,603 $8,156 $157,799 $(70,538)
Basic net income (loss) per common share$1.63 $0.19 $3.59 $(1.64)
Diluted net income (loss) per common share$1.62 $0.19 $3.58 $(1.64)
Dividend declared and paid per common share$0.40 $— $0.40 $0.60 
See accompanying notes to the unaudited condensed consolidated financial statements.
2


CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(dollars in thousands)
(unaudited)
Fiscal quarter endedTwo fiscal quarters ended
July 3, 2021June 27, 2020July 3, 2021June 27, 2020
Net income (loss)$71,603 $8,156 $157,799 $(70,538)
Other comprehensive income (loss):
Foreign currency translation adjustments4,271 3,581 5,497 (9,411)
Comprehensive income (loss)$75,874 $11,737 $163,296 $(79,949)
See accompanying notes to the unaudited condensed consolidated financial statements.
3


CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(amounts in thousands, except share amounts)
(unaudited)
Common stock - shares
Common
stock - $
Additional
paid-in
capital
Accumulated other comprehensive
loss
Retained
earnings
Total
stockholders’
equity
Balance at December 28, 201943,963,103 $440 $— $(35,634)$915,324 $880,130 
Exercise of stock options33,158 — 1,840 — — 1,840 
Withholdings from vesting
of restricted stock
(43,611)— (4,712)— — (4,712)
Restricted stock activity132,759 (1)— — — 
Stock-based compensation expense— — 1,945 — — 1,945 
Repurchase of common stock(474,684)(5)928 — (46,178)(45,255)
Cash dividends declared and paid— — — — (26,260)(26,260)
Comprehensive loss— — — (12,992)(78,694)(91,686)
Balance at March 28, 202043,610,725 $436 $— $(48,626)$764,192 $716,002 
Exercise of stock options14,180 — 1,076 — — 1,076 
Withholdings from vesting
of restricted stock
(1,016)— (77)— — (77)
Restricted stock activity12,287 — — — — — 
Stock-based compensation expense— — 4,540 — — 4,540 
Comprehensive income— — — 3,581 8,156 11,737 
Balance at June 27, 202043,636,176 $436 $5,539 $(45,045)$772,348 $733,278 
Common stock - shares
Common
stock - $
Additional
paid-in
capital
Accumulated other comprehensive
loss
Retained
earnings
Total
stockholders’
equity
Balance at January 2, 202143,780,075 $438 $17,752 $(32,760)$952,603 $938,033 
Exercise of stock options12,065 — 811 — — 811 
Withholdings from vesting
of restricted stock
(37,444)— (3,588)— — (3,588)
Restricted stock activity192,963 (2)— — — 
Stock-based compensation expense— — 6,931 — — 6,931 
Comprehensive income— — — 1,226 86,196 87,422 
Balance at April 3, 202143,947,659 $440 $21,904 $(31,534)$1,038,799 $1,029,609 
Exercise of stock options57,274 — 4,336 — — 4,336 
Withholdings from vesting
of restricted stock
(1,057)— (110)— — (110)
Restricted stock activity7,204 — — — — — 
Stock-based compensation expense— — 5,391 — — 5,391 
Cash dividends declared and paid— — — — (17,596)(17,596)
Comprehensive income— — — 4,271 71,603 75,874 
Balance at July 3, 202144,011,080 $440 $31,521 $(27,263)$1,092,806 $1,097,504 
            See accompanying notes to the unaudited condensed consolidated financial statements.
4


CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Two fiscal quarters ended
July 3, 2021June 27, 2020
Cash flows from operating activities:
Net income (loss)$157,799 $(70,538)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation of property, plant, and equipment44,613 43,774 
Amortization of intangible assets1,866 1,858 
Provisions for excess and obsolete inventory1,451 23,058 
Goodwill impairment— 17,742 
Intangible asset impairments— 26,500 
Other asset impairments and loss on disposal of property, plant and equipment, net of recoveries2,056 7,332 
Amortization of debt issuance costs1,497 916 
Stock-based compensation expense12,322 6,485 
Unrealized foreign currency exchange loss, net61 1,621 
Provisions for doubtful accounts receivable from customers1,206 3,036 
Unrealized (gain) loss on investments(1,279)1,904 
Deferred income taxes expense (benefit)5,817 (10,559)
Effect of changes in operating assets and liabilities:
Accounts receivable21,620 80,566 
Finished goods inventories(19,663)(106,922)
Prepaid expenses and other assets(*)
(8,724)(4,156)
Accounts payable and other liabilities(171,119)214,796 
Net cash provided by operating activities$49,523 $237,413 
Cash flows from investing activities:
Capital expenditures$(20,506)$(16,708)
Proceeds from sale of investments(*)
5,000 1,400 
Net cash used in investing activities$(15,506)$(15,308)
Cash flows from financing activities:
Proceeds from senior notes due 2025$— $500,000 
Payment of debt issuance costs(223)(7,639)
Borrowings under secured revolving credit facility— 644,000 
Payments on secured revolving credit facility— (500,000)
Repurchases of common stock— (45,255)
Dividends paid(17,596)(26,260)
Withholdings from vesting of restricted stock(3,698)(4,789)
Proceeds from exercises of stock options5,147 2,916 
Net cash (used in) provided by financing activities$(16,370)$562,973 
Net effect of exchange rate changes on cash and cash equivalents931 1,192 
Net increase in cash and cash equivalents$18,578 $786,270 
Cash and cash equivalents, beginning of period1,102,323 214,311 
Cash and cash equivalents, end of period$1,120,901 $1,000,581 
(*)Cash flows for the two fiscal quarters ended June 27, 2020 were revised to reflect the reclassification of $1.4 million proceeds from sale of investments from cash flows from operating activities to cash flows from investing activities.
See accompanying notes to the unaudited condensed consolidated financial statements.
5


CARTER’S, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – THE COMPANY
Carter’s, Inc. and its wholly owned subsidiaries (collectively, the “Company”) design, source, and market branded childrenswear under the Carter’s, OshKosh, Skip Hop, Child of Mine, Just One You, Simple JoysMy First Love, little planet, and other brands. The Company’s products are sourced through contractual arrangements with manufacturers worldwide for: 1) wholesale distribution to leading department stores, national chains, and specialty retailers domestically and internationally and 2) distribution to the Company’s own retail stores and eCommerce sites that market its brand name merchandise and other licensed products manufactured by other companies.
NOTE 2 – BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). All intercompany transactions and balances have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the consolidated financial condition, results of operations, comprehensive income (loss), statement of stockholders’ equity, and cash flows of the Company for the interim periods presented. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the fiscal quarter ended July 3, 2021 are not necessarily indicative of the results that may be expected for the current fiscal year ending January 1, 2022.
The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.
The accompanying condensed consolidated balance sheet as of January 2, 2021 was derived from the Company’s audited consolidated financial statements included in its most recently filed Annual Report on Form 10-K. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC and the instructions to Form 10-Q.
COVID-19
The Company is closely monitoring the effects of the ongoing coronavirus (“COVID-19”) pandemic and its impact on our business. Additionally, the Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of COVID-19 as of July 3, 2021 and through the date of this report filing. The accounting matters assessed included, but were not limited to, our allowance for credit losses, inventory reserves, adverse inventory and fabric purchase commitments, stock-based compensation, and the carrying value of our goodwill, indefinite-lived intangible assets, and other long-lived assets. Based on these assessments, in the second quarter and first two quarters of fiscal 2021, the Company recorded a benefit in fabric purchase commitment charges of $2.1 million and $8.4 million, respectively, related to better than expected sales of inventory and utilization of fabric that was reserved for in the first quarter of fiscal 2020 due to COVID-19 related disruptions. As of July 3, 2021, the outstanding reserve for adverse inventory and fabric purchase commitments related to COVID-19 disruptions in the first two quarters of fiscal 2020 was not material.
Additional COVID-19 related charges were $1.0 million and $3.2 million in the second quarter of fiscal 2021 and the first two quarters of fiscal 2021, respectively. These charges were primarily related to the costs associated with additional personal protective equipment and cleaning supplies.
Accounting Policies
The accounting policies the Company follows are set forth in its most recently filed Annual Report on Form 10-K. There have been no material changes to these accounting policies.
6


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 - REVENUE RECOGNITION
The Company’s revenues are earned from contracts or arrangements with retail and wholesale customers and licensees. Contracts include written agreements as well as arrangements that are implied by customary practices or law.
Disaggregation of Revenue
The Company sells its products directly to consumers (“direct-to-consumer”) and to other retail companies and partners that subsequently sell the products directly to their own retail customers. The Company also earns royalties from certain of its licensees. Disaggregated revenues from these sources for the second quarter and two quarters ended fiscal 2021 and 2020 were as follows:
Fiscal quarter ended July 3, 2021
(dollars in thousands)U.S. RetailU.S. WholesaleInternationalTotal
Wholesale channel$— $231,630 $33,610 $265,240 
Direct-to-consumer423,627 — 57,533 481,160 
$423,627 $231,630 $91,143 $746,400 
Royalty income$2,360 $2,876 $1,409 $6,645 
Two fiscal quarters ended July 3, 2021
(dollars in thousands)U.S. RetailU.S. WholesaleInternationalTotal
Wholesale channel$— $515,007 $76,402 $591,409 
Direct-to-consumer830,694 — 111,658 942,352 
$830,694 $515,007 $188,060 $1,533,761 
Royalty income$5,430 $6,651 $2,027 $14,108 
Fiscal quarter ended June 27, 2020
(dollars in thousands)U.S. RetailU.S. WholesaleInternationalTotal
Wholesale channel$— $151,744 $15,541 $167,285 
Direct-to-consumer316,016 — 31,584 347,600 
$316,016 $151,744 $47,125 $514,885 
Royalty income$1,252 $1,508 $828 $3,588 
Two fiscal quarters ended June 27, 2020
(dollars in thousands)U.S. RetailU.S. WholesaleInternationalTotal
Wholesale channel$— $403,874 $54,272 $458,146 
Direct-to-consumer636,733 — 74,478 711,211 
$636,733 $403,874 $128,750 $1,169,357 
Royalty income$3,746 $5,590 $1,590 $10,926 
7


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Accounts Receivable from Customers and Licensees
The components of Accounts receivable, net, were as follows:
(dollars in thousands)July 3, 2021January 2, 2021June 27, 2020
Trade receivables from wholesale customers, net$164,591 $180,830 $159,043 
Royalties receivable5,991 5,733 5,371 
Tenant allowances and other receivables9,478 12,315 15,188 
Total receivables$180,060 $198,878 $179,602 
Less: Wholesale accounts receivable reserves(*)
(16,103)(12,366)(14,024)
Accounts receivable, net$163,957 $186,512 $165,578 
(*)Includes allowance for credit losses of $7.1 million $5.9 million, and $9.2 million for the periods ended July 3, 2021, January 2, 2021, and June 27, 2020, respectively.
Contract Assets and Liabilities
The Company’s contract assets are not material.
Contract Liabilities
The Company recognizes a contract liability when it has received consideration from a customer and has a future obligation to transfer goods to the customer. Total contract liabilities consisted of the following amounts:    
(dollars in thousands)July 3, 2021January 2, 2021June 27, 2020
Contract liabilities - current:
Unredeemed gift cards$18,049 $18,300 $15,667 
Unredeemed customer loyalty rewards4,829 5,241 4,664 
Carter’s credit card - upfront bonus(1)
714 714 714 
Total contract liabilities - current(2)
$23,592 $24,255 $21,045 
Contract liabilities - non-current(3)
$2,500 $2,857 $3,214 
Total contract liabilities$26,092 $27,112 $24,259 
(1)The Company received an upfront signing bonus from a third-party financial institution, which will be recognized as revenue on a straight-line basis over the term of the agreement. This amount reflects the current portion of this bonus to be recognized as revenue over the next twelve months.
(2)Included with Other current liabilities on the Company’s consolidated balance sheets.
(3)This amount reflects the non-current portion of the Carter’s credit card upfront bonus.
NOTE 4 - LEASES
The Company has operating leases for retail stores, distribution centers, corporate offices, data centers, and certain equipment. The Company’s leases generally have initial terms ranging from 1 year to 10 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to early terminate the lease.
As of July 3, 2021, the Company’s finance leases were not material to the consolidated balance sheets, consolidated statements of operations, or statements of cash flows.
The following components of lease expense are included in Selling, general and administrative expenses on the Company’s consolidated statements of operations for the second quarter and first two quarters of fiscal 2021 and 2020:
Fiscal quarter endedTwo fiscal quarters ended
(dollars in thousands)July 3, 2021June 27, 2020July 3, 2021June 27, 2020
Operating lease cost$42,100 $45,527 $84,798 $91,950 
Variable lease cost (*)
16,276 19,219 32,674 35,504 
Net lease cost$58,376 $64,746 $117,472 $127,454 
(*)Includes short-term leases, which are not material, and operating lease asset impairment charges.
8


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Supplemental balance sheet information related to leases was as follows:
Fiscal quarter ended
July 3, 2021June 27, 2020
Weighted average remaining operating lease term (years)5.25.7
Weighted average discount rate for operating leases3.30%3.95%
Cash paid for amounts included in the measurement of operating lease liabilities in the second quarter and two first quarters of fiscal 2021 were $56.8 million and $114.7 million, respectively. Cash paid for amounts included in the measurement of operating lease liabilities in the second quarter and first two quarters of fiscal 2020 were $47.6 million and $97.8 million, respectively. The total cash paid in the second quarter and first two quarters of fiscal 2020 reflects the contractual amounts due to be paid in cash. For the fiscal quarter ended June 27, 2020, the Company deferred cash payments of $35.8 million of these amounts, which are included in the statement of cash flows as part of the change in Accounts payable and other liabilities.
Non-cash transactions to recognize operating assets and liabilities for new leases for the second quarter and first two quarters of fiscal 2021 were $4.3 million and $7.6 million, respectively. Non-cash transactions to recognize operating assets and liabilities for the second quarter and first two quarters of fiscal 2020 were $15.8 million and $45.2 million, respectively.
As of July 3, 2021, the maturities of lease liabilities were as follows:
(dollars in thousands)Operating leases
Remainder of 2021$93,535 
2022159,881 
2023132,257 
2024105,945 
202576,952 
202654,170 
After 202678,074 
Total lease payments$700,814 
Less: Interest(57,663)
Present value of lease liabilities(*)$643,151 
(*)As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments.
NOTE 5 – ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of Accumulated other comprehensive loss consisted of the following:
(dollars in thousands)July 3, 2021January 2, 2021June 27, 2020
Cumulative foreign currency translation adjustments$(15,810)$(21,307)$(35,933)
Pension and post-retirement obligations(*)
(11,453)(11,453)(9,112)
Total accumulated other comprehensive loss$(27,263)$(32,760)$(45,045)
(*)Net of income taxes of $3.5 million, $3.5 million, and $2.8 million for the period ended July 3, 2021, January 2, 2021, and June 27, 2020, respectively.
During the first two quarters of both fiscal 2021 and fiscal 2020, no amounts were reclassified from Accumulated other comprehensive loss to the statement of operations.
9


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 6 – GOODWILL AND INTANGIBLE ASSETS
The balances and changes in the carrying amount of goodwill attributable to each segment were as follows:
(dollars in thousands)U.S. RetailU.S. WholesaleInternationalTotal
Balance at December 28, 2019$83,934 $74,454 $70,638 $229,026 
Goodwill impairment(1)
— — (17,742)(17,742)
Foreign currency impact— — (2,711)(2,711)
Balance at June 27, 2020$83,934 $74,454 $50,185 $208,573 
Balance at January 2, 2021(2)
$83,934 $74,454 $53,388 $211,776 
Foreign currency impact— — 1,419 1,419 
Balance at July 3, 2021(2)
$83,934 $74,454 $54,807 $213,195 
(1)In the first quarter of fiscal 2020, a charge of $17.7 million was recorded to reflect the impairment of the value ascribed to the goodwill in the Other International reporting unit in the International segment.
(2)Goodwill for the International reporting unit is net of accumulated impairment losses of $17.7 million.
A summary of the carrying value of the Company’s intangible assets were as follows:
July 3, 2021January 2, 2021
(dollars in thousands)Weighted-average useful lifeGross amountAccumulated amortizationNet amountGross amountAccumulated amortizationNet amount
Carter’s tradename
Indefinite$220,233 $— $220,233 $220,233 $— $220,233 
OshKosh tradename
Indefinite70,000 — 70,000 70,000 — 70,000 
Skip Hop tradename
Indefinite15,000 — 15,000 15,000 — 15,000 
Finite-life tradenames
5-20 years
3,911 1,376 2,535 3,911 1,251 2,660 
Total tradenames$309,144 $1,376 $307,768 $309,144 $1,251 $307,893 
Skip Hop customer relationships15 years$47,300 $13,422 $33,878 $47,300 $11,834 $35,466 
Carter’s Mexico customer relationships10 years3,116 1,217 1,899 3,108 1,064 2,044 
Total customer relationships$50,416 $14,639 $35,777 $50,408 $12,898 $37,510 
June 27, 2020
(dollars in thousands)Weighted-average useful lifeGross amountAccumulated amortizationNet amount
Carter’s tradename
Indefinite$220,233 $— $220,233 
OshKosh tradename(1)
Indefinite70,000 — 70,000 
Skip Hop tradename(2)
Indefinite15,000 — 15,000 
Finite-life tradenames
5-20 years
3,911 1,127 2,784 
Total tradenames$309,144 $1,127 $308,017 
Skip Hop customer relationships15 years$47,300 $10,245 $37,055 
Carter’s Mexico customer relationships10 years2,814 919 1,895 
Total customer relationships$50,114 $11,164 $38,950 
(1)In the first quarter of fiscal 2020, a charge of $13.6 million, $1.6 million, and $0.3 million was recorded on our indefinite-lived OshKosh tradename asset in the U.S. Retail, U.S. Wholesale, and International segments, respectively, to reflect the impairment of the value ascribed to the indefinite-lived OshKosh tradename asset.
(2)In the first quarter of fiscal 2020, a charge of $6.8 million, $3.7 million, and $0.5 million was recorded on our indefinite-lived Skip Hop tradename asset in the U.S. Wholesale, International, and U.S. Retail segments, respectively, to reflect the impairment of the value ascribed to the indefinite-lived Skip Hop tradename asset.
Amortization expense for intangible assets subject to amortization was approximately $0.9 million for both second fiscal quarters ended July 3, 2021 and June 27, 2020. Amortization expense was approximately $1.9 million for both the first two quarters of fiscal 2021 and for the first two quarters of fiscal 2020.
10


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The estimated amortization expense for the next five fiscal years is as follows:
(dollars in thousands)Amortization expense
Remainder of 2021$1,869 
2022$3,738 
2023$3,696 
2024$3,666 
2025$3,666 
2026$3,666 
NOTE 7 – COMMON STOCK
Open Market Share Repurchases
The Company repurchased and retired shares in open market transactions in the following amounts for the fiscal periods indicated:
Fiscal quarter endedTwo fiscal quarters ended
July 3, 2021June 27, 2020July 3, 2021June 27, 2020
Number of shares repurchased— — — 474,684 
Aggregate cost of shares repurchased (dollars in thousands)$— $— $— $45,255 
Average price per share$— $— $— $95.34 
The total aggregate remaining capacity under outstanding repurchase authorizations as of July 3, 2021 was approximately $650.4 million. The authorizations have no expiration date.
As previously announced, the Company, in connection with the COVID-19 pandemic, suspended its common stock share repurchase program at the end of the first quarter in fiscal 2020. While the Company may elect to resume repurchases at any time, the timing and amount of any future repurchases will be determined by the Company based on its evaluation of market conditions, share price, investment priorities, and other factors.
Dividends
On May 1, 2020, in connection with the COVID-19 pandemic, the Company suspended its quarterly cash dividend. As a result, the Company did not declare or pay cash dividends through April 27, 2021. On April 27, 2021, in connection with the announcement of the amendment on the Company’s secured revolving credit facility, the Company’s Board of Directors authorized a quarterly cash dividend payment of $0.40 per common share, which was paid in the second quarter of fiscal 2021.
The Company did not declare or pay cash dividends in the second fiscal quarter ended June 27, 2020. In the first two fiscal quarters ended June 27, 2020, the Company declared and paid cash dividends per share of $0.60.
The Board of Directors will evaluate future dividend declarations based on a number of factors, including restrictions under the Company’s secured revolving credit facility, business conditions, the Company’s financial performance, and other considerations.
Provisions in the Company’s secured revolving credit facility could have the effect of restricting the Company’s ability to pay cash dividends on, or make future repurchases of, its common stock, as further described in Note 8, Long-Term Debt to the consolidated financial statements.
11


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 8 – LONG-TERM DEBT
Long-term debt consisted of the following:
(dollars in thousands)July 3, 2021January 2, 2021June 27, 2020
$500 million 5.500% Senior Notes due May 15, 2025
$500,000 $500,000 $500,000 
$500 million 5.625% Senior Notes due March 15, 2027
500,000 500,000 500,000 
Total senior notes$1,000,000 $1,000,000 $1,000,000 
Less unamortized issuance-related costs for senior notes(9,563)(10,470)(11,351)
Senior notes, net$990,437 $989,530 $988,649 
Secured revolving credit facility— — 244,000 
Total long-term debt, net
$990,437 $989,530 $1,232,649 
Secured Revolving Credit Facility
As of July 3, 2021, the Company had no outstanding borrowings under its secured revolving credit facility, exclusive of $4.4 million of outstanding letters of credit. As of July 3, 2021, approximately $745.6 million remained available for future borrowing. Any outstanding borrowings under the Company’s secured revolving credit facility are classified as non-current liabilities on the Company’s consolidated balance sheets because of the contractual repayment terms under the credit facility.
On April 21, 2021, the Company, through its wholly owned subsidiary, The William Carter Company (“TWCC”), entered into Amendment No. 3 to its fourth amended and restated credit agreement (“Amendment No. 3”). Among other things, Amendment No. 3 provides that through the remainder of the Restricted Period, which ends on the date the Company delivers its financial statements and associated certificates relating to the third fiscal quarter of 2021:
the Company must maintain a minimum liquidity (defined as cash-on-hand plus availability under the secured revolving credit facility) on the last day of each fiscal month of at least $950 million (the “Revised Liquidity Requirement”), which was increased by $250 million from $700 million; and
the Company may make additional restricted payments, including to pay cash dividends and repurchase common stock, in an amount not to exceed $250 million, provided that (a) no default or event of default will have occurred and be continuing or would result from the payment and (b) after giving effect to the payment, the Company would have been in compliance with Revised Liquidity Requirement as of the last day of the most recent month.
Approximately $0.2 million, including both bank fees and other third party expenses, has been capitalized in connection with Amendment No. 3 and is being amortized over the remaining term of the secured revolving credit facility.
As of July 3, 2021, the interest rate margins applicable to the secured revolving credit facility were 1.375% for LIBOR (London Interbank Offered Rate) rate loans and 0.375% for base rate loans.
As of July 3, 2021, the Company was in compliance with its financial and other covenants under the secured revolving credit facility.
NOTE 9 – STOCK-BASED COMPENSATION
The Company recorded stock-based compensation expense as follows:
Fiscal quarter endedTwo fiscal quarters ended
(dollars in thousands)July 3, 2021June 27, 2020July 3, 2021June 27, 2020
Stock options$300 $585 $774 $1,468 
Restricted stock:
   Time-based awards3,504 2,360 7,404 5,349 
   Performance-based awards347 — 2,904 (1,927)
   Stock awards1,240 1,595 1,240 1,595 
Total$5,391 $4,540 $12,322 $6,485 
The Company recognizes compensation cost ratably over the applicable performance periods based on the estimated probability of achievement of its performance targets at the end of each period. During the first quarter of fiscal 2021, the achievement of
12


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
performance target estimates related to certain performance-based grants were revised resulting in a $2.6 million increase to stock-based compensation expense.
NOTE 10 – INCOME TAXES
As of July 3, 2021, the Company had gross unrecognized income tax benefits of approximately $10.8 million, of which $9.1 million, if ultimately recognized, may affect the Company’s effective income tax rate in the periods settled. The Company has recorded tax positions for which the ultimate deductibility is more likely than not, but for which there is uncertainty about the timing of such deductions.
Included in the reserves for unrecognized tax benefits at July 3, 2021 is approximately $2.1 million of reserves for which the statute of limitations is expected to expire within the next 12 months. If these tax benefits are ultimately recognized, such recognition, net of federal income taxes, may affect the annual effective income tax rate for fiscal 2021 or fiscal 2022 along with the effective income tax rate in the quarter in which the benefits are recognized.
The Company recognizes interest related to unrecognized tax benefits as a component of interest expense and recognizes penalties related to unrecognized income tax benefits as a component of income tax expense. Interest expense recorded on uncertain tax positions was not material for the second fiscal quarter ended July 3, 2021 and June 27, 2020. Interest expense recorded on uncertain tax positions was $0.2 million and $0.5 million for the first two quarters of fiscal 2021 and fiscal 2020, respectively. The Company had approximately $2.2 million, $2.7 million, and $2.8 million of interest accrued on uncertain tax positions as of July 3, 2021, January 2, 2021, and June 27, 2020, respectively.
NOTE 11 – FAIR VALUE MEASUREMENTS
Investments
The Company invests in marketable securities, principally equity-based mutual funds, to mitigate the risk associated with the investment return on employee deferrals of compensation. All of the marketable securities are included in Other assets on the accompanying consolidated balance sheets, and their aggregate fair values were approximately $16.5 million, $20.2 million, and $16.4 million at July 3, 2021, January 2, 2021, and June 27, 2020, respectively. These investments are classified as Level 1 within the fair value hierarchy. The change in the aggregate fair values of marketable securities is due to the net activity of gains and losses and any contributions and distributions during the period. Gains on the investments in marketable securities were $1.1 million for both second fiscal quarters ended July 3, 2021 and June 27, 2020. Gains on the investments in marketable securities were $1.3 million for the two fiscal quarters ended July 3, 2021. Losses on the investments in marketable securities were $1.9 million for the two fiscal quarters ended June 27, 2020. These amounts are included in Other expense (income), net on the Company’s consolidated statement of operations.
Borrowings
As of July 3, 2021, the Company had no outstanding borrowings under its secured revolving credit facility.
The fair value of the Company’s senior notes at July 3, 2021 was approximately $1.05 billion. The fair value of these senior notes with a notional value and carrying value (gross of debt issuance costs) of $1.00 billion was estimated using a quoted price as provided in the secondary market, which considers the Company’s credit risk and market related conditions, and is therefore within Level 2 of the fair value hierarchy.
13


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 12 – EARNINGS PER SHARE
The following is a reconciliation of basic common shares outstanding to diluted common and common equivalent shares outstanding:
Fiscal quarter endedTwo fiscal quarters ended
July 3, 2021June 27, 2020July 3, 2021June 27, 2020
Weighted-average number of common and common equivalent shares outstanding:
Basic number of common shares outstanding
43,445,780 43,162,571 43,408,262 43,259,103 
Dilutive effect of equity awards(1)
169,631 147,480 151,468 — 
Diluted number of common and common equivalent shares outstanding43,615,411 43,310,051 43,559,730 43,259,103 
Earnings per share:
(dollars in thousands, except per share data)
Basic net income (loss) per common share:
Net income (loss)
$71,603 $8,156 $157,799 $(70,538)
Income allocated to participating securities
(860)(86)(1,896)(252)
Net income (loss) available to common shareholders
$70,743 $8,070 $155,903 $(70,790)
Basic net income (loss) per common share
$1.63 $0.19 $3.59 $(1.64)
Diluted net income (loss) per common share:
Net income (loss)
$71,603 $8,156 $157,799 $(70,538)
Income allocated to participating securities
(857)(86)(1,890)(252)
Net income (loss) available to common shareholders
$70,746 $8,070 $155,909 $(70,790)
Diluted net income (loss) per common share
$1.62 $0.19 $3.58 $(1.64)
Anti-dilutive awards excluded from diluted earnings per share computation(2)
171,653 957,041 288,122 559,470
(1)For the two fiscal quarters ended June 27, 2020, there were 230,286 potentially dilutive equity awards that were excluded from the diluted earnings per share calculation because the Company incurred a net loss for this period and their inclusion would be anti-dilutive.
(2)The volume of anti-dilutive awards is, in part, due to the related unamortized compensation costs.
NOTE 13 – OTHER CURRENT LIABILITIES
Other current liabilities at the end of any comparable period, were as follows:
(dollars in thousands)July 3, 2021January 2, 2021June 27, 2020
Accrued employee benefits$18,970 $22,876 $11,021 
Unredeemed gift cards18,049 18,300 15,667 
Accrued bonuses and incentive compensation17,168 8,873 73 
Accrued interest12,078 12,092 13,569 
Accrued salaries and wages10,974 10,650 4,210 
Accrued taxes9,954 10,900 11,383 
Income taxes payable— 21,164 2,389 
Accrued other26,047 30,385 22,322 
Other current liabilities$113,240 $135,240 $80,634 
NOTE 14 – COMMITMENTS AND CONTINGENCIES
The Company is subject to various claims and pending or threatened lawsuits in the normal course of business. The Company is not currently a party to any legal proceedings that it believes would have a material adverse impact on its financial position, results of operations, or cash flows.
14


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company’s contractual obligations and commitments include obligations associated with leases, the secured revolving credit agreement, senior notes, employee benefit plans, and facility consolidations/closures as disclosed in Note 16, Organizational Restructuring and Office Consolidation, to the consolidated financial statements.
NOTE 15 – SEGMENT INFORMATION
The tables below presents certain information for our reportable segments and unallocated corporate expenses for the periods indicated:
Fiscal quarter endedTwo fiscal quarters ended
(dollars in thousands)July 3, 2021% of
consolidated
net sales
June 27, 2020% of
consolidated
net sales
July 3,
2021
% of
consolidated
net sales
June 27,
2020
% of
consolidated
net sales
Net sales:
U.S. Retail$423,627 56.8 %$316,016 61.4 %$830,694 54.2 %$636,733 54.5 %
U.S. Wholesale231,630 31.0 %151,744 29.5 %515,007 33.6 %403,874 34.5 %
International    91,143 12.2 %47,125 9.1 %188,060 12.2 %128,750 11.0 %
Consolidated net sales$746,400 100.0 %$514,885 100.0 %$1,533,761 100.0 %$1,169,357 100.0 %
Operating income (loss):
% of
segment
net sales
% of
segment
net sales
% of
segment
net sales
% of
segment
net sales
U.S. Retail$87,080 20.6 %$23,720 7.5 %$163,600 19.7 %$(8,656)(1.4)%
U.S. Wholesale40,592 17.5 %21,192 14.0 %110,650 21.5 %23,423 5.8 %
International9,007 9.9 %(5,514)(11.7)%18,741 10.0 %(33,219)(25.8)%
Corporate expenses(*)
(29,097)n/a(18,444)n/a(57,913)n/a(39,072)n/a
Consolidated operating income (loss)$107,582 14.4 %$20,954 4.1 %$235,078 15.3 %$(57,524)(4.9)%
(*)Corporate expenses include expenses related to incentive compensation, stock-based compensation, executive management, severance and relocation, finance, office occupancy, information technology, certain legal fees, consulting fees, and audit fees.
(dollars in millions)Fiscal quarter ended July 3, 2021Two fiscal quarters ended July 3, 2021
Charges:U.S. RetailU.S. WholesaleInternationalU.S. RetailU.S. WholesaleInternational
Incremental costs associated with COVID-19 pandemic$0.5 $0.4 $0.1 $1.6 $1.3 $0.3 
Organizational restructuring(1)
(0.6)— 2.3 (0.6)0.1 2.3 
Gain on modification of retail store leases(2)
(0.4)— — (1.9)— — 
Total charges(3)
$(0.5)$0.4 $2.4 $(0.9)$1.4 $2.6 
(1)Fiscal quarter and two fiscal quarters ended July 3, 2021 include $2.3 million of costs associated with the early exit of the Canada corporate office lease. Fiscal quarter and two fiscal quarters ended July 3, 2021 also includes corporate charges related to organizational restructuring of $0.5 million and $0.9 million, respectively.
(2)Related to gains on the modification of previously impaired retail store leases.
(3)Total charges for two fiscal quarters ended July 3, 2021 exclude a customer bankruptcy recovery of $38,000.
15


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(dollars in millions)Fiscal quarter ended June 27, 2020Two fiscal quarters ended June 27, 2020
Charges:U.S. RetailU.S. WholesaleInternationalU.S. RetailU.S. WholesaleInternational
Organizational restructuring(1)(2)
$1.6 $0.7 $1.3 $3.0 $1.3 $1.6 
Goodwill impairment— — — — — 17.7 
Skip Hop tradename impairment charge
— — — 0.5 6.8 3.7 
OshKosh tradename impairment charge
— — — 13.6 1.6 0.3 
Incremental costs associated with COVID-19 pandemic(2)
4.4 6.9 1.5 6.6 7.1 1.8 
Retail store operating leases and other long-lived asset impairments3.7 — — 5.0 — — 
Total charges$9.7 $7.6 $2.9 $28.7 $16.8 $25.2 
(1)The two fiscal quarters ended June 27, 2020 also includes corporate charges related to organizational restructuring of $1.6 million.
(2)The Company reclassified $0.2 million of employee-related costs from Incremental costs associated with COVID-19 pandemic to Organizational restructuring for the second fiscal quarter and two fiscal quarters ended June 27, 2020.
NOTE 16 – ORGANIZATIONAL RESTRUCTURING AND OFFICE CONSOLIDATION
As previously announced, the Company initiated several organizational restructuring initiatives which included a reorganization of staffing models across multiple functions to drive labor savings and increase efficiencies, the consolidation of certain functions into our corporate headquarters in Atlanta, Georgia, and over 100 planned store closures by the end of fiscal 2021.
In conjunction with these initiatives, the Company recorded the following charges in selling, general and administrative expenses:
Fiscal quarter endedTwo fiscal quarters ended
(dollars in thousands)July 3, 2021June 27, 2020July 3, 2021June 27, 2020
Severance and other termination benefits(*)
$(688)$1,207 $(773)$4,096 
Lease exit costs2,863 1,233 3,412 1,664 
Relocation and recruiting— 1,019 1,502 
Other closure costs30 53 93 
Total$2,205 $3,466 $2,699 $7,355 
(*)Severance and other termination benefits in the two fiscal quarters ended July 3, 2021 reflect revised employee assumptions.
The Company paid approximately $1.5 million and $4.5 million in severance and other termination benefits during the second fiscal quarter and two fiscal quarters ended July 3, 2021, respectively. As of July 3, 2021, there was approximately $2.5 million in reserves related to severance and other termination benefits expected to be paid out during fiscal 2021 included in Other current liabilities in the accompanying unaudited condensed consolidated balance sheets as of July 3, 2021. The Company expects to incur additional restructuring-related severance charges of approximately $0.5 million through fiscal 2021.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 relating to our future performance, including, without limitation, statements with respect to our anticipated financial results for any other quarter or period in fiscal 2021 or any other future period, assessment of our performance and financial position, drivers of our sales and earnings growth, and the effects of the COVID-19 pandemic, including with respect to our plans to close certain retail stores and the impacts of supply chain delays and increased freight costs. Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or not materialize, or should any of the underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. Certain of the risks and uncertainties that could cause actual results and performance to differ materially are described in our most recently filed Annual Report on Form 10-K, in Part I. under the heading “Item 1A. Risk Factors”, and other reports filed by the Company with the Securities and Exchange Commission from time to time.
16


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OVERVIEW
We are the largest branded marketer in North America of apparel exclusively for babies and young children. We own two of the most highly recognized and most trusted brand names in the children’s apparel industry, Carter’s and OshKosh B’gosh (or “OshKosh”), and a leading baby and young child lifestyle brand, Skip Hop.
Established in 1865, our Carter’s brand is recognized and trusted by consumers for high-quality apparel and accessories for children in sizes newborn to 14.
Established in 1895, OshKosh is a well-known brand, trusted by consumers for high-quality apparel and accessories for children in sizes newborn to 14, with a focus on playclothes for toddlers and young children. We acquired the OshKosh brand in 2005.
Established in 2003, the Skip Hop brand re-thinks, re-energizes, and re-imagines durable necessities to create higher value, superior quality, and top-performing products for parents, babies, and toddlers. We acquired the Skip Hop brand in 2017.
Our mission is to serve the needs of all families with young children, with a vision to be the world’s favorite brands in young children’s apparel and products. We believe our brands provide a complementary product offering and aesthetic, are each uniquely positioned in the marketplace, and offer strong value to families with young children. Our multi-channel global business model, which includes retail stores, eCommerce, and wholesale sales channels, as well as omni-channel capabilities in the United States and Canada, enables us to reach a broad range of consumers around the world. We have extensive experience in the young children’s apparel and accessories market and focus on delivering products that satisfy our consumers’ needs. As of July 3, 2021, the Company operated 1,003 retail stores in North America.
The following is a discussion of our results of operations and current financial condition. This should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this Form 10-Q and audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the 2020 fiscal year ended January 2, 2021.
Segments
Our three business segments are: U.S. Retail, U.S. Wholesale, and International. These segments are our operating and reporting segments. Our U.S. Retail segment consists of revenue primarily from sales of products in the United States through our retail stores and eCommerce websites. Similarly, our U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale partners. Finally, our International segment consists of revenue primarily from sales of products outside the United States, largely through our retail stores and eCommerce websites in Canada and Mexico, and sales to our international wholesale customers and licensees.
Recent Developments
In the fourth quarter of fiscal 2020, we announced plans to close over 100 retail stores by the end of fiscal 2021. We closed approximately 90 stores in the United States in the first two quarters of fiscal 2021, and we expect to close approximately 25 more stores in the second half of fiscal 2021. These retail store closures are primarily related to less profitable stores or stores in less trafficked shopping centers. We continue to look for profitable retail store locations that allow us to better serve customers, including our omni-channel customers.
Second Fiscal Quarter 2021 Financial Highlights
Each of our business segments delivered double digit growth in net sales and operating income.
Consolidated net sales increased $231.5 million, or 45.0%, to $746.4 million in the second quarter of fiscal 2021.
We believe that this increase in demand was driven by progress in vaccinations, easing restrictions related to COVID-19, the passage of pandemic relief legislation in March 2021, and a return to in-person classes driving back-to-school sales.
Growth in our North American retail store sales was primarily driven by increased store traffic due to more stores being open throughout the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020 and increased average selling prices per unit. The second quarter of fiscal 2020 was adversely impacted by the temporary closure of our retail stores in April and May 2020 and reduced demand as a result of disruptions related to COVID-19.
Our omni-channel programs continued to deliver growth as a result of our investments and enhancements in these programs, which included implementing omni-channel programs in Canada in the second quarter of
17


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
fiscal 2021 and expanding our curbside pickup program and direct-from-store shipment program in fiscal 2020.
We saw demand from our wholesale customers increase meaningfully in the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020 as many of these customers had cancelled or deferred orders of our product in response to COVID-19.
Gross profit increased $133.2 million, or 56.6%, to $368.7 million in the second quarter of fiscal 2021. Gross margin increased 370 basis points (“bps”) to 49.4% in the second quarter of fiscal 2021, primarily driven by higher consolidated net sales across our business segments, increased average selling prices per unit, decreased promotions, and decreased product costs. We are experiencing some COVID-19 related headwinds which have caused supply chain delays, including delays in the receipt of our product, and an increase in inbound freight costs. These headwinds could also adversely impact our financial results in the second half of 2021 as we expect to increase spending in the second half of fiscal 2021 to expedite shipments from Asia to mitigate pandemic-related delays in production.
Selling, general and administrative (“SG&A”) expenses as a percentage of total net sales (“SG&A rate”) decreased 650 bps to 35.9% for the second quarter of fiscal 2021. The decrease in the SG&A rate was primarily driven by increased consolidated net sales, decreased organizational restructuring charges, decreased costs associated with the COVID-19 pandemic, and impairment charges on operating lease assets in the second quarter of fiscal 2020 that did not reoccur in the second quarter of fiscal 2021. We expect to incur additional performance-based compensation costs in the second half of fiscal 2021 compared to the second half of fiscal 2020.
Operating income increased $86.6 million to $107.6 million in the second quarter of fiscal 2021, primarily due to the factors discussed above.
Net income increased $63.4 million to $71.6 million in the second quarter of fiscal 2021, primarily due to the factors discussed above and the tax impacts of each quarter.
Diluted net income per common share increased from $0.19 to $1.62 in the second quarter of fiscal 2021.
A total of $17.6 million was returned to our shareholders, comprised of a $0.40 per share cash dividend.
18


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
SECOND FISCAL QUARTER ENDED JULY 3, 2021 COMPARED TO SECOND FISCAL QUARTER ENDED JUNE 27, 2020
The following table summarizes our results of operations. All percentages shown in the below table and the discussion that follows have been calculated using unrounded numbers.
Fiscal quarter ended
(dollars in thousands, except per share data)July 3, 2021June 27, 2020$ Change% / bps Change
Consolidated net sales$746,400 $514,885 $231,515 45.0 %
Cost of goods sold379,793 284,073 95,720 33.7 %
Adverse purchase commitments (inventory and raw materials), net(2,100)(4,703)2,603 (55.3)%
Gross profit368,707 235,515 133,192 56.6 %
Gross profit as % of consolidated net sales49.4 %45.7 %370 bps
Royalty income, net6,645 3,588 3,057 85.2 %
Royalty income as % of consolidated net sales0.9 %0.7 %20 bps
Selling, general, and administrative expenses267,770 218,149 49,621 22.7 %
SG&A expenses as % of consolidated net sales35.9 %42.4 %(650) bps
Operating income107,582 20,954 86,628 >100%
Operating income as % of consolidated net sales14.4 %4.1 %1,030 bps
Interest expense15,295 15,312 (17)(0.1)%
Interest income(201)(423)222 (52.5)%
Other (income) expense, net(723)587 (1,310)nm
Income before income taxes93,211 5,478 87,733 >100%
Income tax provision (benefit)21,608 (2,678)24,286 nm
Effective tax rate(*)
23.2 %(48.9)%nm
Net income$71,603 $8,156 $63,447 >100%
Basic net income per common share$1.63 $0.19 $1.44 >100%
Diluted net income per common share$1.62 $0.19 $1.43 >100%
Dividend declared and paid per common share$0.40 $— $0.40 nm
(*)Effective tax rate is calculated by dividing the provision (benefit) for income taxes by income before income taxes.
Note: Results may not be additive due to rounding. Percentage changes that are not considered meaningful are denoted with “nm”.
Consolidated Net Sales
Consolidated net sales increased $231.5 million, or 45.0%, to $746.4 million in the second quarter of fiscal 2021. This increase was primarily driven by increased retail store traffic due to more stores being open throughout the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020, increased demand with certain of our wholesale customers as these customers began to recover from business disruptions in the second quarter of fiscal 2020 as a result of COVID-19, expansion of our omni-channel programs, and increased average selling prices per unit, partially offset by decreased net sales through our eCommerce channel. We believe that this increase in demand was driven by progress in vaccinations, easing restrictions related to COVID-19, the passage of pandemic relief legislation in March 2021, and a return to in-person classes driving back-to-school sales. The second quarter of fiscal 2020 was adversely impacted by the closure of our North American retail stores in April and May 2020 and reduced demand as a result of disruptions related to COVID-19. As a result, some demand shifted from retail stores to our eCommerce channel in the second quarter of fiscal 2020. Changes in foreign currency exchange rates used for translation in the second quarter of fiscal 2021, as compared to the second quarter of fiscal 2020, had a favorable effect on our consolidated net sales of approximately $8.0 million.
Gross Profit and Gross Margin
Our consolidated gross profit increased $133.2 million, or 56.6%, to $368.7 million in the second quarter of fiscal 2021. Consolidated gross margin increased 370 bps to 49.4% in the second quarter of fiscal 2021.
19


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Gross profit is calculated as consolidated net sales less cost of goods sold less adverse purchase commitments, net, and gross margin is calculated as gross profit divided by consolidated net sales. Cost of goods sold include expenses related to the merchandising, design, and procurement of product, including inbound freight costs, purchasing and receiving costs, and inspection costs. Also included in costs of goods sold are the costs of shipping eCommerce product to end consumers. Retail store occupancy costs, distribution expenses, and generally all other expenses other than interest and income taxes are included in SG&A. Distribution expenses that are included in SG&A primarily consist of payments to third-party shippers and handling costs to process product through our distribution facilities, including eCommerce fulfillment costs, and delivery to our wholesale customers and to our retail stores. Accordingly, our gross profit and gross margin may not be comparable to other entities that define their metrics differently.
The increase in consolidated gross profit and gross margin was primarily driven by higher consolidated net sales across our businesses segments, increased average selling prices per unit, decreased promotions, and decreased product costs, partially offset by a decreased benefit in inventory provisions and fabric purchase commitment charges related to better than expected sales of inventory and utilization of fabric that were reserved for in the first quarter of fiscal 2020, as well as increased inbound transportation and freight costs as a result of supply chain delays.
Royalty Income
Royalty income increased $3.1 million, or 85.2%, to $6.6 million in the second quarter of fiscal 2021, primarily due to increased licensee sales volume as our licensees began to recover from business disruptions related to COVID-19 pandemic.
Selling, General, and Administrative Expenses
Consolidated SG&A expenses increased $49.6 million, or 22.7%, to $267.8 million in the second quarter of fiscal 2021 and decreased as a percentage of consolidated net sales by approximately 650 bps to 35.9%. This decrease in SG&A rate was primarily driven by increased consolidated net sales, decreased organizational restructuring charges, decreased costs associated with the COVID-19 pandemic, impairment charges on operating lease assets in the second quarter of fiscal 2020 that did not reoccur in the second quarter of fiscal 2021, and decreased eCommerce fulfillment costs as a result of decreased eCommerce units shipped, partially offset by increased performance-based compensation expense, increased costs related to productivity initiatives, and increased distribution costs as a result of more units shipped to retail stores.
Operating Income
Consolidated operating income increased $86.6 million to $107.6 million in the second quarter of fiscal 2021 and increased as a percentage of net sales by approximately 1,030 bps to 14.4% in the second quarter of fiscal 2021, primarily due to the factors discussed above.
Interest Expense
Interest expense was $15.3 million both in the second quarter of fiscal 2021 and in the second quarter of fiscal 2020. Weighted-average borrowings for the second quarter of fiscal 2021 were $1.0 billion at an effective interest rate of 6.04%, compared to weighted-average borrowings for the second quarter of fiscal 2020 of $1.3 billion at an effective interest rate of 4.76%.
The decrease in weighted-average borrowings during the second quarter of fiscal 2021 was attributable to the absence of borrowings under our secured revolving credit facility during the second quarter of fiscal 2021, partially offset by the issuance of $500 million in principal amount of senior notes due 2025 in May 2020. The increase in the effective interest rate for the second quarter of fiscal 2021 was primarily due to the absence of borrowings under our secured revolving credit facility, which bore a lower interest rate than our senior notes, during the second quarter of fiscal 2021.
Other (Income) Expense, Net
Other income, net was $0.7 million in the second quarter of fiscal 2021 compared to other expense, net of $0.6 million in the second quarter of fiscal 2020.
Income Taxes
Our consolidated income tax provision was $21.6 million in the second quarter of fiscal 2021 compared to an income tax benefit of $2.7 million in the second quarter of fiscal 2020. Our effective tax rate was 23.2% in the second quarter of fiscal 2021 compared to (48.9)% in the second quarter of fiscal 2020. The effective tax rate for the second quarter of fiscal 2021 reflects our full year expectations regarding the components of our taxable income by jurisdiction, with the majority of the income earned in the U.S. under existing U.S. tax legislation.
20


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Net Income
Our consolidated net income increased $63.4 million to $71.6 million in the second quarter of fiscal 2021. This increase was due to the factors previously discussed.
Results by Segment - Second Quarter of Fiscal 2021 compared to Second Quarter of Fiscal 2020
The following table summarizes net sales and operating income, by segment, for the second quarter of fiscal 2021 and the second quarter of fiscal 2020:
Fiscal quarter ended
(dollars in thousands)July 3, 2021% of consolidated net salesJune 27, 2020% of consolidated net sales$ Change% Change
Net sales:
U.S. Retail$423,627 56.8 %$316,016 61.4 %$107,611 34.1 %
U.S. Wholesale231,630 31.0 %151,744 29.5 %79,886 52.6 %
International91,143 12.2 %47,125 9.1 %44,018 93.4 %
Consolidated net sales$746,400 100.0 %$514,885 100.0 %$231,515 45.0 %
Operating income (loss):% of segment net sales% of segment net sales
U.S. Retail$87,080 20.6 %$23,720 7.5 %$63,360 >100%
U.S. Wholesale40,592 17.5 %21,192 14.0 %19,400 91.5 %
International9,007 9.9 %(5,514)(11.7)%14,521 >100%
Unallocated corporate expenses(29,097)n/a(18,444)n/a(10,653)57.8 %
Consolidated operating income$107,582 14.4 %$20,954 4.1 %$86,628 >100%
Comparable Sales Metrics
As a result of the temporary store closures in the second quarter of fiscal 2020 in response to COVID-19, we have not included a discussion of the second quarter of fiscal 2021 retail comparable sales as we do not believe it is a meaningful metric during the period.
U.S. Retail
U.S. Retail segment net sales increased $107.6 million, or 34.1%, to $423.6 million in the second quarter of fiscal 2021. The increase in net sales was primarily driven by increased retail store traffic due to more stores being open throughout the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020 as the Company recovered from business disruptions related to COVID-19 and increased average selling prices per unit as a result of decreased promotions, partially offset by decreased net sales through our eCommerce channel as more sales shifted back to the retail stores as a result of more stores being open throughout the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020. As of July 3, 2021, we operated 775 retail stores in the U.S. compared to 864 as of January 2, 2021. The decrease in store count in the second quarter of fiscal 2021 reflects progress against our previously announced plans to close over 100 retail stores that are primarily unprofitable and in less trafficked shopping centers, by the end of fiscal 2021.
U.S. Retail segment operating income increased $63.4 million to $87.1 million in the second quarter of fiscal 2021. Operating margin increased 1,310 bps to 20.6% in the second quarter of fiscal 2021. The primary drivers of the increase in operating margin were a 770 bps increase in gross margin, a 20 bps increase in royalty income, and a 520 bps decrease in SG&A rate. The increase in gross margin was primarily due to increased average selling prices per unit and decreased product costs, partially offset by increased expense for our shrink reserve as a result of increased retail store net sales. The increase in royalty income was primarily due to increased licensee sales volumes driven by increased retail store traffic. The decrease in the SG&A rate was primarily due to increased net sales, decreased eCommerce costs due to more sales shifting back to retail stores in the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020, and decreased organizational restructuring expenses, partially offset by increased performance-based compensation expense, increased distribution and transportation costs as a result of more units shipped to retail stores, and increased marketing expense.
21


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
U.S. Wholesale
U.S. Wholesale segment net sales increased $79.9 million, or 52.6%, to $231.6 million in the second quarter of fiscal 2021 primarily due to increased demand of our Carter’s brands, including our exclusive Carter’s brands, and increased average selling prices per unit.
U.S. Wholesale segment operating income increased $19.4 million, or 91.5%, to $40.6 million in the second quarter of fiscal 2021. Operating margin increased 350 bps to 17.5% in the second quarter of fiscal 2021. The primary drivers of the increase in operating margin were a 370 bps decrease in gross margin, a 20 bps increase in royalty income, and a 700 bps decrease in the SG&A rate. The decrease in gross margin was primarily due to a decreased benefit in inventory provisions and fabric purchase commitment charges related to better than expected sales of inventory and utilization of fabric that were reserved for in the first quarter of fiscal 2020 and increased inbound freight costs, partially offset by increased average selling prices per unit and favorable customer mix. The increase in royalty income was primarily due to increased licensee sales volumes as our licensees recovered from business disruptions related to COVID-19. The decrease in the SG&A rate was primarily due to increased sales, decreased COVID-19 related charges, and better leverage of fixed distribution costs, partially offset by increased performance-based compensation expense and marketing expense.
International
International segment net sales increased $44.0 million, or 93.4%, to $91.1 million in the second quarter of fiscal 2021. Changes in foreign currency exchange rates, primarily between the U.S. dollar and the Canadian dollar, had a $8.0 million favorable effect on International segment net sales in the second quarter of fiscal 2021. The increase in net sales was primarily driven by increased retail store traffic in Canada and Mexico due to more stores being open throughout the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020 as the Company recovered from business disruptions related to COVID-19, increased sales to our international wholesale accounts, and growth in our Canadian eCommerce business primarily due to the introduction of omni-channel initiatives. Canadian eCommerce net sales increased 17.0% during the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020.
In April 2021, we temporarily closed approximately 100 retail stores in Canada in accordance with regulations put in place by local government authorities as a result of rising COVID-19 cases. We began reopening these stores in June 2021, and as of July 3, 2021, we have reopened all of these stores in Canada. As of July 3, 2021, we operated 188 stores and 40 stores in Canada and Mexico, respectively. As of January 2, 2021, we operated 193 stores in Canada, of which 60 were open, and 44 stores in Mexico, of which 16 were open.
International segment operating income was $14.5 million in the second quarter of fiscal 2021 compared to an operating loss of $5.5 million in the second quarter of fiscal 2020. Operating margin increased 2,160 bps to 9.9% in the second quarter of fiscal 2021. The increase in the operating margin was primarily attributable to a 990 bps increase in gross margin and a 1,190 bps decrease in the SG&A rate. The increase in gross margin was primarily due to decreased inventory provisions, a benefit in fabric purchase commitment charges related to better than expected sales of inventory and utilization of fabric that were reserved for in the first quarter of fiscal 2020, and increased average selling prices per unit. The decrease in the SG&A rate was primarily due to increased sales, better leverage of retail store expenses due to increased store traffic, better leverage of costs through our new omni-channel programs in Canada, and other reductions in spending, partially offset by a benefit in bad debt expense in the second quarter of fiscal 2020 that did not reoccur in the second quarter of fiscal 2021, increased performance-based compensation expense, and increased freight costs due to an increase in units sold.
Unallocated Corporate Expenses
Unallocated corporate expenses increased $10.7 million, or 57.8%, to $29.1 million in the second quarter of fiscal 2021. Unallocated corporate expenses, as a percentage of consolidated net sales, increased 30 bps to 3.9% in the second quarter of fiscal 2021. The increase as a percentage of consolidated net sales was primarily due to increased costs related to productivity initiatives and increased performance-based compensation expense, partially offset by increased sales and other reductions in spending.
22


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
TWO FISCAL QUARTERS ENDED JULY 3, 2021 COMPARED TO TWO FISCAL QUARTERS ENDED JUNE 27, 2020
The following table summarizes our results of operations. All percentages shown in the below table and the discussion that follows have been calculated using unrounded numbers.
Two fiscal quarters ended
(dollars in thousands, except per share data)July 3, 2021June 27, 2020$ Change% / bps Change
Consolidated net sales$1,533,761 $1,169,357 $364,404 31.2 %
Cost of goods sold781,524 687,445 94,079 13.7 %
Adverse purchase commitments (inventory and raw materials), net(8,430)18,134 (26,564)nm
Gross profit760,667 463,778 296,889 64.0 %
Gross profit as % of consolidated net sales49.6 %39.7 %990 bps
Royalty income, net14,108 10,926 3,182 29.1 %
Royalty income as % of consolidated net sales0.9 %0.9 %0 bps
Selling, general, and administrative expenses539,697 487,986 51,711 10.6 %
SG&A expenses as % of consolidated net sales35.2 %41.7 %(650) bps
Goodwill impairment— 17,742 (17,742)nm
Intangible asset impairment— 26,500 (26,500)nm
Operating income (loss)235,078 (57,524)292,602 >100%
Operating income (loss) as % of consolidated net sales15.3 %(4.9)%2,020 bps
Interest expense30,643 24,176 6,467 26.7 %
Interest income(426)(887)461 (52.0)%
Other (income) expense, net(1,640)5,405 (7,045)nm
Income (loss) before income taxes206,501 (86,218)292,719 >100%
Provision (benefit) for income taxes48,702 (15,680)64,382 >100%
Effective tax rate(*)
23.6 %18.2 %540 bps
Net income (loss)$157,799 $(70,538)$228,337 >100%
Basic net income (loss) per common share$3.59 $(1.64)$5.23 >100%
Diluted net income (loss) per common share$3.58 $(1.64)$5.22 >100%
Dividend declared and paid per common share$0.40 $0.60 $(0.20)33.3 %
(*)Effective tax rate is calculated by dividing the provision (benefit) for income taxes by income (loss) before income taxes.
Note: Results may not be additive due to rounding. Percentage changes that are not considered meaningful are denoted with “nm”.
Consolidated Net Sales
Consolidated net sales increased $364.4 million, or 31.2%, to $1.53 billion in the first two quarters of fiscal 2021. This increase was primarily driven by increased retail store traffic, increased demand with certain of our wholesale customers, and increased average selling prices per unit, partially offset by decreased net sales through our eCommerce channel. We believe that this increase in demand was driven by progress in vaccinations, easing restrictions related to COVID-19, the passage of pandemic relief legislation in March 2021, strong consumer reaction to our Spring product offerings, and a return to in-person classes driving back-to-school sales. The first two quarters of fiscal 2020 were adversely impacted by the closure of our retail stores in March, April, and May 2020 and reduced demand in our other businesses as a result of disruptions related to COVID-19. Changes in foreign currency exchange rates used for translation in the first two quarters of fiscal 2021, as compared to the first two quarters of fiscal 2020, had a favorable effect on our consolidated net sales of approximately $11.2 million.
Gross Profit and Gross Margin
Our consolidated gross profit increased $296.9 million, or 64.0%, to $760.7 million in the first two quarters of fiscal 2021. Consolidated gross margin increased 990 bps to 49.6% in the first two quarters of fiscal 2021.
The increase in consolidated gross profit and gross margin was primarily driven by higher consolidated net sales across our businesses segments, increased average selling prices per unit, decreased product costs, decreased excess inventory provisions
23


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
and a benefit in fabric purchase commitment charges related to better than expected sales of inventory and utilization of fabric that were reserved for in the first quarter of fiscal 2020, partially offset by increased inbound transportation and freight costs. Gross margin in the first two quarters of fiscal 2020 was adversely impacted by incremental inventory related charges of $41.8 million, inclusive of $18.1 million in adverse inventory and fabric purchase commitments, primarily from disruptions related to COVID-19.
Royalty Income
Royalty income increased $3.2 million, or 29.1%, to $14.1 million in the first two quarters of fiscal 2021, primarily due to increased licensee sales volume as our licensees recovered from business disruptions related to COVID-19.
Selling, General, and Administrative Expenses
Consolidated SG&A expenses increased $51.7 million, or 10.6%, to $539.7 million in the first two quarters of fiscal 2021 and decreased as a percentage of consolidated net sales by approximately 650 bps to 35.2%. This decrease was primarily driven by increased consolidated net sales, better leverage of retail store expenses due to more stores being open throughout the first two quarters of fiscal 2021 compared to the first two quarters of fiscal 2020, decreased organizational restructuring charges, decreased costs associated with the COVID-19 pandemic, decreased impairment charges on operating lease assets, decreased technology related costs, and decreased occupancy costs, partially offset by increased performance-based compensation expense and increased costs related to productivity initiatives.
Goodwill Impairment
During the first quarter of fiscal 2020, the Company’s market capitalization declined, and actual and projected sales and profitability decreased as a result of disruptions related to COVID-19. Based on these events, we concluded that a triggering event occurred, and we performed an interim quantitative impairment test as of March 28, 2020. Based upon the results of the impairment test, we recognized a goodwill impairment charge of $17.7 million during the first quarter of fiscal 2020 which was recorded to the Other International reporting unit in the International segment.
Intangible Asset Impairment
In the first quarter of fiscal 2020, the Company recorded non-cash impairment charges of $15.5 million and $11.0 million related to its OshKosh and Skip Hop tradename assets recorded in connection with the acquisition of OshKosh B’Gosh, Inc. in July 2005 and Skip Hop Holdings, Inc. in February 2017, respectively. The impairment reflected lower-than-expected actual sales, and lower projected sales and profitability due to decreased demand as a result of disruptions related to COVID-19.
Operating Income (Loss)
Consolidated operating income was $235.1 million in the first two quarters of fiscal 2021 compared to an operating loss of $57.5 million in the first two quarters of fiscal 2020. Consolidated operating margin increased 2,020 bps to 15.3% in the first two quarters of fiscal 2021 primarily due to the factors discussed above.
Interest Expense
Interest expense increased $6.5 million, or 26.7%, to $30.6 million in the first two quarters of fiscal 2021. Weighted-average borrowings for the first two quarters of fiscal 2021 were $1.00 billion at an effective interest rate of 6.04%, compared to weighted-average borrowings for the first two quarters of fiscal 2020 of $946.4 million at an effective interest rate of 5.00%.
The increase in weighted-average borrowings during the first two quarters of fiscal 2021 was attributable to the issuance of $500 million in principal amount of senior notes in May 2020, partially offset by the absence of borrowings under our secured revolving credit facility during the first two quarters of 2021. The increase in the effective interest rate for the first two quarters of fiscal 2021 compared to the first two quarters of fiscal 2020 was primarily due to the absence of borrowings under our secured revolving credit facility, which bore a lower interest rate than our senior notes, during the first two quarters of fiscal 2021.
Other (Income) Expense, Net
Other income, net was $1.6 million in the first two quarters of fiscal 2021 compared to other expense, net of $5.4 million in the first two quarters of fiscal 2020. This difference was primarily due to a foreign exchange loss on intercompany loans in the first two quarters of fiscal 2020 related to the strengthening of the U.S. dollar that did not reoccur in the first two quarters of fiscal 2021.
24


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Income Taxes
Our consolidated income tax provision was $48.7 million in the first two quarters of fiscal 2021 compared to an income tax benefit of $15.7 million in the first two quarters of fiscal 2020. Our effective tax rate was 23.6% in the first two quarters of fiscal 2021 compared to 18.2% in the first two quarters of fiscal 2020. The effective tax rate for first two quarters of fiscal 2021 reflects our full year expectations regarding the components of our taxable income by jurisdiction, with the majority of the income earned in the U.S. under existing U.S. tax legislation. The effective tax rate for the first two quarters of fiscal 2020 primarily reflected a year-to-date adjustment in forecasted earnings in the United States at the end of the second quarter of fiscal 2020 that was greater than what was expected at the first quarter of fiscal 2020, the increase in tax benefits related to the vesting of stock awards in the first two quarters of fiscal 2020, and the impact of goodwill impairments in the first quarter of fiscal 2020 with no corresponding tax benefit.
Net Income (Loss)
Consolidated net income was $157.8 million in the first two quarters of fiscal 2021 compared to a net loss of $70.5 million in the first two quarters of fiscal 2021, primarily due to the factors previously discussed.
Results by Segment - First Two Quarters of Fiscal 2021 compared to First Two Quarters of Fiscal 2020
The following table summarizes net sales and operating income, by segment, for the first two quarters of fiscal 2021 and fiscal 2020:
Two fiscal quarters ended
(dollars in thousands)July 3, 2021% of consolidated net salesJune 27, 2020% of consolidated net sales$ Change% Change
Net sales:
U.S. Retail$830,694 54.2 %$636,733 54.5 %$193,961 30.5 %
U.S. Wholesale515,007 33.6 %403,874 34.5 %111,133 27.5 %
International188,060 12.2 %128,750 11.0 %59,310 46.1 %
Consolidated net sales$1,533,761 100.0 %$1,169,357 100.0 %$364,404 31.2 %
Operating income (loss):% of segment net sales% of segment net sales
U.S. Retail$163,600 19.7 %$(8,656)(1.4)%$172,256 >100%
U.S. Wholesale110,650 21.5 %23,423 5.8 %87,227 >100%
International18,741 10.0 %(33,219)(25.8)%51,960 >100%
Unallocated corporate expenses(57,913)n/a(39,072)n/a(18,841)48.2 %
Consolidated operating income (loss)$235,078 15.3 %$(57,524)(4.9)%$292,602 >100%
Comparable Sales Metrics
As a result of the temporary store closures in the first two quarters of fiscal 2020 in response to COVID-19, we have not included a discussion of the first two quarters of fiscal 2021 retail comparable sales as we do not believe it is a meaningful metric during the period.
U.S. Retail
U.S. Retail segment net sales increased $194.0 million, or 30.5%, to $830.7 million in the first two quarters of fiscal 2021. The increase in net sales was primarily driven by increased retail store traffic due to more stores being open throughout the first two quarters of fiscal 2021 compared to the first two quarters of fiscal 2020 as the Company recovered from business disruptions related to COVID-19 and increased average selling prices per unit as a result of decreased promotions, partially offset by decreased net sales through our eCommerce channel as more sales shifted back to the retail stores as a result of more stores being open throughout the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020.
U.S. Retail segment operating income was $163.6 million in the first two quarters of fiscal 2021 compared to an operating loss of $8.7 million in the first two quarters of fiscal 2020. Operating margin increased 2,110 bps to 19.7% in the first two quarters of fiscal 2021. Operating loss in the first two quarters of fiscal 2020 included intangible asset impairment charges of $13.6
25


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
million and $0.5 million related to the OshKosh and Skip Hop tradenames, respectively. The primary drivers of the increase in operating margin were a 960 bps increase in gross margin, a 910 bps decrease in SG&A rate, and the intangible asset impairment charges in the first two quarters of fiscal 2020 that did not reoccur in the first two quarters of fiscal 2021. The increase in gross margin was primarily due to increased average selling prices per unit, decreased product costs, decreased inventory provisions, and decreased fabric purchases commitment charges, partially offset by increased expense for our shrink reserve as a result of increased retail store net sales. The decrease in the SG&A rate was primarily due to increased net sales, better leverage of retail store expenses due to increased store traffic, decreased COVID-19 related charges, impairment charges on operating lease assets in the first two quarters of fiscal 2020 that did not reoccur in the first two quarters of fiscal 2021, and decreased organizational restructuring expenses, partially offset by increased performance-based compensation expense and increased distribution costs.
U.S. Wholesale
U.S. Wholesale segment net sales increased $111.1 million, or 27.5%, to $515.0 million in the first two quarters of fiscal 2021 primarily due to increased demand in our Carter’s brands, including our exclusive Carter’s brands, and increased average selling prices per unit.
U.S. Wholesale segment operating income increased $87.2 million to $110.7 million in the first two quarters of fiscal 2021. Operating margin increased 1,570 bps to 21.5% in the first two quarters of fiscal 2021. Operating income in the first two quarters of fiscal 2020 included intangible asset impairment charges of $6.8 million and $1.6 million related to the Skip Hop and OshKosh tradenames, respectively. The primary drivers of the increase in operating margin were a 1,020 bps increase in gross margin, a 350 bps decrease in SG&A rate, and the intangible asset impairment charges in the first two quarters of fiscal 2020 that did not reoccur in the first two quarters of fiscal 2021. The increase in gross margin was primarily due to a benefit in inventory provisions and fabric purchase commitment charges related to better than expected sales of inventory and utilization of fabric that were reserved for in the first two quarters of fiscal 2020, increased average selling prices per unit, customer mix, and decreased product costs, partially offset by increased inbound freight costs. The decrease in the SG&A rate was primarily due to increased sales, decreased COVID-19 related charges, better leverage of fixed distribution costs, and decreased bad debt expense, partially offset by increased performance-based compensation expense.
International
International segment net sales increased $59.3 million, or 46.1%, to $188.1 million in the first two quarters of fiscal 2021. Changes in foreign currency exchange rates, primarily between the U.S. dollar and the Canadian dollar, had a $11.2 million favorable effect on International segment net sales in the first two quarters of fiscal 2021. The increase in net sales was primarily driven by increased retail store traffic in Canada and Mexico due to more stores being open throughout the first two quarters of fiscal 2021 compared to the first two quarters of fiscal 2020 as the Company recovered from business disruptions related to COVID-19, growth in our Canadian and Mexican eCommerce business, and increased sales to our international wholesale accounts. Canadian eCommerce net sales increased 59.0% during the first two quarters of fiscal 2021 compared to the first two quarters of fiscal 2020, primarily due to increased demand and the introduction of omni-channel initiatives.
International segment operating income was $18.7 million in the first two quarters of fiscal 2021 compared to an operating loss of $33.2 million in the first two quarters of fiscal 2020. Operating margin increased 3,580 bps to 10.0% in the first two quarters of fiscal 2021. Operating loss in the first two quarters of fiscal 2020 included a $17.7 million goodwill impairment charge recorded to the Other International reporting unit, a $3.7 million intangible asset impairment charge related to the Skip Hop tradename, and a $0.3 million intangible asset impairment charge related to the OshKosh tradename. The increase in the operating margin was primarily attributable to the goodwill and intangible asset impairment charges in the first two quarters of fiscal 2020 that did not reoccur in the first two quarters of fiscal 2021, a 950 bps increase in gross margin, and a 950 bps decrease in the SG&A rate. The increase in gross margin was primarily due to decreased inventory provisions, a benefit in fabric purchase commitment charges related to better than expected sales of inventory and utilization of fabric that were reserved for in the first two quarters of fiscal 2020, and increased average selling prices per unit. The decrease in the SG&A rate was primarily due to better leverage of retail store expenses due to increased store traffic, decreased COVID-19 related charges, decreased marketing costs, decreased bad debt expense, and other reductions in costs, partially offset by increased performance-based compensation expense.
Unallocated Corporate Expenses
Unallocated corporate expenses increased $18.8 million, or 48.2%, to $57.9 million in the first two quarters of fiscal 2021. Unallocated corporate expenses, as a percentage of consolidated net sales, increased 50 bps to 3.8% in the first two quarters of fiscal 2021. The increase as a percentage of consolidated net sales primarily due to increased performance-based compensation
26


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
expense and increased costs related to productivity initiatives, partially offset by decreased information technology related costs, decreased corporate occupancy costs, and other reductions in spending.
FINANCIAL CONDITION, CAPITAL RESOURCES, AND LIQUIDITY
Our ongoing cash needs are primarily for working capital and capital expenditures. We expect that our primary sources of liquidity will be cash and cash equivalents on hand, cash flow from operations, and available borrowing capacity under our secured revolving credit facility. These sources of liquidity may be affected by events described in our risk factors, as further discussed under the heading “Risk Factors” in our most recently filed Annual Report on Form 10-K and in other reports filed with the Securities and Exchange Commission from time to time.
We are experiencing some COVID-19 related headwinds which have caused supply chain delays, including delays in the receipt of our product, and an increase in inbound freight costs. These headwinds could also adversely impact our financial results in the second half of 2021 as we expect to increase spending in the second half of fiscal 2021 to expedite shipments from Asia to mitigate pandemic-related delays in production. Additionally, we expect to incur additional performance-based compensation costs in the second half of fiscal 2021 compared to the second half of fiscal 2020.
As of July 3, 2021, the Company had $1.12 billion of cash and cash equivalents at major financial institutions, including approximately $105.8 million held at financial institutions located outside of the United States. We maintain cash deposits with major financial institutions that exceed the insurance coverage limits provided by the Federal Deposit Insurance Corporation in the United States and by similar insurers for deposits located outside the United States. To mitigate this risk, we utilize a policy of allocating cash deposits among major financial institutions that have been evaluated by us and third-party rating agencies as having acceptable risk profiles.
Balance Sheet
Net accounts receivable at July 3, 2021 were $164.0 million compared to $165.6 million at June 27, 2020 and $186.5 million at January 2, 2021. The overall decrease of $1.6 million, or 0.9%, at July 3, 2021 compared to June 27, 2020 primarily reflects improved days sales outstanding, partially offset by increased customer demand. Due to the seasonal nature of our operations, the net accounts receivable balance at July 3, 2021 is not comparable to the net accounts receivable balance at January 2, 2021.
Inventories at July 3, 2021 were $619.6 million compared to $672.2 million at June 27, 2020 and $599.3 million at January 2, 2021. The decrease of $52.6 million, or 7.8%, at July 3, 2021 compared to June 27, 2020 is primarily the result of our lean inventory strategy and supply chain delays, including delays in the receipt of our product, partially offset by increased customer demand. Due to the seasonal nature of our operations, the inventories balance at July 3, 2021 is not comparable to the inventories balance at January 2, 2021.
Accounts payable at July 3, 2021 were $356.8 million compared to $458.1 million at June 27, 2020 and $472.1 million at January 2, 2021. The decrease of $101.2 million, or 22.1%, at July 3, 2021 compared to June 27, 2020 is primarily due to the timing of cash payments and change in payment terms to certain of our vendors. Due to the seasonal nature of our operations, the accounts payable balance at July 3, 2021 is not comparable to the accounts payable balance at January 2, 2021.
Cash Flow
Net Cash Provided by Operating Activities
Net cash provided by operating activities for the first two quarters of fiscal 2021 was $49.5 million compared to net cash provided by operating activities of $237.4 million in the first two quarters of fiscal 2020. Our cash flow provided by operating activities is driven by net income and changes in our working capital. The decrease in net cash provided by operating activities for the first two quarters of fiscal 2021 was primarily due to a decrease in payment terms to certain of our vendors and due to the payment of deferred retail store rents from fiscal 2020, partially offset by increased profitability.
Net Cash Used in Investing Activities
Net cash used in investing activities was $15.5 million for the first two quarters of fiscal 2021 compared to $15.3 million in the first two quarters of fiscal 2020. The increase in net cash used in investing activities for the first two quarters of fiscal 2021 is primarily due to an increase in capital expenditures, partially offset by proceeds from the sale of investments in marketable securities. Capital expenditures in the first two quarters of fiscal 2021 primarily included $11.7 million for information technology initiatives, $5.5 million for our U.S. and international retail store openings and remodels, and $2.4 million for our distribution facilities.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
We plan to invest approximately $50 million in capital expenditures in fiscal 2021, which primarily relates to strategic information technology initiatives, U.S. and international retail store openings and remodels, investments to strengthen our omni-channel capabilities, and distribution facility initiatives.
Net Cash (Used in) Provided by Financing Activities
Net cash used in financing activities was $16.4 million in the first two quarters of fiscal 2021 compared to net cash provided by financing activities of $563.0 million used in the first two quarters of fiscal 2020. This change in cash flow from financing activities was primarily due to the issuance of $500 million in principal amount of senior notes in May 2020, which did not reoccur in the first two quarters of fiscal 2021.
Secured Revolving Credit Facility
As of July 3, 2021, we had no outstanding borrowings under our secured revolving credit facility, exclusive of $4.4 million of outstanding letters of credit. As of July 3, 2021, there was approximately $745.6 million available for future borrowing. Any outstanding borrowings under our secured revolving credit facility are classified as non-current liabilities on our consolidated balance sheets due to contractual repayment terms under the credit facility. However, these repayment terms also allow us to repay some or all of the outstanding borrowings at any time.
On April 21, 2021, through our wholly owned subsidiary, The William Carter Company (“TWCC”), we entered into Amendment No. 3 to our fourth amended and restated credit agreement (“Amendment No. 3”). Among other things, Amendment No. 3 provides that through the remainder of the Restricted Period, which ends on the date the Company delivers its financial statements and associated certificates relating to the third fiscal quarter of 2021:
we must maintain a minimum liquidity (defined as cash-on-hand plus availability under the secured revolving credit facility) on the last day of each fiscal month of at least $950 million (the “Revised Liquidity Requirement”), which was increased by $250 million from $700 million; and
we may make additional restricted payments, including to pay cash dividends and repurchase common stock, in an amount not to exceed $250 million, provided that (a) no default or event of default will have occurred and be continuing or would result from the payment and (b) after giving effect to the payment, we would have been in compliance with Revised Liquidity Requirement as of the last day of the most recent month.
Approximately $0.2 million, including both bank fees and other third party expenses, has been capitalized in connection with Amendment No. 3 and is being amortized over the remaining term of the secured revolving credit facility.
As of July 3, 2021, the interest rate margins applicable to the secured revolving credit facility were 1.375% for LIBOR (London Interbank Offered Rate) rate loans and 0.375% for base rate loans.
As of July 3, 2021, the Company was in compliance with the financial and other covenants under the secured revolving credit facility.
Senior Notes
As of July 3, 2021, we had outstanding $500 million principal amount of senior notes, bearing interest at a rate of 5.625% per annum, and maturing on March 15, 2027, and $500 million principal amount of senior notes, bearing interest at a rate of 5.500% per annum, and maturing on May 15, 2025.
Share Repurchases
In the first two quarters of fiscal 2021, we did not repurchase or retire any shares in open market transactions. In the first two quarters of fiscal 2020, we repurchased and retired 474,684 shares in open market transactions for approximately $45.3 million, at an average price of $95.34 per share.
The total remaining capacity under all remaining repurchase authorizations as of July 3, 2021 was approximately $650.4 million. The share repurchase authorizations have no expiration dates.
In the first quarter of fiscal 2020, we announced that, in connection with the COVID-19 pandemic, we suspended our common stock share repurchase program. While we may elect to resume purchases at any time, the timing and amount of any future repurchases will be determined by the Company based on its evaluation of market conditions, share price, investment priorities, and other factors.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Dividends
On May 1, 2020, in connection with the COVID-19 pandemic, we suspended our quarterly cash dividend. As a result, we did not declare or pay cash dividends through April 27, 2021. On April 27, 2021, in connection with the announcement of the amendment on our secured revolving credit facility, our Board of Directors authorized a quarterly cash dividend payment of $0.40 per common share, which was paid in the second quarter of fiscal 2021.
The Company did not declare or pay cash dividends in the second fiscal quarter ended June 27, 2020. In the first two fiscal quarters ended June 27, 2020, the Company declared and paid cash dividends per share of $0.60.
Our Board of Directors will evaluate future dividend declarations based on a number of factors, including restrictions under our secured revolving credit facility, business conditions, our financial performance, and other considerations. Provisions in our secured revolving credit facility could have the effect of restricting our ability to pay cash dividends on, or make future repurchases of, our common stock, as further described in Note 8, Long-Term Debt to the consolidated financial statements.
Seasonality
We experience seasonal fluctuations in our sales and profitability due to the timing of certain holidays and key retail shopping periods, which generally has resulted in lower sales and gross profit in the first half of our fiscal year versus the second half of the fiscal year. Accordingly, our results of operations during the first half of the year may not be indicative of the results we expect for the full year.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our critical accounting policies and estimates are described under the heading “Critical Accounting Policies and Estimates” in Item 7 of our most recent Annual Report on Form 10-K for the 2020 fiscal year ended January 2, 2021. Our critical accounting policies and estimates are those policies that require management’s most difficult and subjective judgments and may result in the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies and estimates include: revenue recognition and accounts receivable allowance, inventory, goodwill and tradename, accrued expenses, loss contingencies, accounting for income taxes, foreign currency, employee benefit plans, and stock-based compensation arrangements. There have been no material changes in these critical accounting policies and estimates from those described in our most recent Annual Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Currency and Interest Rate Risks
In the operation of our business, we have market risk exposures including those related to foreign currency risk and interest rates. These risks, and our strategies to manage our exposure to them, are discussed below.
Currency Risk
We contract for production with third parties, primarily in Asia. While these contracts are stated in U.S. dollars, there can be no assurance that the cost for the future production of our products will not be affected by exchange rate fluctuations between the U.S. dollar and the local currencies of these contractors. Due to the number of currencies involved, we cannot quantify the potential impact that future currency fluctuations may have on our results of operations in future periods.
The financial statements of our foreign subsidiaries that are denominated in functional currencies other than the U.S. dollar are translated into U.S. dollars using period-end exchange rates for assets and liabilities and weighted-average exchange rates for revenues and expenses. Gains and losses resulting from translating assets and liabilities from the functional currency to U.S. dollars are included in accumulated other comprehensive income (loss).
Our foreign subsidiaries typically record sales denominated in currencies other than the U.S. dollar, which are then translated into U.S. dollars using weighted-average exchange rates. The changes in foreign currency exchange rates in the second quarter
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of fiscal 2021, compared to the second quarter of fiscal 2020, had a $8.0 million favorable effect on our International segment’s net sales.
Fluctuations in exchange rates between the U.S. dollar and other currencies may affect our results of operations, financial position, and cash flows. Transactions by our foreign subsidiaries may be denominated in a currency other than the entity's functional currency. Foreign currency transaction gains and losses also include the impact of intercompany loans with foreign subsidiaries that are marked to market. In our consolidated statement of operations, these gains and losses are recorded within Other (income) expense, net. Foreign currency transaction gains and losses related to intercompany loans with foreign subsidiaries that are of a long-term nature are accounted for as translation adjustments and are included in Accumulated other comprehensive income (loss).
Interest Rate Risk
Our operating results are subject to risk from interest rate fluctuations on our amended secured revolving credit facility, which carries variable interest rates. As July 3, 2021, there were no variable rate borrowings outstanding under the amended secured revolving credit facility. As a result, the impact of a hypothetical 100 bps increase in the effective interest rate would not result in a material amount of additional interest expense over a 12-month period.
Other Risks
We enter into various purchase order commitments with our suppliers. We generally can cancel these arrangements, although in some instances we may be subject to a termination charge reflecting a percentage of work performed prior to cancellation.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of July 3, 2021.
Changes in Internal Control over Financial Reporting
The principal executive officer and principal financial officer also conducted an evaluation of the Company’s internal control over financial reporting (“Internal Control”) to determine whether any changes in Internal Control occurred during the fiscal quarter ended July 3, 2021 that have materially affected, or which are reasonably likely to materially affect, Internal Control.
There were no changes in the Company’s Internal Control that materially affected, or were likely to materially affect, such control over financial reporting during the fiscal quarter ended July 3, 2021.
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PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to various claims and pending or threatened lawsuits in the normal course of our business. The Company is not currently a party to any legal proceedings that it believes would have a material adverse effect on its financial position, results of operations, or cash flows.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors described in our Form 10-K for the 2020 fiscal year ended January 2, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Share Repurchases
The following table provides information about share repurchases during the second quarter of fiscal 2021:
Period
Total number of shares purchased(1)
Average price paid per share
Total number of shares purchased as part of publicly announced plans or programs(2)
Approximate dollar value of shares that may yet be purchased under the plans or programs(3)
April 4, 2021 through May 1, 2021— — — $650,447,970 
May 2, 2021 through May 29, 20211,057 $104.52 — $650,447,970 
May 30, 2021 through July 3, 2021— — — $650,447,970 
Total1,057 $104.52 — 
(1)All of the shares purchased during the current quarter represent shares of our common stock surrendered by our employees to satisfy required tax withholding upon the vesting of restricted stock awards.
(2)As previously announced, the Company, in connection with the COVID-19 pandemic, suspended its common stock share repurchase program in 2020. Refer to the open market repurchases as disclosed in Note 7, Common Stock, to the consolidated financial statements.
(3)Under share repurchase authorizations approved by our Board of Directors.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. MINE SAFETY DISCLOSURES
N/A
ITEM 5. OTHER INFORMATION
N/A
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ITEM 6. EXHIBITS
Exhibit NumberDescription of Exhibits
3.1
3.2
4.1
Amendment No. 3, dated as of April 21, 2021, to the Fourth Amended and Restated Credit Agreement dated as of August 25, 2017, by and among The William Carter Company, as U.S. Borrower, The Genuine Canadian Corp., as Canadian Borrower, Carter’s Holdings B.V., as Dutch Borrower, JPMorgan Chase Bank, N.A., as Administrative Agent, Collateral Agent, U.S. Dollar Facility Swing Line Lender and U.S. Dollar Facility L/C Issuer, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Agent, a Multicurrency Facility Swing Line Lender and a Multicurrency Facility L/C Issuer, JPMorgan Chase Bank, N.A., as European Agent, JPMorgan Chase Bank, N.A., London Branch, as a Multicurrency Facility Swing Line Lender and a Multicurrency Facility L/C Issuer, each lender from time to time party thereto and the other parties party thereto (incorporated by reference to Exhibit 10.1 of Carters, Inc.s Current Report on Form 8-K filed on April 26, 2021).
31.1
31.2
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Exhibit No. (101).INSXBRL Instance Document - the instant document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
Exhibit No. (101).SCHXBRL Taxonomy Extension Schema Document
Exhibit No. (101).CALXBRL Taxonomy Extension Calculation Linkbase Document
Exhibit No. (101).DEFXBRL Taxonomy Extension Definition Linkbase Document
Exhibit No. (101).LABXBRL Taxonomy Extension Label Linkbase Document
Exhibit No. (101).PREXBRL Taxonomy Extension Presentation Linkbase Document
Exhibit No. 104The cover page from this Current Report on Form 10-Q formatted as Inline XBRL

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


CARTER’S, INC.

July 30, 2021/s/ MICHAEL D. CASEY
Michael D. Casey
Chief Executive Officer
(Principal Executive Officer)


July 30, 2021/s/ RICHARD F. WESTENBERGER
Richard F. Westenberger
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)



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