(Adds analyst comments)
By Dilipp S. Nag
BANGALORE, July 22 (Reuters) - Children’s clothing retailer Carter’s Inc (CRI.N) posted a surprise second-quarter profit, driven by strength in Carter’s retail segment.
However, the company, which competes with Children’s Place Retail Stores Inc (PLCE.O) and Gymboree Corp GYMB.O, said it would continue to take a “cautious” outlook for the year given the uncertainty of the current economic environment.
“Although this quarter was a positive surprise, the retail segment of Carter’s probably will not perform as strongly in the second half,” Sterne, Agee & Leach Inc analyst Margaret Whitfield said by phone.
The analyst, who has a “buy” rating on the stock, expects the segment sales to be up mid-single digits in the second half, compared with double-digit growth in the second quarter, because of more challenging comparisons.
Carter’s retail store sales rose 21.5 percent to $92.7 million, driven by a comparable store sales rise of 17.3 percent.
The Atlanta-based Carter’s posted second-quarter net income of $2.8 million, or 5 cents a share, compared with a net loss of $143.4 million, or $2.48 a share, a year earlier.
The company earned 10 cents a share, excluding a charge of $5.3 million related to the retirement of its chief executive, Frederick Rowan.
Total net sales rose 4.8 percent to $301.7 million.
Analysts on average expected the company to post a loss of 1 cent a share, before special items, on revenue of $284.6 million, according to Reuters Estimates.
The company said OshKosh continued to hurt its results for the quarter. OshKosh sells clothing and accessories for children, with the bulk of its business being in the two-to-seven year age group.
Net sales of its OshKosh brand increased 7.7 percent while OshKosh retail store sales rose 2 percent. Comparable OshKosh retail store sales declined 0.9 percent.
Carter’s said it expects to achieve improved profitability from its OshKosh retail segment in the second half of this year by improving its product offerings and managing inventory better.
Carter’s, which sells its Child of Mine brand to Wal-Mart Stores Inc (WMT.N) and Just One Year brand to Target Corp (TGT.N), said it plans to open 25 Carter’s and two OshKosh stores during fiscal 2008. It had 231 Carter’s and 163 OshKosh stores as of June 28.
Carter’s shares closed up $1.19 at $15.26 Tuesday on the New York Stock Exchange. (Editing by Himani Sarkar, Deepak Kannan)