Will Carter’s wholesale business withstand private label competition in 2017?
Report Available: February 10, 2017
Blueshift’s initial research shows CRI’s wholesale business facing a challenge from an increased focus on private label brands in its partner stores, while also seeing demand decline at mall-based retailers. But the company is pushing its online strategy with its relationship with Amazon, and designing its marketing and operations for the millennial mom.
- CRI’s Q3 earnings missed expectations, while its revenue was up 6.1% year to year, in-line with consensus. It wholesale segment grew 3.7% from a year ago while the retail side was up 6.7% year to year on the strength of 25.2% online comp sales growth which offset comp store sales decline of 4.1%. Demand for fall products was sluggish in August so promotions were higher than expected. CRI expects net sales growth of 5% to 6% in Q4 and FY 2016, though wholesale business sales are expected to be comparable to the prior year.
- CRI sells its Carter’s, Child of Mine, Just One You, and Precious Firsts in retailers such as WMT, TGT, KSS, JCP, and M. Many of these companies also sell their own private label children’s apparel, providing direct competition to the CRI lines in their stores. TGT relaunched its children’s line in July (complete with a celebrity-filled party), dropping its Circo and Cherokee lines to introduce the new Cat & Jack label, which includes a line for toddlers and babies, collecting input from 1,000 kids age 4-12. The line is expected to reach $1 billion in sales in its first year, leaving questions as to where its Carter’s products fit.
- CRI expects Spring 2017 wholesale bookings will be lower from a year ago because of a decline in demand from mall-based retailers. M and KSS revealed slow holiday sales, and Toys ‘R’ Us, which carries Carter’s clothes in its Babies ‘R’ Us stores, reported lower same store sales this holiday season, including continued softness in its baby segment. And with CRI opening more than 60 Carter’s stores in FY 2016, there may be some cannibalization of its wholesale business.
- CRI said non-mall-based bookings, about 85% of the wholesale business, are up. The company is also building a relationship with Amazon to grow its e-commerce business, developing an assortment strategy to differentiate products for the customer buying Carter’s online. It is also tailoring its marketing and operations to the millennial mom, focusing on digital and omnichannel to create a seamless shopping experience with an improved mobile website.
How are sales, inventory, and price of CRI’s products at its wholesale partners? How is TGT treating Carter’s now that it is pushing its own Cat & Jack line? What effect will the opening of new CRI brick-and-mortar stores have on the company’s wholesale business? What effect is the decline in overall sales at malls and department stores having on CRI’s wholesale products? How is CRI’s relationship with Amazon proceeding? To answer these and other questions, Blueshift will issue a market research report by gathering data from independent sources in the following areas: Store personnel, Supply chain and distribution, and Industry specialists.
Companies: Carter’s (CRI), Walmart (WMT), Target (TGT), Kohl’s (KSS), Macy’s (M), J.C. Penney (JCP)
Research Begins: Jan. 23, 2017