Carter's Inc (CRI) 2006 Q1 法說會逐字稿

Good day, everyone, and welcome to Carter's first-quarter earnings conference call. On the call today are Fred Rowan, and Chief Executive Officer, Joe Pacifico, President, and Mike Casey, Chief Financial Officer.

After today's prepared remarks, we will take questions as time allows. It you have any follow-up questions after today's call, please direct them to Eric Martin, Vice President of Investor Relations. Mr. Martin's direct telephone number is 404-745-2889. (Operator repeats number.)

Carter's issued its first-quarter earnings press release yesterday after the market closed. The text of the release appears at Carter's Web site at www.Carters.com under the Press Release section.

Before we begin, let me remind you that statements made on this conference call and in the Company's press release, other than those concerning historical information, should be considered forward-looking statements, and actual results may differ materially. For a detailed discussion of factors that could cause actual results to vary from those contained in the forward-looking statements, please refer to the Company's most recent annual report filed with the Securities and Exchange Commission.

Now, I would like to turn the call over to Mr. Rowan. Please go ahead, sir.

Thank you and good morning. Thanks for joining our call.

We achieved good results in the quarter; we're off to a good start. We have sufficient visibility to have confidence in our year.

I think we all realize the concern over rising interest rates and energy costs. We can only respond by saying we have a diversified growth platform of essential brands and essential products that usually weather economic storms. We have a long history to substantiate that.

Our brands are the most recognized and regarded. We also have three strong sub brands with Joy by Carter's and Genuine Kids by OshKosh at Target, and Child of Mine at Wal-Mart. With the acquisition of OshKosh, we've most assuredly extended the revenue and earnings horizon for our company. That integration is going well.

We like our chances this year because products are selling well and in greater breadth than I can recall, also because fall bookings are in and they're good, and our spring '07 products look dynamic. I don't remember being this strong in our product offering. Consequently, our inventories are well in line across all channels. No, we do not have inventory issues with Wal-Mart.

Our global supply chain is very competitive. Because of our investments in talent, systems, planning and allocation and the explosion of unit growth, we have significant leverage to lower costs, increase speed, and keep adding benefits to our products, all at no detriment to gross margins with ever-increasing operating margins.

With that said, our long-term business strategy is to build a business system that is designing and executing things that matter to consumers and customers. We intend to design a model that is very difficult to emulate.

It's important to recognize, while we are optimistic about 2006, we are more excited about our long-term prospects. You should view that we are a company in transition with significant investments built into our guidance. We could make 2006 look better, but we intend to extend the years whereby we deliver 8 to 10% topline and 15 to 20% bottom line.

While the acquisition of OshKosh contributes materially, there are numerous initiatives that enable us to stimulate the Carter's brand and its sub brands. We're very focused on Carter's.

The guts of our model are, one, a significant elevation of product design. This includes all brands and all categories -- our baby, sleepwear, play clothes and licensed products. Keep in mind, we began with baby in Carter's for spring '06 and the results are very strong. Sleepwear and play clothes will follow in fall '06 and spring '07. We have funded all of this through cost reductions. We expect an uplift in Carter's as we enter the second half and more significantly in the first half of '07.

The second initiative is increasing the power of Carter's and OshKosh brands with a very distinct point of view. We have a big idea for each brand and regret we cannot share that for competitive reasons, but we consider them distinct and powerful. Carter's is launching beginning in the second half, and OshKosh and the latter half of '07. There will be obvious signs of change, however, in both brands beginning in the third quarter.

Thirdly, we're leading the brands with our own stores. Each brand will have a very aspirational store format, and we will accelerate store openings beginning this year. This will increase consumer pull for our stores and wholesale channel, as the brands will set a higher standard.

Fourthly, we are developing strong marketing agendas for our wholesale accounts, combined with renewed relationships with retail management and very disciplined business reviews. We have had very productive meetings with our top accounts. We're looking together to two or three-year plans for growth.

Fifthly, we are repositioning OshKosh to pre-eminence. That's going to take some time but we're doing that with product, marketing investments, and talent.

Finally, we want to lead the industry in talent, where we have made remarkable progress.

I'm going to turn it over now to Joe Pacifico, our President, for more specifics about our performance.

Thank you.

This morning, I will give you an overview of the first quarter and an outlook for the balance of 2006 for Carter's and OshKosh on a stand-alone basis. We had an excellent quarter based both on our financial result and on our progress against our key strategic initiatives.

I will start by talking about Carter's. Carter's had another strong quarter with consolidated revenue up 9%. As I talked before, one of our strengths is our balanced portfolio. It provides us multiple growth streams. During Quarter One, we had positive growth across all three distribution channels, wholesale, retail and mass, and in all three product markets, baby, sleepwear and playwear.

Our spring product selling continues to be strong across all channels, which we believe will continue to drive positive performance in the second quarter. This spring product utilizes a lot of our new branding, our new packaging, new size information and the reaction has really been strong from consumers and retailers.

Now, I will walk you through the performance of the different segments for Carter's.

Carter's wholesale revenue for the quarter was up 5%, excluding off-price. Our baby business is doing very well at wholesale, up 6% in revenue in the quarter. We are very pleased with these results, since baby is our core and our most developed business and includes our highest product margins. Baby performance continues to be driven by growth in our core starters program, which are up over 20% in over-the-counter sales in Quarter One. You remember, Starters makes up approximately two-thirds of our baby business. We have an excellent over-the-counter selling in baby and continue to exceed our replenishment calls. This positive selling has led to faster inventory turns for our customers, which is one of their key initiatives.

Looking forward, we have all of our seasonal bookings, baby startups, in hand for the second -- for the third and fourth quarters, so we're confident we will achieve our goal in baby in 2006.

In regard to sleepwear, our revenue was up slightly to last year. Our spring sleepwear selling has been positive and has achieved our objectives. All of our fall sleepwear bookings are in, and for the full year, we expect sleepwear growth to be in the mid single digits. We have completed our sourcing transition on sleepwear to all full package, and this will continue to help us improve our product benefits and our margins in this category.

In regards to our third product segment, playwear, revenue was up 6% for the quarter. Spring playwear over-the-counter selling has been positive. We've continued to perform better each season, which allows us to expand consumer segments and gain incremental space. All fall, 2006 playwear bookings are in and we continue to be confident in our projections of high single digit growth in playwear for the full year.

In regards to our top accounts, we had a good performance in Quarter One. Shipments to seven of our eight top accounts were positive over last year with five up in double digits. Again, we have helped them achieve these strong sales figures by operating with lower inventory, which is yielding faster turns, and increasing our customers' profitability. At the same time, we're focusing on developing two to three-year business plans with our top accounts and are meeting regularly with senior management to be sure we're building collaborative plans.

Based on our first-quarter selling and having secured all of our fall orders, we have great visibility to 2006 and are confident we will achieve our plans of 8 to 10% topline growth in the wholesale channel.

In regard to mass, combined revenue for the mass channel was up 37% in the quarter. Half of this increase came from new space gains and a third came from increases in productivity.

In regards to Just One Year, our shipments to Target were up 51% in the quarter. We have had excellent selling on our brand (indiscernible) since the reset in the second half of last year. This will continue to drive baby replenishment orders in 2006.

In regards to our hanging program, spring selling has been very successful across all categories, and we have two incremental programs with Target for spring '06. Both are doing very well. Looking forward, we have booked all three fall deliveries at Target and are on track to meet our fall goals.

Our Child of Mine brand at Wal-Mart -- another great quarter. Our revenue was up 29%. Brand (indiscernible) season to date is performing at plan or above, and all of our fall bookings again are in from Wal-Mart, so we are confident we will achieve our 2006 revenues in the mass channel.

Talking about our retail stores, at the end of Quarter One, Carter's had 199 retail stores, 48 brand stores and 151 outlets. We opened seven brand stores in Quarter One and closed one outlet.

Quarter revenue -- first-quarter revenue was up 2% for the chain, while comps were down 2.2 up against last year's comps of plus 8.8. We had a tough first quarter in revenue due to, we believe, decreases of traffic in March due to the Easter shift from March last year to April this year. Actually, we were up positive 3 comp through the first two weeks of March and the last three weeks really drove our decline for the quarter. Despite this decreased traffic, we're very encouraged by the fact our spring products are selling very well and our conversion rates have been excellent. We've also increased our gross margin by 100 points over last year. But more importantly, our traffic and comp-store performance is positive in April.

As we approach the second half, we're making significant moves to drive increased performance. We have a strong retail team in-place and beginning with fall, we will start to implement quarterly marketing initiatives that will drive higher emotional (indiscernible) our window, in our stores and in our direct mail programs. In addition, we've established a more disciplined floor plan that supports more frequent product updates and also a more disciplined markdown [cape]. We are confident our retail comp gains guidance for the full year, based on the strength of our product and the marketing actions that are planned for fall. We anticipate opening 30 new stores for the full year, 26 brand and 4 outlets.

Talk about OshKosh wholesale -- we continue to make progress with the OshKosh integration and are encouraged by our results. As you know, we recently finished booking fall, 2006 and are in the middle of booking holiday, 2006. As we are -- we believe, for the second half, we will be flat to last year. However, we are expecting increased profitability based on that we have eliminated planned upfront discounts and edited unprofitable accounts. Our current projections show an increase of 500 basis points in our wholesale standard margin for the second half versus last year.

As we said before, this integration is a process and we are learning and improving every step of the way. We have received excellent feedback from our accounts, and we're building that into our future lines. We will continue to make adjustments in improvement to meet the needs of our customers and consumers. We are beginning to drive a stronger key item competition for the brand and are driving a more aggressive marketing agenda for our customers.

In regard to OshKosh retail, we had 142 stores at the end of the quarter. We opened one new outlet and we closed one. For the full year, we expect to open 14 stores and close 3. The OshKosh outlets suffered from the same traffic weakness that affected Carter's. In addition to traffic, their spring product was not up to expectation. That, combined with the intentional elimination of unprofitable product categories, cost us some revenue. That being said, the new summer products started shipping 2-20 and 3-20, are selling well, and April has been strong and our margins are improved.

We believe second quarter and second half will be very positive for retail, based on several initiatives. The summer and fall products are much stronger than last year. We simplified the pricing and in-store promotions to really create a more compelling store-wide value formula. We are also instituting the same types of marketing programs that we're running at Carter's.

In summary, our priorities for OshKosh business are continued product improvement and more competitive value formula, key item focus, stronger and more important use of denim in the mix, continue to buildout our retail performance, which we see happening in April, and renewed focus on our wholesale chain. If you remember, Carter's does almost four times what OshKosh does in wholesale, synergistic cost reductions and the continued integration of the two organizations.

In regards to our supply chain, we continue to deliver solid performance while also integrating the needs of the OshKosh business. Our strategy continues to be focused on lowering costs, which are reinvested into product benefits, which in turn drive revenue growth.

I mentioned earlier we've done a good job of managing inventory and flow for our wholesale customers. We've also done as well increasing our own inventory turns. For the trailing 12 months, our turn was 4.2 versus 3.7 last year. Our inventory qualities also significantly improved through the reduction of excess. At the same time, we continue to lower our distribution costs, which were plus 3%, while at the same time we increased our revenue 9%.

In closing, we had a robust quarter, strong product performance driving growth across all channels of product categories. Every season is getting stronger as OshKosh -- as we refine the product mix and pricing strategy, narrow the complexity and begin to experience the benefits of our joint leverage. The teams are working well together, and the integration of people and processes is proceeding according to our expectations.

Now, I'd like to turn the session over to Mike Casey.

Thanks, Joe. Good morning, everybody. What I'd like to do is walk you through our first-quarter results, and I will update you on our outlook for the balance of year.

As you've heard, our first-quarter sales and earnings were better than we had expected. We are reporting GAAP earnings of $0.52 per share, which includes charges of $0.02 per share related to the amortization of OshKosh intangibles, and $2.02 per share in compensation expense related to the new standard for stock-option accounting. Excluding these charges, adjusted earnings are $0.56 share, up 22% in the quarter and $0.03 better than the guidance we shared with you on our last call.

For clarity, what I'd like to do is walk you through our results and our guidance, excluding these charges, which we've outlined in our press release. The press release is available on our Web site.

With respect to first-quarter sales, we had growth in all channels of distribution, with and without the benefit of OshKosh. Our consolidated sales were $296 million, up 44%, including $71 million in sales from OshKosh. So OshKosh represented about 24% of our first-quarter sales. Excluding OshKosh, our consolidated sales were $225 million, up over 9%.

Our consolidated wholesale sales increased $32 million or 32% in the first quarter, including $29 million in wholesale sales from OshKosh. Excluding OshKosh and excluding Carter's off-price sales, Carter's wholesale sales increased about $4.5 million or 5% in the first quarter. As Joe mentioned, we also had very strong demand in the mass channel with sales up $14.5 million or 37% in the first quarter, when comparing to growth in both our Child of Mine and Just One Year brands.

On a consolidated basis, our retail sales were up $44 million or 64%, driven by OshKosh retail sales of $42 million. Excluding OshKosh, Carter's retail sales increased about 2% in the first quarter. While comps in Carter's retail stores declined about 2% in the quarter, their gross margin increased 100 basis points.

As I mentioned on our last call, we've made significant progress closing unprofitable OshKosh retail stores. Since the acquisition, we've closed 30 OshKosh stores; that's about 18% of the stores acquired. We've made very good progress improving OshKosh portfolio with the probability of its stores. The four-wall contribution of OshKosh retail stores improved 60 basis points to 17% in the first quarter. By comparison, the four-wall contribution of our Carter's retail stores was 28% in the first quarter, so plenty of room for improvement in OshKosh store profitability.

On a consolidated basis, our gross margin in first quarter was 36.5%, compared to 36.7% last year, so down 20 basis points. Gross margin for our Carter's brand products was about 36%, down 60 basis points from last year, driven primarily by the significant increase in mass channel sales during the quarter. We expect the Carter's brand gross margin for the year to be comparable to last year -- about 36.5%.

OshKosh contributed favorably to gross margin performance in the quarter, due to its retail store mix. OshKosh's retail sales represented about 60% of its total sales during the quarter. OshKosh's gross margin was about 38% in the first quarter and expected to be 38 to 40% for the year.

With respect to spending in the quarter, SG&A on a consolidated and adjusted basis was about 27% of sales, up 210 basis points compared to last year. This increase is due entirely to OshKosh's higher cost structure, given its retail sales mix. As you know, since last year, we've also made significant investments in a new retail management team. In other areas, we continue to manage the growth in spending to be lower than the growth in sales.

On a consolidated basis, our royalty income for the quarter was $7.2 million. That's an increase of $3.7 million and includes $3.3 million in royalties earned by OshKosh. Excluding OshKosh, our royalty income was up 9.5% in the quarter, driven by Carter's brand licensed products.

As expected, due to the impact of the acquisition on a consolidated basis, our operating margins were 11.6%, down 160 basis points from the prior year. The decline is entirely due to the acquisition of OshKosh. Prior to the acquisition, OshKosh's operating margins were less than 5% on an annual basis with all of its profitability earned in the second half of the year.

Consistent with our integration plan, we are improving OshKosh's operating margin, and we've made significant progress since the acquisition. For the quarter, we've achieved positive operating margin for OshKosh. We expect this trend to continue in the second quarter. This is the first time in several years the OshKosh has achieved an operating profit in the first half of the year.

We are on track to realize our acquisition cost savings initiatives, which are estimated to be over $20 million this year. We continue to believe that, over the next few years, OshKosh's operating margin could approximate Carter's operating margin of over 13%.

Interest expense for the first quarter was about $7 million, up 56% since last year due entirely to the acquisition. Our weighted average borrowings under our term loan were $425 million in the first quarter, compared to $164 million in the first quarter of last year. We had no (indiscernible) for borrowings during the quarter. We have $125 million revolving credit facility, and we expect our average borrowings on the revolver this year to be less than $15 million with a peak need of about $30 million midyear. We had significant benefit from the refinancing last year. Our average borrowing rate for the first quarter was about 6.5% compared to over 9% last year.

In terms of liquidity, cash flow used in operations in the first quarter was about $14 million, compared to positive cash flow of $25 million from operations in the first quarter of last year. Cash flow in the first quarter was impacted by significant reductions in Accounts Payable and accrued liabilities and increases in Accounts Receivable, partially offset by a reduction in inventories. These changes in working capital were driven by the timing of payments to our vendors and shipments to our wholesale customers, in addition to the impact of OshKosh. Inventories at the end of the first quarter were up about $48 million compared to the prior year. OshKosh accounts for about 45 million of this $48 million increase. Excluding OshKosh, inventory levels in our Carter's business are up about 3% over last year and reflects our progress improving the efficiency of our supply chain.

Given the strength of our cash position, we made a voluntary payment of $9 million on the term loan in the first quarter. Since the acquisition and refinancing last summer, we've reduced our new term loan by over $80 million, or about 16%. We expect to pay down the term loan 30 to $40 million in total this year. The required amortization is only $4.5 million.

CapEx for the first quarter was only $2 million, primarily for investment in our retail stores. We still expect CapEx for the year will be about $40 million, over half of which will be invested in our retail stores.

With respect to guidance for the second quarter, consolidated sales are projected to be $275 million. That's up 42% and assumes $71 million in sales from OshKosh. Excluding OshKosh, second-quarter sales are projected to be $204 million, up 6% and assumes Carter's wholesale sales, excluding off-price, will be up 2%, our retail sales up 10%, with comps up 3 to 5% and mass channel sales in the second quarter are projected to be up over 20%.

Earnings per share for the second quarter are planned at $0.32 per share, up 10% compared to last year, excluding charges of $0.02 per share related to the amortization of OshKosh intangibles and $0.02 per share in compensation expense related to the new standard for stock-option accounting.

On our last call, we projected 15% growth in earnings in the first half of this year, over 20% growth in earnings in the second half. Based on stronger first-quarter results and our current visibility on the balance of the year, first-half earnings are now expected to be up 17%, second-half earnings still planned up over 20% with mid-teen growth in earnings in the third quarter, over 30% growth earnings expected in the fourth quarter.

With respect to sales for the year, we expect consolidated sales for 2006 will be $1.335 billion to $1.350 billion, up 19 to 20%. We expect OshKosh to contribute about $340 million in sales this year. Excluding OshKosh, we expect Carter's sales to be over $1 billion this year, up 10%.

We are raising our previous earnings guidance for the year, based on our first-quarter results. Earnings for the year are now projected to be $2.93 to $2.98 per share, up 20 to 22% over last year, excluding $0.10 per share in charges related to the amortization of OshKosh intangibles and $0.08 per share in compensation expense related to the adoption of the new standard for stock-option accounting.

With respect to cash flow, we expect cash flow from operations this year to be 60 to $70 million.

That concludes our prepared remarks on our business. We will open up the call to your questions.

Thank you, sir. Ladies and gentlemen, our question-and-answer session will be conducted electronically. (OPERATOR INSTRUCTIONS). Melissa Otto, DE Investment Research.

Good morning and congratulations on a great quarter. Just a question on Wal-Mart -- I would like to get some specific metrics about the sort of progress you're making in that retailer, and if you can give us some details around the brand wall and what sort of safe allocation you're seeing and how the growth is coming through.

Brand wall performing very well. We will reset again midyear, which -- that's all confirmed and ready to roll.

As far as floor fixtures, we had significant gain this year in a playwear fixture. We had a small business in the first half of '05 but it's become a major business and performing really, really well in spring '06. All the other games are really productivity on the same rack and a little bit of comp in new store.

Would you give us a little bit more color around the productivity? Do you have any specifics around that?

I have a total for the mass chain of a third of our business was driven by productivity. I don't know if I have it specifically for them. I have to get back to you on the specifics on the Wal-Mart. In total, it was 33% of the business was driven by productivity. I will get back to you, Melissa, on the Wal-Mart specifically.

No problem. That's my only question for today. Thanks and congratulations on a great quarter.

Brad Stephens, Morgan Keegan.

Good morning, guys. Congrats on a good quarter. A couple questions for you -- I noticed that the revenue guidance for the year, you kind of tightened your range, brought the top end down about 10 million. Could you comment? Is that due to better visibility now? If it is, in fact, due to better visibility of OshKosh, can you remind us or update us on the different distribution that we will see this year versus last year?

Let me speak to the guidance. Sure, we are one month, one quarter rather into the year, so we have better visibility on what the year will be, so we decided to bring up the bottom end of the range and lower the top range. But if you look at it as a percentage, we are a much larger company know, so a $10 million adjustment on the top end is about 0.7% of sales, so (indiscernible) simply better visibility. (indiscernible) reflects the first-quarter results in retail. I will say, even though the comps were down in first-quarter retail, I feel good about the outlook for the balance of the year. We are expecting good comp growth balance of the year.

On OshKosh, could you update us on maybe where we will see OshKosh at this fall, where we didn't last fall?

In terms of distribution, we don't like to give account-specific data, but I think it is fair to say that the distribution will be more limited than Carter's. We're going to be more selective with where we place the OshKosh brand.

Okay. Then last question -- I think you commented that seven of your top eight retailers were up at Carter's and one was down. Without naming names, I will take a guess at who that is. Would you expect them to remain a problem for the remainder of the year?

We plan -- yes, we've one of the top seven planned down slightly for the year, so that was part of our plan all along.

So that will continue to -- that problem will continue to persist?

That's reflected in the guidance, Brad.

All right, fantastic, guys. Thanks.

(OPERATOR INSTRUCTIONS). Christina De Marval, Next Generation Equity Research.

Thank you. I'd like to add my congratulations, too, on a very good quarter.

First, some housekeeping questions, Mike -- could you repeat what the wholesale, the Carter's wholesale, excluding off-price sales?

In the first quarter, it was up 4.8% -- good growth in both baby and playwear, about 6% each, and sleepwear was up about 1% in the first quarter.

Okay.

I think that's an important point to remind -- if you recall, last year, our off-price sales last year were up over about -- were over $30 million. We intentionally moved a lot of our excess goods out through the off-price channel. Our excess inventory position is much better than it was last year, so each year -- each quarter this year I think it's going to be important to understand the growth in our regular wholesale business and then the total wholesale business with off-price. But we are expecting that our off-price sales will be only $20 million this year, compared to $32 million last year, and that's a good thing. In our nature of our business, you always have excess inventory, but the level of excess will be much lower compared to last year.

Okay. Can you also tell me what the unit growth was?

Yes, unit growth is up about 12%, and average price is down about 3.

Okay.

That's largely due to the mix of much greater growth in the mass channel.

Okay, understood. Then in terms of SG&A, you talked about, on a consolidated basis, the increase due to the inclusion of OshKosh. Can you tell us what the SG&A was for each of those? For OshKosh and Carter's, both separately?

Sure. So OshKosh versus Carter's?

Yes, just as a percentage of sales will be fine.

So, SG&A for Carter's -- bear with me a second -- for the first quarter?

Yes.

About 24%. Then SG&A for OshKosh, for the first quarter -- about 38%. I think the important thing to keep in mind there, you know, 60% of OshKosh's sales come from retail. By its nature, that is a higher SG&A business. But with that said, there's significant opportunities to improve that going forward.

Okay. Then with respect to the guidance, the revenue guidance for OshKosh for the second half and for the year, last year, there was a lot of off-price close-out disposition activity. So does your guidance -- can you just review the guidance there? I thought you said it would be up double digits in the second half, but I'm trying to understand if that includes the off-price activity.

(multiple speakers) -- $340 million included -- there will the a significantly lower portion of sales devoted to the off-price channel and the $340 million is reflective of that reduction.

Okay. Then, with respect to the gross margin at OshKosh for the year, do you still expect the high 30s?

Yes, 38 to 40%.

Okay. Finally, in getting back to the mass channel, Target obviously had a tremendous performance in the first quarter. Can you share with us what you would attribute that too? I think you said we should expect continued momentum there. I'm just wondering if you could give us a little more color on that.

It starts with the brand wall, which is the foundation of that department. We had definitely incredible product performance in the first quarter. That actually was fourth quarter/first quarter and will continue in the second quarter. So in all the new programs, we have (indiscernible) have performed very, very well. So I think it was really -- did a good job on product with Target in the first quarter.

Do you think some of it was a catch-up from last year, to the extent that there was any disruption with the name change?

No, not with the name change, but you know, I don't think the product last year -- we definitely -- significant improvements over last year in product but nothing to do with name change, no.

Well, I hope you guys replenish because I can't find anything for my little guys when I go shopping (indiscernible). But it looks like you are doing a great job.

That's always our challenge with Target. They're incredibly productive in turn and trend, turn faster than any retailer we do business with.

Well, it's great to see. Okay, thanks for taking my questions.

Margaret Whitfield, Ryan Beck Brokerage.

I just had a question on retail. Did you say that the comps for the first two weeks of March were up 3% and then the last two weeks were hit with the Easter shift, etc.?

(multiple speakers) -- that's it. Through March 17 with two weeks to go in the first quarter, the comps were up over 3%.

So that was over 3% for the quarter-to-date or for the month of March?

No, no, for the quarter, for the quarter.

Okay. I wondered if you could give us some commentary on how those brand stores performed for Carter's versus the rest of the retail outlets.

Against the comp decline of 2.2% in the first quarter, the outlet stores were down 2.4 and the brand stores were down 1.4.

Okay. Any color on the metrics in terms of units, traffic, ticket, in terms of the composition of the overall comp of -2.2?

Yes.

The metrics are all good. This is Fred. That's not the issue, which makes us feel good. It's not the product, not units per transaction, and not the average dollar spent. It was more like the decline in traffic, and it started in March. You know, I'm not much for weather reports but it was unseasonably cool, combined with the Easter shift. Consequently, we felt that April should pick up if our story line makes sense, and April has picked up.

Okay, thanks again.

Robert Ohmes, Banc of America.

This is actually (indiscernible) calling on behalf of Robbie. I just wanted to see if I could follow up with you on your plan for Carter's [core] wholesale. Since it did look like you're planning for it to accelerate for the balance of the year, I was wondering if you could just give us some color on, you know, is it a particular product category, or a particular retailer that you're going to see this accelerated growth in? Thanks.

Yes, definitely. We are very confident in the overall guidance of 8 to 10%. As I've said before, product sell-throughs have never been better, so we are encouraged by that. A lot of the second half is due to our baby startups, which is about 50% of our business. We start those up usually in the late third and fourth quarter every year. Based on how it performed this year, those startups are up about 20%. That's A significant part of our business. So the retailers saying (indiscernible) well this will year, we're going to give you a lot more startups next year. So that's positive.

Secondly, we continue to see more of our fall line falling into fourth quarter versus third quarter.

Those are really the two components that's driving that fourth-quarter acceleration.

I think you should understand, too, that sleepwear has been sluggish for us for some time now, and with our emphasis on elevating design, we employed an outside talent for end design, and she has really helped us focus in that area of sleepwear in particular and I would say across all categories. So, we feel that we have a dynamic line that we will launch spring, '07. That's why I said earlier we are in phases here. As Joe said, baby is really performing; the play clothes has been doing well but it will do better. In particular, we're seeing the turnaround in that sleepwear business as we enter the latter part of this year.

Thanks, great.

(OPERATOR INSTRUCTIONS). Omar Saad, Credit Suisse.

Thanks, good morning. Two quick questions -- one is could you provide an update -- and I apologize if you discussed it already -- but could you provide an update on where you stand on the opportunity to have a Carter's Web site or an online site to buy products? Not only from a business perspective, but from a personal perspective, we have to drive 45 minutes out to the Carter's outlet to get your product, and would love to either have a brand store closer by but -- for our three kids -- but you know a Web site would also be -- that would allow online purchasing would also be really convenient.

As I mentioned, we are taking this revitalization of Carter's in phases. One is upping the level of designs. With respect to the Web, the first phase is more educational to our consumers. Let them understand what the Carter's brand is all about, what kind of products one should purchase. Currently, we are not marketing and selling over the Web. We have a number of customers that do that for us, and you know, we have to respect that. Some of our top wholesale accounts do a good business with us through the Web. It's not to say at some later point we wouldn't entertain that, but that is not in the cards upfront. We have significantly upgraded the Web, however, and that was part of the marketing strategy. So, if you view the order of things, it's the level of design, it's improving our stores and then attacking the Web.

Okay, great. Also, could you talk about when you expect, on the OshKosh side, when do you expect and how would you expect this to play out -- as you improve the product there, and the design and the quality of the product, I mean when should we think about seeing kind of some real movement in terms of the sales numbers with the OshKosh, whether it's in the retail business or even more importantly in the wholesale side of it?

The second half -- you know, we are targeted. Fall is the first product line we could get our hands around. We are encouraged by summer, which we had nothing to do with, so that's a nice surprise. We've seen an uptick in our stores.

It's more difficult at wholesale, because they've been so bruised over so many years by a lack of performance. I would say that's a little sluggish, but our stores are becoming very positive. But we've got our hands around the fall lines and we think, as we get into the third quarter, we should see an uptick there.

You know, keep in mind it's an evolution. These turnarounds go in phases; they aren't all -- everything gets corrected in the first phase and that was never in our plan. I wouldn't say there aren't any major disappointments. It's just some things are better; some are not as good. But in general, we feel very good about the quality of our turnaround. It will keep building, and it will take a couple years, but that's not to say we won't be delivering good numbers.

Okay, great. Thanks again.

With that, ladies and gentlemen, we have no further questions on our roster. Therefore, Mr. Rowan, I will turn the conference back over to you for any closing remarks.

Thank you. Once again, we appreciate all of you joining our call and always the quality of your questions. We assure you that we are focused on both the short and long run of this company. We have the resources, and we certainly are determined to get the results for our shareholders. We look forward to our next call.

Ladies and gentlemen, that does conclude today's Carter's first-quarter earnings conference call. We do appreciate your participation, and you may disconnect at this time.