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What changed in CARTERS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CARTERS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+428 added−402 removedSource: 10-K (2023-02-24) vs 10-K (2022-02-25)

Top changes in CARTERS INC's 2023 10-K

428 paragraphs added · 402 removed · 283 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

72 edited+16 added−9 removed22 unchanged
Biggest changeApproximately 13,000 employees worked in the United States, 2,200 employees worked in Canada, 350 employees worked in Mexico, and 350 employees worked in other countries, including Hong Kong. As of the end of fiscal 2021, approximately 150 employees were unionized employees, all of whom were in Mexico. We believe we have good labor relationships with our employees.
Biggest changeThe tables below present the composition and location of our employees: Employee Count % of Total Retail stores 12,000 77.4 % Corporate Offices 1,900 12.3 % Distribution centers 1,600 10.3 % Total 15,500 100.0 % Employee Count % of Total United States 12,500 80.6 % Canada 2,150 13.9 % Mexico 500 3.2 % Other (primarily countries in Asia) 350 2.3 % Total 15,500 100.0 % As of the end of fiscal 2022, approximately 160 employees were unionized employees, all of whom were in Mexico.
Our Global Distribution Network The majority of all finished goods manufactured for us is shipped to our distribution facilities or to designated third-party facilities for final inspection, allocation, and reshipment to customers. The goods are delivered to our customers and us by independent shippers. We choose the form of shipment based upon needs, costs, and timing considerations.
Our Global Distribution Network The majority of all finished goods manufactured for us is shipped to our distribution facilities or to designated third-party facilities for final inspection, allocation, and reshipment to customers. The goods are delivered to us and to our customers by independent shippers. We choose the form of shipment based upon needs, costs, and timing considerations.
On our investor relations website (ir.carters.com), we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, director and officer reports on Forms 3, 4, and 5, and any amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
On our investor relations website (ir.carters.com), we make available, free of charge, our SEC reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, director and officer reports on Forms 3, 4, and 5, and any amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We attribute our leading market position to our strong value proposition, brand strength, unique colors, distinctive prints, and commitment to quality, as well as our broad wholesale distribution channel that includes successful and long-standing relationships with leading global and national retailers. Our marketing programs are targeted toward first-time parents, experienced parents, and gift-givers.
We attribute our leading market position to our strong value proposition, brand strength, distinctive prints and colors, and commitment to quality, as well as our broad wholesale distribution channel that includes successful and long-standing relationships with leading global and national retailers. Our marketing programs are targeted toward first-time parents, experienced parents, and gift-givers.
In connection with the manufacture of our products, manufacturers purchase raw materials including fabric and other materials (such as linings, zippers, buttons, and trim) at our direction. We regularly inspect and supervise the manufacture of our products in order to maintain quality control, monitor compliance with our manufacturing specifications and social responsibility standards and to ensure timely delivery.
In connection with the manufacture of our products, manufacturers purchase raw materials including fabric and other materials (such as linings, zippers, buttons, and trim) at our direction. We regularly inspect and supervise the manufacture of our products in order to maintain safety and quality control, monitor compliance with our manufacturing specifications and social responsibility standards, and to ensure timely delivery.
We believe deeply in developing our employees and offer numerous formal training opportunities as well as ongoing informal on-the-job learning, including: • mentoring, reverse mentoring, and executive development programs that nurture emerging talent and facilitate cross-generational knowledge sharing, benefiting employees at all stages of their careers; • development days, when employees step away from their day-to-day responsibilities for curated professional growth opportunities; • online courses and formal development programs designed to enhance personal leadership skills, business acumen, and people management skills, as well as specialized development resources for our retail store, distribution center and office employees; and • each year, we award 20 scholarships to Carter’s employees and children of employees to attend an accredited college or university.
We believe in developing our employees and offer numerous formal training opportunities as well as ongoing informal on-the-job learning, including: • mentoring, reverse mentoring, and executive development programs that nurture emerging talent and facilitate cross-generational knowledge sharing, benefiting employees at all stages of their careers; • development days, when employees step away from their day-to-day responsibilities for curated professional growth opportunities; • online courses and formal development programs designed to enhance personal leadership skills, business acumen, and people management skills, as well as specialized development resources for our retail store, distribution center and office employees; and 8 • each year, we award 20 scholarships to Carter’s employees and children of employees to attend an accredited college or university.
Our U.S. retail stores are generally located in high-traffic strip shopping centers and malls in or near major cities or in outlet centers that are near densely-populated areas. We believe our brand strength and our product assortment have made our retail stores a destination for consumers seeking young children’s apparel and accessories.
Our U.S. retail stores are generally located in high-traffic strip shopping centers and malls in or near major cities or in outlet centers that are near densely-populated areas. We believe our brand strength, product assortment, and shopping experience have made our retail stores a destination for consumers seeking young children’s apparel and accessories.
We also sell our products through our U.S. eCommerce websites at www.carters.com, www.oshkoshbgosh.com, www.oshkosh.com, and www.skiphop.com, and our mobile application. We focus on the customer experience through store and eCommerce website design, visual aesthetics, clear product presentation, and experienced customer service. Our eCommerce websites also feature product recommendations and on-line-only offerings.
We also sell our products through our U.S. eCommerce websites at www.carters.com, www.oshkosh.com, and www.skiphop.com, and our mobile application. We focus on the customer experience through store and eCommerce website design, visual aesthetics, clear product presentation, and experienced customer service. Our eCommerce websites also feature product recommendations and on-line-only offerings.
We strive to create a seamless omni-channel experience between our retail stores and our eCommerce websites, as more fully described below under “Our Customer and Marketing Strategy.” U.S. Wholesale Our U.S. Wholesale segment includes sales of our products to our U.S. wholesale customers.
We strive to create a seamless omni-channel experience between our retail stores and our eCommerce websites, as more fully described below under “Our Customer and Marketing Strategy.” 4 U.S. Wholesale Our U.S. Wholesale segment includes sales of our products to our U.S. wholesale customers.
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.
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.
We continually measure and monitor diversity metrics including pay equity, retention, new hires, internal promotions and identified successors, and our D&I education equips employees with the tools and support needed to further enhance a workplace culture of inclusion. Health and Safety We maintain a safety culture with the goal of eliminating workplace incidents, risks and hazards.
We continually measure and monitor diversity metrics including pay equity, retention, new hires, internal promotions and identified successors, and our D&I education equips employees with the tools and support needed to further enhance a workplace culture of inclusion. Health and Safety We maintain a culture focused on safety with the goal of eliminating workplace incidents, risks and hazards.
Our vendor code of conduct, with which we require our factories to comply, outlines our standards for supplier behavior in creating a fair and safe workplace, and covers employment practices, such as wages and benefits, working hours, health and safety, working age, and discriminatory practices, as well as environmental, ethical, and other legal matters.
Our vendor code of ethics, with which we require our factories to comply, outlines our standards for supplier behavior in creating a fair and safe workplace and covers employment practices, such as wages and benefits, working hours, health and safety, working age, and discriminatory practices, as well as environmental, ethical, and other legal matters.
Additional financial and geographical information about our segments is contained in Item 8 “Financial Statements and Supplementary Data” and under Note 14, Segment Information , to the consolidated financial statements. 2 We have extensive experience in the young children’s apparel and accessories market and focus on delivering products that satisfy our consumers’ needs.
Additional financial and geographical information about our business segments is contained in Item 8 “Financial Statements and Supplementary Data” and under Note 14, Segment Information , to the consolidated financial statements. We have extensive experience in the young children’s apparel and accessories market and focus on delivering products that satisfy our consumers’ needs.
Noncompliance with these laws and regulations may result in substantial monetary penalties and criminal sanctions. Competition The baby and young children’s apparel and accessories market is highly competitive. Competition is generally based on a variety of factors, including comfort and fit, quality, pricing, experience, and selection.
Noncompliance with these laws and regulations may result in substantial monetary penalties and criminal sanctions. Competition The baby and young children’s apparel and accessories market is highly competitive. Competition is generally based on a variety of factors, including comfort and fit, quality, pricing, style, and selection.
These licensing partners develop and sell products through our multiple sales channels, while leveraging our brand strength, customer relationships, and designs. Licensed products provide our customers with a range of lifestyle products that complement and expand upon our baby and young children’s apparel offerings.
These licensed partners develop and sell our branded products through multiple sales channels, while leveraging our brand strength, customer relationships, and designs. Licensed products provide our customers with a range of lifestyle products that complement and expand upon our baby and young children’s apparel offerings.
Our multi-channel, global business model, which includes retail stores, eCommerce, and wholesale sales channels, as well as retail omni-channel capabilities in the United States and Canada, enables us to reach a broad range of consumers around the world.
Our multi-channel, global business model, which includes retail stores, eCommerce, and wholesale distribution 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.
Governmental Regulation We are subject to laws, regulations and standards set by various governmental authorities around the world, including in the United States, Canada, and Mexico, including: • those imposed by the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission (“SEC”), and the New York Stock Exchange (“NYSE”); • the U.S.
Governmental Regulation We are subject to laws, regulations and standards set by various governmental authorities and standard setting bodies around the world, including in the United States, Canada, and Mexico, including: • those imposed by the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission (“SEC”), and the New York Stock Exchange (“NYSE”); • the U.S.
We acquired OshKosh 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 Skip Hop in 2017.
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 Skip Hop in 2017.
Our core baby product line, the largest component of our baby business, provides families with essential products and accessories, including value-focused multi-piece sets. We also have three exclusive Carter’s brands: our Child of Mine brand, which we sell at Walmart, our Just One You brand, which we sell at Target, and our Simple Joys brand, which we sell on Amazon.
Our core baby product line, the largest component of our baby business, provides families with essential products and accessories, including value-focused multi-piece sets. We also have three exclusive Carter’s brands: our Child of Mine brand, which is available at Walmart, our Just One You brand, which is available at Target, and our Simple Joys brand, which is available on Amazon.
As is customary, we have not entered into any long-term contractual arrangements with any contractor or manufacturer. We believe that the production capacity of foreign manufacturers with which we have developed, or are developing, a relationship is adequate to meet our production requirements for the foreseeable future. We believe that alternative foreign manufacturers are readily available.
We have not entered into any long-term contractual arrangements with any contractor or manufacturer. We believe that the production capacity of each foreign manufacturers with which we have developed, or are developing, a relationship is adequate to meet our production requirements for the foreseeable future. We believe that alternative foreign manufacturers are readily available.
Our OshKosh brand wholesale customers in the United States include major retailers, such as, in alphabetical order, Amazon, buybuy BABY, and Target. 4 Our Skip Hop brand wholesale customers in the United States include major retailers, such as, in alphabetical order, Amazon, buybuy BABY, and Target.
Our OshKosh brand wholesale customers in the United States include major retailers, such as Amazon and Target. Our Skip Hop brand wholesale customers in the United States include major retailers, such as, in alphabetical order, Amazon, buybuy BABY, Target, and Walmart.
The SEC maintains an internet site, www.sec.gov, containing reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. 8
The SEC maintains an internet site, www.sec.gov, containing reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. 9
Additionally, Child of Mine , an exclusive Carter’s brand, is sold at Walmart; Just One You , an exclusive Carter’s brand, is sold at Target, and Simple Joys , an exclusive Carter’s brand, is available on Amazon.
Additionally, Child of Mine , an exclusive Carter’s brand, is available only at Walmart; Just One You , an exclusive Carter’s brand, is available only at Target, and Simple Joys , an exclusive Carter’s brand, is available only on Amazon.
We have created and implemented processes to help eliminate safety events by reducing their frequency and severity. We also review and monitor our performance closely.
We have created and implemented processes to help eliminate safety incidents by reducing their frequency and severity. We also review and monitor our performance closely.
Talent and Development Everything we do is guided by our core values: • Act with Integrity • Exceed Expectations • Inspire Innovation 7 • Succeed Together • Invest in People We believe that to succeed as a business and to positively impact families and our communities, we must first create and maintain an inclusive, supportive workplace culture that fosters high employee engagement.
Talent and Development We are guided by our core values: • Act with Integrity • Exceed Expectations • Inspire Innovation • Succeed Together • Invest in People We believe that to succeed as a business and to positively impact families and our communities, we must first create and maintain an inclusive, supportive workplace culture that fosters high employee engagement.
The baby and young children’s apparel market ages zero to 10 in the U.S. is approximately $31 billion as of December 2021. In this market, our Carter’s brands, including our exclusive brands, hold the #1 position with approximately 10% market share and our OshKosh brand has approximately 1% market share as of December 2021.
The baby and young children’s apparel market ages zero to 10 in the U.S. is approximately $29 billion as of December 2022. In this market, our Carter’s brands, including our exclusive brands, hold the #1 position with approximately 10% market share and our OshKosh brand has approximately 1% market share as of December 2022.
As of the end of fiscal 2021, our stores averaged approximately 5,000 square feet per location, ranging from on average approximately 4,300 square feet for our formerly single-branded stores to approximately 7,400 square feet for our stores that consist of adjacent and connected Carter’s and OshKosh stores.
As of the end of fiscal 2022, our stores averaged approximately 5,000 square feet per location, ranging from on average approximately 4,200 square feet for our formerly single-branded stores to approximately 7,400 square feet for our stores that consist of adjacent and connected Carter’s and OshKosh stores.
Each of our stores carries an assortment of Carter’s , OshKosh , and/or Skip Hop branded products, as well as other products, depending on the store and location.
Each of our stores carries an assortment of Carter’s , OshKosh , and/or Skip Hop branded products, as well as other products, including Little Planet branded products, depending on the store and location.
As of the end of fiscal 2021, in the United States we operated 751 stores. We regularly assess potential new retail store locations and closures based on demographic factors, retail adjacencies, competitive factors, and population density as part of a rigorous real estate portfolio optimization process.
As of the end of fiscal 2022, in the United States we operated 757 stores. We regularly assess potential new retail store locations and existing store closures based on demographic factors, retail adjacencies, competitive factors, and population density as part of a rigorous real estate portfolio optimization process.
Prior to placing production, and on a recurring basis, we conduct assessments of political, social, economic, trade, labor and intellectual property protection conditions in the countries in which we source our products, and we conduct assessments of our 5 manufacturers and supply chain, as discussed under “—Corporate Social Responsibility” below.
Prior to placing production, and on a recurring basis, we conduct assessments of political, social, economic, environmental, trade, labor and intellectual property protection conditions in the countries in which we source our products, and we conduct assessments of our manufacturers and supply chain, as discussed under “—Responsible Sourcing” below.
Our International segment includes sales of our products to these licensees, and royalty income based on sales made by certain licensees. As of the end of fiscal 2021, we had approximately 38 international licensees who operated in over 90 countries.
Our International segment includes sales of our products to these licensees, and royalty income based on sales made by certain licensees. As of the end of fiscal 2022, we had 42 international licensees who operated in over 90 countries.
Foreign Corrupt Practices Act, and similar world-wide anti-bribery laws; 6 • health care, employment and labor laws; • product and consumer safety laws, including those imposed by the U.S. Consumer Product Safety Commission and the Americans with Disabilities Act of 1990; • data privacy laws, including the E.U.
Foreign Corrupt Practices Act, and similar world-wide anti-bribery laws; • the tax laws of the United States and other countries; • health care, employment and labor laws; • product and consumer safety laws, including those imposed by the U.S. Consumer Product Safety Commission and the Americans with Disabilities Act of 1990; • data privacy laws, including the E.U.
ITEM 1. BUSINESS 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 ”).
ITEM 1. BUSINESS Overview We are the largest branded marketer of young children’s apparel in North America. We own two of the most highly recognized and trusted brand names in the children’s apparel market, Carter’s and OshKosh B’gosh (or “ OshKosh ”).
Our Carter’s brand wholesale customers in the United States include major retailers, such as, in alphabetical order, buybuy BABY, Costco, Kohl’s, and Macy’s. Additionally, we sell our Child of Mine exclusive brand at Walmart, our Just One You exclusive brand at Target, and our Simple Joys exclusive brand on Amazon.
Our Carter’s brand wholesale customers in the United States include major retailers, such as, in alphabetical order, Costco, JCPenney, Kohl’s, and Macy’s. Additionally, our Child of Mine exclusive brand is available at Walmart, our Just One You exclusive brand is available at Target, and our Simple Joys exclusive brand is available on Amazon.
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 related 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 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 related products. We believe our brands are complementary to one another in product offering and aesthetic. Each brand is uniquely positioned in the marketplace and offers great value to families with young children.
International Our International segment includes sales of our products through our retail stores and eCommerce sites in Canada and Mexico. As of the end of fiscal 2021, in Canada we operated 186 co-branded Carter’s and OshKosh retail stores and an eCommerce site at www.cartersoshkosh.ca, and in Mexico we operated 43 retail stores and an eCommerce site at www.carter.com.mx.
International Our International segment includes sales of our products through our retail stores and eCommerce sites in Canada and Mexico. As of the end of fiscal 2022, in Canada we operated 187 co-branded Carter’s and OshKosh retail stores and an eCommerce site at www.cartersoshkosh.ca, and in Mexico we operated 49 retail stores and an eCommerce site at www.carters.com.mx.
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.
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 OshKosh in 2005.
These products are subject to various customs laws, which may impose tariffs, as well as quota restrictions. In addition, each of the countries in which our products are sold has laws and regulations covering imports.
The majority of our products are imported into the United States, Canada, and Mexico. These products are subject to various customs laws, which may impose tariffs, as well as quota restrictions. In addition, each of the countries in which our products are sold has laws and regulations covering imports.
As of December 2021, our multi-channel business model enabled our Carter’s brands to maintain leading market share of approximately 10% in the zero to 10-year-old market, which represented nearly double the market share of the next largest brand.
As of December 2022, our multi-channel business model enabled our Carter’s brands to maintain leading market share of approximately 10% in the zero to 10-year-old market, which represented approximately 1.7 times the market share of the next largest brand.
In addition, our Carter’s brands maintained the leading market position with approximately 21% in the zero to two-year-old baby market, which represented nearly four times the market share of the next largest brand, and maintained its leading market position with approximately 11% in the three to four-year-old toddler market, which represented approximately 1.5 times the market share of the next largest brand.
In addition, our Carter’s brands maintained the leading market position with approximately 19% in the zero to two-year-old baby market, which represented over three times the market share of the next largest brand, and maintained its leading market position with approximately 12% in the three to four-year-old toddler market, which represented approximately 1.7 times the market share of the next largest brand.
For example, extended periods of unseasonably warm temperatures during the winter season or cool temperatures during the summer season could affect the timing of, and reduce or shift, demand. Human Capital Resources As of the end of fiscal 2021, we had approximately 15,900 employees globally.
For example, extended periods of unseasonably warm temperatures during the winter season or cool temperatures during the summer season could affect the level and timing of demand. Human Capital As of the end of fiscal 2022, we had approximately 15,500 employees globally.
The Carter’s credit card complements and enhances our existing Rewarding Moments loyalty program and provides new benefits for our customers, including free shipping on every eCommerce order, double Rewarding Moments points, and exclusive cardholder-only events.
In fiscal 2019, we launched a new Carter’s credit card program in the United States. The Carter’s credit card complements and enhances our existing My Rewarding Moments loyalty program and provides new benefits for our customers, including free shipping on every eCommerce order, double My Rewarding Moments points, and exclusive cardholder-only events.
Retail segment includes sales of our products through our U.S. retail stores and eCommerce sites, including through our omni-channel capabilities to allow our customers to buy on-line and pick-up in store (or curbside), buy-online and ship-to-store, and in-store buy on-line services.
Retail segment includes sales of our products through our U.S. retail stores and eCommerce sites, including through our omni-channel capabilities to allow our customers to buy on-line and pick-up in store (or curbside), buy-online and ship-to-store, and purchase items in store that may be fulfilled from our distribution facility or another retail store (in-store buy on-line services).
Licensed Products We license our Carter’s , OshKosh , Child of Mine , Just One You , Simple Joys , and Carter’s My First Love brands to partners to expand our product offerings to include footwear, outerwear, accessories (such as hair accessories and jewelry), toys, paper goods, home décor, cribs and baby furniture, and bedding.
Licensed Products We license our Carter’s , OshKosh , Child of Mine , Just One You , Simple Joys , and Little Planet brands to various licensed partners in order to expand our product offerings into additional product categories such as footwear, outerwear, accessories (such as hair accessories and jewelry), toys, paper goods, home décor, cribs and baby furniture, and bedding.
Our Skip Hop brand is best known for its diaper bags, which we believe combine innovative functionality with attractive design. The Skip Hop brand offering also includes products for playtime, travel, mealtime, kid’s bags, bath time, and home gear. We believe Skip Hop is a global lifestyle brand.
Our Skip Hop brand is best known for kid’s bags, home gear, and products for playtime, mealtime, bath time, and travel, and combines innovative functionality with attractive design. We believe Skip Hop is a global lifestyle brand.
The United States and other countries in which our products are sold may impose, from time to time, new duties, tariffs, surcharges, or other import controls or restrictions, or adjust presently prevailing duty or tariff rates or levels.
The United States and other countries in which our products are sold may impose, from time to time, new duties, tariffs, surcharges, or other import controls or restrictions including trade related restrictions on the sourcing and importation of raw materials and finished goods, or adjust presently prevailing duty or tariff rates or levels.
In the United States, we operate two distribution centers in Georgia: an approximately 1.1 million square-foot multi-channel facility in Braselton and a 0.5 million square-foot facility in Stockbridge. We also outsource distribution activities to third-party logistics providers located in California.
In the United States, we operate three distribution centers in Georgia: an approximately 1.1 million square-foot multi-channel facility in Braselton, a 0.5 million square-foot facility in Stockbridge, and a 0.2 million square-foot single-channel facility in Jonesboro. We outsource some distribution activities to third-party logistics providers located in California and leverage additional third-party providers in Georgia primarily for storage seasonally.
Our license agreements require strict adherence to our quality and compliance standards and provide for a multi-step 3 product approval process. We work in conjunction with our licensing partners in the development of their products to ensure that they fit within our brand vision of high-quality products at attractive prices to provide value to the consumer.
Our license agreements require strict adherence to our quality 3 and compliance standards and provide for a multi-step product approval process. We work in conjunction with our licensing partners in the development of our branded products to aim to ensure consistency across product offerings with our brand vision of high-quality products at market-leading value.
In response to the ongoing COVID-19 pandemic, we have implemented and continue to implement safety measures in all our facilities to protect our customers and employees, including ensuring social distancing, frequent cleaning, and use of personal protective equipment for all in our retail stores, and maintaining safe working distances and conditions at our distribution centers.
In response to the ongoing COVID-19 pandemic, we have implemented and continue to follow safety measures in all our facilities to protect our customers and employees including frequent cleaning, having personal protective equipment available for our retail stores, and maintaining safe working distances and conditions at our distribution centers. Available Information Our corporate website address is https://corporate.carters.com.
Our sourcing operations are based in Hong Kong in order to facilitate better service and manage the volume of manufacturing in Asia.
We do not own any raw materials or manufacturing facilities. Our sourcing operations are based in Hong Kong in order to facilitate better service and manage the volume of manufacturing in Asia.
For our Carter’s brand, our focus is on essential, high-volume apparel products for babies and young children, including bodysuits, pants, dresses, multi-piece knit sets, blankets, layette essentials, bibs, booties, sleep and play, rompers, and jumpers.
For our Carter’s brands, our focus is on essential, high-volume apparel products for babies and young children, including bodysuits, layette essentials, sleep and play, pants, tops and t-shirts, multi-piece sets, dresses, and sleepwear.
Launched in 2021, the little planet brand focuses on sustainable clothing through the sourcing of mostly organic cotton as certified under the Global Organic Textile Standard. This brand includes a wide assortment of baby apparel and accessories, sleepwear, and gift bundles.
Launched in 2021, the Little Planet brand focuses on sustainable clothing through the sourcing of mostly organic cotton as certified under the Global Organic Textile Standard (“GOTS”), a global textile processing standard for organic fibers. This brand includes a wide assortment of baby and toddler apparel, accessories, and sleepwear. Our corporate purpose is to inspire the generations raising the future.
Our SEC reports can be accessed through the investor relations section of our website. We also make available on our website the Carter’s Code of Ethics , our corporate governance principles, and the charters for the Compensation, Audit, and Nominating and Corporate Governance Committees of the Board of Directors.
We also make available on our website the Carter’s Code of Ethics , the Vendor Code of Ethics , and the CSR Report our corporate governance principles, and the charters for the Compensation, Audit, and Nominating and Corporate Governance Committees of the Board of Directors.
Our Sales Channels We sell our Carter’s , OshKosh , and Skip Hop branded products through multiple channels, both in the United States and globally. U.S. Retail Our U.S.
Little Planet products are primarily sold through our eCommerce site, many of our retail stores, and at Target. Sales Channels We sell our Carter’s , OshKosh , Skip Hop , and Little Planet branded products through multiple channels, both in the United States and globally. U.S. Retail Our U.S.
We also partner with other brand owners to further expand our product offerings, including apparel with collegiate and professional sport teams’ logos. Skip Hop Under our Skip Hop brand, we design, source, and market products that are sold primarily to families with young children.
We also partner with other brand owners to further expand our retail product offerings, including a range of licensed sports and licensed character t-shirts and sleepwear. Skip Hop Under our Skip Hop brand, we design, source, and market products that are sold primarily to families with young children.
Because of the highly fragmented nature of the industry, we also compete with many small manufacturers and retailers. We believe that the strength of our brand names, combined with our breadth and value of product offerings, longevity in the marketplace, distribution footprint, and operational expertise, position us well against these competitors.
We believe that the strength of our brand names, breadth and value of product offerings, longevity in the marketplace, broad distribution footprint, scale, and operational expertise position us well against these competitors.
During fiscal 2021, approximately 74% of our product was sourced from Cambodia, Vietnam, Bangladesh, and China, and approximately 80% of the fabric that was used in the manufacture of our products was sourced from China, with the remainder primarily from Thailand and Taiwan.
We source the remainder of our products primarily through North America, Central America, and Africa. During fiscal 2022, approximately 70% of our product was sourced from Cambodia, Vietnam, Bangladesh, and India, and approximately 74% of the fabric that was used in the manufacture of our products was sourced from China, with the remainder primarily from India and Bangladesh.
We believe this disciplined approach to product development, which includes consumer research, results in a compelling product offering to consumers, reduces our exposure to short-term trends, and supports efficient operations.
We believe this approach, which includes consumer research, cost engineering, and rigorous attention to detail, results in compelling consumer product offerings, reduces our risk exposure to short-term trends, and supports efficient and productive operations.
In fiscal 2021, we expanded our omni-channel capabilities further by implementing omni-channel programs in our retail stores in Canada. We operate our Rewarding Moments loyalty and rewards program in the United States to drive customer traffic, sales, and brand loyalty. This program is integrated across our U.S. retail stores and online businesses.
We operate our My Rewarding Moments customer loyalty and rewards program in the United States to drive customer traffic, sales, and brand loyalty. This program is integrated across our U.S. retail stores and online businesses. During fiscal 2022, our U.S. retail sales were predominantly made to members of My Rewarding Moments.
At the end of fiscal 2021, our channels included 980 retail stores, approximately 18,800 wholesale locations, and eCommerce websites in North America, as well as our international wholesale accounts and licensees who operate in over 90 countries.
At the end of fiscal 2022, our channels included 993 company-owned retail stores, approximately 19,350 wholesale locations, and eCommerce websites in North America, as well as our international wholesale accounts and licensees who operate in over 90 countries. Our three business segments are: U.S. Retail, U.S. Wholesale, and International. These segments are our operating and reporting segments. Our U.S.
The Skip Hop team includes both an in-house design and a creative team, each of which is dedicated to meeting that goal. We carry Skip Hop brand products in our retail stores, and have made investments in in-store fixturing, branding, and signage packages, along with digital advertising, to further strengthen the position of the Skip Hop brand.
We carry Skip Hop branded products in our retail stores and on our eCommerce site, and have made investments in in-store fixturing, branding, and signage, along with digital advertising, to further strengthen the position of the Skip Hop brand.
Both branded and private label manufacturers as well as specialty apparel retailers aggressively compete in the baby and young children’s apparel market. Our primary competitors include (in alphabetical order): Gap, Old Navy, and The Children’s Place (specialty apparel); Cat & Jack and Garanimals (private label); and Disney, Nike, and Under Armour (national brands).
Our primary competitors include (in alphabetical order): Gap, Old Navy, and The Children’s Place (specialty apparel); Cat & Jack (private label sold exclusively in Target) and Garanimals (private label sold exclusively in Walmart); and Disney, Nike, and Under Armour (national brands). Because of the highly fragmented nature of the industry, we also compete with many small manufacturers and retailers.
Additionally, we regularly assess the manufacturing facilities we use through periodic on-site facility inspections, including the use of independent auditors to supplement our internal staff. We use audit data and performance results to suggest improvements when necessary, and we integrate this information into our on-going sourcing decisions.
We use audit data and performance results to suggest improvements when necessary, and we integrate this information into our on-going sourcing decisions.
Our brand portfolio also includes Skip Hop , a leading baby and young child lifestyle brand, exclusive Carter’s brands developed for specific wholesale customers, and little planet , a brand focused on organic fabrics and sustainable materials.
We also own Skip Hop , a leading young children’s lifestyle brand, exclusive Carter’s brands developed for specific wholesale customers, and Little Planet , a brand focused on organic fabrics and sustainable materials. Established in 1865, our Carter’s brand is recognized and trusted by consumers for high-quality apparel, sleepwear, and accessories for children in sizes newborn to 14.
Our investments in marketing, our loyalty program, and new consumer-facing technologies are focused on acquiring new customers, developing stronger relationships with our existing customers, and extending their connections with our brands. Our goal is to have the most top-of-mind, preferred brands in the young children’s apparel market and to connect with a diverse, digitally savvy customer.
Our investments in marketing, which include our newly-developed marketing personalization initiative, customer loyalty program, and new consumer-facing technologies are focused on acquiring new customers, developing stronger relationships with our existing customers, and extending their connections with our brands.
Corporate Social Responsibility We have adopted a factory on-boarding program that allows us to assess each factory’s compliance with our social responsibility standards before we place orders for product with that factory, including factories utilized by companies that we may acquire.
Responsible Sourcing We have adopted a factory on-boarding program that allows us to assess each factory’s compliance with our ethical and social responsibility standards before we place orders for product with that factory. Additionally, we regularly assess the manufacturing facilities we use through periodic on-site facility inspections, including the use of independent auditors to supplement our internal staff.
General Data Protection Act and the California Consumer Privacy Act; • trade, transportation and logistics related laws, including tariffs and orders issued by Customs and Border Protection; and • applicable environmental laws. A substantial portion of our products is imported into the United States, Canada, and Mexico.
General Data Protection Act (“GDPA”), the California Consumer Privacy Act (“CCPA”), and the California Privacy Rights Act (“CPRA”); • trade, transportation and logistics related laws, including tariffs, quotas, embargoes, and orders issued by Customs and Border Protection and similar agencies in other countries; and • applicable environmental laws.
For both our Carter’s and OshKosh brands, we employ cross-functional product teams to focus on the development of the brands and products. The teams include members from merchandising, art, design, sourcing, product development, marketing and planning, and follow a disciplined approach to fabric usage, color selection, and assortment productivity.
As of December 2022, our OshKosh brand’s market share was approximately 1% of the zero to 10-year-old apparel market in the United States. For both our Carter’s and OshKosh brands, we employ cross-functional teams to develop our product assortments. Team members from merchandising, art, design, sourcing, product development, buying, planning, and marketing follow a disciplined development process.
We believe our OshKosh brand has significant brand name recognition, which consumers associate with high-quality, durable, and authentic playclothes for young children. As of December 2021, our OshKosh brand’s market share was approximately 1% of the zero to 10-year-old apparel market in the United States.
The focus of the OshKosh brand is high-quality playclothes, including denim apparel products, overalls, core bottoms, knit tops, t-shirts, and layering pieces for everyday use. Our OshKosh brand is positioned towards toddlers and young children. We believe our OshKosh brand has significant brand name recognition, which consumers associate with high-quality, durable, and authentic playclothes for young children.
In fiscal 2019, we launched capabilities in the United States to allow our customers to buy on-line and pick-up in store, complementing our existing buy-on-line, ship-to-store and in-store buy on-line services. In fiscal 2020, we enhanced and expanded our omni-channel capabilities in the United States, including curbside pick-up at our retail stores and buy-on-line, deliver-from-store.
Customers can choose to have eCommerce purchases shipped directly to them or to pick-up these purchases in store (buy-on-line and pick-up in-store or buy-on-line, ship-to-store) or through our curbside pick-up services. In fiscal 2021, we expanded our omni-channel capabilities further by implementing many of these omni-channel programs in our retail stores in Canada.
Our Global Sourcing Network We do not own any raw materials or manufacturing facilities. We source all of our garments and other products from a global network of third-party suppliers, primarily located in Asia. We source the remainder of our products primarily through North America, Africa, and Central America.
Our goal is to have the most top-of-mind, preferred brands in the young children’s apparel market and to connect with a diverse, digitally savvy customer. 5 Our Global Sourcing Network We source all of our garments and other products from a global network of third-party suppliers, primarily located in Asia.
We believe that we continue to strengthen our brand image with the consumer by differentiating our products through fabric and material improvements, new artistic applications, new packaging and presentation strategies, and marketing.
We are focused on strengthening our brands with consumers by differentiating our products through fabric and material improvements, new artistic applications, updated packaging and presentation strategies, and marketing. We also place importance on differentiating our products and presentation through in-store fixturing, branding, signage, photography, and advertising across all of our global channels of distribution.
Removed
During fiscal 2020 and fiscal 2021, the global pandemic, caused by the spread of the novel strain of coronavirus (including variants, “COVID-19”), negatively affected the global economy, disrupted global supply chains, and created significant disruption of the financial and retail markets, including a disruption in consumer demand for baby and children’s clothing and accessories during fiscal 2020.
Added
Our long-term growth strategy focuses on four key strategic priorities: • Lead in eCommerce — We operate an award-winning online platform focused on children’s apparel in the United States, with omni-channel capabilities to support the shopping preferences of families with young children.
Removed
For more information on the effects of the pandemic on the Company, and our response to the pandemic, see “Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations.” Our three business segments are: U.S. Retail, U.S. Wholesale, and International. These segments are our operating and reporting segments. Our U.S.
Added
We plan to continue to invest in eCommerce and omni-channel capabilities to provide a market-leading eCommerce experience for consumers. eCommerce is expected to contribute to our overall growth objectives in the coming years. • Win in Baby — Our Carter’s brand has a unique position in the marketplace.
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Our long-term growth strategy focuses on: • providing the best value and experience in apparel and related products for young children; • extending the reach of our brands; and • improving profitability.
Added
It is the leading brand in the newborn to two-year-old apparel market in the United States, with over three times the market share of the next largest brand.
Removed
The slight decrease in market share compared to fiscal 2020 is primarily due to our strategic focus on growing operating profitability, which increased more than the sales growth in the overall market.
Added
We believe the strength of our brands, product innovation, and targeted marketing and customer acquisition initiatives position us well for growth in this market segment. 2 • Age Up — Our long track record of success suggests consumers trust Carter’s for their baby apparel purchases and, as their children grow, many stay with us and appreciate the high value our product offerings provide in those early years of life. • Expand Globally — In recent years, we have strengthened our position in the Canada market by investing in omni-channel capabilities, including same-day pick-up and curbside pick-up services.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur global supply chain could be negatively affected due to a number of factors, including: • political instability or other global events resulting in the disruption of operations or trade in or with foreign countries from which we source our products; • the occurrence of a natural disaster, unusual weather conditions, or a disease epidemic in foreign countries from which we source our products; • financial instability, including bankruptcy or insolvency, of one or more of our major vendors; • the imposition of new laws and regulations relating to imports, duties, taxes, and other charges on imports, including those that the U.S. government has implemented and may further implement on imports from China; • increased costs of raw materials (including cotton and other commodities), labor, fuel, and transportation; • interruptions in the supply of raw materials, including cotton, fabric, and trim items; • increases in the cost of labor in our sourcing locations; • changes in the U.S. customs procedures concerning the importation of apparel products; • unforeseen delays in customs clearance of any goods; • disruptions in the global transportation network, such as a port strikes or delays, work stoppages or other labor unrest, capacity withholding, world trade restrictions, acts of terrorism, or war; • the application of adverse foreign intellectual property laws; • the ability of our vendors to secure sufficient credit to finance the manufacturing process, including the acquisition of raw materials; • potential social compliance concerns resulting from our use of international vendors, third-party manufacturers, and licensees, over whom we have limited control; • manufacturing delays or unexpected demand for products may require the use of faster, but more expensive, transportation methods, such as air-freight services; and • other events beyond our control that could interrupt our supply chain and delay receipt of our products into the United States, Canada, and Mexico, as well as the ninety additional countries in which our international partners and international wholesale customers operate.
Biggest changeOur global supply chain could be negatively affected due to a number of factors, including: • political instability or other global events resulting in the disruption of operations or trade in or with foreign countries from which we source our products; • the occurrence of a natural disaster, unusual weather conditions, or a disease epidemic in foreign countries from which we source our products; 16 • financial instability, including bankruptcy or insolvency, of one or more of our major vendors, including our transportation providers and carriers; • the imposition of new laws and regulations relating to imports, duties, taxes, and other charges on imports, including those that the U.S. government has implemented and may further implement on imports from China, such as the Uyghur Forced Labor Prevention Act and other sanctions and trade regulations issued by the U.S. government related to forced labor in the Xinjiang Uyghur Autonomous Region of China and other regions which may affect our sourcing operations and the availability of raw materials, including cotton, used by the vendors from which we purchase goods; • increased costs of raw materials (including cotton and other commodities), labor, fuel, and transportation; • interruptions in the supply of raw materials, including cotton, fabric, and trim items; • increases in the cost of labor in our sourcing locations; • changes in the U.S. customs procedures concerning the importation of apparel products, durable goods and accessories; • unforeseen delays in customs clearance of any goods; • disruptions in the global transportation network, such as a port strikes or delays, work stoppages or other labor unrest, capacity withholding, world trade restrictions, acts of terrorism, or war; • the application of adverse foreign intellectual property laws; • the ability of our vendors to secure sufficient credit to finance the manufacturing process, including the acquisition of raw materials; • potential social compliance concerns resulting from our use of international vendors, third-party manufacturers, and licensees, over whom we have limited control; • manufacturing delays or unexpected demand for products may require the use of faster, but more expensive, transportation methods, such as air-freight services; and • other events beyond our control that could interrupt our supply chain and delay receipt of our products into the United States, Canada, and Mexico, as well as the ninety additional countries in which our international partners and international wholesale customers operate.
Risks associated with our eCommerce business in the United States, Canada, and Mexico include: • the failure of the computer systems, including those of third-party vendors, that operate our eCommerce sites and mobile applications, including, among others, inadequate system capacity, service outages, computer viruses, human error, changes in programming, security breaches, system upgrades or migration of these services to new systems; • disruptions in telecommunications services or power outages; • reliance on third parties for computer hardware and software, as well as delivery of merchandise to our customers on-time and without damage; • limitations of shipping volumes which may be imposed by service providers; • rapid technology changes; • the failure to deliver products to customers on-time and within customers’ expectations; • credit or debit card, or other electronic payment-type, fraud, or disruptions in payment systems; 11 • the diversion of sales from our physical stores; • natural disasters or adverse weather conditions; • changes in applicable federal, state and international regulations; • liability for online content; and • consumer privacy concerns and regulation.
Risks associated with our eCommerce business in the United States, Canada, and Mexico include: • the failure of the computer systems, including those of third-party vendors, that operate our eCommerce sites and mobile applications, including, among others, inadequate system capacity, service outages, computer viruses, human error, changes in programming, security breaches, system upgrades or migration of these services to new systems; • disruptions in telecommunications services or power outages; • reliance on third parties for computer hardware and software, as well as delivery of merchandise to our customers on-time and without damage; • limitations of shipping volumes which may be imposed by service providers; • rapid technology changes; • the failure to deliver products to customers on-time and within customers’ expectations; • credit or debit card, or other electronic payment-type, fraud, or disruptions in payment systems; • the diversion of sales from our physical stores; • natural disasters or adverse weather conditions; • changes in applicable federal, state and international regulations; • liability for online content; and • consumer privacy concerns and regulation.
Cost increases caused by currency exchange rate fluctuations could make our products 12 less competitive or have a material adverse effect on our profitability. Currency exchange rate fluctuations could also disrupt the businesses of our third-party manufacturers that produce our products by making their purchases of raw materials or products more expensive and more difficult to finance.
Cost increases caused by currency exchange rate fluctuations could make our products less competitive or have a material adverse effect on our profitability. Currency exchange rate fluctuations could also disrupt the businesses of our third-party manufacturers that produce our products by making their purchases of raw materials or products more expensive and more difficult to finance.
Labor disputes at third-party factories where our goods are produced, the shipping ports we use, or within our transportation carriers create significant risks for our business, particularly if these disputes result in work slowdowns, lockouts, strikes, or other disruptions during our peak manufacturing and importing times.
Labor disputes at third-party factories where our goods are produced, the shipping ports we use, or within our transportation carriers create significant risks for our business, particularly if these disputes result in work slowdowns, lockouts, strikes, or other disruptions during our peak 17 manufacturing and importing times.
The techniques used by cyber criminals change frequently, may not be recognized until launched, and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations, or hostile foreign governments or agencies.
The techniques used by cyber criminals change frequently, may not be recognized until launched, and can 15 originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations, or hostile foreign governments or agencies.
Additionally, fluctuations in exchange rates impact the amount of our reported sales and expenses, which could have a material adverse effect on our financial position, results of operations, and cash flows. Our business could suffer a material adverse effect from unseasonable or extreme weather conditions, or other effects of climate change.
Additionally, fluctuations in currency exchange rates impact the amount of our reported sales and expenses, which could have a material adverse effect on our financial position, results of operations, and cash flows. Our business could suffer a material adverse effect from unseasonable or extreme weather conditions, or other effects of climate change.
As a result, these competitors may be able to adapt to changes in customer requirements more quickly, take advantage of acquisitions and other opportunities more readily, devote greater resources to the marketing and sale of their products, and adopt more aggressive pricing strategies than we can.
As a result, these competitors may be able to adapt to changes in customer requirements and preferences more quickly, take advantage of acquisitions and other opportunities more readily, devote greater resources to the marketing and sale of their products, and adopt more aggressive pricing strategies than we can.
On the other hand, if we underestimate demand for our products, our third-party manufacturers may not be able to produce products to meet consumer requirements, and this could result in delays in the shipment of products and lost revenues, as well as damage to our reputation and relationships.
On the other hand, if we underestimate demand for our products, our third-party manufacturers may not be able to produce enough products to meet consumer requirements, and this could result in delays in the shipment of products and lost revenues, as well as damage to our reputation and relationships.
At time of subsequent vesting, exercise, or expiration of an award, the difference between our actual income tax deduction, if any, and the previously accrued income tax benefit is recognized in our income tax expense/benefit during the current period and can consequently raise or lower our effective tax rate for the period.
At time of subsequent vesting, exercise, or expiration of an award, the difference between our 21 actual income tax deduction, if any, and the previously accrued income tax benefit is recognized in our income tax expense/benefit during the current period and can consequently raise or lower our effective tax rate for the period.
A violation of our vendor policies, licensee agreements, health and safety standards, labor laws, anti-bribery laws, or other policies or laws by these employees, vendors, third-party manufacturers, or licensees could damage the image and reputation of our brands and could subject us to liability.
A violation of our vendor policies, licensee agreements, health and safety standards, labor laws, anti-bribery laws, privacy laws or other policies or laws by these employees, vendors, third-party manufacturers, or licensees could damage the image and reputation of our brands and could subject us to liability.
Our IT systems are vulnerable to damage or interruption from a variety of sources, including physical damage, telecommunications or network failures or interruptions, system malfunction, natural disasters, malicious human acts, terrorism, and war, and we have experienced interruptions in the past.
However, our IT systems are vulnerable to damage or interruption from a variety of sources, including physical damage, telecommunications or network failures or interruptions, system malfunction, natural disasters, malicious human acts, terrorism, and war, and we have experienced interruptions in the past.
Any loss or 14 interruption to our systems or the services provided by third parties would adversely affect our business, financial condition, and results of operations. Failure to implement new information technology systems or needed upgrades to our systems, including operational and financial systems, could adversely affect our business.
Any loss or interruption to our systems or the services provided by third parties would adversely affect our business, financial condition, and results of operations. Failure to implement new information technology systems or needed upgrades to our systems, including operational and financial systems, could adversely affect our business.
We have incurred, and may continue to incur, substantial expenses for legal services due to the SEC and U.S. Attorney’s Office investigations and any related proceedings. These matters may continue to divert management’s time and attention away from operations.
We have incurred, and may continue to incur, substantial expenses for legal services due to SEC and U.S. Attorney’s Office investigations and any related proceedings. These matters may continue to divert management’s time and attention away from operations.
There can be no assurance that the demand for our products will not decline, or that we will be able to successfully and timely evaluate and adapt our products to changes in consumer tastes and preferences 9 or fashion trends.
There can be no assurance that the demand for our products will not decline, or that we will be able to successfully and timely evaluate and adapt our products to changes in consumer tastes and preferences or fashion trends.
We are subject to various claims and pending or threatened lawsuits in the course of our business, including claims that our designs infringe on the intellectual property rights of third parties. We are also affected by trends in litigation, including class action litigation brought under various laws, including consumer protection, employment, and privacy and information security laws.
We are subject to various claims and pending or threatened lawsuits in the course of our business, including claims that our designs infringe on the intellectual property rights of third parties. We are also affected by trends in litigation, including class action litigation brought under various laws, including product liability, consumer protection, employment, and privacy and information security laws.
In addition, litigation risks related to claims that technologies we use infringe intellectual property rights of third parties have been amplified by the increase in third parties whose primary business is to assert such claims. Reserves are established based on our best estimates of our potential liability.
In addition, litigation risks related to claims that technologies we use infringe intellectual property rights of third parties have been amplified by the increase in third parties whose primary business is to assert such claims. When appropriate, reserves are established based on our best estimates of our potential liability.
Cyber criminals are constantly devising schemes to circumvent information technology security safeguards and other retailers have recently suffered serious data security breaches.
Cyber criminals are constantly devising schemes to circumvent information technology security safeguards and other retailers have suffered serious data security breaches.
As we have experienced in the past, we face the risk that if one or more of these customers significantly decreases their business or terminates their relationship with us as a result of financial difficulties (including bankruptcy or insolvency), competitive forces, consolidation, reorganization, or other reasons, then we may have significant levels of excess inventory that we may not be able to place elsewhere, a material decrease in our sales, or material impact on our operating results.
As we have experienced in the past, we face the risk that if one or more of these customers significantly decreases their business or terminates their relationship with us as a result of financial difficulties (including bankruptcy or insolvency), competitive forces, consolidation, reorganization, changes in merchandising strategies, or other reasons, then we may have significant levels of excess inventory that we may not be able to place elsewhere, a material decrease in our sales, or material impact on our operating results.
Problems in any of these areas could result in a reduction in sales, increased costs and damage to our reputation and brands, which could adversely affect our business and results of operations. In addition, in fiscal 2021 we experienced a decrease in net sales in our eCommerce channel compared to fiscal 2020.
Problems in any of these areas could result in a reduction in sales, increased costs and damage to our reputation and brands, which could adversely affect our business and results of operations. In addition, in fiscal 2022 we experienced a decrease in net sales in our eCommerce channel compared to fiscal 2021.
Further, third parties may assert intellectual property claims against us, particularly as we expand our business geographically or through acquisitions, and any such claim could be expensive and time consuming to defend, regardless of its merit.
Further, third parties may assert intellectual property claims against us, particularly as we expand our business geographically or through acquisitions, and any such claim could be expensive and time consuming to defend, regardless of their merit.
Although we maintain policies with our employees, vendors, third-party manufacturers, and licensees that promote ethical business practices, and our employees, agents, and third-party compliance auditors periodically visit and monitor the operations of these entities, we do not control our vendors, third-party manufacturers, or licensees, or their practices.
Although we maintain policies with our employees, vendors, marketing partners, third-party manufacturers, and licensees that promote ethical business practices, and our employees, agents, and third-party compliance auditors periodically visit and monitor the operations of these entities, we do not control our vendors, third-party manufacturers, or licensees, or their practices.
Any adverse effect on the quality of these decisions could impact our ability to retain real estate locations adequate to meet our targets or efficiently manage the profitability of our existing fleet of stores and could have a material adverse effect on our results of operations.
Any adverse effect on the quality of these decisions could impact our ability to retain real estate locations adequate to meet our profit or growth targets or efficiently manage the profitability of our existing fleet of stores and could have a material adverse effect on our results of operations.
The response to the COVID-19 pandemic has negatively affected the global economy, disrupted global supply chains, and created significant disruption of the financial and retail markets, including increased unemployment rates and a disruption in consumer demand for baby and children’s clothing and accessories.
The response to the COVID-19 pandemic negatively affected the global economy, disrupted global supply chains, and created significant disruption in financial and retail markets, including increased unemployment rates and a disruption in consumer demand for baby and children’s clothing and accessories.
The value of our brands, and our sales, could be diminished if we are associated with negative publicity, including through actions by our employees, and our vendors, third-party manufacturers, and licensees, over whom we have limited control.
The value of our brands, and our sales, could be diminished if we are associated with negative publicity, including through actions by our employees, and our vendors, marketing partners, third-party manufacturers, and licensees, over whom we have limited control.
Our retail success is dependent upon identifying locations and negotiating appropriate lease terms for retail stores. A significant portion of our revenues is through our retail stores in leased retail locations across the United States, Canada, and Mexico.
Our retail success is dependent upon identifying locations and negotiating appropriate lease terms for retail stores. We derive a significant portion of our revenues is through our retail stores in leased retail locations across the United States, Canada, and Mexico.
Merchandise usually must be ordered well in advance of the season and frequently before apparel trends are confirmed by customer purchases. We must enter into contracts for the purchase and manufacture of merchandise well in advance of the applicable selling season.
Merchandise usually must be ordered well in advance of the season and frequently before apparel trends are validated by customer purchases. We must enter into contracts for the purchase and manufacture of merchandise well in advance of the applicable selling season.
Overall spending in the market is affected by a number of global and macroeconomic factors, such as overall economic conditions and employment levels, uncertainty in the political climate, gasoline and utility costs, business conditions, availability of consumer credit, tax rates, the availability of tax credits, interest rates, inflationary pressures, levels of consumer indebtedness, foreign currency exchange rates, weather, and overall levels of consumer confidence.
Overall spending in the market is affected by a number of global and macroeconomic factors, such as overall economic conditions and employment levels, gasoline and utility costs, business conditions, availability of consumer credit, tax rates, the availability of tax credits, interest rates, inflationary pressures and general uncertainty regarding the overall future political and economic climate, levels of consumer indebtedness, foreign currency exchange rates, weather, and overall levels of consumer confidence.
Our eCommerce business faces distinct risks, and our failure to successfully manage it could have a negative impact on our profitability. The successful operation of our eCommerce business as well as our ability to provide a positive shopping experience that will generate orders and drive subsequent visits depends on efficient and uninterrupted operation of our order-taking and fulfillment operations.
Our eCommerce business faces distinct risks, and our failure to successfully manage it could have a negative impact on our profitability. The successful operation of our eCommerce business as well as our ability to provide a positive shopping experience that will generate consumer demand and drive subsequent visits depends on efficient and uninterrupted operation of our order-taking and fulfillment operations.
Further, while we take steps to ensure the reputations of our brands are maintained through license and vendor agreements, there can be no guarantee that our brand image will not be negatively affected through its association with products or actions of our licensees or vendors.
Further, while we take steps to ensure the reputations of our brands are maintained through license and vendor agreements, there can be no guarantee that our brand image will not be negatively affected through its association with products or actions of our licensees, vendors, or third-party manufacturers.
In addition, our reserves for doubtful accounts for estimated losses resulting from the inability of our customers to make payments may prove not to be sufficient if any one or more of our customers are unable to meet outstanding obligations to us, which could materially adversely affect our operating results.
In addition, our reserves for estimated credit losses resulting from the inability of our customers to make payments may prove not to be sufficient if any one or more of our customers are unable to meet outstanding obligations to us, which could materially adversely affect our operating results.
Additionally, there can be no assurance that any share repurchases will enhance shareholder value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock, and short-term stock price fluctuations could reduce the program’s effectiveness. 21
Additionally, there can be no assurance that any share repurchases will enhance shareholder value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock, and short-term stock price fluctuations could reduce the program’s effectiveness. The market price of our comment stock may be volatile.
We may experience delays, product recalls, or loss of revenues if our products do not meet our quality standards. From time to time, we receive shipments of product from our third-party vendors that fail to conform to our quality control standards.
We may experience delays, product recalls, or loss of revenues or incur additional costs if our products do not meet our quality standards. From time to time, we receive shipments of product from our third-party vendors that fail to conform to our quality control standards.
Risks Related to Executing Our Strategic Plan Our failure to properly manage strategic initiatives in order to achieve our objectives may negatively impact our business. The implementation of our business strategy periodically involves the execution of complex initiatives, such as acquisitions, which may require that we make significant estimates and assumptions about a project.
Risks Related to Executing Our Strategic Plan Our failure to properly manage strategic initiatives in order to achieve our objectives may negatively impact our business. The implementation of our business strategy periodically involves the execution of complex initiatives, such as acquisitions, which may require that we make significant estimates and assumptions about opportunities and initiatives that we may pursue.
Additionally, if we are unable to adequately staff this facility to meet demand, or if the cost of such staffing is higher than projected due to competition, mandated wage increases, regulatory changes, or other factors, our operating results may be further harmed. In addition, we use an automated system that manages the order processing for our eCommerce business.
Additionally, if we are unable to adequately staff this facility to meet demand, or if the cost of such staffing is higher than projected due to competition, mandated wage increases, regulatory changes, or other factors, our operating results may be further harmed. In addition, we use automated systems that manage the order processing for our eCommerce business.
We may be unable to successfully integrate businesses we acquire and such acquisitions may fail to achieve the financial results we expected.
For completed acquisitions, we may be unable to successfully integrate businesses we acquire and such acquisitions may fail to achieve the financial results we expected.
Financial difficulties for, or the loss of one or more of, our major wholesale customers could result in a material loss of revenues. A significant amount of our business is with our wholesale customers. For fiscal 2021, we derived approximately 32% of our consolidated net sales from our U.S.
Financial difficulties for, or the loss of one or more of, our major wholesale customers could result in a material loss of revenues. A significant amount of our business is with our wholesale customers. For fiscal 2022, we derived approximately 34% of our consolidated net sales from our U.S.
We are subject to income taxes in federal and applicable state and local tax jurisdictions in the United States, Canada, Hong Kong, Mexico, and other foreign jurisdictions. The taxable income in each jurisdiction is affected by certain transfer prices between affiliated entities.
We are subject to income taxes in federal and applicable state and local tax jurisdictions in the United States, Canada, Hong Kong, Mexico, and other foreign jurisdictions. Our taxable income in each jurisdiction is affected by certain transfer pricing arrangements between affiliated entities.
For example, frequent or unusually heavy or intense snowfall, flooding, hurricanes, or other extreme weather conditions over an extended period have caused and could in the future cause our stores to close for a period of time or permanently, and could make it difficult for our customers to travel to our stores or to receive products shipped to them, which in turn could negatively impact our operating results.
For example, frequent or unusually heavy or intense snowfall, flooding, hurricanes, heat stress and sea level rise, or other extreme weather conditions over an extended period have caused and could in the future cause our stores to close for a period of time or permanently, and could make it difficult for our customers and employees to travel to our stores or to receive products shipped to them, which in turn could negatively impact our operating results.
For example, as of and for the first quarter of fiscal 2020, we recorded intangible asset impairments of $26.5 million and a goodwill impairment of $17.7 million based on forecasted financial information derived from the information reasonably available to us at the time given the unknown future impact of the COVID-19 pandemic.
In addition, in the first quarter of fiscal 2020, we recorded intangible asset impairments of $26.5 million and a goodwill impairment of $17.7 million based on forecasted financial information derived from the information reasonably available to us at the time given the unknown future impact of the COVID-19 pandemic.
In addition, from time to time, particularly in response to the ongoing COVID-19 pandemic, we may seek to renegotiate existing lease terms or downsize, consolidate, reposition, or close some of our real estate locations, which in most cases requires a modification of an existing store lease.
In addition, from time to time, such as we have done in response to the ongoing COVID-19 pandemic, we may seek to renegotiate existing lease terms or downsize, consolidate, reposition, or close some of our real estate locations, which in most cases requires a modification of an existing store lease.
We are also reliant on the security practices of our third-party service providers, which may be outside of our direct control. The services provided by these third parties are subject to the same risk of outages, other failures and security breaches described above.
We are also reliant on the security practices of our third-party service providers, which may be outside of our direct control. The services provided by these third parties have been, and will likely continue to be, subject to the same risk of outages, other failures and security breaches described above.
We are subject to laws, regulations and standards set by various governmental authorities around the world, including in the United States, Canada, and Mexico, including: • those imposed by the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC, and the New York Stock Exchange (“NYSE”); • the U.S.
We are subject to laws, regulations and standards set by various governmental authorities around the world, including in the United States, Canada, and Mexico, including: • those imposed by the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC, and the NYSE; • the U.S.
In the event that this system becomes inoperable for any reason, we may be unable to ship orders in a timely manner, and as a result, we could experience a reduction in our direct-to-consumer business, which could negatively impact our sales and profitability. Risks Relating to Our International Expansion We may be unsuccessful in expanding into international markets.
In the event that one of these systems becomes inoperable for any reason, we may be unable to ship orders in a timely manner, and as a result, we could experience a reduction in our direct-to-consumer business, which could negatively impact our sales and profitability. 18 Risks Relating to Our International Expansion We may be unsuccessful in expanding into international markets.
These risks could have a material adverse effect on our brand image, as well as our results of operations and financial condition. Our profitability may decline as a result of increasing pressure on margins, including deflationary pressures on our selling prices and increases in production costs and costs to serve.
These risks could have a material adverse effect on our brand image, as well as our results of operations and financial condition. Our profitability may decline as a result of lower margins, such as through deflationary pressures on our selling prices and increases in production costs and costs to serve.
The extent to which COVID-19 impacts our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, the effectiveness and availability of vaccines and boosters, and the efficacy, scope, and duration of other actions to limit the spread of COVID-19 or treat its impact, among others.
The extent to which COVID-19 impacts our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including a resurgence of COVID-19, including new variants, the effectiveness and availability of vaccines and boosters, and the efficacy, scope, and duration of other actions to limit the spread of COVID-19 or treat its impact, among others.
Supreme Court ruling, under which states may have additional ability to tax entities operating in their state, but lacking physical presence; • mandatory country by country reporting of revenue, employees and profits, and certain international initiatives (such as the Organisation for Economic Co-operation and Development (OECD)’s Base Erosion and Profit Shifting (BEPS)) that are focused on the equity of international taxation, which may ultimately result in a worldwide minimum tax, or more defined approach around global profit allocation between related companies operating in jurisdictions with disparate income tax rates; and • tax revenue reductions as a result of the economic impact of the pandemic, which may lead to increases in state tax rates or the expansions of their tax base. 20 GENERAL RISK Quarterly cash dividends and share repurchases are subject to a number of uncertainties, and may affect the price of our common stock.
Supreme Court ruling, under which states may have additional ability to tax entities operating in their state, but lacking physical presence; • mandatory country by country reporting of revenue, employees and profits, and certain international initiatives (such as the Organisation for Economic Co-operation and Development (OECD)’s Base Erosion and Profit Shifting (BEPS)) that are focused on the equity of international taxation, which may ultimately result in a worldwide minimum tax, or more defined approach around global profit allocation between related companies operating in jurisdictions with disparate income tax rates; and • tax revenue reductions as a result of the economic impact of the pandemic, which may lead to increases in state tax rates or the expansions of their tax base.
General Data Protection Act and the California Consumer Privacy Act; • trade, transportation and logistics related laws, including tariffs and orders issued by Customs and Border Protection; and • applicable environmental laws. Our failure to comply with these various laws and regulations could have an adverse impact on our reputation, financial condition, or results of operations.
GDPA and the CCPA; • trade, transportation and logistics related laws, including tariffs and orders issued by Customs and Border Protection; and • applicable environmental laws. Our failure to comply with these various laws and regulations could have an adverse impact on our reputation, financial condition, or results of operations.
As a result, we have in the past experienced delays in the shipment of our products. In the event that these slow-downs, disruptions or strikes occur in the future in connection with labor agreement negotiations or otherwise, it may have a material adverse effect on our financial position, results of operations, or cash flows.
In the event that these slow-downs, disruptions or strikes occur in the future in connection with labor agreement negotiations or otherwise, it may have a material adverse effect on our financial position, results of operations, or cash flows.
In addition, if our retail eCommerce sites or our other customer-facing technology systems do not appeal to our customers, reliably function as designed, or maintain the privacy of customer data, or if we are unable to consistently meet our brand and delivery promises to our customers, we may experience a loss of customer confidence or lost sales, or be exposed to fraudulent purchases, which could adversely affect our reputation and results of operations. 18 Our success is dependent upon retaining key individuals within the organization to execute our strategic plan.
In addition, if our retail eCommerce sites or our other customer-facing technology systems do not appeal to our customers, reliably function as designed, or maintain the privacy of customer data, or if we are unable to consistently meet our brand and delivery promises to our customers, we may experience a loss of customer confidence or lost sales, or be exposed to fraudulent purchases, which could adversely affect our reputation and results of operations.
In fiscal 2021 and the early part of 2022, the costs of raw materials, packaging materials, labor, energy, fuel, transportation, and other inputs necessary for the production and distribution of our products have rapidly increased. We also expect the pressures of input cost inflation to continue into 2022.
In fiscal 2021 and 2022, the costs of raw materials, packaging materials, labor, energy, fuel, transportation, and other inputs necessary for the production and distribution of our products increased significantly. We also expect the pressures of certain input cost inflation to continue in 2023.
In such circumstances, we could be held liable to our customers, other parties, or employees as well as be subject to regulatory or other actions for breaching privacy law (including the E.U. General Data Protection Act and the California Consumer Privacy Act) or failing to adequately protect such information.
In such circumstances, we could be held liable to our customers, other parties, or employees as well as be subject to regulatory or other actions for breaching privacy law (including the E.U. GDPA, CCPA, and the CPRA) or failing to adequately protect such information.
We also expect to bear additional costs pursuant to our advancement and indemnification obligations to directors and officers under the terms of our organizational documents in connection with proceedings related to these matters.
We also expect to bear additional costs pursuant to our advancement and indemnification obligations to directors and officers under the terms of our organizational documents in connection with proceedings related to these matters. Our insurance may not provide coverage to offset all of the costs incurred in connection with these proceedings.
Some new stores may be located in areas where we have existing sales channels. Increasing the number of stores in these markets may result in inadvertent diversion of customers and sales from our existing sales channels in the same market, thereby negatively affecting our results of operations.
Increasing the number of stores in these markets may result in inadvertent diversion of customers and sales from our existing sales channels in the same market, thereby negatively affecting our results of operations.
In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. 19 In addition, both our senior secured revolving credit facility and, in certain circumstances, our indenture governing the senior notes contain restrictive covenants that, subject to specified exemptions, restrict our ability to incur indebtedness, grant liens, make certain investments (including business acquisitions), pay dividends or distributions on our capital stock, engage in mergers, dispose of assets and use the proceeds from any such dispositions, and raise debt or equity capital to be used to repay other indebtedness when it becomes due.
In addition, both our senior secured revolving credit facility and, in certain circumstances, the indenture that governs the senior notes contain restrictive covenants that, subject to specified exemptions, restrict our ability to incur indebtedness, grant liens, make certain investments (including business acquisitions), pay dividends or distributions on our capital stock, engage in mergers, dispose of assets and use the proceeds from any such dispositions, and raise debt or equity capital to be used to repay other indebtedness when it becomes due.
If our international expansion plans are unsuccessful, our results could be materially adversely affected. 17 Risks Related to Governmental and Regulatory Changes Failure to comply with the various laws and regulations as well as changes in laws and regulations could have an adverse impact on our reputation, financial condition, or results of operations.
Risks Related to Governmental and Regulatory Changes Failure to comply with the various laws and regulations as well as changes in laws and regulations could have an adverse impact on our reputation, financial condition, or results of operations.
The COVID-19 pandemic has impacted and continues to impact global supply chain operations, causing delays in the production and transportation of our product. For example, in fiscal 2020 the COVID-19 pandemic had a material adverse effect on our sourcing operations, particularly in China and the rest of Asia, and has slowed our ability to import products into North America.
For example, in fiscal 2020 and 2021 the COVID-19 pandemic had a material adverse effect on our sourcing operations, particularly in China and the rest of Asia, and has slowed our ability to import products into North America.
Our entry into new markets may have upfront investment costs that may not be accompanied by sufficient revenues to achieve typical or expected operational and financial performance and such costs may be greater than expected.
Our entry into new markets may have upfront investment costs that may not be accompanied by sufficient revenues to achieve typical or expected operational and financial performance and such costs may be greater than expected. If our international expansion plans are unsuccessful, our results could be materially adversely affected.
Our insurance may not provide coverage to offset all of the costs incurred in connection with these proceedings. 13 Risks Related to Cybersecurity, Data Privacy, and Information Technology Our systems, and those of our third-party vendors, containing personal information and payment data of our retail store and eCommerce customers, employees, and other third parties could be breached, which could subject us to adverse publicity, costly government enforcement actions or private litigation, and expenses.
Risks Related to Cybersecurity, Data Privacy, and Information Technology Our systems, and those of our third-party vendors, containing personal information and payment data of our retail store and eCommerce customers, employees, and other third parties could be breached, which could subject us to adverse publicity, costly government enforcement actions or private litigation, and expenses.
Similarly, we are also subject to general political and economic risks in connection with our global operations, including political instability, terrorist attacks, and changes in diplomatic and trade relationships, any of which may have a significant adverse effect on our business, financial condition, and results of operations.
We are subject to general political and economic risks in connection with our global operations, including political instability (both in the United States and globally, including the ongoing conflict between Russia and Ukraine and the related economic and retaliatory measures), terrorist attacks, and changes in diplomatic and trade relationships, any of which may have a significant adverse effect on our business, financial condition, and results of operations.
Inventory levels in excess of consumer demand may result in inventory write-downs (which occurred, for example, in the first quarter of fiscal 2020 due to the COVID-19 pandemic) and the sale of excess inventory at discounted prices, which could have an adverse effect on the image and reputation of our brands and negatively impact profitability.
Inventory levels in excess of consumer demand have resulted and may continue to result in inventory write-downs and the sale of excess inventory at discounted prices, which could have an adverse effect on the image and reputation of our brands and negatively impact profitability.
In fiscal 2021, we purchased approximately 54% of our products from ten vendors, of which approximately half comes from three vendors. Additionally, we estimate that approximately 80% of the fabric that is used in the manufacture of our products is sourced from China. We expect that we will continue to source a significant portion of our products from these vendors.
Additionally, we estimate that approximately 74% of the fabric that is used in the manufacture of our products is sourced from China. We expect that we will continue to source a significant portion of our products from these vendors.
Wholesale segment and approximately 32% of our consolidated net sales from our top ten wholesale customers. As of the end of fiscal 2021, approximately 80% of our gross accounts receivable were from our ten largest wholesale customers, with three of these customers having individual receivable balances in excess of 10% of our total 10 accounts receivable.
As of the end of fiscal 2022, approximately 81% of our gross accounts receivable were from our ten largest wholesale customers, with three of these customers having individual receivable balances in excess of 10% of our total accounts receivable.
As of the end of fiscal 2021, we had $1.00 billion aggregate principal amount of debt outstanding (excluding $4.1 million of outstanding letters of credit), and $745.9 million of undrawn availability under our senior secured revolving credit facility after giving effect to $4.1 million of letters of credit issued under our senior secured revolving credit facility.
As of the end of fiscal 2022, we had $620.0 million aggregate principal amount of debt outstanding (excluding $3.5 million of outstanding letters of credit), and $726.5 million of undrawn availability under our senior secured revolving credit facility after giving effect to $3.5 million of letters of credit issued under our senior secured revolving credit facility.
Our ability to attract and retain qualified executive management, marketing, merchandising, design, sourcing, operations, including distribution center and retail store, and support function staffing is key to our success.
Our success is dependent upon retaining key individuals within the organization to execute our strategic plan. Our ability to attract and retain qualified executive management, marketing, merchandising, design, sourcing, technology, operations, including distribution center and retail store, and support function staffing is key to our success.
Our inability to retain personnel could cause us to experience business disruption due to a loss of historical knowledge and a lack of business continuity and may adversely affect our results of operations, financial position, and cash flows. We may be unable to successfully integrate acquired businesses, and such acquisitions may fail to achieve the financial results we expected.
Our inability to retain personnel could cause us to experience business disruption due to a loss of historical knowledge and a lack of business continuity and may adversely affect our results of operations, financial position, and cash flows.
The demand for baby and young children’s apparel and accessories in particular may also be subject to other external factors, such as general inflationary pressures, as well as the costs of our products, which are driven in part by the costs of raw materials (including cotton and other commodities), labor, fuel, transportation and duties, any increases in mandatory minimum wages, and the costs to deliver those products to our customers.
The demand for baby and young children’s apparel and accessories in particular may also be subject to other external factors, such as general inflationary pressures, as well as the costs of our products, which are driven in part by the costs of raw materials (including cotton and other commodities), labor, fuel, transportation and duties, any increases in mandatory minimum wages, and the costs to deliver those products to our customers. 13 If external pressures, including deflation, cause us to reduce our sales prices and we fail to sufficiently reduce our product costs or operating expenses, or if we are unable to fully optimize prices or pass on increased costs to our customers, our profitability could decline.
Our eCommerce business may continue to be negatively impacted if consumers shift back to traditional brick-and-mortal retail after the COVID-19 pandemic. Profitability and our reputation and relationships could be negatively affected if we do not adequately forecast the demand for our products and, as a result, create significant levels of excess inventory or insufficient levels of inventory.
Profitability and our reputation and relationships could be negatively affected if we do not adequately forecast the demand for our products and, as a result, create significant levels of excess inventory or insufficient levels of inventory.
Any delays, interruption, or increased costs in the manufacture of our products could have a material adverse effect on our operating results or cash flows. 16 Additionally, the nature of our business requires us to carry a significant amount of inventory, especially prior to the peak holiday selling season when we build up our inventory levels, and to support our retail omni-channel strategies, including our buy on-line and pick-up in store program.
Additionally, the nature of our business requires us to carry a significant amount of inventory, especially prior to the peak holiday selling season when increase our inventory levels, and to support our retail omni-channel strategies, including our buy on-line and pick-up in store program.
Risk Relating to Litigation We are and may become subject to various claims and pending or threatened lawsuits, including as a result of investigations or other proceedings related to previously disclosed investigations.
As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations. 14 Risk Relating to Litigation We are and may become subject to various claims and pending or threatened lawsuits, including as a result of investigations or other proceedings related to previously disclosed investigations.
We have also outsourced elements of our IT systems, including to cloud-based solution vendors, and, as a result, a number of third-party vendors may or could have access to our confidential information.
We have outsourced elements of our IT systems, including to cloud-based solution vendors, and use third-party vendors in other aspects of our operations and, as a result, a number of third-party vendors may or could have access to confidential information. Our third-party vendors have experienced service interruptions and cyber-attacks in the past, and we expect they may continue.
Our inability to successfully integrate businesses we acquire, or if such businesses do not achieve the financial results we expect, may increase our costs and have a material adverse impact on our financial condition and results of operations.
Our inability to successfully integrate businesses we acquire, or if such businesses do not achieve the financial results we expect, may increase our costs and have a material adverse impact on our financial condition and results of operations. 20 Risks Related to Financial Reporting, Our Debt, and Tax We may not achieve sales growth plans, profitability objectives, and other assumptions that support the carrying value of our intangible assets.
As a result, the COVID-19 pandemic and related measures taken to contain the spread of COVID-19 have had, and will likely continue to have, a significant adverse effect on our business, financial condition, and results of operations.
As a result, the COVID-19 pandemic and related measures taken to contain the spread of COVID-19 have had, and may likely continue to have, a significant adverse effect on our business, financial condition, and results of operations. For example, temporary store closures and the disruption of global supply chains in 2020 and 2021 significantly impacted our operations at that time.
Failure to renew existing store leases, secure adequate new lease terms, or successfully modify existing locations, or failure to effectively manage the profitability of our existing fleet of stores, could have a material adverse effect on our results of operations.
Failure to renew existing store leases, secure adequate new lease terms, or successfully modify existing locations, or failure to effectively manage the profitability of our existing fleet of stores, could have a material adverse effect on our results of operations. 12 Additionally, the economic environment may at times make it difficult to determine the fair market rent of real estate properties within the United States and internationally.
To address this, we have increased wages and implemented other policies in order to retain existing employees and attract additional employees. These wage increases impacted our operating results.
Additionally, we have experienced significant competition in hiring employees for this facility, which we attribute to the impacts of governmental stimulus related to COVID-19 and to increased competition and rising wages. To address this, we have increased wages and implemented other policies in order to retain existing employees and attract additional employees. These wage increases impacted our operating results.
Risks Related to Operating a Global Business We operate in a highly competitive market and the size and resources of some of our competitors may allow them to compete more effectively than we can. The global baby and young children’s apparel and accessories market is very competitive and includes both branded and private label manufacturers.
This could materially harm our brand and our reputation in the marketplace. 11 Risks Related to Operating a Global Business We operate in a highly competitive market and the size and resources of some of our competitors may allow them to compete more effectively than we can.
Public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation, and raw material costs, and may require us to make additional investments in facilities and equipment. As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations.
Public expectations and internal goals for reductions in greenhouse gas emissions could result in increased energy, transportation, and raw material costs, and may require us to make additional investments in facilities and equipment.
In addition, in 15 fiscal 2021, we experienced increased inbound transportation and freight costs, and we expect these increased costs to continue and to adversely impact our financial and operating results in fiscal 2022. Also, in fiscal 2020 and 2021, the U.S.
In addition, in fiscal 2021 and 2022, we experienced increased inbound transportation and freight costs as compared to prior periods, and we expect that we may experience increased costs in the future that may adversely impact our financial and operating results in fiscal 2023 and further periods.
Quarterly cash dividends and share repurchases under our share repurchase program have historically been part of our capital allocation strategy.
General Risks Quarterly cash dividends and share repurchases are subject to a number of uncertainties, and may affect the price of our common stock. Quarterly cash dividends and share repurchases under our share repurchase program have historically been part of our capital allocation strategy.
We have also shifted some of our product deliveries to other ports of entry which may experience volume increases that may create delays at these ports that did not exist before we, and others, shifted significant volume to them. Further, in the past, the insolvency of a major shipping company has also had an effect on our supply chain.
We, along with other companies, have also shifted a significant amount of our product deliveries to ports of entry on the East Coast of the United States, which have experienced volume increases that created, and may continue to create, delays at these ports that did not exist before we, and others, shifted significant volume to them.
Successful operation of a retail store depends, in part, on the overall ability of the retail location to attract a consumer base sufficient to generate profitable store sales volumes. If we are unable to identify new retail locations with consumer traffic sufficient to support a profitable sales level, our retail growth may be limited.
If we are unable to identify new retail locations with consumer traffic sufficient to support a profitable sales level, our retail growth may be limited. Some new stores may be located in areas where we have existing sales channels.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur largest distribution centers, which we lease, are located in Braselton, Georgia and Stockbridge, Georgia, and are 1.1 million and 0.5 million square feet, respectively, and supports all of our operating segments. We also lease additional space in or use third-party logistics providers in California, Canada, China, Mexico and Vietnam for warehousing and distribution purposes.
Biggest changeOur largest distribution centers, which we lease, are located in Braselton, Georgia, Stockbridge, Georgia, and Jonesboro, Georgia and are 1.1 million, 0.5 million, and 0.2 million square feet, respectively. The distribution centers in Braselton, Georgia and Stockbridge, Georgia support all of our operating segments, and the distribution center in Jonesboro, Georgia supports our U.S. Wholesale segment.
ITEM 2. PROPERTIES The following is a summary of our principal owned and leased properties as of January 1, 2022. Our corporate headquarters occupies 278,000 square feet of leased space in a building in Atlanta, Georgia. Our lease for that space expires in April 2030.
ITEM 2. PROPERTIES The following is a summary of our principal owned and leased properties as of December 31, 2022. Our corporate headquarters occupies 278,000 square feet of leased space in a building in Atlanta, Georgia. Our lease for that space expires in April 2030.
We also operate the following number of leased retail stores: 751 in the United States, 186 in Canada, and 43 in Mexico. Our average remaining lease term for retail store leases in the United States, Canada, and Mexico is approximately 3.4 years, excluding renewal options.
Our average remaining lease term for retail store leases in the United States, Canada, and Mexico is approximately 3.3 years, excluding renewal options.
In addition, our regional headquarters for Canada occupied leased space in a building in Mississauga, Ontario through May 31, 2021; we anticipate we will relocate that office to other leased space in Mississauga, Ontario in 2022. We also occupy leased space in Hong Kong, China, which serves as our principal sourcing office in Asia.
In addition, we occupy leased space in a building in Mississauga, Ontario, which serves as our regional headquarters for Canada, and we occupy leased space in Hong Kong, which serves as our principal sourcing office in Asia.
Added
We also lease additional space in or use third-party logistics providers in California, Canada, China, Mexico and Vietnam for warehousing and distribution purposes. We also operate the following number of leased retail stores: 757 in the United States, 187 in Canada, and 49 in Mexico.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe timing and amount of any repurchases will be at our discretion subject to restrictions under our revolving credit facility, market conditions, stock price, other investment priorities, and other factors. 23 Dividends On February 24, 2022, the Company's Board of Directors authorized a quarterly cash dividend payment of $0.75 per common share, payable on March 18, 2022 to shareholders of record at the close of business on March 8, 2022.
Biggest changeDividends On February 23, 2023, the Company's Board of Directors authorized a quarterly cash dividend payment of $0.75 per common share, payable on March 17, 2023 to shareholders of record at the close of business on March 7, 2023.
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.
Our Board of Directors will evaluate future dividend 25 declarations based on a number of factors, including restrictions under our secured revolving credit facility, business conditions, our financial performance, and other considerations.
The Board of Directors declared and we paid cash dividends of $0.40 per share in each of the second and third quarters of fiscal 2021 and $0.60 per share in the fourth quarter of fiscal 2021.
In fiscal 2021, the Board of Directors declared and the Company paid quarterly cash dividends of $0.40 per common share in each of the second and third quarters of fiscal 2021 and $0.60 per common share in the fourth quarter of fiscal 2021.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Historical Stock Price and Number of Record Holders Our common stock trades on the New York Stock Exchange (NYSE) under the trading symbol CRI. The last reported sale price per share of our common stock on February 18, 2022 was $88.48.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock trades on the New York Stock Exchange (NYSE) under the trading symbol CRI. As of February 17, 2023, there were 184 holders of record of our common stock.
We repurchased and retired shares in open market transactions in the following amounts for the fiscal periods indicated: For the fiscal year ended January 1, 2022 January 2, 2021 December 28, 2019 Number of shares repurchased 2,967,619 474,684 2,107,472 Aggregate cost of shares repurchased (dollars in thousands) $ 299,339 $ 45,255 $ 196,910 Average price per share $ 100.87 $ 95.34 $ 93.43 In the third quarter of fiscal 2021, we reinstated our common stock share repurchase program.
We repurchased and retired shares in open market transactions in the following amounts for the fiscal periods indicated: For the fiscal year ended December 31, 2022 January 1, 2022 January 2, 2021 Number of shares repurchased 3,747,187 2,967,619 474,684 Aggregate cost of shares repurchased (dollars in thousands) $ 299,667 $ 299,339 $ 45,255 Average price per share $ 79.97 $ 100.87 $ 95.34 Future repurchases may occur from time to time in the open market, in privately negotiated transactions, or otherwise.
Share Repurchase Program On February 24, 2022, our Board of Directors authorized share repurchases up to $1.00 billion, inclusive of approximately $301.9 million remaining under previous authorizations. The total remaining capacity under outstanding repurchase authorizations as of January 1, 2022 was approximately $351.1 million, exclusive of the February 2022 share repurchase authorization, based on settled repurchase transactions.
There were 1,085 shares surrendered between October 30, 2022 and November 26, 2022. Share Repurchase Program On February 24, 2022, our Board of Directors authorized share repurchases up to $1.00 billion, inclusive of $301.9 million remaining under previous authorizations. The total aggregate remaining capacity under outstanding repurchase authorizations as of December 31, 2022 was $749.5 million.
As a result, the Board of Directors did not declare and we did not pay cash dividends in the second, third, or fourth quarters of fiscal 2020, or in the first quarter of fiscal 2021.
As a result of actions taken in connection with the COVID-19 pandemic, the Board of Directors did not declare and the Company did not pay cash dividends for the first quarter of 2021.
Open Market Share Repurchases The following table provides information about shares repurchased during the fourth 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 remaining shares that can be purchased under the plans or programs (2) October 3, 2021 through October 30, 2021 887,349 $ 98.00 887,349 $ 453,227,014 October 31, 2021 through November 27, 2021 454,342 $ 104.86 453,205 $ 405,703,430 November 28, 2021 through January 1, 2022 531,166 $ 102.78 531,166 $ 351,109,063 Total 1,872,857 $ 101.02 1,871,720 (1) Includes shares of our common stock surrendered by our employees to satisfy required tax withholding upon the vesting of restricted stock awards.
Open Market Share Repurchases The following table provides information about shares repurchased during the fourth quarter of fiscal 2022: Period Total number of shares purchased (*) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of remaining shares that can be purchased under the plans or programs October 2, 2022 through October 29, 2022 320,012 $ 71.30 320,012 $ 784,626,269 October 30, 2022 through November 26, 2022 53,710 $ 74.13 52,625 $ 780,725,321 November 27, 2022 through December 31, 2022 432,069 $ 72.21 432,069 $ 749,526,315 Total 805,791 804,706 (*) Includes shares of our common stock surrendered by our employees to satisfy required tax withholding upon the vesting of restricted stock awards.
Our Board of Directors declared and we paid cash dividends of $0.60 per share in the first quarter of fiscal 2020. On May 1, 2020, in connection with the COVID-19 pandemic, our Board of Directors suspended our quarterly cash dividend.
In fiscal 2022, the Board of Directors declared and the Company paid quarterly cash dividends of $0.75 per common share during all four quarters.
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On that date there were 174 holders of record of our common stock.
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A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions.
Removed
There were 1,137 shares surrendered between October 31, 2021 and November 27, 2021. (2) In August 2021, we reinstated our previously suspended share repurchase program. As of August 19, 2021, total remaining capacity was $650.4 million. The authorization does not have a prescribed expiration date.
Added
The timing and amount of any repurchases will be at the discretion of the Company subject to restrictions under the Company’s revolving credit facility and considerations given to market conditions, stock price, other investment priorities, excise taxes, and other factors.
Removed
We had previously announced the suspension of our common stock share repurchase program, in connection with the COVID-19 pandemic, at the end of the first quarter in fiscal 2020. Future repurchases may occur from time to time in the open market, in privately negotiated transactions, or otherwise.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFiscal year ended (dollars in thousands, except per share data) January 1, 2022 (52 weeks) January 2, 2021 (53 weeks) $ Change % / bps Change Consolidated net sales $ 3,486,440 $ 3,024,334 $ 462,106 15.3 % Cost of goods sold 1,832,045 1,696,224 135,821 8.0 % Adverse purchase commitments (inventory and raw materials), net (7,879) 14,668 (22,547) nm Gross profit 1,662,274 1,313,442 348,832 26.6 % Gross profit as % of consolidated net sales 47.7 % 43.4 % 430 bps Royalty income, net 28,681 26,276 2,405 9.2 % Royalty income as % of consolidated net sales 0.8 % 0.9 % (10) bps Selling, general, and administrative expenses 1,193,876 1,105,607 88,269 8.0 % SG&A expenses as % of consolidated net sales 34.2 % 36.6 % (240) bps Goodwill impairment — 17,742 (17,742) nm Intangible asset impairment — 26,500 (26,500) nm Operating income 497,079 189,869 307,210 >100% Operating income as % of consolidated net sales 14.3 % 6.3 % 800 bps Interest expense 60,294 56,062 4,232 7.5 % Interest income (1,096) (1,515) 419 (27.7) % Other expense, net (409) 338 (747) nm Income before income taxes 438,290 134,984 303,306 >100% Income tax provision 98,542 25,267 73,275 >100% Effective tax rate (*) 22.5 % 18.7 % 380 bps Net income $ 339,748 $ 109,717 $ 230,031 >100% Basic net income per common share $ 7.83 $ 2.51 $ 5.32 >100% Diluted net income per common share $ 7.81 $ 2.50 $ 5.31 >100% Dividend declared and paid per common share $ 1.40 $ 0.60 $ 0.80 >100% (*) Effective tax rate is calculated by dividing the provision for income taxes by income before income taxes.
Biggest changeFiscal year ended (dollars in thousands, except per share data) December 31, 2022 January 1, 2022 $ Change % / bps Change Consolidated net sales $ 3,212,733 $ 3,486,440 $ (273,707) (7.9) % Cost of goods sold 1,735,910 1,832,045 (96,135) (5.2) % Adverse purchase commitments (inventory and raw materials), net 4,465 (7,879) 12,344 nm Gross profit 1,472,358 1,662,274 (189,916) (11.4) % Gross profit as % of consolidated net sales 45.8 % 47.7 % (190) bps Royalty income, net 25,820 28,681 (2,861) (10.0) % Royalty income as % of consolidated net sales 0.8 % 0.8 % 0 bps Selling, general, and administrative expenses 1,110,007 1,193,876 (83,869) (7.0) % SG&A expenses as % of consolidated net sales 34.6 % 34.2 % 40 bps Intangible asset impairment 9,000 — 9,000 nm Operating income 379,171 497,079 (117,908) (23.7) % Operating income as % of consolidated net sales 11.8 % 14.3 % (250) bps Interest expense 42,781 60,294 (17,513) (29.0) % Interest income (1,261) (1,096) (165) 15.1 % Other expense (income), net 975 (409) 1,384 nm Loss on extinguishment of debt 19,940 — 19,940 nm Income before income taxes 316,736 438,290 (121,554) (27.7) % Income tax provision 66,698 98,542 (31,844) (32.3) % Effective tax rate (*) 21.1 % 22.5 % (140) bps Net income $ 250,038 $ 339,748 $ (89,709) (26.4) % Basic net income per common share $ 6.34 $ 7.83 $ (1.49) (19.0) % Diluted net income per common share $ 6.34 $ 7.81 $ (1.47) (18.8) % Dividend declared and paid per common share $ 3.00 $ 1.40 $ 1.60 114.3 % (*) Effective tax rate is calculated by dividing the provision for income taxes by income before income taxes.
The amounts payable to participating financial institutions for suppliers who voluntarily participate in the SCF program are included in Accounts payable on our consolidated statement balance sheets. Payments made under the SCF program, like payments on other Accounts payable, are a reduction to our operating cash flow.
The amounts payable to the participating financial institutions for suppliers who voluntarily participate in the SCF program are included in Accounts payable on our consolidated statement balance sheets. Payments made under the SCF program, like payments on other Accounts payable, are a reduction to our operating cash flow.
Factors affecting such impairment reviews include the continued market acceptance of our current products and the development of new products. We use qualitative and quantitative methods to assess for impairment, including the use of discounted cash flows (“income approach”) and relevant data from guideline public companies (“market approach”). We perform impairment tests of goodwill at the reporting unit level.
Factors affecting such impairment reviews include the continued market acceptance of our current products and the development of new products. We use qualitative and quantitative methods to assess for impairment, including the use of discounted cash flows (“income approach”) and relevant data from guideline public companies (“market approach”). 41 We perform impairment tests of goodwill at the reporting unit level.
Deferred gains and losses that exceed 10% of the greater of the plan’s projected benefit obligations or market value of assets are amortized to earnings over the average remaining life of inactive plan participants. Any future obligation under our pension plan not funded from returns on plan assets are expected to be funded from cash flows from operations.
Deferred gains and losses that exceed 10% of the greater of the plan’s projected benefit obligations or market value of assets are amortized to earnings over the average remaining life of inactive plan participants. Any future obligation under our pension plan not funded from returns on plan assets is expected to be funded from cash flows from operations.
(2) The minimum lease obligation includes all lease and non-lease components that were included in the measurement of the lease liability. (3) The table above excludes our reserves for income taxes, as we are unable to reasonably predict the ultimate amount or timing of settlement. (4) The table above excludes purchase obligations.
(2) The minimum lease obligation includes all lease and non-lease components that were included in the measurement of the lease liability. (3) The table above excludes our reserves for income taxes, as we are unable to reasonably predict the ultimate amount or timing of settlement. (4) The table above excludes inventory purchase obligations.
Our significant accounting policies are described in our accompanying consolidated financial statements. The following discussion addresses our critical accounting policies and estimates, which are those policies that require management’s most 36 difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Our significant accounting policies are described in our accompanying consolidated financial statements. The following discussion addresses our critical accounting policies and estimates, which are those policies that require management’s most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Goodwill and Tradename The carrying values of goodwill and indefinite-lived tradename assets are subject to annual impairment reviews as of the last day of each fiscal year. Between annual assessments, impairment reviews may also be triggered by any significant events or changes in circumstances affecting our business.
Goodwill and Tradenames The carrying values of goodwill and indefinite-lived tradename assets are subject to annual impairment reviews as of the last day of each fiscal year. Between annual assessments, impairment reviews may also be triggered by any significant events or changes in circumstances affecting our business.
The process of estimating the fair value of a tradename incorporates the relief-from-royalty method, which requires us to make assumptions and to apply judgment, including forecasting revenue growth rates and selecting the appropriate terminal value, discount rate, and royalty rate.
The process of estimating the fair value of a tradename incorporates the relief-from-royalty valuation method, which requires us to make assumptions and to apply judgment, including forecasting revenue growth rates and selecting the appropriate terminal growth rate, discount rate, and royalty rate.
At time of subsequent vesting, exercise, forfeiture, or expiration of an award, the difference between our actual income tax deduction, if any, and the previously accrued income tax benefit is recognized in our income tax expense/benefit during the current period. 40
At time of subsequent vesting, exercise, forfeiture, or expiration of an award, the difference between our actual income tax deduction, if any, and the previously accrued income tax benefit is recognized in our income tax expense/benefit during the current period.
If the results of a qualitative test determine 37 that it is “more likely than not” that the fair value of a reporting unit is less than its carrying value, then a goodwill impairment test using quantitative assessments must be performed.
If the results of a qualitative test determine that it is “more likely than not” that the fair value of a reporting unit is less than its carrying value, then a goodwill impairment test using quantitative assessments must be performed.
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.
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.
Fiscal Years Our fiscal year ends on the Saturday in December or January nearest December 31. Every five or six years, our fiscal year includes an additional 53 rd week of results. Fiscal 2021, which ended on January 1, 2022, contained 52 weeks. Fiscal 2020, which ended on January 2, 2021, contained 53 weeks.
Fiscal Years Our fiscal year ends on the Saturday in December or January nearest December 31. Every five or six years, our fiscal year includes an additional 53 rd week of results. Fiscal 2022, which ended on December 31, 2022, contained 52 weeks. Fiscal 2021, which ended on January 1, 2022, contained 52 weeks.
We acquired OshKosh 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 Skip Hop in 2017.
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 Skip Hop in 2017.
The Company also has minimum inventory purchase commitments, including fabric commitments, with our suppliers which secure a portion of our raw material needs for future seasons. In the event anticipated market sales prices are lower than these committed costs or customer orders are canceled, the Company records a reserve for these adverse inventory and fabric purchase commitments.
The Company also has minimum inventory purchase commitments, including fabric commitments, with our suppliers which secure a portion of our raw material needs for future seasons. In the event anticipated market sales prices are lower than these committed costs or customer orders are canceled, the Company records an estimated liability reserve for these adverse inventory and fabric purchase commitments.
Stock-Based Compensation Arrangements We recognize the cost resulting from all stock-based payment transactions in the financial statements at grant date fair value. The fair value of stock awards is determined based on the quoted closing price of our common stock on the date of grant.
Stock-Based Compensation Arrangements We recognize the cost resulting from all stock-based compensation arrangements in the financial statements at grant date fair value. The fair value of stock awards is determined based on the quoted closing price of our common stock on the date of grant.
Additionally, Child of Mine , an exclusive Carter’s brand, is sold at Walmart; Just One You , an exclusive Carter’s brand, is sold at Target, and Simple Joys , an exclusive Carter’s brand, is available on Amazon.
Additionally, Child of Mine , an exclusive Carter’s brand, is available only at Walmart; Just One You , an exclusive Carter’s brand, is available only at Target, and Simple Joys , an exclusive Carter’s brand, is available only on Amazon.
For a comparison of our results for fiscal year 2020 to our results for fiscal year 2019 and other financial information related to fiscal year 2019, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Annual Report on Form 10-K, filed with the SEC on February 26, 2021.
For a comparison of our results for fiscal year 2021 to our results for fiscal year 2020 and other financial information related to fiscal year 2020, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Annual Report on Form 10-K, filed with the SEC on February 25, 2022.
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.
Our Board of Directors will evaluate future dividend declarations based on a number of factors, including restrictions under the Company’s revolving credit facility, business conditions, the Company’s financial performance, and other considerations.
(5) The table above excludes any potential future Company funding for obligations under our defined benefit retirement plans. Our estimates of such obligations as of January 1, 2022 have been determined in accordance with U.S.
(5) The table above excludes any potential future Company funding for obligations under our defined benefit retirement plans. Our estimates of such obligations as of December 31, 2022 have been determined in accordance with U.S.
We have included the fair value of these arrangements of approximately $0.2 million for fiscal 2021, $0.5 million for fiscal 2020, and $3.1 million for fiscal 2019 as a component of SG&A expenses on our consolidated statements of operations, rather than as a reduction of net sales.
We have included the fair value of these arrangements of approximately $0.6 million for fiscal 2022, $0.2 million for fiscal 2021, and $0.5 million for fiscal 2020 as a component of SG&A expenses on our consolidated statements of operations, rather than as a reduction of net sales.
Revenue Recognition and Accounts Receivable Allowance Our revenues, which are reported as Net sales, consist of sales to customers, net of returns, discounts, chargebacks, and cooperative advertising. We recognize revenue when (or as) the performance obligation is satisfied. Generally, the performance obligation is satisfied when we transfer control of the goods to the customer.
Revenue Recognition and Accounts Receivable Allowance Our revenues, which are reported as Net sales, consist of sales to customers, net of returns, discounts, chargebacks, and cooperative advertising. We recognize revenue when (or as) the performance obligation is satisfied.
Wholesale, and International segments, respectively, to reflect the impairment of the value ascribed to the indefinite-lived OshKosh tradename asset. The charge recorded on our indefinite-lived Skip Hop tradename asset included charges of $6.8 million, $3.7 million, and $0.5 million in the U.S. Wholesale, International, and U.S.
The charge recorded on our indefinite-lived Skip Hop tradename asset included charges of $5.6 million, $3.0 million, and $0.4 million 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.
The Board of Directors declared and we paid cash dividends of $0.40 per share in each of the second and third quarters of fiscal 2021 and $0.60 per share in the fourth quarter of fiscal 2021.
In fiscal 2021, the Board of Directors declared and the Company paid quarterly cash dividends of $0.40 per common share in each of the second and third quarters of fiscal 2021 and $0.60 per common share in the fourth quarter of fiscal 2021.
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 January 1, 2022 were $231.4 million compared to $186.5 million at January 2, 2021.
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 December 31, 2022 were $198.6 million compared to $231.4 million at January 1, 2022.
Liquidity Outlook Based on our current outlook, we believe that cash generated from operations and available cash, together with amounts available under our secured revolving credit facility, will be adequate to meet our working capital needs and capital expenditure requirements for our longer-term strategic plans, although no assurance can be given in this regard.
Liquidity Outlook Based on our current outlook, we believe that cash and cash equivalents on hand, cash flow generated from operations, and available borrowing capacity under our secured revolving credit facility, will be adequate to meet our working capital needs and capital expenditure requirements for our longer-term strategic plans, although no assurance can be given in this regard.
The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions. Actual results that differ from the actuarial assumptions are reflected as deferred gains and losses in Accumulated other comprehensive income (loss) within stockholder’s equity.
Plan valuations based on the actuarial assumptions used may differ materially from actual results due to changing market and economic conditions. Actual results that differ from the plan valuations are reflected as deferred gains and losses in Accumulated other comprehensive income (loss) within shareholder’s equity.
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 related 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 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 related products. We believe our brands are complementary to one another in product offering and aesthetic. Each brand is uniquely positioned in the marketplace and offers great value to families with young children.
Our estimate as of January 1, 2022 for commitments to purchase inventory in the normal course of business, which are cancellable (with or without penalty, depending on the stage of production) and span a period of one year or less, was between $550 million and $650 million.
Our estimate as of December 31, 2022 for commitments to purchase inventory in the normal course of business, which are cancellable (with or without penalty, depending on the stage of production) and span a period of one year or less, was between $400 million and $500 million.
Results by Segment - Fiscal Year 2021 (52 Weeks) compared to Fiscal Year 2020 (53 Weeks) The following table summarizes net sales and operating income, by segment, for the fiscal years ended January 1, 2022 and January 2, 2021: Fiscal year ended (dollars in thousands) January 1, 2022 (52 weeks) % of consolidated net sales January 2, 2021 (53 weeks) % of consolidated net sales $ Change % Change Net sales: U.S.
Results by Segment - Fiscal Year 2022 compared to Fiscal Year 2021 The following table summarizes net sales and operating income, by segment, for the fiscal years ended December 31, 2022 and January 1, 2022: Fiscal year ended (dollars in thousands) December 31, 2022 % of consolidated net sales January 1, 2022 % of consolidated net sales $ Change % Change Net sales: U.S.
At 25 the end of fiscal 2021, our channels included 980 retail stores, approximately 18,800 wholesale locations, and eCommerce websites in North America, as well as our international wholesale accounts and licensees who operate in over 90 countries. We have extensive experience in the young children’s apparel and accessories market and focus on delivering products that satisfy our consumers’ needs.
At the end of fiscal 2022, our channels included 993 company-owned retail stores, approximately 19,350 wholesale locations, and eCommerce websites in North America, as well as our international wholesale accounts and licensees who operate in over 90 countries. We have extensive experience in the young children’s apparel and accessories market and focus on delivering products that satisfy our consumers’ needs.
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.
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 OshKosh in 2005.
Impairment reviews for an indefinite-lived tradename can be conducted using qualitative analysis, and if necessary, by a quantitative impairment test. If a tradename is considered impaired, we recognize a loss equal to the difference between the carrying amount and the estimated fair value of the tradename.
A tradename is considered impaired if the estimated fair value of the tradename is less than the carrying amount. Impairment reviews for an indefinite-lived tradename can be conducted using qualitative analysis, and if necessary, by a quantitative impairment test.
Unallocated Corporate Expenses Unallocated corporate expenses include corporate overhead expenses that are not directly attributable to one of our business segments and include unallocated accounting, finance, legal, human resources, and information technology expenses, occupancy costs for our corporate headquarters, and other benefit and compensation programs, including stock-based compensation.
Performance-based compensation as a percentage of net sales decreased 180 bps. 34 Unallocated Corporate Expenses Unallocated corporate expenses include corporate overhead expenses that are not directly attributable to one of our business segments and include unallocated accounting, finance, legal, human resources, and information technology expenses, occupancy costs for our corporate headquarters, and other benefit and compensation programs, including performance-based compensation.
Weighted-average borrowings for fiscal 2021 were $1.00 billion at an effective interest rate of 6.02%, compared to weighted-average borrowings for fiscal 2020 of $1.03 billion at an effective interest rate of 5.39%.
Weighted-average borrowings were $738.7 million at an effective interest rate of 5.84%, compared to weighted-average borrowings for fiscal 2021 of $1.00 billion at an effective interest rate of 6.02%.
On our consolidated balance sheet, the $1.00 billion of outstanding senior notes as of January 1, 2022 is reported net of $8.6 million of unamortized issuance-related debt costs, and the $1.00 billion of outstanding senior notes as of January 2, 2021 is reported net of $10.5 million of unamortized issuance-related debt costs.
On our consolidated balance sheet, the $500.0 million of outstanding senior notes as of December 31, 2022 is reported net of $3.4 million of unamortized issuance-related debt costs, and the $1.00 billion of outstanding senior notes as of January 1, 2022 is reported net of $8.6 million of unamortized issuance-related debt costs.
The allowance for expected credit losses includes estimated losses resulting from the inability of our customers to make payments. If the financial condition of a customer were to deteriorate, resulting in an impairment of its ability to make payments, an additional allowance could be required. Past due balances over 90 days are reviewed individually for collectibility.
The allowance for expected credit losses includes estimated losses resulting from the inability of our customers to make payments. If the financial condition of a customer were to deteriorate, resulting in an impairment of its ability to make payments, an additional allowance could be required. Our credit and collections department reviews all past due balances regularly.
This SCF program enables our suppliers to sell their receivables due from the Company to a participating financial institution at their discretion. We are not a party to the agreements between the participating financial institutions and the suppliers in connection with the SCF program.
This SCF program enables our suppliers to sell their receivables due from the Company to participating financial institution at their discretion. As of December 31, 2022, the SCF program has a $70 million revolving capacity. We are not a party to the agreements between the participating financial institution and the suppliers in connection with the SCF program.
Cost of goods sold includes 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.
Gross margin is calculated as gross profit divided by consolidated net sales. Cost of goods sold includes 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.
We record these reimbursements under cooperative advertising arrangements with certain of our major wholesale customers at fair value. Fair value is determined based upon, among other factors, comparable market analysis for similar advertisements.
For arrangements in which the Company receives a distinct good or service, we record these reimbursements under cooperative advertising arrangements with certain of our major wholesale customers at fair value. Fair value is determined based upon, among other factors, comparable market analysis for similar advertisements when fair value is determinable.
Inventory Our inventories, which consist primarily of finished goods, are stated approximately at the lower of cost (first-in, first-out basis for wholesale inventory and average cost for retail inventories) or net realizable value.
Except in very limited circumstances, we do not allow our wholesale customers to return goods to us. Inventory Our inventories, which consist primarily of finished goods, are stated approximately at the lower of cost (first-in, first-out basis for wholesale inventory and average cost for retail inventories) or net realizable value.
There were no weighted-average borrowings for fiscal 2021 compared to $212.2 million of weighted-average borrowings for fiscal 2020. The decrease in weighted-average borrowings for fiscal 2021 was due to the absence of borrowings under our secured revolving credit facility during fiscal 2021.
Weighted-average borrowings for fiscal 2022 were $106.6 million, and there were no weighted-average borrowings for fiscal 2021. The increase in weighted-average borrowings for fiscal 2022 was due to the absence of borrowings under our secured revolving credit facility during fiscal 2021.
We use the income approach and the market approach to determine the fair value of a reporting unit. The assumptions used in these approaches include revenue growth and profitability, terminal values, discount rates, and an implied control premium. These assumptions are consistent with those we believe hypothetical marketplace participants would use.
We use a 50% weighting of the income approach and a 50% weighting of the market approach to determine the fair value of a reporting unit. The assumptions used in these approaches include revenue growth and profitability, terminal growth rates, discount rates, market multiples, and an implied control premium.
Capital expenditures in fiscal 2021 primarily included $22.6 million for information technology initiatives, $9.1 million for omni-channel initiatives and our U.S. and international retail store openings and remodels, and $4.2 million for our distribution facilities.
Capital expenditures in fiscal 2022 primarily included $17.5 million for omni-channel initiatives and our U.S. and international retail store openings and remodels, $12.9 million for information technology, and $7.5 million for our distribution facilities.
Except for any ongoing obligations to disclose material information as required by federal securities laws, we do not have any intention or obligation to update forward-looking statements after we file this Annual Report on Form 10-K.
Those risk factors expressly qualify all subsequent oral and written forward-looking statements attributable to us or persons acting on our behalf. Except for any ongoing obligations to disclose material information as required by federal securities laws, we do not have any intention or obligation to update forward-looking statements after we file this Annual Report on Form 10-K.
Launched in 2021, the little planet brand focuses on sustainable clothing through the sourcing of mostly organic cotton as certified under the Global Organic Textile Standard. This brand includes a wide assortment of baby apparel and accessories, sleepwear, and gift bundles.
Launched in 2021, the Little Planet brand focuses on sustainable clothing through the sourcing of mostly organic cotton as certified under the GOTS, a global textile processing standard for organic fibers. This brand includes a wide assortment of baby and toddler apparel, accessories, and sleepwear. Our corporate purpose is to inspire the generations raising the future.
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 ”).
Our Business We are the largest branded marketer of young children’s apparel in North America. We own two of the most highly recognized and trusted brand names in the children’s apparel market, Carter’s and OshKosh B’gosh (or “ OshKosh ”).
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.
As of December 31, 2022, outstanding borrowings on our revolving credit facility were $120.0 million. 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.
We plan to invest approximately $65 million in capital expenditures in fiscal 2022, which primarily relates to U.S. and international retail store openings and remodels, strategic information technology initiatives, and investments in our distribution facilities.
We plan to invest approximately $75 million in capital expenditures in fiscal 2023, which primarily relates to U.S. and international retail store openings and remodels, investments in our distribution facilities, and strategic information technology initiatives. 36 Net Cash Used in Financing Activities Net cash used in financing activities increased $466.6 million, or 132.3%, to $819.3 million.
The decrease in weighted-average borrowings was attributable to the absence of borrowings under our secured revolving credit facility during all of fiscal 2021, partially offset by the issuance of $500 million in principal amount of senior notes in May 2020.
The decrease in weighted-average borrowings was attributable to the early extinguishment of our $500 million in aggregate principal amount of 5.500% senior notes due May 2025 in the second quarter of fiscal 2022, partially offset by increased borrowings under our secured revolving credit facility.
As of January 1, 2022, we had approximately $984.3 million of cash and cash equivalents held at major financial institutions, including approximately $112.7 million held at financial institutions located outside of the United States.
We cannot predict the timing and amount of such impact. As of December 31, 2022, we had approximately $211.7 million of cash and cash equivalents held at major financial institutions, including approximately $44.1 million held at financial institutions located outside of the United States.
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 January 1, 2022, our secured revolving credit facility returned to its pre-COVID 19 terms that were in effect prior to Amendment No. 2.
Capitalized items are Defined Terms pursuant to Amendment No. 4, dated as of April 11, 2022. Approximately $2.4 million, including both bank fees and other third-party expenses, has been capitalized in connection with Amendment No. 4 and is being amortized over the remaining term of the secured revolving credit facility.
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.
In this market, our Carter’s brands, including our exclusive brands, hold the #1 position with approximately 10% market share and our OshKosh brand has approximately 1% market share as of December 2022. 27 Our multi-channel, global business model, which includes retail stores, eCommerce, and wholesale distribution 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.
International International segment net sales increased $104.2 million, or 29.2%, to $460.8 million in fiscal 2021. Changes in foreign currency exchange rates, primarily between the U.S. dollar and the Canadian dollar, had a $20.0 million favorable effect on International segment net sales.
International International segment net sales decreased $8.7 million, or 1.9%, to $452.1 million in fiscal 2022. Changes in foreign currency exchange rates, primarily between the U.S. dollar and the Canadian dollar, had an $11.2 million unfavorable effect on International segment net sales.
Actual results may differ materially from those suggested by our forward-looking statements for various reasons including those discussed under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. Those risk factors expressly qualify all subsequent oral and written forward-looking statements attributable to us or persons acting on our behalf.
We based these statements on assumptions that we consider reasonable. Actual results may differ materially from those suggested by our forward-looking statements for various reasons including those discussed under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
Loss Contingencies We record accruals for various contingencies including legal exposures as they arise in the normal course of business. We determine whether to disclose and accrue for loss contingencies based on an assessment of whether the risk of loss is remote, reasonably possible, or probable.
We determine whether to disclose and accrue for loss contingencies based on an assessment of whether the risk of loss is remote, reasonably possible, or probable and whether the loss can be reasonably estimated.
Dividends On February 24, 2022, the Company's Board of Directors authorized a quarterly cash dividend payment of $0.75 per common share, payable on March 18, 2022 to shareholders of record at the close of business on March 8, 2022. Our Board of Directors declared and we paid cash dividends of $0.60 per share in the first quarter of fiscal 2020.
Dividends On February 23, 2023, the Company's Board of Directors authorized a quarterly cash dividend payment of $0.75 per common share, payable on March 17, 2023 to shareholders of record at the close of business on March 7, 2023.
Future repurchases may occur from time to time in the open market, in privately negotiated transactions, or otherwise. The timing and amount of any repurchases will be at our discretion subject to restrictions under our revolving credit facility, market conditions, stock price, other investment priorities, and other factors.
The timing and amount of any repurchases will be at the discretion of the Company subject to restrictions under the Company’s revolving credit facility and considerations given to market conditions, stock price, other investment priorities, excise taxes, and other factors.
Obsolete, damaged, and excess inventory is carried at net realizable value by establishing reserves after assessing historical recovery rates, current market conditions, and future marketing and sales plans.
Obsolete, damaged, and excess inventory is carried at net realizable value by establishing reserves after assessing historical recovery rates, current market conditions, and future marketing and sales plans. Adjustments to bring inventory to net realizable value as a result of obsolete, damaged, and excess inventory increased $4.9 million, or 34.0%, to $19.3 million as of December 31, 2022.
Senior Notes As of January 1, 2022, TWCC had $500.0 million principal amount of senior notes outstanding, bearing interest at a rate of 34 5.500% per annum, and maturing on May 15, 2025, and $500.0 million principal amount of senior notes outstanding, bearing interest at a rate of 5.625% per annum, and maturing on March 15, 2027.
As of December 31, 2022, the Company was in compliance with the financial and other covenants under the secured revolving credit facility. Senior Notes As of December 31, 2022, TWCC had $500.0 million principal amount of senior notes outstanding, bearing interest at a rate of 5.625% per annum, and maturing on March 15, 2027.
Terms of the Secured Revolving Credit Facility Our secured revolving credit facility provides for an aggregate credit line of $750 million which includes a $650 million U.S. dollar facility and a $100 million multicurrency facility denominated in U.S. dollars, Canadian dollars, Euros, Pounds Sterling, or other currencies agreed to by the applicable lenders.
Terms of the Secured Revolving Credit Facility Our secured revolving credit facility provides for an aggregate credit line of $850 million which includes a $750 million U.S. dollar facility and a $100 million multicurrency facility. The credit facility matures in April 2027.
Our retail store revenues, also reported as Net sales, are recognized at the point of sale. Retail sales through our on-line channels are recognized at time of delivery to the customer. We recognize retail sales returns at the time of transaction by recording adjustments to both revenue and cost of goods sold.
Generally, the performance obligation is satisfied when we transfer control of the goods to the customer. 40 Our retail store revenues, also reported as Net sales, are recognized at the point of sale. Retail sales through our on-line channels are recognized at time of delivery to the customer.
Additional financial and geographical information about our segments is contained in Item 8 “Financial Statements and Supplementary Data” and under Note 14, Segment Information , to the consolidated financial statements.
Additional financial and geographical information about our business segments is contained in Item 8 “Financial Statements and Supplementary Data” and under Note 14, Segment Information , to the consolidated financial statements. Gross Profit and Gross Margin Gross profit is calculated as consolidated net sales less cost of goods sold less adverse purchase commitments (inventory and raw materials), net.
Secured Revolving Credit Facility As of January 1, 2022, we had no outstanding borrowings under our secured revolving credit facility, exclusive of $4.1 million of outstanding letters of credit. As of January 2, 2021, we had no outstanding borrowings under our secured revolving credit facility, exclusive of $5.0 million of outstanding letters of credit.
As of January 1, 2022, we had no outstanding borrowings under our secured revolving credit facility, exclusive of $4.1 million of outstanding letters of credit. As of December 31, 2022 and January 1, 2022, there was approximately $726.5 million and $745.9 million available for future borrowing, respectively.
Changes in foreign currency exchange rates used for translation in fiscal 2021, as compared to fiscal 2020, had a favorable effect on our consolidated net sales of approximately $20.0 million. Gross Profit and Gross Margin Our consolidated gross profit increased $348.8 million, or 26.6%, to $1.66 billion in fiscal 2021. Consolidated gross margin increased 430 bps to 47.7%.
Changes in foreign currency exchange rates used for translation in fiscal 2022 had an unfavorable effect on our consolidated net sales of approximately $11.2 million. Gross Profit and Gross Margin Our consolidated gross profit decreased $189.9 million, or 11.4%, to $1.47 billion and consolidated gross margin decreased 190 bps to 45.8%.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY Our ongoing cash needs are primarily for working capital, capital expenditures, interest on debt, and the return of capital to our shareholders. 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.
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. We believe that our sources of liquidity will fund our projected requirements for at least the next twelve months.
On May 1, 2020, in connection with the COVID-19 pandemic, our Board of Directors suspended our quarterly cash dividend. As a result, 35 the Board of Directors did not declare and we did not pay cash dividends in the second, third, or fourth quarters of fiscal 2020, or in the first quarter of fiscal 2021.
As a result of actions taken in connection with the COVID-19 pandemic, the Board of Directors did not declare and the Company did not pay cash dividends for the first quarter of 2021.
Net Cash Used in Investing Activities Net cash used in investing activities was $32.4 million in fiscal 2021, compared to $31.5 million in fiscal 2020. This increase in net cash used in investing activities is primarily due to increased capital expenditures, partially offset by increased proceeds from sales of investments in marketable securities.
Net Cash Used in Investing Activities Net cash used in investing activities increased $7.9 million, or 24.4%, to $40.4 million. This increase in net cash used in investing activities is primarily due to proceeds from sales of investments in marketable securities in fiscal 2021, that did not reoccur in fiscal 2022.
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, and decreased COVID-19 related charges, partially offset by increased performance-based compensation expense.
The decrease in the SG&A rate was primarily due to decreased performance-based compensation expense and other reductions in spending, partially offset by increased transportation costs.
However, these repayment terms also allow us to repay some or all of the outstanding borrowings at any time.
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.
As of January 1, 2022, the interest rate margins applicable to the amended revolving credit facility were 1.125% for LIBOR rate and 0.125% for base rate loans. The effective interest rate for borrowings under the secured revolving credit facility during fiscal 2020 was 2.84%.
As of December 31, 2022, the interest rate margins applicable to the amended revolving credit facility were 1.375% for adjusted term SOFR rate loans and 0.375% for base rate loans.
Share Repurchases On February 24, 2022, our Board of Directors authorized share repurchases up to $1.00 billion, inclusive of approximately $301.9 million remaining under previous authorizations.
We reinstated our common stock share repurchase program in the third quarter of fiscal 2021. On February 24, 2022, our Board of Directors authorized share repurchases up to $1.00 billion, inclusive of $301.9 million remaining under previous authorizations. The total remaining capacity under outstanding repurchase authorizations as of December 31, 2022 was approximately $749.5 million, based on settled repurchase transactions.
Our brand portfolio also includes Skip Hop , a leading baby and young child lifestyle brand, exclusive Carter’s brands developed for specific wholesale customers, and little planet , a brand focused on organic fabrics and sustainable materials.
We also own Skip Hop , a leading young children’s lifestyle brand, exclusive Carter’s brands developed for specific wholesale customers, and Little Planet , a brand focused on organic fabrics and sustainable materials. Established in 1865, our Carter’s brand is recognized and trusted by consumers for high-quality apparel, sleepwear, and accessories for children in sizes newborn to 14.
The carrying values of the Company’s indefinite-lived OshKosh and Skip Hop tradename assets as of January 1, 2022 were $70.0 million and $15.0 million, respectively. 38 Accrued Expenses Accrued expenses for workers’ compensation, incentive compensation, health insurance, 401(k), and other outstanding obligations are assessed based on actual commitments, statistical trends, and/or estimates based on projections and current expectations, and these estimates are updated periodically as additional information becomes available.
Accrued Expenses Accrued expenses for workers’ compensation, incentive compensation, health insurance, 401(k), and other outstanding obligations are assessed based on actual commitments, statistical trends, and/or estimates based on projections and current expectations, and these estimates are updated periodically as additional information becomes available. 42 Loss Contingencies We record accruals for various contingencies including legal exposures as they arise in the normal course of business.
We believe that our sources of liquidity will fund our projected requirements for at least the next twelve months. However, these sources of liquidity may be 32 affected by the COVID-19 pandemic and other events described in our risk factors, as discussed under the heading “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
However, these sources of liquidity may be affected by events described in our risk factors, as discussed under the heading “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. 35 As discussed under the heading “Recent Developments” in Part II, Item 7 of this Annual Report on Form 10-K, we expect inflationary pressures and declining consumer sentiment to continue and to adversely impact our financial results in fiscal 2023.
Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related amount recognized in the accompanying consolidated statements of operations. We account for performance-based awards over the vesting term of the awards that are expected to vest based on whether it is probable that the performance criteria will be achieved.
We account for performance-based awards over the vesting term of the 43 awards that are expected to vest based on whether it is probable that the performance criteria will be achieved. We reassess the probability of vesting at each reporting period for awards with performance criteria and adjust stock-based compensation expense based on the probability assessments.
The increase in the operating margin was primarily attributable to a 440 bps increase in gross margin and a 400 bps decrease in the SG&A rate.
The primary drivers of the decrease in operating margin were a 100 bps decrease in gross margin and a 340 bps increase in SG&A rate. The decrease in gross margin was primarily due to increased average cost per unit sold.
Amounts determined to be in excess of the fair value of these arrangements are recorded as a reduction of net sales. Except in very limited circumstances, we do not allow our wholesale customers to return goods to us.
Amounts determined to be in excess of the fair value of these arrangements are recorded as a reduction of net sales. For arrangements in which the Company does not receive a distinct good or service, we record these reimbursements as a reduction of net sales.
Selling, General, and Administrative Expenses Consolidated SG&A expenses increased $88.3 million, or 8.0%, to $1.19 billion in fiscal 2021 while the SG&A rate decreased approximately 240 bps to 34.2%.
Royalty income decreased $2.9 million, or 10.0%, to $25.8 million, primarily due to decreased licensee sales volume. Selling, General, and Administrative Expenses Consolidated SG&A expenses decreased $83.9 million, or 7.0%, to $1.11 billion in fiscal 2022 while the SG&A expenses as a percentage of consolidated net sales (“SG&A rate”) increased approximately 40 bps to 34.6%.
We expect these delays, and the increased costs to mitigate these delays, to continue and to adversely impact our financial results in fiscal 2022. Additionally, in fiscal 2021 and the early part of 2022, the costs of raw materials, packaging materials, labor, energy, fuel, and other inputs necessary for the production and distribution of our products have rapidly increased.
Inflationary Pressures In fiscal 2022, the cost of transportation, particularly ocean freight rates, raw materials, packaging materials, labor, energy, fuel, and other inputs necessary for the production and distribution of our products rapidly increased. These inflationary pressures of input costs may persist in fiscal 2023.
This change in cash flow from financing activities was primarily due to an issuance of $500 33 million in principal amount of senior notes in May 2020, which did not reoccur in fiscal 2021, and an increase in the return of capital to our shareholders through common stock share repurchases and cash dividends in fiscal 2021.
This change in cash flow used in financing activities was primarily due to the early extinguishment of our $500 million in aggregate principal amount of 5.500% senior notes due May 2025 and increased cash dividends paid to our shareholders.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of January 1, 2022, there were no variable rate borrowings outstanding under the amended 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.
Biggest changeAs of December 31, 2022, there were $120.0 million variable rate borrowings outstanding under the amended revolving credit facility. As a result, the impact of a hypothetical 100 bps increase in the effective interest rate would result in additional interest expense of $1.2 million over a 12-month period. Other Risks We enter into various purchase order commitments with our suppliers.
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 expense (income), net.
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.
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.
Currency Risk We contract to purchase product from 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 contracted manufacturers.
The changes in foreign currency exchange rates used for translation in fiscal 2021, compared to fiscal 2020, had a $20.0 million favorable effect on our consolidated 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.
The changes in foreign currency exchange rates used for translation in fiscal 2022 had a $11.2 million unfavorable effect on our consolidated 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.
Other Risks We enter into various purchase order commitments with our suppliers. We 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. 41
We 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. 44

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