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What changed in CARTERS INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of CARTERS INC's 2024 and 2025 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 2025 report.

+358 added−347 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-27)

Top changes in CARTERS INC's 2025 10-K

358 paragraphs added · 347 removed · 260 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

56 edited+22 added−16 removed38 unchanged
Biggest changeOur global distribution capabilities are further strengthened through our relationships with multi-national retailers and other wholesale partners with over 1,100 points of distribution, and over 100 global websites. • Drive Shareholder Value Through Profitability, Cash Flow, and Return of Excess Capital — We believe we possess a resilient business model, which historically has resulted in double-digit operating margins, strong operating cash flow, low balance sheet leverage, and meaningful liquidity.
Biggest changeWe plan to continue to prioritize investments in our brand experiences with our wholesale partners, both digitally and in-store. Outside of North America, our global distribution capabilities are further strengthened through our relationships with multi-national retailers and other wholesale partners with over 1,100 points of distribution, and over 150 global websites.
This technology helps us to improve our management of inventory and allows us to fulfill more omni-channel orders more effectively. U.S. Wholesale Our U.S. Wholesale segment includes sales of our products to our U.S. wholesale customers. Our Carter’s brand wholesale customers in the United States include major retailers, such as, in alphabetical order, Costco, JCPenney, Kohl’s, Macy’s, and Sam’s Club.
This technology helps us to improve our management of inventory and allows us to fulfill omni-channel orders more effectively. U.S. Wholesale Our U.S. Wholesale segment includes sales of our products to our U.S. wholesale customers. Our Carter’s brand wholesale customers in the United States include major retailers, such as, in alphabetical order, Costco, JCPenney, Kohl’s, Macy’s, and Sam’s Club.
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 mission is to serve the needs of 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.
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.
In connection with 7 the manufacture of our products, manufacturers purchase raw materials including fabric and other materials (such as linings, zippers, buttons, and trim) at our direction.
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 in our market is generally based on a variety of factors, including comfort and fit, quality, pricing, style, 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 in our market is generally based on a variety of factors, including comfort and fit, quality, pricing, style, selection, and breadth of distribution.
Our Hong Kong office acts as an agent for substantially all of our sourcing in Asia and monitors production at manufacturers’ facilities to ensure quality control, compliance with our manufacturing specifications and social responsibility standards, as well as timely delivery of finished garments to our distribution facilities.
Our Hong Kong office acts as an agent for substantially all of our sourcing in Asia and monitors production at manufacturers’ facilities to ensure quality control, compliance with our manufacturing specifications and social responsibility standards, as well as timely delivery of finished apparel to our distribution facilities.
These segments are our operating and reporting segments. Our U.S. Retail segment consists of revenue primarily from sales of products in the United States through our retail stores and eCommerce websites. Similarly, our U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale partners.
These segments are our operating and reporting segments. Our U.S. Retail segment consists of revenue primarily from sales of products in the United States through our retail stores and eCommerce websites. Similarly, our U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale customers.
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
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. 11
As of December 2023, 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, and planning follow a disciplined development process.
As of December 2024, our OshKosh brand’s market share was less than 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, and planning follow a disciplined development process.
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 Management As of the end of fiscal 2023, we had approximately 15,230 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 Management As of the end of fiscal 2024, we had approximately 15,350 employees globally.
Little Planet products are primarily sold through our eCommerce site, our retail stores, and in the wholesale channel 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.
Little Planet products are sold through our retail stores, our eCommerce site, and in the wholesale channel. 5 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.
Our Carter’s brands maintained the leading market position with approximately 20% in the zero to two-year-old baby market and maintained its leading market position with approximately 10% in the three to four-year-old toddler market. Our Carter’s brands also have an approximately 3% market share in the five to ten-year-old kid market.
Our Carter’s brands maintained the leading market position with approximately 21% in the zero to two-year-old baby market and maintained its leading market position with approximately 11% in the three to four-year-old toddler market. Our Carter’s brands also have an approximately 3% market share in the five to ten-year-old kid market.
Store purchases are primarily fulfilled from each store’s inventory, but our in-store buy-online services offer our broadest assortment to be shipped to a customer from one of our distribution facilities or from another retail store. In fiscal 2022, we began utilizing Radio Frequency Identification (“RFID”) technology in our stores.
Store purchases are primarily fulfilled from each store’s inventory, but our in-store buy-online services offer our broadest assortment to be shipped to a customer from one of our distribution facilities or from another retail store. We utilize radio frequency identification (“RFID”) technology in our stores.
At the end of fiscal 2023, our channels included 1,034 company-owned retail stores, eCommerce websites, approximately 19,350 wholesale locations in North America, as well as our international wholesale accounts and licensees who operate in over 1,100 locations outside of North America in over 90 countries. Our three business segments are: U.S. Retail, U.S. Wholesale, and International.
At the end of fiscal 2024, our channels included 1,057 company-owned retail stores in North America, eCommerce websites, approximately 19,500 wholesale locations in North America, as well as our international wholesale accounts and licensees who operate in over 1,100 locations outside of North America in over 90 countries. Our three business segments are: U.S. Retail, U.S. Wholesale, and International.
Established in 2003, the Skip Hop brand rethinks, reenergizes, and reimagines 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 rethinks, reenergizes, and reimagines durable necessities to create higher value, superior quality, and award-winning products for parents, babies, and toddlers. We acquired Skip Hop in 2017.
Our Skip Hop brand wholesale customers in the United States include major retailers, such as, in alphabetical order, Amazon, Target, and Walmart. We collaborate with our wholesale customers to provide a consistent and high-level of service, and to drive growth through eCommerce, replenishment, product mix, and brand presentation initiatives.
Our Little Planet brand wholesale customers in the United States include major retailers, such as, in alphabetical order, Amazon and Target. 6 We collaborate with our wholesale customers to provide a consistent and high-level of service, and to drive growth through eCommerce, replenishment, product mix, and brand presentation initiatives.
The baby and young children’s apparel market, ages zero to 10, in the U.S. is approximately $28 billion as of December 2023. In this market, our Carter’s brands, including our exclusive brands, hold the #1 position with over 9% market share and our OshKosh brand has approximately 1% market share as of December 2023.
The baby and young children’s apparel market, ages zero to 10, in the U.S. is approximately $28 billion as of December 2024. 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 less than 1% market share as of December 2024.
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.
Our Skip Hop brand is best known for diaper bags, kid’s bags, home gear, and products for playtime, mealtime, bath time, and travel, and combines innovative functionality with attractive design. Skip Hop was the #1 brand in diaper bags in 2024. We believe Skip Hop is a global lifestyle brand.
We use the OEKO-TEX ® Standard 100 certification label, a well-known certification for textiles tested for harmful substances, which appeared on much of our baby apparel and sleepwear in fiscal 2023. We have established targets, validated by the Science-Based Target Initiative, to reduce our Scope 1 and 2 greenhouse gas emissions.
We use the OEKO-TEX ® Standard 100 certification label, a well-known certification for textiles tested for harmful substances, which appeared on more than 98% of our baby apparel and sleepwear in fiscal 2024. We have established targets, validated by the Science-Based Target Initiative, to reduce risks associated with our Scope 1 and 2 greenhouse gas emissions.
As such, our marketing investments are targeted at acquiring new customers, developing stronger relationships with our existing customers, and extending our customers’ tenure with our brands, and include our newly-developed marketing personalization capabilities, customer loyalty program, digital and social media, and strengthened consumer-facing technologies such as our mobile app.
As such, our marketing investments are targeted at acquiring new customers, developing stronger relationships with our existing customers, and extending our customers’ tenure with our brands. Included among our marketing investments are our newly developed marketing personalization capabilities, a rebranded and relaunched customer loyalty program, enhanced digital and social media programs, and strengthened consumer-facing technologies such as our mobile app.
The tables below present the composition and location of our employees: Employee Count % of Total Retail stores 11,840 77.7 % Corporate offices 1,860 12.2 % Distribution centers 1,530 10.1 % Total 15,230 100.0 % Employee Count % of Total United States 12,070 79.2 % Canada 2,160 14.2 % Mexico 680 4.5 % Other (primarily countries in Asia) 320 2.1 % Total 15,230 100.0 % Talent and Development We are guided by our core values: • Act with Integrity • Exceed Expectations • Inspire Innovation • Succeed Together • Invest in People 8 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 tables below present the composition and location of our employees: Employee Count % of Total Retail stores 11,932 77.7 % Corporate offices 1,866 12.2 % Distribution centers 1,552 10.1 % Total 15,350 100.0 % Employee Count % of Total United States 12,170 79.3 % Canada 2,205 14.4 % Mexico 660 4.3 % Other (primarily countries in Asia) 315 2.1 % Total 15,350 100.0 % 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.
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.
We have made investments to in-store fixturing, branding, and signage, along with digital advertising, to further strengthen the position of the Skip Hop brand. Skip Hop branded products are sold through our retail stores, our eCommerce site, and in the wholesale channel.
We also have frequent meetings with the senior management of key accounts to align on strategic growth plans. Our largest wholesale customer accounted for approximately 10.4% of consolidated net sales in fiscal 2023. International Our International segment includes sales of our products through our retail stores and eCommerce sites in Canada and Mexico.
We also have frequent meetings with the senior management of key accounts to align on strategic growth plans. Our two largest wholesale customers accounted for 10.9% and 10.1%, respectively, of consolidated net sales in fiscal 2024. International Our International segment includes sales of our products through our retail stores and eCommerce sites in Canada and Mexico.
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.
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.
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.
Consumer Product Safety Commission and the Americans with Disabilities Act of 1990; • data privacy laws, including the European Union 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.
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.
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.
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.
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 2024, our stores averaged approximately 5,100 square feet per location.
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.
Our sourcing operations are based in Hong Kong in order to facilitate better service and manage the volume of manufacturing in Asia.
We also place importance on differentiating our brand experience through in-store fixturing, branding, signage, photography, and advertising across all of our global channels of distribution. 3 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.
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, home décor, cribs and baby furniture, and bedding.
We attribute our leading market position to our strong value proposition, brand strength, distinctive design, 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 design, commitment to quality, and our broad distribution through our company-owned retail stores, websites, and mobile app, as well as our wholesale distribution channel that includes successful and long-standing relationships with leading global and national retailers.
Our Brands Carter’s & OshKosh B’gosh Our Carter’s and OshKosh product offerings include apparel and accessories for babies (sizes newborn to 24 months), toddlers (sizes 2T to 5T), and kids (sizes 4-14).
We also plan to continue to pursue opportunities to improve productivity throughout the business and to manage spending prudently. Our Brands Carter’s & OshKosh B’gosh Our Carter’s and OshKosh product offerings include apparel and accessories for babies (sizes newborn to 24 months), toddlers (sizes 2T to 5T), and kids (sizes 4-14).
We are the largest specialty retailer in North America focused on young children’s apparel, with over 1,000 Company-operated stores and dedicated websites in the United States, Canada, and Mexico. In wholesale, we are the largest supplier of young children’s apparel to the largest retailers in North America.
No other children’s apparel company in the world has our combined capabilities in the retail store, online and wholesale channels. We are the largest specialty retailer in North America focused on young children’s apparel, with over 1,000 company-owned stores and dedicated websites in the United States, Canada, and Mexico.
Carter’s is the leading brand in the zero to 10-year-old market in the United States, with particular strength in the zero to two-year-old segment. As of December 2023, our multichannel business model enabled our Carter’s brands to maintain a leading market share of over 9% in the zero to 10-year-old market.
As of December 2024, our multichannel business model enabled our Carter’s brands to maintain a leading market share of approximately 10% in the zero to 10-year-old market.
We regularly assess potential new retail store locations and existing store closures based on demographic factors, retail adjacencies, competitive factors, population density, and growth projections as part of a rigorous real estate portfolio optimization process.
We regularly assess potential new retail store locations and closures of existing stores based on demographic factors, retail adjacencies, competitive factors, population density, growth projections, and performance of existing stores as part of a rigorous real estate portfolio optimization process. We also sell our products through our U.S. eCommerce websites at www.carters.com, www.oshkosh.com, www.skiphop.com, www.shoplittleplanet.com, and through our mobile app.
Our International segment includes sales of our products to wholesale accounts outside of the United States, including both domestic retailers with international operations and international retailers. In addition, we license our Carter’s and OshKosh brands to international customers that sell our products through branded retail and online stores, as well as to wholesale customers, within their licensed territories.
In addition, we license our Carter’s and OshKosh brands to international customers that sell our products through branded retail and online stores, as well as to wholesale customers, within their licensed territories. Our International segment includes sales of our products to these licensees, and royalty income based on sales made by certain licensees.
We, therefore, actively monitor import restrictions and developments and seek to minimize our potential exposure to import related risks through shifts of production among countries, including consideration of countries with tariff preference and free trade agreements, manufacturers, and geographical diversification of our sources of supply. 7 Additionally, we are subject to various other federal, state, local and foreign laws and regulations that govern our activities, operations, and products, including data privacy, truth-in-advertising, accessibility, customs, wage and hour laws and regulations, and zoning and occupancy ordinances that regulate retailers generally and govern the promotion and sale of merchandise and the operation of retail stores and eCommerce sites.
Additionally, we are subject to various other federal, state, local and foreign laws and regulations that govern our activities, operations, and products, including data privacy, truth-in-advertising, accessibility, customs, wage and hour laws and regulations, and zoning and occupancy ordinances that regulate retailers generally and govern the promotion and sale of merchandise and the operation of retail stores and eCommerce sites.
Seasonality and Weather We experience seasonal fluctuations in our sales and profitability due to the timing of certain holidays and key retail shopping periods, which generally have resulted in lower sales and gross profit in the first half of our fiscal year versus the second half of the year.
We believe that the awareness and strength of our brand names, combined with the breadth and value of our product offerings, broad distribution, scale, and operational expertise, position us well against these competitors. 9 Seasonality and Weather We experience seasonal fluctuations in our sales and profitability due to the timing of certain holidays and key retail shopping periods, which generally have resulted in lower sales and gross profit in the first half of our fiscal year versus the second half of the year.
Both national brand 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; Cat & Jack (private label sold exclusively in Target) and Garanimals (sold exclusively in Walmart); and Disney, Nike, and Under Armour (national brands).
Our primary competitors include (in alphabetical order): Gap, Old Navy, and The Children’s Place; Cat & Jack (private label sold exclusively in Target) and Garanimals (sold exclusively in Walmart); and Disney, Nike, Adidas, and Under Armour (national brands). Because of the highly fragmented nature of the industry, we also compete with many small specialty brands and retailers.
Under the credit card program agreement with the third-party financial institution, the Company receives payments for the establishment of new credit accounts, as well as royalties on the usage of the credit card by customers. 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.
A third-party financial institution issues the Carter’s credit card to consumers and bears all underwriting and credit risk under the program. Under the credit card program agreement with the third-party financial institution, the Company receives payments for the establishment of new credit accounts, as well as royalties on the usage of the credit card by customers.
We have the most extensive distribution of childrenswear – our brands are sold in more than 19,350 retail locations in North America and through our wholesale customers’ websites.
We have the most extensive distribution of childrenswear – our brands are sold in more than 19,500 wholesale retail locations in North America and through our wholesale customers’ websites. Our brand reach efforts are enabled by our long-standing wholesale customer partnerships, which are important contributors to our sales and profitability and consumer brand awareness.
We also expanded the scope of our Little Planet product offerings, and we plan to increase the availability of sustainable choices across all our product lines.
As a result of customer demand, we have increased the sales of and expanded the scope of our Little Planet brand and PurelySoft collection, and we plan to increase the availability of sustainable choices across all our product lines to support the growing demand.
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.
Responsible Sourcing We continue to seek the best pricing in our sourcing practices, and with that goal in mind, 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.
We source the remainder of our products primarily through North America, Africa, and Central America. During fiscal 2023, approximately 74% of our product was sourced from Cambodia, Vietnam, Bangladesh, and India, and approximately 66% of the fabric that was used in the manufacture of our products was sourced from China, with the remainder primarily from India, Bangladesh, Thailand, and Taiwan.
During fiscal 2024, approximately 75% of our product was sourced from Vietnam, Cambodia, Bangladesh, and India, and approximately 60% of the fabric that was used in the manufacture of our products was sourced from China, with the remainder sourced primarily from India, Vietnam, Thailand, and Bangladesh. We do not own any raw materials or manufacturing facilities.
Our distribution center activities include receiving finished goods from our vendors, inspecting those products, and preparing and shipping them to our wholesale customers, retail stores, and eCommerce customers.
We outsource certain distribution activities to third-party logistics providers located in California and leverage additional third-party providers in Georgia, as needed, primarily for storage seasonally. Our distribution center activities include receiving finished goods from our vendors, inspecting those products, and preparing and shipping them to our wholesale customers, retail stores, and eCommerce customers.
We also sell our products through our U.S. eCommerce websites at www.carters.com, www.oshkosh.com, and www.skiphop.com, and through our mobile app. 4 We focus on the customer experience through store and eCommerce website design, visual aesthetics, clear product presentation, and exceptional customer service. Our eCommerce websites also feature product recommendations and online-only offerings.
We focus on the customer experience through store and eCommerce website design, visual aesthetics, clear product presentation, and exceptional customer service. Our eCommerce websites also feature product recommendations and online-only offerings. We strive to create a seamless omni-channel experience between our retail stores and our eCommerce websites.
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 2023 our International channel included wholesale accounts in approximately 19,350 locations in North America and wholesale accounts and licensees who operated in over 1,100 locations outside of North America.
As of the end of fiscal 2024 our International channel included wholesale accounts in approximately 19,500 locations in North America and wholesale accounts and licensees who operated in over 1,100 locations outside of North America. As of the end of fiscal 2024, we had approximately 40 international licensees who operated in over 90 countries.
We use audit data and performance results to identify potential improvements, and we integrate this information into our on-going sourcing decisions.
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 identify potential improvements, and we integrate this information into our on-going sourcing decisions.
Our goal is to have the most top-of-mind, preferred brands in the young children’s apparel market and to connect with diverse, digitally savvy customers.
Our Marketing Strategy For all our brands, our marketing is largely focused on driving brand preference and engagement with first-time and experienced parents, as well as gift-givers. Our goal is to have the most top-of-mind, preferred brands in the young children’s apparel market and to connect with diverse, digitally savvy consumers.
In the United States, we operate three distribution centers in Georgia: an approximately 1.1 million square-foot multichannel 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 certain distribution activities to third-party logistics providers located in California and leverage additional third-party providers in Georgia primarily for storage seasonally.
We choose the form of shipment based upon needs, costs, and timing considerations. 8 In the United States, we operate three distribution centers in Georgia: an approximately 1.1 million square-foot multichannel facility in Braselton, a 0.5 million square-foot facility in Stockbridge, and a 0.2 million square-foot single-channel facility in Jonesboro.
Our core baby product line 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 sold at Walmart, our Just One You brand, which is sold at Target, and our Simple Joys brand, which is available on Amazon.
We also have three exclusive Carter’s brands: our Child of Mine brand, which is sold at Walmart, our Just One You brand, which is sold at Target, and our Simple Joys brand, which is available on Amazon. 4 Carter’s is the leading brand in the zero to 10-year-old market in the United States, with particular strength in the zero to two-year-old segment.
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 2023, our U.S. retail sales were predominantly made to members of My Rewarding Moments .
This program is integrated across our U.S. retail stores and online businesses. During fiscal 2024, our U.S. retail sales were predominantly made to members of Carter’s Rewards . Complementing our Carter’s Rewards loyalty program is our Carter’s private label credit card, which provides added benefits for our Carter’s Rewards customers.
In 2024, we will be relaunching our loyalty 5 program with the goals of further deepening our customer loyalty, increasing the frequency of visits, and growing customer lifetime value. Complementing our My Rewarding Moments loyalty program is our Carter’s credit card program, which we launched in the United States in 2019.
We use our customer loyalty program in the United States to drive customer traffic, sales, and brand loyalty. In the second quarter of fiscal 2024, we rebranded and relaunched our loyalty program as Carter’s Rewards with the goals of further deepening our customer loyalty, increasing the frequency of visits, and growing customer lifetime value.
As of the end of fiscal 2023, in Canada we operated 188 co-branded Carter’s and OshKosh retail stores and an eCommerce site at www.cartersoshkosh.ca, and in Mexico we operated 54 retail stores and an eCommerce site at www.carters.com.mx.
As of the end of fiscal 2024, in Canada we operated 191 retail stores and an eCommerce site at www.cartersoshkosh.ca, and in Mexico we operated 62 retail stores and an eCommerce site at www.carters.com.mx. Our International segment includes sales of our products to wholesale accounts outside of the United States, including both domestic retailers with international operations and international retailers.
In furtherance of these commitments, we discussed our efforts to grow our sustainable product offerings, reduce our carbon footprint, and uplift our workers and communities. In fiscal 2022, we continued to transition to more sustainably grown cotton through the Better Cotton Initiative and introduced LENZING ™ ECOVERO ™ , a sustainable viscose fiber sourced from responsibly managed forests.
At the end of fiscal 2024, we continued our transition to more sustainably grown cotton through the Better Cotton Initiative, with over 50% of our cotton sourced through this program. Additionally, we expanded our use of LENZING ™ ECOVERO ™ , a sustainably produced viscose fiber sourced from responsibly managed forests.
This policy is derived from the policies, standards, and conventions of the International Labor Organization, and includes a commitment to the Universal Declaration of Human Rights. 6 Sustainability We issued our third annual Corporate Social Responsibility (“CSR”) Report in fiscal 2023, in which we highlighted our three strategic pillars that guide our long-term CSR commitments: Product, Planet, and People.
In addition, our social responsibility policy establishes our expectations for our global suppliers and guides our oversight. This policy is derived from the policies, standards, and conventions of the International Labor Organization, and includes a commitment to the Universal Declaration of Human Rights.
We have created and implemented processes to help eliminate safety incidents by reducing their frequency and severity, and we review and monitor our performance closely. Available Information Our corporate website address is https://corporate.carters.com.
Our teams are also focused on ensuring fairness across our global enterprise. 10 Health and Safety We maintain a culture focused on safety with the goal of eliminating workplace incidents, risks and hazards. We have created and implemented processes to help eliminate safety incidents by reducing their frequency and severity, and we review and monitor our performance closely.
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Our long-term growth strategy focuses on three key strategic priorities: • Provide the Best Value and Experience in Young Children’s Apparel — We own two of the best known and trusted brands in young children’s apparel – Carter’s and OshKosh B’gosh .
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Our growth agenda is centered on three fundamental areas: • Elevate the style and value of our product offerings — We are focused on driving growth by delivering market-leading style and enhancing our value proposition. In fiscal 2024, informed by consumer demand and insights, we initiated a shift of our U.S.
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With over 100 years of rich history, these iconic brands have well-earned reputations for quality and value with generations of consumers, which has contributed to our leading market share in North America.
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Retail product assortment to increase the sales mix of the “best” (more premium fashion) and the opening price point components of our apparel offering. As a result, both components represented a higher proportion of sales in the second half of fiscal 2024 compared to the first half of fiscal 2024.
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Our omnichannel capabilities include retail stores located in open-air center, outlet, and mall locations as well as a highly rated website, which together provide the broadest and best expression of our assortment in the marketplace.
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The shift to increase the penetration of our “best” product is supported by a house-of-brands strategy that enables us to leverage new, more targeted and differentiated brands like Little Planet, as well as our curated collections from PurelySoft, OshKosh B’gosh , Skip Hop and Carter’s .
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These channels are fully integrated in the U.S. and Canada and provide convenience for consumers, to include same-day and curbside pickup of online purchases. • Leverage Our Market-Leading Distribution Capabilities — Our global, multichannel business model is unique. No other children’s apparel company in the world has our combined strength in wholesale, retail store, and online 2 capabilities.
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Over time we plan to develop this strategy further as a way of reaching more of the marketplace, including some customer segments which we do not serve today. 3 Also in fiscal 2024, and enabled by our enhanced pricing capabilities, we made retail price investments to be more competitive in select toddler and kids size playwear categories and during higher-volume market share promotional events, and to support inventory management objectives.
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In recent years we have benefited from structural changes to our business, which included focusing our efforts on fewer, better, and higher margin sales, reducing lower margin-product choices, closing over 100 low-margin stores, remaining lean on inventory and staffing, and focusing our marketing investments on brand building versus margin-erosive promotions.
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Areas of playwear investment included select opening price point categories, which are less differentiated from similar private label products in the marketplace and exhibit higher price elasticity, and additional programs such as collections, fleece, and activewear. Collectively these efforts helped to drive growth in the value component of our U.S.
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We believe these changes, along with planned improvements in marketing effectiveness, localized product offerings, and improved digital capabilities, will continue to support our margin, cash flow, and return of capital objectives.
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Retail assortment and contributed to an increase in conversion rates (measured as the percentage of store visitors and website traffic that resulted in a purchase) and units per transaction in both stores and eCommerce in the second half of fiscal 2024 compared to the first half of fiscal 2024. • Improve our marketing capabilities and effectiveness — Our marketing investments are targeted at acquiring new customers, developing stronger relationships with our existing customers, and extending our customers’ tenure with our brands.
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Cumulatively over the past 10 years, we have generated $3.5 billion in operating cash flow, invested approximately $0.7 billion in capital expenditures, and returned $2.5 billion to our shareholders through dividends and share repurchases.
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Recent areas of investment include brand marketing, personalization capabilities, a rebranded and relaunched customer loyalty program, enhanced digital and social media programs, and strengthened consumer-facing technologies such as our mobile app. Collectively these investments contributed to sequential improvement in U.S.
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As of the end of fiscal 2023, the square footage of our stores ranged from approximately 4,300 to 7,300 square feet, with an average of approximately 5,000 square feet per location. As of the end of fiscal 2023, in the United States we operated 792 stores.
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Retail comparable sales, growth in new and reactivated customers, and an improved retention rate in the second half of fiscal 2024 compared to the first half of fiscal 2024. • Leverage our unparalleled multi-channel market presence to extend the reach of our brands — Our global, multichannel business model is unique.
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We strive to create a seamless omni-channel experience between our retail stores and our eCommerce websites.
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Across our retail fleet, we made progress in fiscal 2024 accelerating remodels and introducing new in-store experiences. In fiscal 2024, we opened our first-ever flagship store in Atlanta, Georgia, which includes brand-centric presentations, in-store shops for baby, toddler and kids, and Little Planet , modern digital displays, a gifting station, and community engagement events.
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As of the end of fiscal 2023, we had 39 international licensees who operated in over 90 countries. Our Marketing Strategy For all of our brands, our marketing is largely focused on driving brand preference and engagement with both first-time and experienced parents, as well as gift-givers.
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We believe learnings from the ongoing innovations at our flagship store will inspire new and remodeled store experiences across our fleet. In wholesale, we are the largest supplier of young children’s apparel to the largest retailers in North America.
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A third-party financial institution issues the Carter’s credit card to consumers and bears all underwriting and credit risk under the program. The Carter’s credit card provides added benefits for our My Rewarding Moments customers, which it will continue to do with our loyalty program relaunch.
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In addition to the fundamental areas above, we intend to pursue improvements to our operating model, which includes improving our product and brand development processes in an effort to be faster, nimbler and able to respond to changing consumer preferences more rapidly.
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In addition, our social responsibility policy establishes our expectations for our global suppliers and guides our oversight.
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Our marketing programs are targeted toward first-time parents, experienced parents, and gift-givers. Our core baby product line provides families with essential products and accessories, including value-focused multi-piece sets.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks 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. • Financial difficulties for, or the loss of one or more of, our major wholesale customers could result in a material loss of revenues. • Our retail success is dependent upon identifying locations and negotiating appropriate lease terms for retail stores. • Our eCommerce business faces distinct risks, and our failure to successfully manage it could have a negative impact on our profitability. • 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. • 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. • We may not be able to increase prices to fully offset inflationary pressures on costs, such as raw materials, labor, and transportation costs, which may impact our expenses and profitability. • Our revenues, product costs, and other expenses are subject to foreign economic and currency risks due to our operations outside of the United States. • Our business could suffer a material adverse effect from unseasonable or extreme weather conditions, or other effects of climate change.
Biggest changeRisks Related to Operating a Global Business • We face risks related to the uncertainty regarding the future of international trade agreements and the United States’ position on international trade. • 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. • Financial difficulties for, or the loss of one or more of, our major wholesale customers could result in a material loss of revenues. • Our retail success is dependent upon identifying locations and negotiating appropriate lease terms for retail stores. • Our eCommerce business faces distinct risks, and our failure to successfully manage it could have a negative impact on our profitability. • 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. • 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. • We may not be able to increase prices to fully offset inflationary pressures on costs, such as raw materials, labor, and transportation costs, which may impact our expenses and profitability. • Our revenues, product costs, and other expenses are subject to foreign economic and currency risks due to our operations outside of the United States. • Our business could suffer a material adverse effect from unseasonable or extreme weather conditions, or other effects of climate change. • Environmental, social, and governance matters and any related reporting obligations may adversely impact our business, financial condition and results of operations. 12 Risks Related to our Global Supply Chain and Labor Force • We source substantially all of our products through foreign-based suppliers and manufacturers.
If we fail or are perceived to have failed to achieve previously announced public goals or to accurately disclose our progress on such goals or initiatives, our reputation, business, financial condition and results of operations could be adversely impacted.
If we fail or are perceived to have failed to achieve previously announced public goals or to accurately disclose our progress on such goals or initiatives, our reputation, business, results of operations, and financial condition could be adversely impacted.
In the event we are required or decide to pay amounts in connection with any such claims or lawsuits, such amounts could exceed applicable insurance coverage, if any, or contractual rights available to us. As a result, such lawsuits could be significant and have a material adverse impact on our business, financial condition, and results of operations.
In the event we are required or decide to pay amounts in connection with any such claims or lawsuits, such amounts could exceed applicable insurance coverage, if any, or contractual rights available to us. As a result, such lawsuits could be significant and have a material adverse impact on our business, results of operations and financial condition.
For example, our taxable income may be affected by new laws, rulings, initiatives, and other events, which may affect our business, financial condition, or results of operations in future periods, including: • the CARES Act, which was enacted in March 2020, and which significantly affects U.S. taxation by providing a retention credit and eases limitations on certain deductions including interest due to potential volatility in 2020 taxable income; • a 2018 U.S.
For example, our taxable income may be affected by new laws, rulings, initiatives, and other events, which may affect our business, results of operations, or financial condition in future periods, including: • the CARES Act, which was enacted in March 2020, and which significantly affects U.S. taxation by providing a retention credit and eases limitations on certain deductions including interest due to potential volatility in 2020 taxable income; • a 2018 U.S.
Supreme Court ruling, under which states may have additional ability to tax entities operating in their state, but lacking physical presence; 24 • 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.
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 Risks • Quarterly cash dividends and share repurchases are subject to a number of uncertainties, and may affect the price of our common stock. • The market price of our common stock may be volatile. • Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or agents.
General Risks • Quarterly cash dividends and share repurchases are subject to a number of uncertainties, and may affect the price of our common stock. • The market price of our common stock may be volatile. • Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could limit our 13 shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or agents.
In addition, if our retail eCommerce sites or our other 22 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 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.
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, market volatility, bank failures, 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 11 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, market volatility, bank failures, 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.
Alternatively, if a court were to find this provision of our amended and restated bylaws inapplicable to, or unenforceable in respect of, one or more of the 25 specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.
Alternatively, if a court were to find this provision of our amended and restated bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.
A significant number of our stores are located in malls and other shopping centers, and many of these malls and shopping centers have been experiencing declines in customer traffic. 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.
A significant number of our stores are located in malls 16 and other shopping centers, and many of these malls and shopping centers have been experiencing declines in customer traffic. 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.
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.
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. 18 Our business could suffer a material adverse effect from unseasonable or extreme weather conditions, or other effects of climate change.
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 common stock may be volatile.
Additionally, there can be no assurance that any share 27 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 common stock may be volatile.
We cannot provide any assurances that such events will not occur and impacts therefrom will not be material in the future. Failure to implement new information technology systems or needed upgrades to our systems, including operational and financial systems, could adversely affect our business.
We cannot provide any assurances that such events will not occur and impacts therefrom will not be material in the future. 23 Failure to implement new information technology systems or needed upgrades to our systems, including operational and financial systems, could adversely affect our business.
Our dependence on foreign supply sources are subject to risks associated with global sourcing and manufacturing which could result in disruptions to our operations. • A relatively small number of vendors supply a significant amount of our products, and losing one or more of these vendors could have a material adverse effect on our business. • Labor or other disruptions along our supply chain may adversely affect our relationships with customers, reputation with consumers, and results of operations. • Our inability to effectively source and manage inventory could negatively impact our ability to timely deliver our inventory supply and disrupt our business, which may adversely affect our operating results. • Our Braselton, Georgia distribution facility handles a large portion of our merchandise distribution.
Our dependence on foreign supply sources is subject to risks associated with global sourcing and manufacturing which could result in disruptions to our operations. • A relatively small number of vendors supply a significant amount of our products, and losing one or more of these vendors could have a material adverse effect on our business. • Labor or other disruptions along our supply chain may adversely affect our relationships with customers, reputation with consumers, and results of operations. • Our inability to effectively source and manage inventory could negatively impact our ability to timely deliver our inventory supply and disrupt our business, which may adversely affect our operating results. • Our Braselton, Georgia distribution facility handles a large portion of our merchandise distribution.
As our customers react to recent global economic conditions we have seen and may see customers reduce spending on our products and take additional precautionary measures to limit or delay expenditures and preserve capital and liquidity, thereby adversely affecting our customers’ ability or willingness to purchase our products.
As our customers react to global economic conditions we have seen and may see customers reduce spending on our products and take additional precautionary measures to limit or delay expenditures and preserve capital and liquidity, thereby adversely affecting our customers’ ability or willingness to purchase our products.
In addition, there is concern that climate changes could cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters, which could have a long-term adverse impact on our business and results of operations.
In addition, there is concern that climate change could cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters, which could have a long-term adverse impact on our business and results of operations.
As a result, we are vulnerable to demand and pricing shifts and to suboptimal selection and timing of merchandise purchases and allocations to our sales channels. In the past, we have not always predicted our customers’ preferences and acceptance levels of our trend items with accuracy.
As a result, we are vulnerable to demand and pricing shifts and to suboptimal selection and timing of merchandise purchases and allocations to our sales 21 channels. In the past, we have not always predicted our customers’ preferences and acceptance levels of our trend items with accuracy.
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 12 their 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.
Additionally, while deflation 15 could positively impact our product costs, it could have an adverse effect on our average selling prices per unit, resulting in lower sales and operating results. This could have a material adverse effect on our results of operations, liquidity, and financial condition.
Additionally, while deflation could positively impact our product costs, it could have an adverse effect on our average selling prices per unit, resulting in lower sales and operating results. This could have a material adverse effect on our results of operations, liquidity, and financial condition.
The UFLPA took effect on June 21, 2022 and, along with US CBP withhold release orders, may in turn have an adverse effect on global supply chains, including our own supply chains for cotton and cotton-containing products, and the price of cotton in the marketplace.
The UFLPA took effect on June 21, 2022 and, along with US CBP withhold release orders, may in turn have an adverse effect on global supply chains, including our own supply chains for cotton and cotton-containing products, and the price of cotton in the 20 marketplace.
We may be unable to continue to grow through acquisitions if we are not able to identify suitable acquisition candidates or acquire them on favorable terms, and potential acquisitions may be abandoned or delayed if necessary financing is not available or regulatory approvals cannot be obtained.
We may be unable to continue to grow through acquisitions if we are not able to identify suitable acquisition candidates or 25 acquire them on favorable terms, and potential acquisitions may be abandoned or delayed if necessary financing is not available or regulatory approvals cannot be obtained.
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.
For example, 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.
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.
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 standards.
Failure to implement new systems or upgrade systems, including operational and financial systems, as needed or complications encountered in implementing new systems or upgrading existing systems could cause disruptions that may 18 adversely affect our business and results of operations.
Failure to implement new systems or upgrade systems, including operational and financial systems, as needed or complications encountered in implementing new systems or upgrading existing systems could cause disruptions that may adversely affect our business and results of operations.
In addition, for any new vendors, we may encounter delays in 20 production and added costs as a result of the time it takes to train our vendors in producing our products and adhering to our quality control standards.
In addition, for any new vendors, we may encounter delays in production and added costs as a result of the time it takes to train our vendors in producing our products and adhering to our quality control standards.
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.
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 14 or fashion trends.
While our goal remains to increase the strength, recognition and trust in our brand by increasing our customer base and expanding our products, if in the future any of our current marketing channels becomes less effective, if we are unable to continue to use any of these channels, if we receive negative publicity or fail to maintain our brand, if the cost of using these channels significantly increases or if we are not successful in generating new channels, we may not be able to attract new customers or increase the activity of our existing members on our platform in a cost-effective manner.
While our goal remains to increase the strength, recognition and trust in our brands by increasing our customer base and expanding our products, if in the future any of our current marketing channels becomes less effective, if we are unable to continue to use any of these channels, if we receive negative publicity or fail to maintain our brands, if the cost of using these channels significantly increases or if we are not successful in generating new channels, we may not be able to attract new customers or increase the activity of our existing members on our platform in a cost-effective manner.
The occurrence of one or more of these events could result in disruptions to our operations, which in turn could increase our cost of goods sold, decrease our gross profit, and/or impact our ability to deliver to our customers.
The occurrence of one or more of these events could result in disruptions to our operations, which in turn could increase our cost of goods sold, decrease our gross profit, and/or impact our ability to deliver products to our customers.
We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility. We may experience fluctuations in our tax obligations and effective tax rate.
We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility. 26 We may experience fluctuations in our tax obligations and effective tax rate.
These systems, including our servers, are also vulnerable to physical or electronic break-ins, security breaches from inadvertent or intentional actions by our employees, third-party service providers, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service 17 attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information).
These systems, including our servers, are also vulnerable to physical or electronic break-ins, security breaches from inadvertent or intentional actions by our employees, third-party service providers, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service 22 attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information).
In addition, products that fail to meet our standards, or other unauthorized products, may be sold by third-parties without our knowledge or consent. This could materially harm our brand and our reputation in the marketplace. Although we have not incurred any material product recalls or delays to date, we have been subject to product recalls and/or delays in the past.
In addition, products that fail to meet our standards, or other unauthorized products, may be sold by third-parties without our knowledge or consent. This could materially harm our brands and our reputation in the marketplace. Although we have not incurred any material product recalls or delays to date, we have been subject to product recalls and/or delays in the past.
These, and additional legislation which may be passed, may cause us to incur significant additional costs of compliance due to the need for expanded data collection, analysis, and certification with respect to greenhouse gas emissions and other climate change related risks, as well as other ESG topics.
These, and additional legislation which may be passed, have caused and may cause us to incur additional costs of compliance due to the need for expanded data collection, analysis, and certification with respect to greenhouse gas emissions and other climate change related risks, as well as other ESG topics, which may be significant.
Our dependence on foreign supply sources are subject to risks associated with global sourcing and manufacturing which could result in disruptions to our operations. We source substantially all of our products through a network of vendors primarily in Asia, principally coordinated by our Hong Kong sourcing office.
Our dependence on foreign supply sources is subject to risks associated with global sourcing and manufacturing which could result in disruptions to our operations. We source substantially all of our products through a network of vendors primarily in Asia, principally coordinated by our Hong Kong sourcing office.
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 2023 we experienced a decrease in net sales in our eCommerce channel compared to fiscal 2022.
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 both fiscal 2024 and fiscal 2023 we experienced a decrease in net sales in our eCommerce channel compared to fiscal 2022.
Our 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, 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.
Our 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, 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, war, vessel availability due to longer transit times and/or schedule changes or timing of new vessel commissioning, and ocean container availability; • 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 90 additional countries in which our international partners and international wholesale customers operate.
Other assumptions that support the carrying value of these intangible assets, including a deterioration of macroeconomic conditions which would negatively affect the cost of capital and/or discount rates, could also result in impairment of the remaining asset values.
Other assumptions that support the carrying value of these intangible assets, including a deterioration of macroeconomic conditions which would negatively affect the cost of capital and/or discount rates, could also result in impairment of the remaining asset values, which could be material.
These projects could place significant demands on our accounting, financial, information technology, and other systems, and on our business overall. We are dependent on our management’s ability to oversee these projects effectively and implement them successfully.
These projects could place significant demands on our accounting, financial, information technology, and other systems, and on our business overall, and could require significant investment. We are dependent on our management’s ability to oversee these projects effectively and implement them successfully.
If our estimates and assumptions about a project are incorrect, or if we miscalculate the resources or time we need to complete a project or fail to implement a project effectively, our business and operating results could be adversely affected.
If our estimates and assumptions about a project are incorrect, or if we underestimate the resources or time we need to complete a project or fail to implement a project effectively, our business and operating results could be adversely affected.
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.
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 investigations.
For example, in fiscal 2022, we recorded a non-cash pre-tax impairment charge of $9.0 million on our Skip Hop indefinite-lived tradename asset, reflecting the effect of increased discount rates and lower forecasted sales and profitability.
Additionally, in fiscal 2022, we recorded a non-cash pre-tax impairment charge of $9.0 million on our Skip Hop indefinite-lived tradename asset, reflecting the effect of increased discount rates and lower forecasted sales and profitability.
Although we have announced goals with respect to certain ESG topics, including Scope 1 and 2 greenhouse gas emissions, suppliers with science-based sustainability targets, waste, plastic packaging, and water usage, as well as goals with respect to our products and our people, we may be unable to meet them or be required to revise them.
Although we have announced goals with respect to certain ESG topics, including Scope 1 and 2 greenhouse gas emissions, suppliers with science-based sustainability targets, waste, plastic packaging, and water usage, as well as goals with respect to our products and our people, we may be unable to meet them, or we may revise our goals or targets, or change our priorities or strategies.
Although the aggregate impact of cybersecurity breaches has not been material to date, we have been subject to cybersecurity incidents in the past, including within the last three years, and expect them to continue as cybersecurity threats evolve in sophistication.
Although the aggregate impact of cybersecurity breaches has not been material to date, we have been subject to cybersecurity and information security incidents in the past, including within the last three years and including third parties, and expect them to continue as cybersecurity threats evolve in sophistication.
ITEM 1A. RISK FACTORS Risk Factors Summary The following is a summary of the principal risks and uncertainties described in more detail in this Annual Report on Form 10-K for the year ended December 30, 2023.
ITEM 1A. RISK FACTORS Risk Factors Summary The following is a summary of the principal risks and uncertainties described in more detail in this Annual Report on Form 10-K for the year ended December 28, 2024.
A subsequent reduction or elimination of our cash dividend, or subsequent suspension or elimination of our share repurchase program could adversely affect the market price of our common stock.
A subsequent reduction or elimination of our cash dividend, or subsequent recommencement and later suspension or elimination of our share repurchase program, could adversely affect the market price of our common stock.
During the requisite service period for compensable equity-based compensation awards that we may grant to certain employees, we recognize a deferred income tax benefit on the compensation expense we incur for these awards for all employees other than our named executive officers.
During the requisite service period for compensable equity-based compensation awards that we may grant to certain employees, we recognize a deferred income tax benefit on the compensation expense we incur for these awards for all employees, subject to a limitation applicable to our named executive officers.
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, including as a result of emerging technologies, such as artificial intelligence and machine learning, 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.
As of the end of fiscal 2023, we had $500.0 million aggregate principal amount of debt outstanding (excluding $4.4 million of outstanding letters of credit), and $845.6 million of undrawn availability under our senior secured revolving credit facility after 23 giving effect to $4.4 million of letters of credit issued under our senior secured revolving credit facility.
As of the end of fiscal 2024, we had $500.0 million aggregate principal amount of debt outstanding (excluding $4.7 million of outstanding letters of credit), and $845.3 million of undrawn availability under our senior secured revolving credit facility after giving effect to $4.7 million of letters of credit issued under our senior secured revolving credit facility.
Risks Related to Global and Macroeconomic Conditions • Our business is sensitive to overall levels of consumer spending, particularly in the young children’s apparel market. • Our business could be negatively impacted by political or economic risks that we are exposed to as a part of our global operations. • The COVID-19 pandemic and other global crises had, and may in the future have, a significant adverse effect on our business, financial condition, and results of operations.
Risks Related to Global and Macroeconomic Conditions • Our business is sensitive to overall levels of consumer spending, consumer confidence, and consumer sentiment, particularly in the young children’s apparel market. • Our business could be negatively impacted by political or economic risks that we are exposed to as a part of our global operations. • Public health crises have and may in the future have a significant adverse effect on our business, financial condition, and results of operations.
For example, we have recently experienced delays with respect to our shipments via ocean vessels due to attacks by a militant group at the entrance to the Red Sea region.
For example, in fiscal 2024 we experienced delays with respect to our shipments via ocean vessels due to attacks by a militant group at the entrance to the Red Sea region.
In fiscal 2023, we purchased approximately 55% of our products from ten vendors, with three vendors representing approximately one half of the purchases made from our top ten vendors. Additionally, we estimate that approximately 66% of the fabric that is used in the manufacture of our products is sourced from China.
In fiscal 2024, we purchased approximately 62% of our products from ten vendors, with three vendors representing approximately one half of the purchases made from our top ten vendors. Additionally, we estimate that approximately 60% of the fabric that is used in the manufacture of our products is sourced from China.
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. 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.
Risks Related to Our Brands and Product Value • The acceptance of our products in the marketplace is affected by consumer tastes and preferences, along with fashion trends. • We may be unable to protect our intellectual property rights, which could diminish the value of our brands, weaken our competitive position, and adversely affect our reputation and results. • Our future growth depends significantly on our branding and marketing efforts, and if our marketing efforts are not successful or we receive negative publicity, the value of our brands, and our sales, could be diminished. • We may experience delays, product recalls, or loss of revenues or incur additional costs if our products do not meet our quality standards.
Risks Related to Our Brands and Product Value • The acceptance of our products in the marketplace is affected by consumer tastes and preferences, along with fashion trends. • We may be unable to protect our intellectual property rights, which could diminish the value of our brands, weaken our competitive position, and adversely affect our reputation and results. • 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 future growth depends significantly on our branding and marketing efforts, and if our marketing efforts are not successful or if we receive negative publicity, the value of our brands, and our sales, could be diminished. • We may experience delays, product recalls, or loss of revenues or incur additional costs if our products do not meet our quality standards.
Public health crises, such as the COVID-19 pandemic, have and may in the future have a significant adverse effect on our business, financial condition, and results of operations. We are subject to public health crises, such as the COVID-19 pandemic, which has had and may continue to have a significant impact on our operations, cash flow and liquidity.
Public health crises have and may in the future have a significant adverse effect on our business, financial condition, and results of operations. We are subject to public health crises which have had, and may in the future have, a significant impact on our operations, cash flow and liquidity.
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, adopt more aggressive pricing strategies than we can, and more successfully utilize developing technology, including data analytics, artificial intelligence, and machine learning. 13 Financial difficulties for, or the loss of one or more of, our major wholesale customers could result in a material loss of revenues.
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, adopt more aggressive pricing strategies than we can, and more successfully utilize developing technology, including data analytics, artificial intelligence, and machine learning.
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. 14 Our eCommerce business faces distinct risks, and our failure to successfully manage it could have a negative impact on our profitability.
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.
These developments have led to growing concerns about the systemic impact of a potential global economic recession, energy costs, geopolitical issues, or the availability and cost of credit and higher interest rates, which could further lead to increased market volatility, decreased consumer confidence, and diminished growth expectations in the U.S. economy and abroad.
Economic uncertainty in the United States and abroad has led to growing concerns about the systemic impact of rising energy costs, geopolitical issues, or the availability and cost of credit and higher interest rates, which could further lead to increased market volatility, decreased consumer confidence, and diminished growth expectations in the U.S. economy and abroad.
Risks Relating 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. • Failure to implement new information technology systems or needed upgrades to our systems, including operational and financial systems, could adversely affect our business. 10 Risks Related to our Global Supply Chain and Labor Force • We source substantially all of our products through foreign production arrangements.
Risks Relating 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. • Failure to implement new information technology systems or needed upgrades to our systems, including operational and financial systems, could adversely affect our business.
If our international expansion plans are unsuccessful, our results could be materially adversely affected. 21 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 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.
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.
U.S. and international regulators, customers, and investors are increasingly focused on corporate environmental, social, and governance (“ESG”) practices and disclosures and may evaluate our business or other practices according to a variety of ESG targets, standards, and expectations. For example, new domestic and international laws and regulations relating to ESG matters are under consideration or being adopted.
U.S. and international regulators, customers, and investors are increasingly focused on corporate environmental, social, and governance (“ESG”) practices and disclosures and may evaluate our business or other practices according to a variety of ESG targets, standards, and expectations.
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.
Additionally, on December 23, 2021, President Biden signed the Uyghur Forced Labor Prevention Act (the “UFLPA”) into law, which is intended to address the use of forced labor in China’s Xinjiang Uyghur Autonomous Region (“XUAR”).
Additionally, on December 23, 2021, the Uyghur Forced Labor Prevention Act (the “UFLPA”) was signed into law, addresses the use of forced labor in China’s Xinjiang Uyghur Autonomous Region (“XUAR”).
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.
In addition, the expense for retaining our workforce may increase in response to competition, as necessary. 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.
Issues with respect to the compliance of merchandise we sell with these regulations and standards, regardless of our culpability or customer concerns about such issues, could result in damage to our reputation, lost sales, uninsured product liability claims or losses, product recalls, and increased costs.
Issues with respect to the compliance of merchandise we sell with these regulations and standards, regardless of our culpability or customer concerns about such issues, could result in damage to our reputation, lost sales, uninsured product liability claims or losses, product recalls, and increased costs. 24 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.
Wholesale segment, approximately 33% of our consolidated net sales from our top ten wholesale customers, and approximately 29% of consolidated net sales from our top five wholesale customers, which includes net sales from our exclusive brands sold, in alphabetical order, at Amazon, Target, and Walmart. Our largest wholesale customer accounted for approximately 10.4% of consolidated net sales in fiscal 2023.
Wholesale segment, approximately 35% of our consolidated net sales from our top ten wholesale customers, and approximately 31% of consolidated net sales from our top five wholesale customers, which includes net sales from our exclusive brands sold, in alphabetical order, at Amazon, Target, and Walmart.
If we are unable to respond effectively to these changes to the sustainability landscape, governments, customers, and investors may conclude that our policies and/or actions with respect to ESG matters are inadequate.
If we are unable to respond effectively to these changes to the sustainability landscape, governments, customers, and investors may conclude that our policies and/or actions with respect to ESG matters are inadequate. In addition, the methodologies for reporting and measuring ESG metrics may change and may result in adjustments to previously reported information.
Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impact our business operations. If any of the following risks actually occur, our operating results may be affected. Risks Related to Global and Macroeconomic Conditions Our business is sensitive to overall levels of consumer spending, particularly in the young children’s apparel market.
Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impact our business operations. If any of the following risks actually occur, our operating results may be affected.
These changes may increase the effects described above, and changing weather patterns could result in decreased agricultural productivity in certain regions, which may limit availability and/or increase the cost of certain key materials, such as cotton.
These changes may increase the effects described above, and changing weather patterns could result in decreased agricultural productivity in certain regions, which may limit availability and/or increase the cost of certain key materials, such as cotton. Environmental, social, and governance matters and any related reporting obligations may adversely impact our business, financial condition and results of operations.
As of the end of fiscal 2023, 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 accounts receivable.
Our two largest wholesale customers accounted for 10.9% and 10.1%, respectively, of consolidated net sales in fiscal 2024. As of the end of fiscal 2024, approximately 83% 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.
Our eCommerce business may continue to be negatively impacted if we do not successfully integrate our traditional brick-and-mortar shopping experience with our eCommerce experience or if we fail to improve on our eCommerce shopping experience, and any increase we may see in net sales from the growth in brick-and-mortar retail may not be sufficient to offset the decreases in net sales from eCommerce.
Our eCommerce business may continue to be negatively impacted if we do not successfully integrate our traditional brick-and-mortar shopping experience with our eCommerce experience or if we fail to improve on our eCommerce shopping experience, and any increase we may see in net sales from the growth in brick-and-mortar retail may not be sufficient to offset the decreases in net sales from eCommerce. 17 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.
If we encounter problems with this facility, our ability to deliver our products to the market could be adversely affected. Risks Relating to Our International Expansion • 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 Relating to Our International Expansion • We may be unsuccessful in expanding into international markets. 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 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.
The implementation of our business strategy periodically involves the execution of complex initiatives, such as investments and acquisitions, which may require that we make significant estimates and assumptions about opportunities and initiatives that we may pursue.
Both retail consumer and wholesale customer demand for young children’s apparel and accessories, specifically brand name apparel products, is affected by the overall level of consumer spending.
Risks Related to Global and Macroeconomic Conditions Our business is sensitive to overall levels of consumer spending, consumer confidence, and sentiment, particularly in the young children’s apparel market. Both retail consumer and wholesale customer demand for young children’s apparel and accessories, specifically brand name apparel products, is affected by the overall level of consumer spending, consumer confidence, and sentiment.
For example, in recent years, the U.S. economy has been negatively impacted by historically high inflation rates, which have negatively impacted and may continue to negatively impact consumer demand.
For example, in recent years, the U.S. economy has been negatively impacted by historically high inflation rates, which have negatively impacted and may continue to negatively impact consumer demand. Birth rate fluctuations, which in turn affect the number of customers that are acquired and retained, can have a material impact on consumer spending and our business.
Risks 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.
If we encounter problems with this facility, our ability to deliver our products to the market could be adversely affected. Risks 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 investigations.
Further, additional investments needed to upgrade and expand our information technology infrastructure may require significant investment of additional resources and capital, which may not always be available or available on favorable terms. Risks Related to our Global Supply Chain and Labor Force We source substantially all of our products through foreign production arrangements.
Further, additional investments needed to upgrade and expand our information technology infrastructure may require significant investment of additional resources and capital, which may not always be available or available on favorable terms. Risks Relating to Our International Expansion We may be unsuccessful in expanding into international markets.
These attacks have required us to route shipments around the Cape of Good Hope at the southern tip of Africa, which has added an additional seven to ten days of transit time.
These attacks required us to route shipments around the Cape of Good Hope at the southern tip of Africa, which has added an additional seven to ten days of transit time. If these hostilities, or hostilities in other regions of the world, continue or escalate, our business and results of operations could be materially adversely affected.
Risks Related to Our Brands and Product Value The acceptance of our products in the marketplace is affected by consumer tastes and preferences, along with fashion trends. We believe that our continued success depends on our ability to create products that provide a compelling value proposition for our consumers in all of our distribution channels.
We believe that our continued success depends on our ability to create products that provide a compelling value proposition for our consumers in all of our distribution channels.
A significant amount of our business is with our wholesale customers. For fiscal 2023, we derived approximately 34% 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 2024, we derived approximately 36% of our consolidated net sales from our U.S.
Additionally, increasing consumer awareness of environmental issues has sparked a trend in the industry of offering more sustainable products, allowing customers to make conscious decisions, which could put us at a competitive disadvantage as compared to other companies. 16 Environmental, social, and governance matters and any related reporting obligations may adversely impact our business, financial condition and results of operations.
Additionally, increasing consumer awareness of environmental issues has sparked a trend in the industry of offering more sustainable products, allowing customers to make conscious decisions, which could put us at a competitive disadvantage as compared to other companies with respect to some of our product offerings. 19 Risks Related to our Global Supply Chain and Labor Force We source substantially all of our products through foreign-based suppliers and manufacturers.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeFor example, the Company has implemented the following: • Vendor onboarding processes including a Privacy Impact Assessment and a Cyber Security and Compliance Questionnaire; and • Enrollment of each vendor in a third-party risk monitoring tool that alerts the CISO’s team should that vendor’s security posture change. 26 Governance The Audit Committee of the Board of Directors oversees risks from cybersecurity threats, including through quarterly reports to the Audit Committee by the Company’s CISO and CIO and, as needed, special reports to the Audit Committee and/or the Chairperson of the Audit Committee.
Biggest changeFor example, the Company has implemented the following: • Vendor onboarding processes including a Privacy Impact Assessment and a Cyber Security and Compliance Questionnaire; and • Enrollment of each vendor in a third-party risk monitoring tool that alerts the CISO’s team should that vendor’s security posture change.
The Company has implemented the following processes to assess, identify, and manage material risks from cybersecurity threats: • Annual assessments, by an independent third party, of the Company’s cybersecurity framework under the National Institute for Standards and Technology (“NIST”) cybersecurity framework; • Penetration tests conducted by a third-party; • Simulation of attacks on the Company’s systems by third-parties to test the Company’s systems and protections; • “Table-top” simulation exercises involving the Company’s management and its third-party consultants and advisors to simulate a cyber incident and the Company’s response to that incident, pursuant to the Company’s Incident Response Plan; and • Payment card industry (“PCI”) audits to assess the Company’s processing of credit card transactions pursuant to standards adopted by the PCI.
The Company has implemented the following processes to assess, identify, and manage material risks from cybersecurity threats: • Annual audits, by an independent third party, of the Company’s cybersecurity framework under the National Institute for Standards and Technology (“NIST”) cybersecurity framework; • Penetration tests conducted by a third-party; • Simulation of attacks on the Company’s systems by third-parties to test the Company’s systems and protections; • “Table-top” simulation exercises involving the Company’s management and its third-party consultants and advisors to simulate a cyber incident and the Company’s response to that incident, pursuant to the Company’s Incident Response Plan; and 28 • Payment card industry (“PCI”) audits to assess the Company’s processing of credit card transactions pursuant to standards adopted by the PCI.
Cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition, except as disclosed in the risk factor titled “Our systems, and those of our third-party vendors, contain personal information and payment data of our retail store and eCommerce customers, and other third parties could be breached, which could subject us to adverse publicity, costly government enforcement actions or private litigation, and expenses” in Part I, Item 1A, “Risk Factors”.
Cybersecurity threats, including as a result of any previous cybersecurity incidents incurred either by us or third parties, have not materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition, except as disclosed in the risk factor titled “Our systems, and those of our third-party vendors, contain personal information and payment data of our retail store and eCommerce customers, and other third parties could be breached, which could subject us to adverse publicity, costly government enforcement actions or private litigation, and expenses” in Part I, Item 1A, “Risk Factors”.
The assessment and management of those risks is led by the Company’s CISO, who has over 20 years of experience working in information technology, including over 10 years specifically focused on information security, infrastructure, and strategy, and the Company’s CIO, who has over 25 years of experience in Retail, Consumer Products, Merchandising, Supply Chain and IT, of which 15 years have been in leadership roles, and implemented by the CISO’s team, who are responsible for leading enterprise-wide cybersecurity strategy, policy, standards, architecture, processes and operations.
The assessment and management of those risks is led by the Company’s CISO, who has over 20 years of experience working in information technology, including over 10 years specifically focused on information security, infrastructure, and strategy, and the Company’s CIO, who has over 30 years of experience in Retail, Consumer Products, Merchandising, and IT, of which 16 years have been in leadership roles, and implemented by the CISO’s team, who are responsible for leading enterprise-wide cybersecurity strategy, policy, standards, architecture, processes and operations.
The CISO reports to the Senior Vice President and Chief Information Officer (the “CIO”), who in turn reports to the CFO.
The CISO reports to the Executive Vice President, Chief Information & Technology Officer (the “CITO”), who in turn reports to the CEO.
The Incident Response Plan has been developed to align with the four phases for the security handling lifecycle set forth in the National Institute for Standards and Technology Special Publication 800-61: (1) Preparation, (2) Detection & Analysis, (3) Containment Eradication & Recovery, and (4) Post-Incident Activity.
In addition, members of the CISO’s and CIO’s teams monitor the Company’s systems and processes and promptly report incidents as required under the Incident Response Plan, including, but not limited to, reporting to the appropriate members of management and, as needed, the Audit Committee. 29 The Incident Response Plan has been developed to align with the four phases for the security handling lifecycle set forth in the National Institute for Standards and Technology Special Publication 800-61: (1) Preparation, (2) Detection & Analysis, (3) Containment Eradication & Recovery, and (4) Post-Incident Activity.
Removed
In addition, members of the CISO’s and CIO’s teams monitor the Company’s systems and processes and promptly report incidents as required under the Incident Response Plan, including, but not limited to, reporting to the appropriate members of management and, as needed, the Audit Committee.
Added
Governance The Audit Committee of the Board of Directors oversees risks from cybersecurity threats, including through quarterly reports to the Audit Committee by the Company’s CISO and CIO and, as needed, special reports to the Audit Committee and/or the Chairperson of the Audit Committee.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe 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: 792 in the United States, 188 in Canada, and 54 in Mexico.
Biggest changeWe 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: 804 in the United States, 191 in Canada, and 62 in Mexico.
Our average remaining lease term for retail store leases in the United States, Canada, and Mexico is approximately 3.2 years, excluding renewal options.
Our average remaining lease term for retail store leases in the United States, Canada, and Mexico is approximately 3.4 years, excluding renewal options.
ITEM 2. PROPERTIES The following is a summary of our principal owned and leased properties as of December 30, 2023. Our corporate headquarters occupies 209,000 square feet of leased space in a building in Atlanta, Georgia. Our lease for that space expires in July 2035.
ITEM 2. PROPERTIES The following is a summary of our principal owned and leased properties as of December 28, 2024. Our corporate headquarters occupies 209,000 square feet of leased space in a building in Atlanta, Georgia. Our lease for that space expires in July 2035.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOpen Market Share Repurchases The following table provides information about shares repurchased during the fourth quarter of fiscal 2023: Period Total number of shares purchased (1) Average price paid per share (2) 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 1, 2023 through October 28, 2023 188,761 $ 66.65 188,761 $ 669,453,093 October 29, 2023 through November 25, 2023 122,983 $ 67.97 122,745 $ 661,110,640 November 26, 2023 through December 30, 2023 159,405 $ 72.88 159,405 $ 649,492,412 Total 471,149 470,911 (1) Includes shares of our common stock surrendered by our employees to satisfy required tax withholding upon the vesting of restricted stock awards.
Biggest changeOpen Market Share Repurchases The following table provides information about shares repurchased during the fourth quarter of fiscal 2024: 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 September 29, 2024 through October 26, 2024 — $ — — $ 598,966,271 October 27, 2024 through November 23, 2024 195 $ 51.64 — $ 598,966,271 November 24, 2024 through December 28, 2024 — $ — — $ 598,966,271 Total 195 — (*) All the 195 shares purchased represent shares of our common stock surrendered by our employees to satisfy required tax withholding upon the vesting of restricted stock awards between October 27, 2024 and November 23, 2024.
In each quarter of fiscal 2023, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.75 (for an aggregate cash dividend per common share of $3.00 for fiscal 2023).
In fiscal 2023 the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.75 (for an aggregate cash dividend per common 31 share of $3.00 for fiscal 2023).
We repurchased and retired shares in open market transactions in the following amounts for the fiscal periods indicated: For the fiscal year ended December 30, 2023 December 31, 2022 January 1, 2022 Number of shares repurchased (1) 1,446,269 3,747,187 2,967,619 Aggregate cost of shares repurchased (dollars in thousands) (2) $ 100,034 $ 299,667 $ 299,339 Average price per share (2) $ 69.17 $ 79.97 $ 100.87 (1) Share repurchases were made in compliance with all applicable rules and regulations and in accordance with the share repurchase authorizations described in Item 8 “Financial Statements and Supplementary Data” under Note 11, Common Stock, to the consolidated financial statements.
We repurchased and retired shares in open market transactions in the following amounts for the fiscal periods indicated: Fiscal year ended December 28, 2024 December 30, 2023 December 31, 2022 Number of shares repurchased (1) 736,423 1,446,269 3,747,187 Aggregate cost of shares repurchased (dollars in thousands) (2) $ 50,526 $ 100,034 $ 299,667 Average price per share (2) $ 68.61 $ 69.17 $ 79.97 (1) Share repurchases were made in compliance with all applicable rules and regulations and in accordance with the share repurchase authorizations described in Item 8, “Financial Statements and Supplementary Data” under Note 11, Common Stock , to the consolidated financial statements.
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 20, 2024, there were 172 holders of record of our common stock.
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 18, 2025, there were 178 holders of record of our common stock.
(2) The aggregate cost of share repurchases and average price paid per share excludes excise tax on share repurchases imposed as part of the Inflation Reduction Act of 2022. Future repurchases may occur from time to time in the open market, in privately negotiated transactions, or otherwise.
(2) The aggregate cost of share repurchases and average price paid per share excludes excise tax on share repurchases imposed as part of the Inflation Reduction Act of 2022. The Company paused share repurchases during the third quarter of fiscal 2024. 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 $301.9 million remaining under previous authorizations. The total aggregate remaining capacity under outstanding repurchase authorizations as of December 30, 2023 was $649.5 million. The share repurchase authorizations have no expiration dates.
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 28, 2024 was $599.0 million. The share repurchase authorizations have no expiration dates.
In fiscal 2022 the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.75 (for an aggregate cash dividend per common share of $3.00 for fiscal 2022).
In each quarter of fiscal 2024, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.80 (for an aggregate cash dividend per common share of $3.20 for fiscal 2024).
The timing and amount of any repurchases will be at the discretion of the Company subject to restrictions under the Company’s secured revolving credit facility and considerations given to market conditions, stock price, other investment priorities, excise taxes, and other factors. 28 Dividends On February 26, 2024, the Company's Board of Directors declared a quarterly cash dividend payment of $0.80 per common share, payable on March 29, 2024 to shareholders of record at the close of business on March 11, 2024.
The timing and amount of any repurchases will be at the discretion of the Company subject to restrictions under the Company’s secured revolving credit facility and considerations given to market conditions, stock price, other investment priorities, excise taxes, and other factors.
Removed
There were 238 shares surrendered between October 29, 2023 and November 25, 2023. (2) The average price paid per share excludes excise tax on share repurchases imposed as part of the Inflation Reduction Act of 2022.
Added
Dividends On February 21, 2025, the Company’s Board of Directors declared a quarterly cash dividend payment of $0.80 per common share, payable on March 28, 2025 to shareholders of record at the close of business on March 10, 2025.

Item 7. Management's Discussion & Analysis

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

96 edited+63 added−60 removed65 unchanged
Biggest changeThe decrease in consolidated operating income is due to the factors discussed above, partially offset by the nonrecurrence of a $9.0 million non-cash pre-tax impairment charge related to the Skip Hop tradename in fiscal 2022. • Other (income) expense, net was $8.0 million in fiscal 2023, primarily due to a $6.9 million payment received in January 2024 as a result of a court-approved settlement in December 2023 related to payment card interchange fees. • Diluted net income per common share decreased $0.10, or 1.6%, to $6.24, and adjusted diluted net income per common share decreased $0.71, or 10.3%, to $6.19. • Inventories decreased $207.4 million, or 27.9%, to $537.1 million, due to decreased “pack and hold” inventory, decreased days of supply, and decreased product costs. • As a result of our strong financial position and available liquidity, we returned $212.0 million to our shareholders, comprised of $100.0 million in share repurchases and $112.0 million in cash dividends. 32 RESULTS OF OPERATIONS 2023 FISCAL YEAR ENDED DECEMBER 30, 2023 COMPARED TO 2022 FISCAL YEAR ENDED DECEMBER 31, 2022 The following table summarizes our results of operations: Fiscal year ended (dollars in thousands, except per share data) December 30, 2023 December 31, 2022 $ Change % / bps Change Consolidated net sales $ 2,945,594 $ 3,212,733 $ (267,139) (8.3) % Cost of goods sold 1,549,659 1,740,375 (190,716) (11.0) % Gross profit 1,395,935 1,472,358 (76,423) (5.2) % Gross profit as % of consolidated net sales 47.4 % 45.8 % 160 bps Royalty income, net 21,410 25,820 (4,410) (17.1) % Royalty income as % of consolidated net sales 0.7 % 0.8 % (10) bps Selling, general, and administrative expenses 1,093,940 1,110,007 (16,067) (1.4) % SG&A expenses as % of consolidated net sales 37.1 % 34.6 % 250 bps Intangible asset impairment — 9,000 (9,000) nm Operating income 323,405 379,171 (55,766) (14.7) % Operating income as % of consolidated net sales 11.0 % 11.8 % (80) bps Interest expense 33,973 42,781 (8,808) (20.6) % Interest income (4,776) (1,261) (3,515) 278.7 % Other (income) expense, net (8,034) 975 (9,009) nm Loss on extinguishment of debt — 19,940 (19,940) nm Income before income taxes 302,242 316,736 (14,494) (4.6) % Income tax provision 69,742 66,698 3,044 4.6 % Effective tax rate (*) 23.1 % 21.1 % 200 bps Net income $ 232,500 $ 250,038 $ (17,537) (7.0) % Basic net income per common share $ 6.24 $ 6.34 $ (0.10) (1.6) % Diluted net income per common share $ 6.24 $ 6.34 $ (0.10) (1.6) % Dividend declared and paid per common share $ 3.00 $ 3.00 $ — — % (*) Effective tax rate is calculated by dividing the provision for income taxes by income before income taxes.
Biggest changeWe are projecting approximately 30 new store openings and 19 store closures in fiscal 2025, with a greater number of net store openings in future years. • As a result of our strong financial position and available liquidity, we returned $166.7 million to our shareholders, comprised of $116.2 million in cash dividends and $50.5 million in share repurchases. 36 RESULTS OF OPERATIONS 2024 FISCAL YEAR ENDED DECEMBER 28, 2024 COMPARED TO 2023 FISCAL YEAR ENDED DECEMBER 30, 2023 The following table summarizes our results of operations: Fiscal year ended (dollars in thousands, except per share data) December 28, 2024 December 30, 2023 $ Change % / bps Change Consolidated net sales $ 2,844,102 $ 2,945,594 $ (101,492) (3.4) % Cost of goods sold 1,478,936 1,549,659 (70,723) (4.6) % Gross profit 1,365,166 1,395,935 (30,769) (2.2) % Gross profit as % of consolidated net sales 48.0 % 47.4 % 60 bps Royalty income, net 19,251 21,410 (2,159) (10.1) % Royalty income as % of consolidated net sales 0.7 % 0.7 % 0 bps Selling, general, and administrative expenses 1,099,689 1,093,940 5,749 0.5 % SG&A expenses as % of consolidated net sales 38.7 % 37.1 % 160 bps Intangible asset impairment 30,000 — nm nm Operating income 254,728 323,405 (68,677) (21.2) % Operating income as % of consolidated net sales 9.0 % 11.0 % (200) bps Interest expense 31,331 33,973 (2,642) (7.8) % Interest income (11,039) (4,776) (6,263) 131.1 % Other expense (income), net 3,627 (8,034) 11,661 nm Income before income taxes 230,809 302,242 (71,433) (23.6) % Income tax provision 45,300 69,742 (24,442) (35.0) % Effective tax rate (*) 19.6 % 23.1 % (350) bps Net income $ 185,509 $ 232,500 $ (46,990) (20.2) % Basic net income per common share $ 5.12 $ 6.24 $ (1.12) (18.0) % Diluted net income per common share $ 5.12 $ 6.24 $ (1.12) (18.0) % Dividend declared and paid per common share $ 3.20 $ 3.00 $ 0.20 6.7 % (*) Effective tax rate is calculated by dividing the provision for income taxes by income before income taxes.
Discount rates are dependent upon interest rates and the cost of capital at a point in time. These assumptions are consistent with those we believe hypothetical marketplace 42 participants would use. An impairment is recorded for any excess carrying value above the fair value of the reporting unit, not to exceed the carrying value of goodwill.
Discount rates are dependent upon interest rates and the cost of capital at a point in time. These assumptions are consistent with those we believe hypothetical marketplace participants would use. An impairment is recorded for any excess carrying value above the fair value of the reporting unit, not to exceed the carrying value of goodwill.
For arrangements in which the Company receives a distinct good or service, we record these reimbursements under cooperative 41 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.
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.
In determining undiscounted future cash flows for the recoverability test of store leases, we take various factors into account, including the continued market acceptance of our current products, the development of new products, changes in merchandising strategy, retail store cost controls, store traffic, competition, and the effects of 43 macroeconomic factors such as consumer spending.
In determining undiscounted future cash flows for the recoverability test of store leases, we take various factors into account, including the continued market acceptance of our current products, the development of new products, changes in merchandising strategy, retail store cost controls, store traffic, competition, and the effects of macroeconomic factors such as consumer spending.
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, purchasing, receiving, 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, purchasing, receiving, and inspection costs. Also included in costs of goods sold are the costs of 33 shipping eCommerce product to end consumers.
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.
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, 40 occupancy costs for our corporate headquarters, and other benefit and compensation programs, including performance-based compensation.
To determine whether there has been a permanent impairment on such assets, a recoverability test is performed by comparing anticipated undiscounted future cash flows from the use and eventual disposition of the asset or asset group to the carrying value of the asset.
To determine whether there has been a permanent impairment on 46 such assets, a recoverability test is performed by comparing anticipated undiscounted future cash flows from the use and eventual disposition of the asset or asset group to the carrying value of the asset.
These segments are our operating and reporting segments. Our U.S. Retail segment consists of revenue primarily from sales of products in the United States through our retail stores and eCommerce websites. Similarly, our U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale partners.
These segments are our operating and reporting segments. Our U.S. Retail segment consists of revenue primarily from sales of products in the United States through our retail stores and eCommerce websites. Similarly, our U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale customers.
The process of estimating the fair value requires us to make assumptions and to apply judgement including forecasting revenue growth and profitability, utilizing external market participant assumptions, including estimated market rents, and selecting the appropriate discount rate.
The process of estimating the fair value requires us to make assumptions and to apply judgment including forecasting revenue growth and profitability, utilizing external market participant assumptions, including estimated market rents, and selecting the appropriate discount rate.
In each quarter of fiscal 2023, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.75 (for an aggregate cash dividend per common share of $3.00 for fiscal 2023).
In fiscal 2023, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.75 (for an aggregate cash dividend per common share of $3.00 for fiscal 2023).
For a comparison of our results for fiscal year 2022 to our results for fiscal year 2021 and other financial information related to fiscal year 2021, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report on Form 10-K, filed with the SEC on February 24, 2023.
For a comparison of our results for fiscal year 2023 to our results for fiscal year 2022 and other financial information related to fiscal year 2022, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Annual Report on Form 10-K, filed with the SEC on February 27, 2024.
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 2023 ended on December 30, 2023, fiscal 2022 ended on December 31, 2022, and fiscal 2021 ended on January 1, 2022.
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 2024 ended on December 28, 2024, fiscal 2023 ended on December 30, 2023, and fiscal 2022 ended on December 31, 2022.
Based on our results for fiscal 2023, a hypothetical 1% increase in our effective tax rate would have resulted in an increase in our income tax expense of $3.0 million. Employee Benefit Plans We sponsor a frozen defined benefit pension plan and other unfunded post-retirement plans.
Based on our results for fiscal 2024, a hypothetical 1% increase in our effective tax rate would have resulted in an increase in our income tax expense of $2.3 million. 47 Employee Benefit Plans We sponsor a frozen defined benefit pension plan and other unfunded post-retirement plans.
At the end of fiscal 2023, our channels included 1,034 company-owned retail stores, eCommerce websites, approximately 19,350 wholesale locations in North America, as well as our international wholesale accounts and licensees who operate in over 1,100 locations outside of North America in over 90 countries. Segments Our three business segments are: U.S. Retail, U.S. Wholesale, and International.
At the end of fiscal 2024, our channels included 1,057 company-owned retail stores in North America, eCommerce websites, approximately 19,500 wholesale locations in North America, as well as our international wholesale accounts and licensees who operate in over 1,100 locations outside of North America in over 90 countries. Segments Our three business segments are: U.S. Retail, U.S. Wholesale, and International.
To 37 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 30, 2023 were $183.8 million compared to $198.6 million at December 31, 2022.
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 28, 2024 were $194.8 million compared to $183.8 million at December 30, 2023.
Share Repurchases 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 30, 2023 was approximately $649.5 million, based on settled repurchase transactions. The share repurchase authorizations have no expiration dates.
Share Repurchases 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 28, 2024 was approximately $599.0 million, based on settled repurchase transactions. The share repurchase authorizations have no expiration dates.
As of December 30, 2023 and December 31, 2022, there was approximately $845.6 million and $726.5 million available for future borrowing, respectively. 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.
As of December 28, 2024 and December 30, 2023, there was $845.3 million and $845.6 million available for future borrowing, respectively. 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.
As discussed above, the Company performed quantitative impairment assessments on the value of the Company’s indefinite-lived intangible tradename assets as of December 31, 2022. Based on these assessments, a non-cash pre-tax impairment charge of $9.0 million was recorded during the fourth quarter of fiscal 2022 on our indefinite-lived Skip Hop tradename asset to write-down the carrying value to $6.0 million.
As discussed above, the Company performed quantitative impairment assessments on the value of the Company’s indefinite-lived intangible tradename assets as of December 28, 2024. Based on these assessments, a non-cash pre-tax impairment charge of $30.0 million was recorded during the fourth quarter of fiscal 2024 on our indefinite-lived OshKosh tradename asset to write-down the carrying value to $40.0 million.
On our consolidated balance sheet, the $500.0 million of outstanding senior notes as of December 30, 2023 is reported net of $2.6 million of unamortized issuance-related debt costs, and 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.
On our consolidated balance sheet, the $500.0 million of outstanding senior notes as of December 28, 2024 is reported net of $1.9 million of unamortized issuance-related debt costs, and the $500.0 million of outstanding senior notes as of December 30, 2023 is reported net of $2.6 million of unamortized issuance-related debt costs.
The increase in the SG&A rate was driven by fixed cost deleverage on decreased net sales, increased performance-based compensation expense, and retail store openings, partially offset by decreased marketing expense. U.S. Wholesale U.S.
The increase in the SG&A rate was driven by fixed cost deleverage on decreased net sales, investments in our retail stores and brand marketing, increased retail store rents and employee compensation costs, and increased transportation costs, partially offset by decreased performance-based compensation expense. U.S. Wholesale U.S.
During the requisite service period, we recognize a deferred income tax benefit for the expense recognized for U.S. GAAP. 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.
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.
This decrease is primarily due to the decrease in inventory balances, including decreased “pack and hold” inventory. Rebates, discounts and other cash consideration received from a vendor related to inventory purchases are reflected as reductions in the cost of the related inventory item and are therefore reflected in Cost of goods sold when the related inventory item is sold.
Rebates, discounts and other cash consideration received from a vendor related to inventory purchases are reflected as reductions in the cost of the related inventory item and are therefore reflected in Cost of goods sold when the related inventory item is sold.
We plan to invest approximately $80 million in capital expenditures in fiscal 2024, which primarily relates to U.S. and international retail store openings and remodels, investments in our distribution facilities, and strategic information technology initiatives. Net Cash Used in Financing Activities Net cash used in financing activities decreased $486.6 million, or 59.4%, to $332.6 million.
We plan to invest approximately $65 million in capital expenditures in fiscal 2025, which primarily relates to U.S. and international retail store openings and remodels, investments in our distribution facilities, and strategic information technology initiatives. Net Cash Used in Financing Activities Net cash used in financing activities decreased $157.8 million, or 47.4%, to $174.8 million.
Net Income Our consolidated net income decreased $17.5 million, or 7.0%, to $232.5 million, due to the factors previously discussed. 34 Results by Segment - Fiscal Year 2023 compared to Fiscal Year 2022 The following table summarizes net sales and operating income, by segment, for the fiscal years ended December 30, 2023 and December 31, 2022: Fiscal year ended (dollars in thousands) December 30, 2023 % of consolidated net sales December 31, 2022 % of consolidated net sales $ Change % Change Net sales: U.S.
Net Income Consolidated net income decreased $47.0 million, or 20.2%, to $185.5 million, due to the factors previously discussed. 38 Results by Segment - Fiscal Year 2024 compared to Fiscal Year 2023 The following table summarizes net sales by segment and segment operating income for the fiscal years ended December 28, 2024 and December 30, 2023: Fiscal year ended (dollars in thousands) December 28, 2024 % of consolidated net sales December 30, 2023 % of consolidated net sales $ Change % Change Net sales: U.S.
(2) In fiscal 2023, a pre-tax adjustment of approximately $6.9 million ($5.3 million net of tax, or $0.14 per diluted share) was made related to a gain on a court-approved settlement in December 2023.
(4) In fiscal 2023, a pre-tax adjustment of $6.9 million ($5.3 million net of tax, or $0.14 per diluted share) was made related to a gain on a court-approved settlement in December 2023. Note: Results may not be additive due to rounding.
However, these sources of liquidity may be affected by events described in the “Forward-Looking Statements” section, in our risk factors, as discussed under the heading “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K, and in other reports filed with the Securities and Exchange Commission from time to time.
However, these sources of liquidity may be affected by events described in the “Forward-Looking Statements” section, in our risk factors, as discussed under the heading “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K, and in other reports filed with the Securities and Exchange Commission from time to time. 41 As discussed under the heading “Known or Anticipated Trends” in Part II, Item 7 of this Annual Report on Form 10-K, macroeconomic factors have had a negative impact on consumer sentiment and consumer demand for our products.
In fiscal 2022 the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.75 (for an aggregate cash dividend per common share of $3.00 for fiscal 2022).
In each quarter of fiscal 2024, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.80 (for an aggregate cash dividend per common share of $3.20 for fiscal 2024).
We expect product input costs to decrease in fiscal 2024, and we expect inbound transportation rates, including ocean freight rates, to decrease in the first half of fiscal 2024. Royalty Income We have licensing agreements with domestic and international licensees that grant licensees the right to access certain trademarks in return for royalty payments or licensing fees.
In fiscal 2025, we expect product input costs to increase by a low-single digit percentage and inbound transportation rates, including ocean freight rates, to increase by a high-single digit percentage. Royalty Income We have licensing agreements with domestic and international licensees that grant licensees the right to access certain trademarks in return for royalty payments or licensing fees.
Distribution expenses that are included in SG&A primarily consist of payments to third-party shippers and handling costs to process product through our distribution facilities, including eCommerce fulfillment costs, and delivery to our wholesale customers and to our retail stores.
Distribution expenses that are included in SG&A primarily consist of payments to third-party shippers and handling costs to process product through our distribution facilities, including eCommerce fulfillment costs, and delivery to our wholesale customers and to our retail stores. Our gross profit and gross margin may not be comparable to other entities that define their metrics differently.
Financing Activities Secured Revolving Credit Facility As of December 30, 2023, we had no outstanding borrowings under our secured revolving credit facility, exclusive of $4.4 million of outstanding letters of credit. As of December 31, 2022, we had $120.0 million outstanding borrowings under our secured revolving credit facility, exclusive of $3.5 million of outstanding letters of credit.
Financing Activities Secured Revolving Credit Facility As of December 28, 2024, we had no outstanding borrowings under our secured revolving credit facility, exclusive of $4.7 million of outstanding letters of credit. As of December 30, 2023, we had no outstanding borrowings under our secured revolving credit facility, exclusive of $4.4 million of outstanding letters of credit.
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.
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.
We have included the fair value of these arrangements of approximately $0.6 million for fiscal 2022 and $0.2 million for fiscal 2021 as a component of SG&A expenses on the Company’s consolidated statements of operations, rather than as a reduction of Net sales.
We have included the fair value of these arrangements of $0.9 million for fiscal 2024 and $0.6 million for fiscal 2022 as a component of SG&A expenses on the Company’s consolidated statements of operations, rather than as a reduction of Net sales. There were no amounts for cooperative advertising arrangements recorded as a component of SG&A expenses for fiscal 2023.
The decrease in net sales was driven by decreased net sales in Canada, decreased demand from our international wholesale partners, and a strengthening of the U.S. Dollar against other foreign currencies. These decreases were partially offset by growth in sales in our Mexico retail stores and wholesale channels and increased average selling prices per unit.
International International segment net sales decreased $23.6 million, or 5.5%, to $405.6 million, driven by decreased net sales in Canada, decreased demand from our international wholesale partners in the Middle East and Europe, decreased average selling prices per unit, and a strengthening of the U.S. dollar against other foreign currencies, partially offset by growth in our retail stores in Mexico.
Impairment of Goodwill and Other Indefinite-Lived Intangible Assets The carrying values of the goodwill and indefinite-lived tradename assets are subject to annual impairment reviews which are performed as of the last day of each fiscal year.
Increases to this reserve are reflected in Costs of goods sold on our consolidated statement of operations. Impairment of Goodwill and Other Indefinite-Lived Intangible Assets The carrying values of the goodwill and indefinite-lived tradename assets are subject to annual impairment reviews which are performed as of the last day of each fiscal year.
Sensitivity tests on the Skip Hop indefinite-lived tradename asset showed that a 100 basis point increase in the discount rate or a 10% decrease in forecasted revenues would result in further impairment charges of approximately $1.0 million, and a 25 basis point decrease in the royalty rate would result in further impairment charges of approximately $3.0 million.
Sensitivity tests on the OshKosh indefinite-lived tradename asset showed that a 100 basis point increase in the discount rate, a 500 basis point decrease in the revenue growth rate, or a 50 basis point decrease in the royalty rate would result in further impairment charges of approximately $5 million, $10 million, and $20 million, respectively.
In international markets, we expect our growth will be driven through new store openings and omni-channel capabilities in Mexico and Canada, expansion through our wholesale partner in Brazil, and growth with other wholesale customers.
In international markets, we expect our growth will be driven through our Canadian retail stores, new store openings in Mexico, investments in marketing to improve traffic, expansion through our wholesale partner in Brazil, and growth with other wholesale customers.
Our retail store revenues, also reported as Net sales, are recognized at the point of sale. Retail sales through our online channels are recognized at time of delivery to the customer.
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. Our retail store revenues, also reported as Net sales, are recognized at the point of sale. Retail sales through our online channels are recognized at time of delivery to the customer.
Retail and International performance, and the Company uses such information to assess the performance of the U.S. Retail and International segments. Additionally, we believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of our business.
Additionally, we believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of our business.
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.
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.
Fiscal Year Ended December 30, 2023 December 31, 2022 (In millions, except earnings per share) Operating Income % Net Sales Income Taxes Net Income Diluted Net Income per Common Share Operating Income % Net Sales Income Taxes Net Income Diluted Net Income per Common Share As reported (GAAP) $ 323.4 11.0 % $ 69.7 $ 232.5 $ 6.24 $ 379.2 11.8 % $ 66.7 $ 250.0 $ 6.34 Organizational restructuring (1) 4.4 1.0 3.4 0.09 — — — — Legal settlement (2) — (1.7) (5.3) (0.14) — — — — Loss on extinguishment of debt (3) — — — — — 4.8 15.2 0.38 Intangible asset impairment (4) — — — — 9.0 2.1 6.9 0.17 As adjusted $ 327.8 11.1 % $ 69.1 $ 230.6 $ 6.19 $ 388.2 12.1 % $ 73.6 $ 272.0 $ 6.90 (1) Related to charges for organizational restructuring and related corporate office lease amendment actions in fiscal 2023.
Fiscal year ended December 28, 2024 December 30, 2023 (In millions, except earnings per share) Operating Income % Net Sales Income Taxes Net Income Diluted Net Income per Common Share Operating Income % Net Sales Income Taxes Net Income Diluted Net Income per Common Share As reported (GAAP) $ 254.7 9.0 % $ 45.3 $ 185.5 $ 5.12 $ 323.4 11.0 % $ 69.7 $ 232.5 $ 6.24 Organizational restructuring (1) 1.8 0.2 1.6 0.04 4.4 1.0 3.4 0.09 Intangible asset impairment (2) 30.0 7.2 22.8 0.63 — — — — Partial pension plan settlement (3) — 0.2 0.7 0.02 — — — — Legal settlement (4) — — — — — (1.7) (5.3) (0.14) As adjusted $ 286.6 10.1 % $ 52.9 $ 210.7 $ 5.81 $ 327.8 11.1 % $ 69.1 $ 230.6 $ 6.19 (1) Related to charges for organizational restructuring in the fiscal year ended December 28, 2024 and organizational restructuring and related corporate office lease amendment actions in the fiscal year ended December 30, 2023.
The method of calculating sales metrics varies across the retail industry. As a result, our comparable sales metrics may not be comparable to those of other retailers. U.S. Retail U.S. Retail segment net sales decreased $178.4 million, or 10.6%, to $1.50 billion.
The method of calculating sales metrics varies across the retail industry. As a result, our comparable sales metrics may not be comparable to those of other retailers.
Our estimate as of December 30, 2023 for commitments to purchase inventory was between $400 million and $500 million. We are unable to reasonably predict future reserves for income taxes, as these are contingent on the ultimate amount or timing of settlement.
We are unable to reasonably predict future reserves for income taxes, as these are contingent on the ultimate amount or timing of settlement.
Although the Company determined that no impairment exists for the OshKosh or Skip Hop indefinite-lived tradename assets, these assets could be at risk for impairment should macroeconomic factors, including declining consumer sentiment, adversely affect the Company’s financial results.
Although the Company determined that no impairment exists for the Canada reporting unit, goodwill ascribed to the Canada reporting unit could be at risk for impairment should macroeconomic factors, including declining consumer sentiment, continue to adversely affect the Company’s financial results.
Senior Notes As of December 30, 2023, 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.
As of December 28, 2024, the Company was in compliance with the financial and other covenants under the secured revolving credit facility. Senior Notes As of December 28, 2024, 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.
Under a qualitative assessment, we estimate if it is “more likely than not” that the fair value of the reporting unit is less than its carrying value. Qualitative factors may include but are not limited to: macroeconomic conditions; industry and market considerations; cost factors that may have a negative effect on earnings; overall financial performance; and other relevant entity-specific events.
Qualitative factors may include but are not limited to: macroeconomic conditions; industry and market considerations; cost factors that may have a negative effect on earnings; overall financial performance; and other relevant entity-specific events.
As of December 30, 2023, we had approximately $351.2 million of cash and cash equivalents held at major financial institutions, including approximately $79.0 million held at financial institutions located outside of the United States.
As of December 28, 2024, we had $412.9 million of cash and cash equivalents held at major financial institutions, including $75.3 million held at financial institutions located outside of the United States.
The senior notes mentioned above are unsecured and are fully and unconditionally guaranteed by Carter’s, Inc. and certain domestic subsidiaries of TWCC. The guarantor subsidiaries are 100% owned directly or indirectly by Carter’s, Inc. and all guarantees are joint, several and unconditional.
The guarantor subsidiaries are 100% owned directly or indirectly by Carter’s, Inc. and all guarantees are joint, several and unconditional.
We estimate forfeitures of restricted stock awards based on historical experience and expected future activity. 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 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.
Such obligations include: 1) debt repayments and letters of credit (as described in Item 8 “Financial Statements and Supplementary Data” under Note 10, Long-Term Debt , to the consolidated financial statements), 2) operating lease liabilities (as described in Item 8 “Financial Statements and Supplementary Data” under Note 5, Leases , to the consolidated financial statements) and 3) liabilities related to employee benefit plans (as described in Item 8 “Financial Statements and Supplementary Data” under Note 17, Employee Benefit Plans , to the consolidated financial statements). 40 In addition, we have commitments to purchase inventory in the normal course of business, which are cancelable (with or without penalty, depending on the stage of production) and span a period of one year or less.
Such obligations include: 1) debt repayments and letters of credit (as described in Item 8, “Financial Statements and Supplementary Data” under Note 10, Long-Term Debt , to the consolidated financial statements), 2) operating lease liabilities (as described in Item 8, “Financial Statements and Supplementary Data” under Note 5, Leases , to the consolidated financial statements) and 3) liabilities related to employee benefit plans (as described in Item 8, “Financial Statements and Supplementary Data” under Note 17, Employee Benefit Plans , to the consolidated financial statements).
For arrangements in which the Company does not receive a distinct good or service, we record these reimbursements as a reduction of net sales. The majority of the Company’s digital cooperative advertising arrangements are recorded as a reduction of net sales as there was no distinct good or service received by the Company.
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.
Sensitivity tests on the OshKosh indefinite-lived tradename asset showed that a 100 basis point increase in the discount rate, a 10% decrease in forecasted revenues, or a 25 basis point decrease in the royalty rate would not change the conclusion and would not result in an impairment charge.
Sensitivity tests on the Canada reporting unit showed that a 100 basis point increase in the discount rate or a 100 basis point decrease in the long-term revenue growth rate would not change the conclusion and would not result in an impairment charge.
In fiscal 2022, the Company performed a quantitative impairment test on the goodwill ascribed to each of the Company’s reporting units and on the value of its indefinite-lived intangible tradename assets as of December 31, 2022 due to increased discount rates, decreased actual and projected sales and profitability, and the announcement of the substantial doubt of a Skip Hop wholesale customer’s ability to continue to operate as a going concern.
Intangible Asset Impairment Due to decreased actual and projected sales and profitability, the Company performed a quantitative impairment test on the goodwill ascribed to each of the Company’s reporting units and on the value of its indefinite-lived intangible tradename assets as of December 28, 2024.
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 decreased $10.3 million, or 53.3%, to $9.0 million as of December 30, 2023.
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.
The increase in the SG&A rate was due to fixed cost deleverage on decreased sales, increased investments in our Mexican retail stores and technology, and increased performance-based compensation expense.
The increase in SG&A rate was driven by fixed cost deleverage on decreased sales, investments in our retail stores and brand marketing, and increased charitable donations, partially offset by decreased performance-based compensation expense, decreased organizational restructuring costs, and decreased consulting costs.
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.
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. 44 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.
Units sold decreased high-single digits, while average selling prices per unit increased mid-single digits. Canadian comparable net sales, including retail stores and eCommerce, decreased 7.3% driven by decreased traffic in our eCommerce channel and in our retail stores. As of December 30, 2023, we operated 188 retail stores in Canada, compared to 187 at the end of fiscal 2022.
Units sold decreased by a low-single digit percentage. Canadian comparable net sales, including retail stores and eCommerce, decreased 2.7%, driven by decreased traffic in our eCommerce channel and in our retail stores, in part due to macroeconomic headwinds. As of December 28, 2024, we operated 191 retail stores in Canada, compared to 188 at the end of fiscal 2023.
Additional financial and geographical information about our business segments is contained in Item 8 “Financial Statements and Supplementary Data” and under Note 18, 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.
Additional financial and geographical information about our business segments is contained in Item 8 “Financial Statements and Supplementary Data” and under Note 18, Segment Information , to the consolidated financial statements. In fiscal 2024, the Company changed its measure of segment profitability to segment operating income.
Income Taxes Our consolidated income tax provision increased $3.0 million, or 4.6%, to $69.7 million, and the effective tax rate increased approximately 200 bps to 23.1%. The increased effective tax rate relates to a higher proportion of income generated in the United States, which is a higher tax jurisdiction relative to the locations of our international operations.
Income Taxes Our consolidated income tax provision decreased $24.4 million, or 35.0%, to $45.3 million, and the effective tax rate decreased 350 bps to 19.6%. The decreased effective tax rate relates to a lower proportion of income generated in the United States, where the tax rate is higher relative to some of our international jurisdictions, compared to fiscal 2023.
The timing and amount of any repurchases will be at the discretion of the Company subject to restrictions under the Company’s secured revolving credit facility and considerations given to market conditions, stock price, other investment priorities, excise taxes, and other factors. 38 Dividends On February 26, 2024, the Company's Board of Directors declared a quarterly cash dividend payment of $0.80 per common share, payable on March 29, 2024 to shareholders of record at the close of business on March 11, 2024.
The timing and amount of any repurchases will be at the discretion of the Company subject to restrictions under the Company’s secured revolving credit facility and considerations given to market conditions, stock price, other investment priorities, excise taxes, and other factors.
Royalty income decreased $4.4 million, or 17.1%, to $21.4 million, driven by decreased customer demand. Selling, General, and Administrative Expenses Consolidated SG&A expenses decreased $16.1 million, or 1.4%, to $1.09 billion in fiscal 2023 while SG&A rate increased approximately 250 bps to 37.1%.
Royalty income decreased $2.2 million, or 10.1%, to $19.3 million, driven by decreased wholesale customer demand. Selling, General, and Administrative Expenses Consolidated SG&A expenses increased $5.7 million, or 0.5%, to $1.10 billion in fiscal 2024 and SG&A rate increased 160 bps to 38.7%.
A deterioration of macroeconomic factors may negatively impact these estimates and assumptions and result in future impairment charges. Goodwill The Company performs impairment tests of its goodwill at the reporting unit level. Qualitative and quantitative methods are used to assess for impairment, including the use of discounted cash flows (“income approach”) and relevant data from guideline public companies (“market approach”).
A 45 deterioration of macroeconomic factors may negatively impact these estimates and assumptions and result in future impairment charges. Goodwill The Company performs impairment tests of its goodwill at the reporting unit level.
As of December 30, 2023, we operated 54 retail stores in Mexico, compared to 49 in fiscal 2022. International segment operating income decreased $11.7 million, or 20.6%, to $44.9 million, due to a decrease in gross profit of $2.6 million and an increase in SG&A expenses of $11.3 million. Operating margin decreased 200 bps to 10.5%.
As of December 28, 2024, we operated 62 retail stores in Mexico, compared to 54 in fiscal 2023. International segment operating income decreased $6.2 million, or 13.7%, to $39.0 million, driven by an increase in SG&A expenses of $5.8 million.
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. 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.
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. During the requisite service period, we recognize a deferred income tax benefit for the expense recognized for U.S. GAAP.
This increase in net cash used in investing activities is primarily due to increased capital expenditures. Capital expenditures in fiscal 2023 primarily included $42.2 million for our U.S. and international retail store openings and remodels, $9.0 million for information technology, and $7.2 million for our distribution facilities.
This decrease in net cash used in investing activities is driven by decreased capital expenditures. Capital expenditures in fiscal 2024 were primarily related to U.S. and international retail store openings and remodels and investments in our distribution facilities.
Note: Results may not be additive due to rounding. Percentage changes that are considered not meaningful are denoted with “nm”. Consolidated Net Sales Consolidated net sales decreased $267.1 million, or 8.3%, to $2.95 billion.
Note: Results may not be additive due to rounding. Percentage changes considered not meaningful denoted with “nm”. Consolidated Net Sales Consolidated net sales decreased $101.5 million, or 3.4%, to $2.84 billion. The decrease in net sales was driven by lower traffic and demand in our U.S.
There have been no issuances of stock options since 2018, and there are no unrecognized compensation costs remaining on outstanding stock options. Subjective assumptions include a forfeiture rate assumption for all restricted stock awards and an estimate for the probability that the performance criteria will be achieved for performance awards.
Subjective assumptions also include a forfeiture rate assumption for all restricted stock awards and an estimate for the probability that the performance criteria will be achieved for performance-based restricted stock awards. We estimate forfeitures of restricted stock awards based on historical experience and expected future activity.
Weighted-average borrowings were $545.5 million at an effective interest rate of 6.22%, compared to weighted-average borrowings for fiscal 2022 of $738.7 million at an effective interest rate of 5.84%.
Interest Expense Consolidated interest expense decreased $2.6 million, or 7.8%, to $31.3 million due to a decrease in weighted-average borrowings. Weighted-average borrowings were $500.0 million at an effective interest rate of 6.23%, compared to weighted-average borrowings for fiscal 2023 of $545.5 million at an effective interest rate of 6.22%.
Cash Flow Net Cash Provided by Operating Activities Net cash provided by operating activities increased $440.8 million, or 498.9%, to $529.1 million. Our cash flow provided by operating activities is driven by net income and changes in our net working capital.
The increase of $6.1 million, or 2.5%, is driven by the timing of payments for purchases of inventory. Cash Flow Net Cash Provided by Operating Activities Net cash provided by operating activities decreased $230.3 million, or 43.5%, to $298.8 million. Our cash flow provided by operating activities is driven by net income and changes in our net working capital.
In fiscal 2023, we repurchased and retired 1,446,269 shares in open market transactions for approximately $100.0 million, at an average price of $69.17 per share. In fiscal 2022, we repurchased and retired 3,747,187 shares in open market transactions for approximately $299.7 million, at an average price of $79.97 per share.
In fiscal 2023, we repurchased and retired 1,446,269 shares in open market transactions for $100.0 million, at an average price of $69.17 per share. 42 The Company paused share repurchases during the third quarter of fiscal 2024. Future repurchases may occur from time to time in the open market, in privately negotiated transactions, or otherwise.
The decrease of $14.8 million, or 7.5%, was driven by decreased net sales and the timing of wholesale customer shipments and associated payments. Inventories at December 30, 2023 were $537.1 million compared to $744.6 million at December 31, 2022.
The increase of $11.1 million, or 6.0%, primarily reflects the timing of wholesale customer shipments and payments. Inventories at December 28, 2024 were $502.3 million compared to $537.1 million at December 30, 2023. The decrease of $34.8 million, or 6.5%, was due to decreased days of supply and lower average unit costs.
The fair value of stock awards is determined based on the quoted closing price of our common stock on the date of grant. The fair value of stock options is determined based on the Black-Scholes option pricing model, which requires the use of subjective assumptions.
The fair value of stock options is determined based on the Black-Scholes option pricing model, which requires the use of subjective assumptions. There have been no issuances of stock options since 2018, and there are no unrecognized compensation costs remaining on outstanding stock options.
Wholesale 1,014,584 34.4 % 1,080,471 33.6 % (65,887) (6.1) % International 429,230 14.6 % 452,103 14.1 % (22,873) (5.1) % Consolidated net sales $ 2,945,594 100.0 % $ 3,212,733 100.0 % $ (267,139) (8.3) % Operating income: % of segment net sales % of segment net sales U.S.
Wholesale 1,021,396 35.9 % 1,014,584 34.4 % 6,812 0.7 % International 405,598 14.3 % 429,230 14.6 % (23,632) (5.5) % Consolidated net sales $ 2,844,102 100.0 % $ 2,945,594 100.0 % $ (101,492) (3.4) % Segment operating income (1) : Segment operating margin Segment operating margin U.S.
Our gross profit and gross margin may not be comparable to other entities that define their metrics differently. 30 Known or Anticipated Trends Macroeconomic Factors and Consumer Demand Macroeconomic factors, including inflationary pressures on families with young children, increased interest rates, the lapping of government stimulus, increased consumer debt levels, decreased savings rates, resumption of student loan repayments, geopolitical unrest, and increased risks of a recession continued to create a complex and challenging environment for our business in fiscal 2023.
Known or Anticipated Trends Macroeconomic Factors and Consumer Demand Macroeconomic factors, including persistent inflationary pressures on families with young children, elevated interest rates, increased consumer debt levels, decreased savings rates, and geopolitical unrest continue to create a complex and challenging retail environment.
For further details on rates and assumptions, see Item 8 “Financial Statements and Supplementary Data” under Note 17, Employee Benefit Plans , to the consolidated financial statements. 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 most significant assumption used to determine the Company’s projected benefit obligation under its defined benefit plans is the discount rate. For further details on rates and assumptions, see Item 8, “Financial Statements and Supplementary Data” under Note 17, Employee Benefit Plans , to the consolidated financial statements.
The decrease of $207.4 million, or 27.9%, was due to decreased “pack and hold” inventory, decreased days of supply, and decreased product costs. We are currently experiencing stable inventory levels, inventory transit times, and flow of seasonal product in line with our historical experience.
We are currently experiencing stable inventory levels, inventory transit times, and flow of seasonal product in line with our historical experience. Operating lease assets at December 28, 2024 were $577.1 million compared to $528.4 million at December 30, 2023.
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 in the second quarter of fiscal 2022 and decreased commons stock share repurchases, partially offset by payments on our secured revolving credit facility.
This change in cash flow used in financing activities was primarily driven by decreased common stock share repurchases and by payments on our secured revolving credit facility in fiscal 2023 that did not reoccur in fiscal 2024.
International International segment net sales decreased $22.9 million, or 5.1%, to $429.2 million in fiscal 2023. Changes in foreign currency exchange rates, primarily between the U.S. dollar and the Canadian dollar, used for translation in fiscal 2023 had an immaterial impact on International segment net sales.
Changes in foreign currency exchange rates, primarily between the U.S. dollar and the Canadian dollar and the U.S. dollar and the Mexican peso, used for translation in fiscal 2024 had an unfavorable effect on International segment net sales of $7.4 million. Average selling prices per unit decreased by a low-single digit percentage driven by our investment in pricing.
Gross Profit and Gross Margin Our consolidated gross profit decreased $76.4 million, or 5.2%, to $1.40 billion and consolidated gross margin increased 160 bps to 47.4%. The decrease in consolidated gross profit was impacted by decreased net sales. The increase in consolidated gross margin was driven by decreased inventory provisions and increased average selling prices per unit.
Retail segment net sales decreased $84.7 million, or 5.6%, to $1.42 billion. The decrease in net sales was driven by lower traffic in our eCommerce channels and in our retail stores, as well as decreased average selling prices per unit.
The increase in gross margin was due to increased average selling prices per unit and decreased inventory provisions. Average cost per unit sold remained relatively consistent as increases to product input costs were offset by decreased ocean freight rates.
The increase in gross margin was due to decreased average cost per unit, partially offset by a benefit in excess inventory provisions in fiscal 2023 that did not reoccur in fiscal 2024 and decreased average selling prices per unit mentioned above.
As discussed under the heading “Known or Anticipated Trends” in Part II, Item 7 of this Annual Report on Form 10-K, we expect continued pressure on consumer sentiment in fiscal 2024, which may adversely impact our financial results in fiscal 2024. We cannot predict the timing and amount of such impact.
Continued pressure on consumer sentiment in fiscal 2025 may have an adverse impact on financial results in fiscal 2025. We cannot predict the timing and amount of such impact.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−1 removed3 unchanged
Biggest changeGains and losses resulting from translating assets and liabilities from the functional currency to U.S. dollars are included in Accumulated other comprehensive income (loss). Our foreign subsidiaries typically record sales denominated in currencies other than the U.S. dollar, which are then translated into U.S. dollars using weighted-average exchange rates.
Biggest changeOur foreign subsidiaries typically record sales denominated in currencies other than the U.S. dollar, which are then translated into U.S. dollars using weighted-average exchange rates. The changes in foreign currency exchange rates used for translation in fiscal 2024 had a $7.4 million unfavorable effect on our consolidated net sales.
The financial statements of our foreign subsidiaries that are denominated in functional currencies other than the U.S. dollar are translated into U.S. dollars using period-end exchange rates for assets and liabilities and weighted-average exchange rates for revenues and expenses.
The financial statements of our foreign subsidiaries that are denominated in functional currencies other than the U.S. dollar are translated into U.S. dollars using period-end exchange rates for assets and liabilities and weighted-average exchange rates for 48 revenues and expenses. The resulting translation adjustments are recorded as a component of Accumulated other comprehensive income (loss).
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. 46
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. 49
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.
Fluctuations in exchange rates between the U.S. dollar and other currencies may affect our results of operations, financial position, and cash flows. Transactions by our foreign subsidiaries may be denominated in a currency other than the entity's functional currency. Foreign currency transaction gains and losses also include the impact of intercompany loans with foreign subsidiaries that are marked to market.
Foreign currency transaction gains and losses related to intercompany loans with foreign subsidiaries that are of a long-term nature are accounted for as translation adjustments and are included in Accumulated other comprehensive income (loss). Interest Rate Risk Our operating results are subject to risk from interest rate fluctuations on our secured revolving credit facility, which carries variable interest rates.
In our consolidated statement of operations, these gains and losses are recorded within Other (income) expense, net. Foreign currency transaction gains and losses related to intercompany loans with foreign subsidiaries that are of a long-term nature are accounted for as translation adjustments and are included in Accumulated other comprehensive income (loss).
As of December 30, 2023, there were no variable rate borrowings outstanding under the secured 45 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.
As a result, the impact of a hypothetical 100 bps increase in the effective interest rate would not result in a material amount of additional interest expense over a 12-month period. Other Risks We enter into various purchase order commitments with our suppliers.
Removed
The changes in foreign currency exchange rates used for translation in fiscal 2023 had an immaterial impact 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.
Added
Interest Rate Risk Our operating results are subject to risk from interest rate fluctuations on our secured revolving credit facility, which carries variable interest rates. As of December 28, 2024, there were no variable rate borrowings outstanding under the secured revolving credit facility.

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