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Here's Why You Must Buy Carter's (CRI) Stock Going Into 2022

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Carter’s Inc. CRI has displayed resilience in 2021, driven by gains from price realization, productivity improvements, and cost-management efforts. Its focus on expanding e-commerce and omni-channel capabilities bodes well, given the increased preference for online shopping. Also, strong demand for its products and services remains a key growth driver.

Cumulatively, these factors will help the CRI stock stay resilient in 2022. The Zacks Rank #2 (Buy) company’s shares have risen 4.8% in the past year. Notably, the industry witnessed growth of 18.5%, whereas the sector declined 9.9%.

Factors Supporting Growth

Carter’s looks well-poised for growth in 2022, driven by the robust demand trends across the retail and wholesale channels. It has been witnessing healthy demand from a few of its largest customers, which positions it for further growth. Sturdy demand and fewer promotions led to improved price realization in third-quarter 2021, which aided gross and operating margins. Additionally, improved e-commerce and digital penetration is likely to contribute to the company’s growth.

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Zacks Investment Research

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Carter’s is seeking opportunities to strengthen e-commerce capabilities through investments to speed up deliveries. The company’s e-commerce business has been performing well, driven by expanded omnichannel facilities, including curbside pickup, same-day pickup, buy online and pickup at store, and ship from store along with easy access to a broad array of online products when shopping in stores. Its stores fulfilled 30% of online orders as of the end of the third quarter.

The company’s e-commerce penetration in the United States is anticipated to grow 40% in 2021, suggesting a rise from less than 32% in 2019. This might be attributable to same-day pickup facilities and easy online access to all its product offerings. On the international front, e-commerce sales in Canada witnessed 30% growth. International e-commerce sales are expected to exceed $100 million in 2021. Management earlier anticipated e-commerce penetration to grow 42% by 2024.

Driven by the shift of wholesale customer shipments from the third quarter to the fourth quarter along with solid international demand and improved price realization, management raised its 2021 guidance. The company anticipates yearly sales of $3.45 billion and expects the metric to be 98% of the pre-pandemic level. Adjusted earnings are envisioned to be $7.57, suggesting a rise from the last year’s reported figure of $4.16 million.

The company also issued an upbeat fourth-quarter view, wherein it expects sales of $1,025 million. Adjusted earnings are envisioned to be $2.00 per share, with an adjusted operating income of $127 million. It also noted that the fourth quarter has started on a solid note.

Conclusion

Carter’s, like its peers, continues to witness elevated costs related to higher spending on compensation provisions, brand marketing and technology initiatives. Management also noted that higher freight charges, particularly air freight, are likely to remain deterrents. It projects adverse COVID-19 impacts, including supply-chain headwinds, inflation, and production and transportation delays in the times ahead.

However, Carter’s looks poised to steer through the unprecedented environment, driven by its strategies, high demand and increasing e-commerce penetration. Also, a VGM Score of B and a long-term earnings growth rate of 31.3% drive optimism on the stock.

Stocks to Consider

We have highlighted some favorably-ranked stocks from the broader Consumer Discretionary space, such as Caleres Inc. CAL, Guess GES and Steven Madden SHOO.

Caleres currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 796.2%, on average. Shares of CAL have gained 491% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Caleres’ sales and earnings per share for the current financial year suggests growth of 31.8% and 377.1%, respectively, from the year-ago period. The Zacks Consensus Estimate for the current year’s earnings is pegged at $3.88 per share, increasing 0.8% in the past 30 days.

Guess, also a Zacks Rank #1 stock, has a trailing four-quarter earnings surprise of 97%, on average. The GES stock has gained 5.9% in the past year.

The Zacks Consensus Estimate for Guess’ current financial year sales suggests growth of 38.6%, while the consensus mark for earnings suggests substantial growth from the year-ago period’s reported figure. The Zacks Consensus Estimate for the current fiscal year’s earnings of $2.97 per share has been unchanged in the past 30 days.

Steven Madden currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 41.9%, on average. Shares of SHOO have rallied 29.5 in a year.

The Zacks Consensus Estimate for Steven Madden’s sales and earnings for the current financial year suggests growth of 50.8% and 267.2% from the year-ago period’s reported figures, respectively. The Zacks Consensus Estimate for 2021 earnings of $2.35 per share has been unchanged in the past 30 days.


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Guess, Inc. (GES) : Free Stock Analysis Report

Carter's, Inc. (CRI) : Free Stock Analysis Report

Steven Madden, Ltd. (SHOO) : Free Stock Analysis Report

Caleres, Inc. (CAL) : Free Stock Analysis Report

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