Carter's Investor Day Highlights Growth Drivers

Carter's Inc.

reported that cotton overhangs on its stock but there are multiple growth drivers evident, according to Sterne Agee, which has published a research report on the company. In the report, Sterne Agee writes "CRI management is hopeful that by spring 2011 cotton prices will settle in at $0.80-$1.00 well below current levels as there will be greater visibility on spring plantings by March and April. These price points are thought to provide attractive economics to suppliers and buoy plantings of cotton versus other crops. CRI took selective price increases on the spring line to help offset higher input costs estimated at 11% for the first half as the firm expected lower cotton prices in the fall. However, cotton prices have continued to move higher and more aggressive but as yet un-quantified price hikes are expected for the fall line to be set by calendar year end. The line will be shown to customers later this month. At the time of the Q4 call in February, CRI is expected to have greater visibility on its 2011 outlook but continues to expect that the cotton pressures will be of shorter duration. If this is the case, then margins would be set to rebound in 2012 as implied in our projection. Other firms, however, have suggested the cycle could be of longer duration which is the key risk in investing in CRI at this time." Sterne Agee maintains its Neutral rating and $29 price target. Carter's Inc. closed yesterday at $25.85.