Michael D. Casey - Chief Executive Officer, Executive Vice President, Director Joseph Pacifico - President James Petty - President of Retail Stores

Omar Saad - Credit Suisse First Boston Margaret Whitfield - Sterne Agee & Leach Benjamin Rowbotham - Goldman Sachs

Welcome to Carter’s third quarter earnings conference call. Today’s call is being recorded. On the call today are Mike Casey, Chief Executive Officer, Joe Pacifico, President, and Jim Petty, President of Retail Stores. After today’s prepared remarks we will take questions as time allows. If you have any follow up questions after today’s call, please direct them to Eric Martin, Vice President of Investor Relations. Mr. Martin’s direct telephone number is 404-745-2889. Carter’s issued its third quarter earnings press release yesterday after the market closed. The text of the release appears on Carter’s website at www.carters.com under the Press Releases section. Additionally, presentation materials for today’s earnings conference can be accessed on the company’s website by clicking on the Investor Relations tab and choosing Conference Calls and Webcasts on the left side of the screen. Before we begin, let me remind you that statements made on this conference call and in the company’s press release other than those concerning historical information should be considered forward-looking statements and actual results may differ materially. For a detailed discussion of factors that could cause actual results to differ from those contained in the forward-looking statements, please refer to the company’s most recent annual report filed with the Securities and Exchange Commission. Also on this call the company will reference various non-GAAP financial measurements. A reconciliation of these non-GAAP financial measurements to the GAAP financial measurements is provided in the company’s earnings release. Now I’d like to turn the call over to Mr. Casey. Michael D. Casey: Thanks for joining us for an update on our business. We’ve prepared a brief presentation on our third quarter results, which is available on our website. Before going through the presentation, I’d like to frame up what I believe is important for you to understand bout our business. In a tough retail environment we exceeded our goals for the third quarter, which is our largest quarter of our year. The trends in our business are good heading into the final weeks of the year. Our performance reflects the benefit of significant investments made over the past year to strengthen our organization and our product offerings. We’re very fortunate to be competing in the young children’s apparel space. It’s a less discretionary purchase. It’s also a very affordable purchase. The birth rate continues to be strong, and parents and grandparents continue to spend money on their young children. For years Carter’s has led the young children’s apparel market because we’re providing consumers with significant product value. Our average unit price is less than $8. By comparison the value equation in recent years at OshKosh has been out of balance and we’ve been working hard to correct it. Over the past two years we’ve refined our product and pricing strategies to strengthen the OshKosh product offering. In the second quarter we started to see meaningfully better performance in our OshKosh retail segment. That positive trend continued through the third quarter and into the fourth quarter. On our last call we outlined a handful of milestones in each of the retail and wholesale segments to correct OshKosh’s performance. We believe we are on track to achieve those milestones. Ideally all components of our business would be performing at an optimal level. Of course that’s rarely the case but the beauty of our business is we now have multiple levels to enable growth. Starting with the highlights of our third quarter results on page 2 of the presentation, our sales for the quarter were up 6% driven primarily by the strength of our retail store segments and earlier demand in our wholesale and mass channel segments. On a GAAP basis our earnings were $0.58 a share including charges related to the write-down of an OshKosh distribution facility. On an adjusted basis excluding that charge, earnings were $0.60 a share 3% better than last year. We’d say at least $0.10 of the $0.60 we’re reporting is attributed to earlier than expected spend and the timing of spending. We continue to make excellent progress controlling the growth in inventories. Inventories were down 13% at the end of September due primarily to the higher sales in the quarter. We’re expecting inventories to be up 5% at the end of the year. Cash flow continues to be good. Through the first nine months we generated $57 million of cash flow. The improvement in cash flow was driven by better inventory management and we’re expecting operating cash flow of at least $80 million this year. In terms of our outlook based on the strength of our retail segments, the strength of our product offerings and the current trends in our business, our outlook for the year has improved since our last call. On page 3 you have a snapshot of the growth in sales for each component of our business. Here you can see the terrific performance in both retail segments. We had growth in all but one segment, OshKosh wholesale, which Joe will review with you this morning. On page 4 you have our third quarter P&L. Historically our third quarter has been the largest quarter in terms of sales and earnings contribution. It typically contributes about 30% of our annual sales and over 40% of our operating income. Our gross profit margin in the quarter was comparable to last year. We’re pleased with that performance given the very promotional environment. As expected, SG&A grew at a rate faster than gross profit. SG&A is up $10 million which includes a $6 million increase in retail store expenses primarily related to new stores. The increase in SG&A also reflects a $4 million provision for incentive compensation. There were no provisions for incentive comp in 2007. At the bottom of the page you have EPS on a GAAP and adjusted basis. On page 5 we reconciled the GAAP to adjusted earnings and give effect to the distribution facility write-down and closure costs. On page 6 you have our third quarter segment profitability. On an adjusted basis our operating margin shown on the lower right-hand corner of the page decreased 100 basis points, which has a value of about $4.5 million or $0.05 per share. The margin improvement in our OshKosh retail segment was offset by lower margins in our wholesale and mass channel segments. In Carter’s wholesale segment profitability decreased 290 basis points from last year driven by a higher mix of sales to off-price retailers and related provisions for excess inventory. Our Carter’s retail store operating margin decreased 100 basis points largely due to the impact of the new stores. The new stores generally start out less productive than the comping stores but ramp up nicely over the first two to three years. We also had a decline in mass channel profitability primarily due to performance of certain components of our Child of Mine brand and higher provisions for excess inventory. At OshKosh we’re very encouraged by the recent trends in the retail segments which represent more than 75% of OshKosh’s annual sales. We believe the performance is directly related to strengthening the product offering and better management of the stores. As expected the OshKosh retail segment is posting better results than the wholesale segment. However our wholesale customers are achieving much better over-the-counter selling with the OshKosh product and earning higher margins. We believe this will enable better performance in our wholesale segment beginning with spring 2009. On page 7 you have a summary of our cash flow and debt structure. At the end of the quarter we had about $60 million of cash on hand. Given the environment we believe it’s a good time to be carrying more cash on the balance sheet. We haven’t used our $125 million revolving credit facility for more than a year and we don’t expect to need the revolver for the foreseeable future. We’re very comfortable with our leverage because as you know we’ve operated with significantly higher leverage in the past. We’re fortunate to have refinanced our credit facilities a couple years ago and negotiated very favorable pricing. We’ve made good progress on our share repurchase program. Since March of 2007 we repurchased 8% of our outstanding shares at less than $20 per share. For an update on our wholesale and mass channel segments, I’ll turn the call over to Joe Pacifico.

I’ll start by discussing our Carter’s wholesale business which is on page 8. Sales were up 1% for the quarter despite canceling orders from high credit-risk accounts. These results are better than what we discussed on our last call when we projected quarter three down double digits. The better results in quarter three were due to earlier-than-expected order demand which was driven by very strong over-the-counter selling for our customers. In the third quarter over-the-counter selling was up double digits in all three of our product categories; baby, sleepwear and playwear. These results include the benefits from our fall ’08 strategies that we began developing a year ago. These strategies included a more compelling product offering, increased product value and the implementation of an everyday low pricing strategy. Another one of our initiatives is the rollout of the newborn to 24 month shops. These shops pull together our three products categories; baby, sleepwear and playwear; in the newborn to 24 month size range which we feel makes the shopping experience more compelling and more convenient and creates a dominant brand presentation. We believe Carter’s dominance in the baby business makes this possible and serves as a competitive advantage. By mid-November prior to the holiday rush we plan to have over 400 shops at Kohl’s and 15 at Macy’s. We also plan to rollout over 300 shops at J.C. Penney in the first half of 2009. Looking at the balance of the year, we are well positioned with inventory heading into quarter four as a result of the better over-the-counter selling in third quarter. From a sales perspective, because of increased sales in the third quarter we now project fourth quarter and the year to be up low single digits in line with the plan we shared with you on the last call. In regard to spring ’09 we have orders in hand and are projecting sales of low to mid single digits. We believe that the line will perform well over the counter due to our rolling forward the same product and marketing strategies that we began implementing with the fall ’08 line. We also anticipate ending the season with cleaner inventory than last year due to stronger sell-throughs of fall product which improved the customers’ and our profitability. Turn to the mass channel on page 9. In total mass channel sales were up 13% in the third quarter. We are projecting quarter four up mid single digits which would bring us to low single-digit growth for the year. In the mass channel we have two different stories. Just One Year, our brand at Target, we have and continue to have consistently good performance. Our quarter three sales were in line with plan and Target’s over-the-counter selling was good in the quarter. We’re projecting sales up high single digits in quarter four and for the year. Child of Mine, our brand at Wal-Mart, quarter three sales were +18%. This is a timing issue driven by earlier demand in certain product categories. As a result of the earlier shipping in the third quarter, we now expect fourth quarter to be down 8% but the second half should still be up 6% to 8%. With that said, we still have some product issues we are working through with Wal-Mart. We said on the last call we thought we had corrected our product issues for fall ’08. I believe we have accomplished that objective for 75% of our mix. We still have more work to do on the packaged goods segment of the business. We’re confident we will correct what is underperforming but it will affect our ability to grow the Child of Mine business in the first half of next year. Turning to OshKosh wholesale on page 10, sales were down for the quarter. The decline in sales this year is a direct result of our customers reducing their orders based on product performance last year. Our performance is in line with what we expected. We knew this would be a tough year for OshKosh wholesale because of our over-the-counter performance last year. That’s why our focus this year was to accomplish two key initiatives which will drive positive bookings in 2009. One, increase our product sell-through percentages before permanent markdown, and secondly, improve the retailers’ natural margin. We accomplished both of these objectives with our spring line, our summer line and now fall. To put it in perspective for you, our spring/summer line, our sell-throughs before perm were at 55% this year versus 45% the prior year. Fall is currently trending in the 60% to 65% sell-through before perm. On top of this we are also increasing the customers’ margins. We feel this is a direct result of our total repositioning of the OshKosh brand. We’ve gotten back to basics with much better product, the color and art is more age appropriate, and a greater focus on core products. As we shared with you on prior calls, we’ve lowered wholesale prices to provide greater consumer value. We at the same time lowered our product costs and are achieving our margin objectives. We are pleased with the consumers’ response of the brand. They seem to be clearly embracing the product and pricing strategies, and this gives us confidence as we head into 2009. Looking ahead to spring ’09 we expect at least mid-single-digit increases in sales. Based on the trend we are seeing we believe we can build a meaningful and profitable wholesale business for OshKosh. In closing I’d like to comment on our strategies and how we are positioning going into 2009. Last year we took a hard look at our value equation and product and brand positioning. We conducted a comprehensive competitive analysis, did broad consumer research and a price elasticity study. We then incorporated these learnings [inaudible] which are driving great value to the consumer and positive results for both the customers and us. These same strategies are in place in 2009 and should continue to position us well in this tough economic environment. Now I’ll turn the call over to Jim Petty who will discuss how these strategies are being executed at retail.

As we shared with you on the last call, retail continues to build momentum in both brands with strong consumer acceptance of its value equation and price clarity. Over the past year we have focused on improving both brands through better talent, inventory management, price clarity and an overall store shopping environment. Now as it relates to Carter’s, our third quarter comparable store sales increase of 6.1% and year-to-date increase of 11.3% reinforces our belief that our key initiatives are working. We have achieved seven straight quarters of positive comps. Third quarter results are highlighted by positive comp performance in all product categories with the exception of accessories which represents about 10% of the business. In this difficult environment gross margin improved over last year. This is mainly due to product performance and inventory management. I encourage you to visit our stores to see the strength of the product and the value to the customer. As indicated on page 11, all key performance indicators improved as compared to last year with the exception of the number of transactions which were comparable to last year. Fourth quarter is off to a good start and our outlook remains positive. However due to the increasingly challenging economic environment and last year’s fourth quarter comparable store sales increase of 9%, we’re assuming flat to low single-digit comp store performance for the fourth quarter. We expect that performance to be accompanied by gross margin expansion and better managed inventories. Moving on to OshKosh. As you recall we began seeing an improving sales trend in the second quarter. This was mainly due to strengthening of product offering and effective inventory management. This momentum has carried through the third quarter and into the fourth quarter. Our focus was and will continue to be on gross margin quality. For the quarter we significantly improved gross margin quality which resulted in a 950 basis point increase in operating margin. In addition to gross margin improvement, comps were up 13.2% in the third quarter. This is a distinct change in the trend of business comping positive for the first time since Q1 of 2007. We attribute the turnaround to significantly better product assortment with much stronger value for the customer, improved inventory management and improved in-store execution with a focus on fixturing and visual merchandising. All product categories comp’ed positive with better margins. As referenced on page 12, all key performance indicators with the exception of UPTs were improved as compared to last year. The decline in UPTs was mainly due to an aggressive liquidation of excess inventory last year. To reiterate, while fourth quarter comps for OshKosh are expected to be up low single digits, our focus will continue to be improving gross margin quality. Early reads on holiday are encouraging and we are well positioned from a marketing agenda and inventory perspective. Now back to Mike. Michael D. Casey: On our last call in July we outlined some important milestones that we have shown on page 13 to measure our progress turning the OshKosh business around. Our retail performance over the past five months provides a good indication that we’re on track to rebuild this terrific brand. Based on the current trends in our business we feel we’re on track to achieve the milestones in both the retail and wholesale segments. On page 14 we’ve updated the assumptions supporting our 2008 guidance. We’re currently expecting low single-digit growth in fourth quarter sales which supports earnings of $0.43 to $0.47 per share. For the year we expect mid-single-digit growth in sales. Earnings are now projected to be flat to down 3% for the year. That’s a bit better than our last update. We expect to invest about $50 million in cap ex largely in our retail segment. That concludes our prepared remarks on the business. We’ll open up the call to your questions.

(Operator Instructions) Our first question comes from Omar Saad - Credit Suisse First Boston. Omar Saad - Credit Suisse First Boston: Congratulations guys on a great quarter when a lot of these consumers thoughts are dropping like flies lately. Mike and Joe, I wondered if you could help us understand how you’ve been able to improve value positions of consumers because that seems to be having a great impact on your business holding up so well on top of the fact that the category is generally a more stable category. But in an inflationary environment, how have you been able to improve that kind of proposition to the consumer where they feel like they’re getting great value for the products given w hat’s happened and what we’re hearing is happening on the inflation side?

As we said, we began over a year ago looking at how we were positioned in the market, price competitiveness and we felt definitely OshKosh needed more work than the Carter’s brand but there was one area of Carter’s we needed. So we focused on that as an organization, we looked at every one of our core products and we re-engineered these products to match benefits to what the consumer is willing to pay in the market, and it has really paid off. Our results in the third quarter are beyond our expectations for both brands but really the total organization focusing on a few items and getting them in line with what needed to be in the market, and it’s worked well for us. Michael D. Casey: I think companies who have a strong value message are doing well in this market, and Carter’s for a long time has had a very compelling value message and terrific product, good price. That hasn’t been the case with OshKosh until recently. So one of the good things that we’ve learned over the years with Carter’s and in recent years with OshKosh, we started to implement into the OshKosh product offering. To Joe’s point, our performance is largely a reflection of a lot of hard work over the past year or more to strengthen our product offering across all business segments. Omar Saad - Credit Suisse First Boston: Switching gears a little bit, in your wholesale business are you seeing any trends with competitive brands. This environment is very [inaudible] these smaller companies. Are you seeing any shifts in terms of private label becoming more or less prominent in this environment?

I think everybody was on a pretty good roll from probably ’03 to ’07. I think the slowing of business puts a lot more pressure on the customer also to make commitments. So a brand like us that does probably 25% of our business on replenishment and we drive a lot of core products in common inventory does give us a little bit of a competitive advantage to pick up business in this type of environment. Omar Saad - Credit Suisse First Boston: On the comp side on the Carter’s retail, we saw a deceleration. It’s still a great number compared to everything else that we’re hearing out of other companies out there. Do you think that’s an appropriate run rate or are you kind of modeling and except that to decelerate with the rest of the market place given the macro?

It’s really been a pretty well balanced quarter from a comp store performance and the momentum that we’ve achieved over the quarter is pretty much continuing. We’re feeling confident about things and we’re on plan.

Our next question comes from Margaret Whitfield - Sterne Agee & Leach. Margaret Whitfield - Sterne Agee & Leach: I wondered if you could discuss at Carter’s wholesale the level of over-the-counter sales at your key retailers and what the level of your inventories are at these key retailers? Could there be any upside perhaps to the forecast you just provided for Q4?

Sales in the third quarter as we said were up double digits and that was in baby, playwear and sleepwear. Inventories are in very good position. I hate to say chasing a little bit of inventory but we’re almost chasing a little bit of inventory in a couple product categories. We feel very strong. We’re in a good position for the balance of the year. Our order file is very clean so we think we’ll end the year very well. I don’t think we can get too much more specific than that on a percentage but definitely good positioned inventory and sales over the counter has been better than we expected. Margaret Whitfield - Sterne Agee & Leach: What has been the impact if you could quantify it of the troubled retailers that were on your watch list and will they be a factor in the fourth quarter outlook at wholesale?

We’ve taken that out of our plan as we said on the last call. To put it in perspective, we’re probably running about a 7% cancelation rate this year which is double what we normally experienced over the last three to five years and that’s directly related to those credit risk accounts. Some we took out in anticipation so we feel that’s all taken out of our plan. Michael D. Casey: In terms of the earnings impact, it’s probably about $0.03 this year. Most of that we took in the first half of this year. Margaret Whitfield - Sterne Agee & Leach: What was the level of off-price selling? I presume that’s tied to these troubled retailers in the Q3.

Year-over-year it’s higher. No doubt about it. When business gets tough, you find yourself with more goods particularly to Joe’s point with us canceling orders from these high credit risk accounts and we moved that out through off-price retailers and in this environment you get paid less for that. So that’s had an impact on our business. Margaret Whitfield - Sterne Agee & Leach: Would you imagine you’re through the worst of it and there will be less of this in Q4?

Yes. Actually I think we’re in good shape heading into the balance of the year. Margaret Whitfield - Sterne Agee & Leach: Jim, how did the comps trend at each unit during the quarter and how are the comps trending thus far in October?

I’ll give you for both brands for the third quarter. For Carter’s we were at a 4.9% in July and then a 6% comp in August and a 6.8% comp in September and obviously we came in at 6.1%. In OshKosh we were at an 11.4% in July, we were at a 16.8% in August and we were at a 10.9% in September coming in at the 13.2%. Momentum is consistent so we’re feeling guardedly optimistic. Margaret Whitfield - Sterne Agee & Leach: So October’s consistent with the run rate of the quarter overall? Michael D. Casey: Times are good. Margaret Whitfield - Sterne Agee & Leach: So your forecast could prove conservative potentially.

I think that we’ve really got to be very guarded. We don’t know what’s happening around the corner. I think none of us do. So we’re just being guardedly optimistic. We’ve got two important months ahead of us. Margaret Whitfield - Sterne Agee & Leach: The difference between the brand stores and the outlet stores, any notable differences in the two units.

Directionally the brand stores are better from a comp perspective and that’s then consistent with what we said at the end of Q2.

Our next question comes from Benjamin Rowbotham - Goldman Sachs. Benjamin Rowbotham - Goldman Sachs: I was hoping you guys could provide a little bit more color on gross margin trends at Carter’s wholesale in the quarter and also what you’re factoring into the outlook there.

Let me talk about the operating margin. The operating margin’s been impacted by largely what’s going on in the environment so as Joe said we’ve had to cancel out some orders from some high credit risk accounts and when you do that you have higher provisions for excess inventory, higher provisions for the [inaudible] going to realize by marketing those products out to the off-price channels. That has weighed down the gross margin. The operating margin was down year-over-year. My guess is you’ll continue to see some decline in that operating margin over the next quarter or so. I would encourage you to look at the absolute margin in that business. Carter’s wholesale continues to be the largest and most profitable component of our business. It’s a very efficient business model but year-over-year the margins are down largely due to what’s going on in the environment. Benjamin Rowbotham - Goldman Sachs: As you look forward into ’09 from an inflation perspective given the pullback in energy prices, what are you thinking there now?

Very good question. You saw the headlines this morning that oil’s now below $70 a barrel. I looked back this morning where it was a year ago. Interestingly it was over $80 a barrel a year ago. I think the last time we chatted a few months ago it was closer to $150 a barrel going to $200. There’s a little bit of a silver lining in what’s going on in the world and I think our outlook on costs is better than it was three months ago. We have visibility through spring 2009 where we saw some portion of a 2% product cost increase that was manageable. We were able to offset that with efficiencies elsewhere in our business. Fall ’09 we’ve got folks traveling to Asia now and negotiating fall ’09 prices. A few months ago we probably would have said that the cost increases there would be at least 2%, maybe closer to 4% or more. Today we think it’ll be comparable to what we saw in spring ’09 and actually might be a bit better. We’ll probably plan it at least at a level equal to this spring ’09 cross. But there’s a lot of capacity freeing up in the world right now because consumer demand is down and that’s an opportunity for us.

We have no further questions on our roster. Therefore Mr. Casey, I’ll turn the conference back over to you for any closing remarks. Michael D. Casey: Thank you all for joining us this morning. As always, we appreciate your questions and your support. We look forward to updating you again in February on our next call.

Ladies and Gentlemen, this does conclude today’s Carter’s call. If you would like to listen to a replay of this call, it will be available beginning at 11:30 a.m. Eastern Time today through midnight Friday, the 31st of October. The dial in number for the replay is 888-203-1112 in the United States and Canada and 719-457-0820 from international locations. The confirmation code to access the replay is 7243510. We do appreciate your participation and you may disconnect at this time.