Michael D. Casey - Chairman and Chief Executive Officer Richard F. Westenberger - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Andrew Schmidt - FBR Capital Markets & Co., Research Division Taposh Bari - Goldman Sachs Group Inc., Research Division Stephanie Schiller Wissink - Piper Jaffray Companies, Research Division Rakesh Babarbhai Patel - Stephens Inc., Research Division Daniel O'Hare - BofA Merrill Lynch, Research Division Kate McShane - Citigroup Inc, Research Division Tom Nikic - Sterne Agee & Leach Inc., Research Division Steven Louis Marotta - CL King & Associates, Inc., Research Division Janet Lynne Knopf - Oppenheimer & Co. Inc., Research Division Anna A. Andreeva - Oppenheimer & Co. Inc., Research Division Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division

Welcome to Carter's Fourth Quarter and Fiscal 2014 Earnings Conference Call. On the call today are Michael Casey, Chairman and Chief Executive Officer; Richard Westenberger, Executive Vice President and Chief Financial Officer; Brian Lynch, President; and Sean McHugh, Vice President and Treasurer. [Operator Instructions] Carter's issued its fourth quarter and fiscal 2014 earnings press release earlier this morning. A copy of the release and presentation materials for today's call have been posted on the Investor Relations section of the company's website at www.carters.com. Before we begin, let me remind you that statements made on this conference call and in the company's presentation materials about the company's outlook, plans and future performance are forward-looking statements. Actual results may differ materially from those projected. For a discussion of factors that could cause actual results to vary from those contained in the forward-looking statements, please refer to the company's most recent outlook -- I'm sorry, most recent quarterly 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 and presentation materials. Also, today's call is being recorded. And now I would like to turn the call over to Mr. Casey. Michael D. Casey: Thanks very much. Good morning, everyone. Thanks for joining us on the call. Before we walk you through the presentation on our website, I'd like to share some thoughts on our business with you. Earlier today, we reported a record level of sales and earnings for the fourth quarter and the year. This was our 26th consecutive year of sales growth, a significant year of progress for our company. In 2014, we opened over 100 beautiful new stores in North America. We strengthened the presentation of our brands across all channels of distribution. We launched new e-commerce capabilities in Canada, completed the buildout of our multichannel distribution center in Georgia, and negotiated more favorable product costs for 2015. Despite the highly promotional retail market, we improved price realization. We leveraged SG&A and improved our operating margin. In 2014, we continued to gain market share, strengthening our position as the leader in young children's apparel. We invested in new systems to enable our growth plans, and we distributed over $120 million in excess capital to shareholders for a total distribution of over $600 million in the past 2 years through share repurchases and dividends. All in all, it was a very good year for our company. We expect 2015 will be another good year for us. We are planning good growth in sales and profitability this year, including margin expansion. As a reminder, we are focused on 3 key strategic priorities for our business. The first is to provide the best value and experience in young children's apparel. The second is to extend the reach of our brands, and the third is to improve profitability. We believe we've strengthened our market position by focusing on the things that matter most to consumers. More so than the previous generation, millennial moms say that good value is the most important characteristic when shopping for brands. In a recent Consumer Reports survey of nearly 16,000 subscribers, Carter's and OshKosh ranked in the top 5 of 53 major outlet chains for value, quality and selection, and were the best rated brands in young children's apparel. We believe we continue to outperform our competitors and gain share because our brands have a well-earned reputation for quality and value with multiple generations of consumers. In terms of our brand experience, we made good progress last year, strengthening our brand presentation with our top wholesale customers in our stores and online. For spring 2015, we refreshed the Carter's brand experience. I'd encourage you to visit and see the strength of our spring product offerings, compelling values and the new brand presentation. We also continue to improve the mobile experience, making it easier to shop for the best selection of our brands. Last year, nearly 30% of the demand for our brands came from mobile devices, including tablets. We're investing in new systems to enable customers to shop online and pick up in our stores. Later this year, we plan to launch a new customer loyalty program, called rewarding moments. It's a beautifully branded cross-channel, cross-brand rewards program. We expect this initiative will help drive higher frequency of visits and customer retention. The young children's apparel market in the United States grew about 1% last year to $19.7 billion. Our share of this market continued to grow to about 16.5% by extending the reach of our brands. We continue to see good returns on our new store openings, which performed in line with our plan last year. We plan to open 300 Carter's stores over the next 5 years, with projected incremental sales of $350 million. Increasingly, most store openings in the United States will be in our new side-by-side store format, which brings together the best brands in young children's apparel. These stores provide a complementary product offering, serving the needs of a newborn to a 10-year-old child in 1 convenient location. Among other benefits, the side-by-side store model has enabled us to strengthen the performance of our OshKosh brand. OshKosh achieved 2 important milestones this past year, exceeding $500 million in global sales, and we opened our 200th store. With the success of the new side-by-side store model, we plan to open 250 OshKosh stores over the next 5 years, with projected incremental sales of $200 million. We're also reaching more consumers with the success of our e-commerce business. We continue to see strong demand online for our brands with e-commerce sales up 28% last year, driven by growth in traffic and conversion rates. This has been our fastest-growing, highest margin business. On a combined basis, our stores and online sales grew over 14% last year. We also saw our good demand for our brands outside the United States. International sales represented about 11% of our total sales. Canada continues to be the largest component of our international business, representing about 2/3 of total international sales. In local currency, sales in Canada grew 23% last year, strengthening our positioning as the market leader with over 12% share of this $2 billion market. We've replicated the strong multichannel model built in the United States, in Canada, which provides many opportunities to grow and gain share. We plan to open 80 stores in Canada over the next 5 years with projected incremental sales of $100 million. We expect our new e-commerce operations in Canada to contribute an additional $25 million in sales, growing to 10% of store sales by 2019. Over 40% of the demand on our U.S. website came from international markets last year. The sources of this demand have given us good insight into new market opportunities. Last year, sales to Chinese consumers shopping at our U.S. website were nearly $16 million, more than double the previous year. It's by far, the fastest-growing international market for us online. In 2015, we plan to launch new e-commerce capabilities in China. In a recent McKinsey study, clothing and footwear were ranked as the most likely categories to be purchased by Chinese consumers online. Given the level of demonstrated demand for our Carter's brand, we're allocating more resources to explore multichannel opportunities in China. We plan to make good progress improving our operating margin this year, which we expect will be driven by a higher mix of retail and e-commerce sales, a higher mix of direct sourcing, lower product costs and continued progress with our OshKosh brand. We completed the buildout of our multichannel distribution center in Georgia last year. In the fourth quarter, we experienced much better performance with the new material handling systems and a more experienced workforce, which enabled us to exceed our holiday shipping goals and leverage expenses. In 2015, we expect to see continued leverage of our distribution expenses, which represent the second largest component of SG&A. The outlook for product costs continues to be good. Cotton prices and fuel costs have trended lower. The U.S. dollar has strengthened. Global demand for apparel is generally weaker, and manufacturing capacity at our cost objectives has improved. Collectively, these factors may help mitigate the impact of rising labor costs in Asia. We saw modest cost increases for spring 2015 and lower product costs for fall. For the year, we're planning lower product costs for 2015, which we expect will enable gross margin and operating margin expansion this year. In terms of current business trends, we had a strong start to the year. January was particularly good, one of the best starts to spring selling that we can recall. Beginning mid-February, we saw weaker-than-planned demand, with winter storms in many parts of the country. What we gained in January, we may give back in February. This is the lightest part of the year for us. Historically, March is the largest month in terms of sales and earnings contribution in the first half. We'll have a better read on spring selling when we update you again in April. As you may know, shipments from the West Coast have been delayed due to a labor dispute between the dockworkers and management of the ports. A tentative agreement was reached last Friday. The best information we have suggests it may take several months to work through the backlog of containers. Over 60% of our spring products were scheduled to come through the West Coast. To the extent possible, we rerouted goods through the East Coast. We've estimated exposure of $15 million to $20 million in lower and less profitable sales in the first half due to the late arrival of goods. This is a fluid situation. Thankfully, it appears some resolution is in place. We'll do our best to mitigate the short-term effects of delayed shipments by curtailing spending where possible. In terms of our longer-term outlook, we believe our multichannel business model enables organic growth of about 8% a year on average over the next 5 years. That's our planning horizon. We plan to grow our sales to over $4 billion by 2019. We're assuming low single-digit average annual growth in Carter's wholesale sales, high single-digit average annual growth in retail store sales, and about 15% average annual growth in e-commerce and international sales. The growth assumptions for e-commerce and international sales are lower than our previous forecasts. The rate of growth in international demand on our U.S. website has slowed in recent months, we believe due to the strength of the U.S. dollar. We've reflected in our latest models the impact of negative movements in currency exchange rates and Target's decision to exit Canada. The exchange rate with Canada has deteriorated by nearly 20% since January 2014, reducing the sales and earnings contribution from our business there. In time, we believe we'll recapture the loss in sales to Target, given our multichannel capabilities in Canada. With respect to profitability, we're planning our consolidated earnings to grow by more than sales over the next 5 years, and are planning to improve our operating margin to its previous peak of 14% by 2018. Given our strong cash flow model, we also expect that share repurchases will be a recurring component of our business model, which may also contribute to earnings growth. In summary, we made significant progress last year, strengthening our position as the leader in young children's apparel. We own the largest share of $19.7 billion young children's apparel market in the United States. We've been gaining share, and we have plenty of room for organic growth. We plan to continue extending the reach of our brands with the support of our national retail partners through our own stores, online and in international markets. Our brands are sold in over 17,000 doors in the United States. No other company has our brand reach in young children's apparel. Despite the near-term challenges, the outlook for our business is good. We have a very talented organization that has demonstrated its ability to deliver exceptional value to consumers and its highly competitive market. We're encouraged by the early read on demand for our spring product offerings and our potential for growth this year and for many years to come. Rich will now walk you through our presentation on the website. Richard F. Westenberger: Thank you, Mike. Good morning, everyone. I'll review our fourth quarter and full year 2014 results, followed by our outlook for 2015, including our projections for the first quarter. Note that my remarks in our presentation materials, which have been posted to our website, present our business results on an as-adjusted basis, which we believe provides a meaningful comparison of the company's results. Full reconciliations of our GAAP to adjusted results are provided in the appendix of today's presentations. It's important to note that our fourth quarter and fiscal year 2014 contained an extra week compared to 2013. This happens every 5 or 6 years, depending on the company's fiscal calendar. This 53rd week contributed approximately $44 million in net sales, largely consistent with our plan coming into the year. Additional information on the contribution of the 53rd week by business segment is included in today's press release. I'll begin on Page 2 with some fourth quarter highlights. As Mike mentioned, our fourth quarter performance delivered record sales and earnings. Consolidated net sales increased 13%. We delivered growth in all business segments, with higher revenues across our U.S. wholesale and retail businesses, and growth in international net sales. Our top line was slightly stronger than our prior internal forecast due principally to stronger replenishment demand in Carter's wholesale. On a comparable 13-week basis, consolidated fourth quarter net sales grew 7% versus the prior year. Adjusted operating income grew 24% despite a challenging retail environment and foreign exchange headwinds. The growth in our business, and our ongoing focus on expense management enabled us to expand operating margin by 110 basis points over the prior year. Adjusted earnings per share grew 30% to $1.32 compared to $1.02 in the fourth quarter of 2013. Moving to the detail of our sales performance in the fourth quarter on Page 3. Overall, our strong consolidated sales growth in the quarter was driven by higher unit sales with a modest improvement in average pricing across the business. Total Carter's brand sales in the U.S. grew 13% with good contributions from both our retail and wholesale businesses. Carter's direct-to-consumer comp increased 3.5%, driven by growth in our e-commerce business with Carter's retail store sales comparable to last year. Net sales in the Carter's wholesale segment increased over 10%, with growth in all Carter's brands. On a comparable 13-week basis, Carter's wholesale grew 3%. Our overall OshKosh business in the U.S. continues to perform well. In the fourth quarter, total OshKosh sales in the U.S. grew 15%. Our OshKosh direct-to-consumer comp increased to nearly 7%, with solid gains in both the stores and e-commerce channels. International segment net sales grew over 8% in the fourth quarter, principally driven by our multichannel business in Canada. The weakening of the Canadian dollar against the U.S. dollar adversely affected segment net sales by approximately $6 million in the quarter. On a constant currency basis, fourth quarter international segment sales increased 15% over the prior year. Moving to Page 4 and our fourth quarter P&L. Consolidated gross margin in the fourth quarter was 41% compared to 42% in the prior year, reflecting primarily higher product costs, which we partially offset through improved pricing year-over-year. Adjusted SG&A levered 240 basis points in the fourth quarter. Spending was well-controlled, and was lower than we had previously forecasted. Adjusted operating income grew 24% in the fourth quarter, and adjusted operating margin improved by 110 basis points to 13.4%. The weighted average share count declined approximately 3% versus a year ago, reflecting our share repurchase activity. So again, on the bottom line, fourth quarter adjusted EPS was $1.32, representing solid growth over last year. Moving to Page 5, where we have recapped spending in the fourth quarter. Consistent with prior periods, the growth of spending was driven by higher operational expenses associated with our growing direct-to-consumer businesses with nearly 100 new stores versus last year in North America and significant growth in the e-commerce channel. In Q4, we recorded higher provisions for performance-based compensation versus last year given our improved profitability in 2014. Notable favorable offsetting items for the fourth quarter include the absence of expenses related to Japan since we exited those operations earlier in 2014, and lower professional fees. Distribution expenses in our Braselton facility in the fourth quarter were favorable to our forecast. And we achieved leverage on our overall distribution expenses in the fourth quarter. Overall, I think managing cost was the highlight of our performance in 2014. Consumer demand was uneven for a good portion of the year. We were able to effectively manage discretionary spend while continuing to support our growth investments, and we achieved the full year leverage in SG&A that we have targeted coming into 2014. Pages 6 through 8, summarize our full year performance in 2014. Mike has highlighted a number of achievements for the year in his remarks. That list of accomplishments includes our financial performance which represented another very strong year of growth. Net sales grew 10% in 2014. Adjusted operating margin improved by 30 basis points to 12.4%, and adjusted EPS grew 17%. Now turning to Page 9 for a few balance sheet and cash flow highlights. Our balance sheet and liquidity remain strong. We ended the fourth quarter with approximately $340 million in cash and roughly $180 million of availability on our revolving credit facility. The quarter end inventory increased 6.5% versus a year ago, driven by unit growth. Business growth drove the overall increase in inventory compared to a year ago. Year-end inventories were somewhat lower than our prior forecast, principally due to stronger than anticipated demand at the end of the fourth quarter. We believe the quality of inventory is very good. We're forecasting 2015 year-end inventories to increase in the high single-digit range driven by planned growth across the business. In the fourth quarter, we repurchased approximately 245,000 shares for $19 million. For the year, we repurchased 1.1 million shares for a total of $82 million. We have approximately $180 million remaining under our current board repurchase authorization. We paid out $10 million in dividends in the fourth quarter and $40 million in total for the year. In 2014, we've returned more than $120 million to shareholders through share repurchases and dividends. Our operating cash flow for the year was $282 million, up from $210 million in 2013. This improvement reflects higher net income and favorable movements in networking capital. Full year capital expenditures were $103 million compared to $183 million last year. This lower CapEx was in line with our forecast. Recall that 2013 included meaningful spending on projects such as our Braselton distribution center, and the buildout of our new Atlanta corporate headquarters. Free cash flow increased significantly in 2014 to $179 million compared to $27 million last year, driven by the improved operating cash flow and lower CapEx that I've noted. In terms of return of capital initiatives, our board has authorized an increase to our quarterly dividend of 16% or $0.03 to $0.22 per share beginning with a dividend to be paid next month. Also as Mike said earlier, as our expectation that we will continue to deploy excess cash to share repurchases in 2015. We will report our progress on any such activity each quarter as we did throughout 2014. Now to provide a little more color on our fourth quarter performance. Page 11, summarizes our business and results. I'll make some comments on each segment beginning with Carter's wholesale on Page 12. Net sales in the Carter's wholesale segment increased over 10% in the fourth quarter, with growth across all of the Carter's brands. Segment operating margin was comparable to last year at 17.3%. Improvements in pricing and expense leverage were offset by product cost increases. We have good wholesale bookings in hand for 2015. Spring seasonal bookings are up in the low single digits and fall bookings are up in the mid single digits. These seasonal bookings projections are higher than are planned full year net sales for the Carter's wholesale segment in 2015 which we're planning to be comparable with 2014. We are planning roughly even sales in this part of the business as a result of the 53rd week in 2014, as well as having planned shipments of a greater proportion of spring 2015 seasonal product in the fourth quarter of 2014 than a year ago. Adjusting for these items results in about a 3% sales growth for Carter's wholesale segment which is in line with our longer-term expectations for this part of the business. Turning to Page 13, and the Carter's retail segment. Total Carter's U.S. retail segment sales for the fourth quarter increased 16% versus last year, driven by the addition of 55 net new stores and an increase in direct-to-consumer comparable sales of 3.5%. Retail store comp sales were roughly unchanged compared to the prior year, reflecting lower consumer traffic that was offset partially by improved conversion and pricing. After a slow start to the quarter, monthly comps improved sequentially in November and December, as consumer traffic strengthened. Business was particularly strong in the last 2 weeks of December. Our brand stores comped positively in the fourth quarter. We saw some comp pressure in outlet locations away from more densely populated areas, but to a lesser degree than the fourth quarter of 2013, in part we believe, due to lower gas prices. In December, when gas prices were at their lowest, our outlet stores comped positively. We opened 8 new stores in the fourth quarter and closed 2. New stores continue to perform well, and were delivering solid returns on investment. In 2015, we expect to open approximately 65 new Carter's stores in the U.S. Carter's e-commerce sales grew 22% over last year and represented 20% of total Carter's retail segment sales. Demand from international customers softened in the fourth quarter, which we attribute in part to that strengthening of the U.S. dollar against many other currencies, as well as conflicts in certain countries such as Ukraine. Carter's e-commerce continues to be our most profitable business, with operating margins in excess of 20%. Carter's retail segment profits grew 22%, and segment operating margin improved by 110 basis points, reflecting an increased e-commerce contribution and store marketing expense leverage. These benefits were partially offset by higher product costs that were not fully offset by pricing improvements. Pages 14 through 17 includes some recent photos from our Carter's stores, as well as some pages from our recent direct mail piece. Pages 14 and 15 show one of our Atlanta stores set for spring. The store highlights what we think are the tremendous colors, style and value of our spring assortments. We've also refreshed the Carter's branding in our stores online and in our marketing to update how we communicate the value and beauty of our products, especially to today's millennial moms. Slides 16 and 17 are pages from our latest spring catazine for Carter's. Moving to Page 18 and OshKosh retail. OshKosh retail was our fastest-growing segment in the fourth quarter. We continue to be pleased with the momentum that OshKosh is demonstrating. Segment sales increased 18% versus last year, reflecting the addition of 19 net new stores, strong e-commerce sales growth and positive store comps. Our total OshKosh direct-to-consumer comparable sales increased nearly 7% in the fourth quarter, driven by e-commerce sales growth of 20%, and a retail store comp increase of 4%. We saw all geographies comp positively in the fourth quarter, with all store types also comping positively. Our drive-to outlet store comp performance improved meaningfully compared with the fourth quarter of 2013. During the fourth quarter, we opened 7 new stores and closed 2. All new stores were in the side-by-side format. As of year-end, we have a total of 51 side-by-side stores or approximately 1/4 of our OshKosh store portfolio. We remain pleased with the performance of these stores, and in 2015, plan to accelerate the rollout of this format by opening approximately 45 new stores. OshKosh retail segment operating profit more than doubled compared to last year to $9 million. Segment operating margin improved to 8.1%, driven by store, marketing and field support expense leverage. Pages 19 through 22 include a couple of shots of our spring assortment floor set in our OshKosh stores, as well as a couple of pages from our current direct mail catazine. I encourage you to take a look at how we're presenting OshKosh in our stores and in our marketing communications, as we think the brand has never looked better. Turning to OshKosh wholesale on Page 23. Fourth quarter net sales in this business segment grew 2% compared to last year for the full year in 2014. Sales declined 2%. OshKosh wholesale segment operating income doubled to $4 million compared to $2 million in the prior year. Segment margin nearly doubled to 17.8%, reflecting lower inventory provisions and favorable distribution-related costs. Spring 2015 seasonal bookings are planned comparable to 2014. Fall 2015 seasonal bookings are planned down in the low single-digit range. For the full year in 2015, we're forecasting OshKosh wholesale segment sales to decline approximately 10% or about $7 million. Similar to Carter's wholesale, planned OshKosh wholesale sales are affected by the 53rd week, as well as greater shipments of spring 2015 product at the end of 2014 than a year ago. In this segment, we continue to focus on working with our wholesale customers to optimize the assortments which they carry, and improving the quality and consistency of the presentation of the OshKosh brand. Moving on to our international segment on Page 24. Fourth quarter international segment net sales increased 8% over last year, with growth of 15% on a constant currency basis. This increase principally reflects growth across all channels in Canada. Our Canada business, in total, grew 12% in the fourth quarter or 21% on a constant currency basis. International segment retail store sales declined 2%, as growth in our Canadian retail store business was more than offset by the exit of our Japanese retail business earlier in 2014. Canadian retail store revenues increased 5% in U.S. dollars or 14% in local currency, driven by the addition of 22 net new stores versus a year ago. Canadian retail stores comped down 4.6% in the fourth quarter, reflecting lower store traffic and our exit of the legacy Bonnie Togs private-label offering, which we will fully anniversary in the first quarter of 2015. In fiscal 2014, our Carter's and OshKosh brands collectively comped up in the low single digits. Improving our store traffic trend in Canada is an important area of focus for us in 2015. In the fourth quarter, we opened 9 new stores in Canada, bringing our year-end store count to 124, and we plan to open 20 new stores in Canada this coming year. International segment e-commerce sales increased by $3 million in the fourth quarter, driven by the launch of our Canadian website in July of 2014. We believe this business will be a solid contributor to our overall growth in Canada in the coming years. Our international wholesale business achieved another solid quarter with sales growth of 17%, principally driven by growth with U.S. multinational retailers across several markets. Also, with regard to our international wholesale business, everyone's now familiar with Target's decision to exit the Canadian market. In the fourth quarter, we incurred some costs related to this event, notably charges to write down accounts receivable and inventory. We do not expect to incur additional significant expenses related to Target Canada in 2015. International segment adjusted operating income was $13 million in the fourth quarter compared to $18 million in the prior year. The segment operating margin decline reflects higher product costs in part due to the weakening of the Canadian dollar, increased promotional activity in light of lower store traffic, e-commerce start-up costs and incremental expenses related to Target Canada. Given the significance of movement in exchange rates, over the past year, we've included on Page 26 some additional information. Like any company that has operations outside the United States, there are several effects from movements in currency exchange rates. First, when our Canadian financial statements are translated into U.S. dollars, the outcome is a lower contribution from our Canadian operations due to the weaker Canadian dollar. This effect was more pronounced on the top line, approximately $16 million for our international segment in total in 2014, but relatively minor from an earnings perspective. We've estimated that 2014 earnings were lower by approximately $0.10 due to the other principal effects of FX, namely the negative impact on product costs in the Canadian business, as well as losses from remeasuring and revaluing certain balance sheet items. We planned 2015 under the assumption that exchange rates more or less stay at their current level for the balance of the year, but obviously, actual exchange rates can be much more volatile as we saw in 2014, particularly in the second half of the year, and even the significant volatility experienced since the beginning of 2015. Page 26 includes the picture of our new store in Bogota, Colombia. This is one of the 40 retail locations opened by our international partners in 2014. At the end of the fourth quarter, our international partners' footprint included nearly 700 retail locations in approximately 60 markets. In 2015, our partners plan to increase their location count by more than 10%. Moving to Page 27 and a new international e-commerce partnership. We recently extended our international reach by partnering with Hopscotch, a leading online provider of children's apparel and related products in India. The Hopscotch website features an exclusive Carter's shop, and an OshKosh shop is planned for later this year. We think this new venture is a great way to tap into the significant consumer marketplace in India. Now turning to Page 28 for our outlook for fiscal 2015 and the first quarter. For the full year of 2015, we're expecting net sales to grow approximately 5%, driven by our U.S. direct-to-consumer and international businesses. Unfavorable exchange rate movements and the 53rd week in 2014 are estimated to reduce our expected 2015 revenue growth rate by about 2 percentage points. We anticipate full year adjusted earnings per share growth in the range of 10% to 14% compared to 2014's adjusted $3.93 per share, driven by top line growth and operating margin expansion. From a pacing perspective, we expect earnings growth will be significantly weighted to the second half, driven by lower product costs. The first half earnings are expected to decline modestly. We're planning for capital spending of approximately $130 million, driven by our store opening plans in the U.S. and Canada, and investment in information technology initiatives, principally in retail and enterprise systems. Operating cash flow is expected to be strong again in 2015 in the range of $275 million to $300 million. For the first quarter, we expect net sales to increase approximately 3%, driven by growth in our direct-to-consumer businesses. This first quarter outlook contemplates an adverse net sales impact of approximately $15 million due to delayed inventory receipts. We expect first quarter adjusted diluted earnings per share to be roughly comparable to a year ago. As Mike noted, our first-half earnings will likely be pressured by the delays in product coming through the West Coast. Other risks that remain top of mind for us include; further potential weakening of the Canadian dollar, the ongoing unevenness of consumer demand and traffic in our direct-to-consumer businesses here in the U.S. and in Canada, and the level of promotional activity in the marketplace. And with these remarks, we're now ready to take your questions.

[Operator Instructions] And for our first question, we go to Susan Anderson with FBR Capital Markets. Andrew Schmidt - FBR Capital Markets & Co., Research Division: This is Andy Schmidt, on for Susan. I was wondering if you could talk a little bit about the price and cost relationship in the fourth quarter. Was it in line with your expectations? And then also in 2015, it seems like the Braselton facility leverage should provide some meaningful benefit to results. I'm wondering if you could talk about that as well Michael D. Casey: Sure. The pricing was a bit better in the fourth quarter relative to last year. I would say it was a bit short of what we had hoped for. If you recall, the last earnings call, we were a bit behind our plan in October. Thankfully, business picked up in November and December, but what we didn't sell in October, we had to promote in November and December. So I'd say the pricing was a bit lower than what we had hoped for. And with respect to Braselton, Braselton pickup. They did a fabulous job over the holiday shopping season. We had a ramp-up from some portion of about 50,000 e-commerce units a day to well over 300,000 units a day, and they did that for about a week. So where we stumbled a bit in the third quarter with the transition to new systems. With a more experienced workforce and working out some of the issues with the system, the fourth quarter performance was much, much better. We delevered in the third quarter. We leveraged expenses in the fourth quarter, and the outlook for 2015 is good. So that's been a good investment for us, and we're seeing a good return on that investment.

And for our next question, we go to Taposh Bari with Goldman Sachs. Taposh Bari - Goldman Sachs Group Inc., Research Division: Mike, I wanted to ask about the side-by-side investments that you're making. Some nice performance out of the OshKosh stores that are side by side. I was hoping you can provide some context on how the Carter's side-by-sides are doing? And then it looks like you're going to accelerate the store pace of the OshKosh stores in aggregate, given the side-by-side investment, just trying to get a better handle on your thinking behind that decision. Michael D. Casey: Sure. So the stores are working in line with our expectations. I think it's fair to say there's a bit of cannibalization on the Carter's store. We would say it's minimal though. Typically, the traffic is coming to the Carter's side of the store. It's -- our brand is top of mind for new moms. We're told that about 80% of new moms shop with Carter's. And as they come in to the story, they get an unexpected surprise to see OshKosh attached to it. So OshKosh is benefiting from the traffic coming into the Carter's store, but as the consumers' shopping, she's filling the basket with both brands now. So I'd say the trade-off is well worth it. We're picking up some portion of about $800,000 in annual sales from the OshKosh side of the store. We might be giving up some portion of about, maybe, 5% or about $60,000 on the Carter's side. So the returns on both sides of the house are very good, and we have finally figured out a way to develop a very profitable OshKosh store model, which enables us to open more stores. And that's going to be the growth for the OshKosh brand going forward, these retail stores and the benefit that we'll get from e-commerce as well. So it's been a great model, and it's got good growth ahead of it. Taposh Bari - Goldman Sachs Group Inc., Research Division: Great. And I wanted to follow up on just your thinking about 2015. I get that it's going to be back-half-weighted, but it sounds like there are a lot of factors occurring, especially in the first half, given the port challenges. So Richard, maybe help us understand how you're thinking about gross margins directionally for the year. SG&A, are you planning on getting leverage? I think I heard you mention that you're expecting continued leverage on the DC. Some more context on those lines would be great. Richard F. Westenberger: Sure. Well, as we said in our remarks, the plan is weighted towards the second half. We are expecting product costs to be down in the second half of the year. So that's more of a disproportionate drive benefit in the second 6 months of the year versus the first. We are planning for gross margin expansion. We had planned that for the first half as well, but more modestly than in the second half. That maybe a little bit more under pressure now with the port delays, but our forecasts do show some improvement in gross margin in the first half. SG&A, at the moment, right now we're planning for the full year to be up in the high single-digit range. We're not planning for leverage. The deleverage that we're planning for it largely, a result of the continued growth of the higher cost structure direct-to-consumer businesses, and we're also investing in the business. So there's a handful of things that are continuing to push up our SG&A. We think they're absolutely the right decisions and investments to make in supporting the long term growth profile of the business. Depreciation is running a little higher. That's largely the effect of having expanded the store base, as well as some technology investments over the last couple of years. In the current year, we're going to spend a bit more on marketing to drive, we hope, a little bit more traffic to the stores -- store traffic has been an ongoing issue, not just for us, but for the industry. So we are going to spend a bit more to encourage the consumer to come visit us. And then we're spending on several fairly significant technology projects, which we think are the right thing to do for the business long term. We're improving our systems in Canada. We are spending on a broad array of technology initiatives in retail, which are intended to improve our omni-channel capabilities, and then we're embarking on a project to replace our core financial system. So on balance, we're expecting SG&A will be up in the high single-digit range. All of that will translate, we hope, if we deliver our plans to good solid expansion in our bottom line operating margin for the year and growth in EPS as well. Taposh Bari - Goldman Sachs Group Inc., Research Division: Okay. Can I just squeeze one more in? If you can quantify, I know you gave us revenue impact from the extra week and FX for '14, but off of current rates, if we're to assume the current rates held steady, can you give us a sense of what that could mean for EPS in '15 and if you can -- if possible, can you help quantify what the EPS impact was from the extra week? And I'll stop there. Richard F. Westenberger: Sure. The 53rd week was worth $0.05 or $0.06 on the bottom line, around $44 million in net sales contribution. FX for 2015, we've estimated that it's going to impact sales negatively by about $20 million, and it's probably the better part of $0.20 per share on the bottom line.

And we go next to Stephanie Wissink with Piper Jaffray. Stephanie Schiller Wissink - Piper Jaffray Companies, Research Division: I just wanted to follow up, guys, on the unit growth guidance over the next 5 years, just to make sure that we're modeling this correctly. So when you open a side-by-side unit, that is actually considered 2 stores, one for Carter's and one for OshKosh, is that correct? Michael D. Casey: That's correct. Stephanie Schiller Wissink - Piper Jaffray Companies, Research Division: Okay. And then just with respect to Topash's earlier question on the economics or the 4-wall unit performance of those side-by-sides, can you just help us think about modeling those going forward? How should we think about the revenue -- total revenue contribution? It sounds like up about $700-and-some thousand, net, but also, how do we think about the margin structure of that combined unit? Michael D. Casey: Well, I'd say, the economics for the Carter's boxes is typical to a standalone Carter's brand store. We would pro forma that to do around $1.2 million on the top line. With a 4-wall operating margin in the low-20 -- low- to mid-20% range, the OshKosh side-by-side box is a little smaller in terms of square footage, so the top line is not quite as robust as you mentioned. It's around $700,000 on the top line, driving a mid- to upper-teens operating margin on a 4-wall basis. Stephanie Schiller Wissink - Piper Jaffray Companies, Research Division: Okay, that's super helpful. And then just the last question on units versus price, it was interesting to see that your units are expanding. I'm just curious if you can give us some insight into the strategy to maybe expand the investments into separates versus the single-unit packs that you've been selling in the past on the infant side, in particular. But is that a strategy really to expand the separates business, and you're seeing the benefit of that in units? Michael D. Casey: Stephanie, I would say that the strongest business we have is actually multi-piece sets, and we continue to see that that's the -- millennial moms are busy. They want to make sure that things match up. We want to make it easy for them. So our strongest business is, actually, continues to be multi-piece sets, not only in baby, but in playwear. Our biggest business is when we're able to put that together, beautifully design it, so that she sees the way that the top complements the bottom, and of course, it's a heck of a lot easier for the dad to dress the kid too when we do that. So that's a significant part of the growth. We do have a good business in separates and playwear. There's an opening price business. There's a t-shirt business, obviously, that we have. I would say that our multi-piece garments, multi-piece sets and multi-piece items are the strongest growth as we go forward.

Our and next question, we go to Rick Patel from Stephens. Rakesh Babarbhai Patel - Stephens Inc., Research Division: Can you talk about just some color on the current trends? You're 2 months into the quarter now. Given where the guidance is, I guess, where's the negative surprise really been for the first quarter? Is it more of a mall traffic issue? Is it promotional pressure, and do you see this across both Carter's and OshKosh or is it one versus the other? Just some help there. Michael D. Casey: Sure. So I would tell you, I would say, January, our performance was particularly good. Sales were up over 10% for the total company. First couple of weeks of February were actually particularly good. We got clobbered over Presidents' Day weekend. That's when a lot of the storms hit, and so what we picked up in January, we may give back in February. The important thing for you to know is, probably, less than 7% of our profits come in January and February. The big month is March. March, probably, it's by far the largest month in the first 7 months of the year. So in April, we'll have a better view on business generally, and our concern on -- with these West Coast port delays, we were told earlier this week that about 80% of the product that we expected to have on March 1 for the Easter shopping season will be late. 80% will be there, 20% will be late. It could be as late as -- by as much as 3 weeks, and the Easter dresses sell better before Easter than after Easter. So we're keeping an eye on that. We're doing our best to get product in, and make sure that we've got beautiful assortment for our customers, but that's something we're keeping an eye on. But the big part of the quarter is still ahead of us. Rakesh Babarbhai Patel - Stephens Inc., Research Division: And just digging into that, the issue with the port challenges, is it limited to dresses [ph] or is it going to impact -- is it going to have an impact across the whole assortment or is it concentrated towards certain lines? Michael D. Casey: No, it's across -- it's our spring product offerings. So we had about 60% of our spring product offering coming through the West Coast. And starting last year when we anticipated an issue with the -- at the threat of the port strike, we started routing goods through the East Coast, about 40% of spring product is coming through the East Coast. So not all of spring is affected, but more than half is. Rakesh Babarbhai Patel - Stephens Inc., Research Division: Great. And just one more, if I may. On the wholesale side of the business, I think you were negatively impacted by a key customer pulling back in 2014. Do you expect that headwind to continue in the spring season or has that customer resumed their purchases? Just some help there. Michael D. Casey: Rick, I would say that we're back on track overall. We feel good about the growth in wholesale. We've got that business over a 2-year period, a 2-year CAGR for that business. We're going to grow that about 3% a year. And just checking through all of our customers, we've got 8 of the 10 customers showing good growth over that time period with an average growth of 3% or more. So there's always going to be some puts and takes with the help of customers, management changes, what have you, but I would say that we're back on track, and we're looking for growth with the customer that we spoke of some time ago.

We go next to Robert Ohmes with Bank of America Merrill Lynch. Daniel O'Hare - BofA Merrill Lynch, Research Division: This is Dan O'Hare, on for Robbie Ohmes. So quick question about the international partner stores. Just wanted to get your take on what the strategy is longer term. How many partner doors do you think or stores do you think the Carter's brand has the opportunity for longer term, and then are there any regions or partners to call out as high performers? Michael D. Casey: Thanks for the question. I would say the bigger part of our international business is going to be driven by Canada near term, and hopefully, China long-term. The partners businesses that we described, we've probably got well over 20 partners in some portion of 60 countries. So we do a little bit of business with a lot of people, and they're very good business partners. These are retailers doing a great job, representing our brands throughout the world. And I would say that's got a good growth profile, but that, I would say, is the smaller part of our international business. The big dollars are going to be driven by the multichannel business up in Canada, a lot of growth there, and the next big opportunity is in China. So we're hopeful, by the end of this year, our Carter's brand is selling on Tmall, and we'll share more with you as that business launches this year, but we're excited about Canada. We're excited about China. Other parts of the world we're looking at are Mexico and Brazil to do something more meaningful on, at least, a wholesale basis, if not, a wholesale e-commerce and, potentially, retail basis. Daniel O'Hare - BofA Merrill Lynch, Research Division: Got it. And then just one more, if I may. So looks like you're seeing solid performance with OshKosh at retail, pairing it with the Carter's brand, and I just wanted to know if there's any differences between what you're seeing at retail and in wholesale when like -- when you pair the brands together. Michael D. Casey: Dan, I would say, OshKosh wholesale, we got good results in the fourth quarter, and the accounts have been supportive of us overall, but we focused our efforts in direct-to-consumer. Candidly, we really wanted to strengthen that business, work on the product value, and the styling and making sure we're convenient for moms. So we put our energy into making sure that we have everything right in the direct-to-consumer business. And I think as we continue to strengthen that, we intend that that's going to help the business in our wholesale channel. But the accounts have been supportive, thus far. We having a choice, they put their dollars in the Carter's playwear because it was the better bet for them based on our performance. But our spring bookings are comparable to last year, fall is down a little bit. We're still booking in process there, but we're implementing some of the successes we've had in our retail stores. The good success is our World's Best Overall bars, which are performing well, Baby B'gosh, which we've had wonderful results with the launch of that product over the last year. So that will be infiltrating into the wholesale channel as we go forward, and we're exploring strategies on how we can leverage the successes we're having at direct-to-consumer, and bring those successes to our wholesale customers.

Our next question, we go to Kate McShane with Citi Research. Kate McShane - Citigroup Inc, Research Division: If I could just wrap up the questions on February trends. Obviously, the weather has been very adverse, but just wondering if you've seen an increase in your online activity because of weather? Michael D. Casey: Good question. Actually, over the past year, we got -- we had winter -- bad winter storms last year as well, and we found it interesting when mom and dad are home, and it's snowing outside, they're less -- they're not anymore interested in buying spring product than they would be if they were going out to the store. So you don't see a correlation. When people are stuck home, they're -- and the winter's, the weather is bad. The -- we don't see us pick up online. I think what we saw last October, and what we're seeing, I think, at least in February, the consumer with the weather is just not inclined to shop for spring product in a big way, and so that's why we're hopeful that we see much better performance in March. Kate McShane - Citigroup Inc, Research Division: Okay, that's helpful. And thank you for all the detail on 2015 guidance. I was wondering if I could just drill down on SG&A a little bit more in terms of the bucket of spend. Where are we seeing the biggest increase in your different buckets within SG&A and with marketing going up, are we seeing a meaningful increase of marketing as a percentage of sales? Richard F. Westenberger: I'd say the biggest buckets of increased spend continue to be just the absolute growth of our direct-to-consumer businesses, so opening what will turn out to be another 100 stores or so in North America. The continued growth of e-commerce, those drive a tremendous amount of operational expenses. Those are the single biggest buckets. From there, it's, Kate, probably the items that I mentioned; it's depreciation, it's spending on technology. We are continuing to invest in international, so you have the full-year effect of having staffed up that team, as well as some of the start-up costs from trying to develop the Chinese market. I'd say, the investment in marketing is relatively modest actually. We're going to test some things, and if we see good results, then we'll potentially think about investing more in marketing, but it's a fairly modest uptick in our marketing spend. I'd say, relatively consistent as a percentage of sales, might be up slightly year-over-year.

We'll take our next question from Tom Nikic from Sterne Agee. Tom Nikic - Sterne Agee & Leach Inc., Research Division: I was wondering if the 10% to 14% EPS growth that you're projecting for the year includes any benefit from share buyback and also just, generally, how should we think about the share buyback as a percentage of free cash flow or anything like that. Richard F. Westenberger: Well, Tom, the framework that we've laid out a couple of years ago that we've been following has been to deploy at least 50% of our free cash flow through return of capital initiatives. And that includes the dividend, the quarterly dividend that we pay, and then the balance to share repurchase. So I won't be precise around our assumptions for share repurchase. The guidance does imply a certain amount of share repurchase, and we intend to be active in deploying some of our excess capital towards share buyback this year. Tom Nikic - Sterne Agee & Leach Inc., Research Division: All right, great. And I was also wondering about pricing for this year. With product costs coming down in the back half of the year, I'm wondering if you're sort of less inclined to take pricing this year or if you are hoping that you can still push through pricing and sort of capture the cost savings in the back half of the year as well? Michael D. Casey: Tom, there's a couple of things. In the first half of the year, we're expecting prices to be up modestly, low single digits. A lot of that's a result of the item pricing that we implemented for fall, and those roll over into spring on a lot of the key items that are sold year-round in the Carter's business. So we would expect that we'd have some pricing for spring already happening, and we've sold that product to the wholesalers. So that will occur, I would say, low single digits. In terms of fall, I would say pricing strategy, probably comparable to last year from a strategic perspective, so costs are down. Pricing strategy would be similar overall. We always look to have AUR gains on how we operate our business, but in terms of raising prices on items, particularly, that's not the case for fall. We'd say, by and large, comparable to last fall.

And we go next to Steve Marotta with CL King & Associates. Steven Louis Marotta - CL King & Associates, Inc., Research Division: Just to try to put a finer point on the cost-price relationship you mentioned, the lower costs in the second half. Could you talk a little bit about that mid single digit, high single digit? Michael D. Casey: Cost reduction? Richard F. Westenberger: Product cost down modestly in the second half, Steve. I don't know that we want to be much more precise than that. Steven Louis Marotta - CL King & Associates, Inc., Research Division: Okay. And the other question I have pertains to CapEx, roughly $130 million is slated for fiscal '15. Could you break it out, please, between stores, IT, and any other large items? Richard F. Westenberger: Yes, the big buckets of the $130 million would be $60 million-or-so relates to new stores or remodels in the U.S. and in Canada, probably close to $50 million of technology that would include the retail IT initiatives, what we're doing with Canada, what we're doing with financial systems. And then kind of all other which would be supply chain distribution. Kind of everything else was around $20 million. Steven Louis Marotta - CL King & Associates, Inc., Research Division: Great. One last question. When do you plan on the new DC to run at peak efficiency? I know the fourth quarter was better than the third. Are you there now or do you think additional efficiencies will be hit in the second or third quarter of this year? Michael D. Casey: I think it's an ongoing process. We're expecting better leverage in the second half than the first half.

And we go next to Anna Andreeva with Oppenheimer. Janet Lynne Knopf - Oppenheimer & Co. Inc., Research Division: This is Janet Lynne, on for Anna. I just had a quick question on -- a follow-up on AUR if you could tell me how AUR performed in the fourth quarter. And then a question on international related to the exit of Target Canada. With Walmart taking over some of those stores, is there an opportunity to make up some of the lost revenues or are you expecting to see an increase in your own retail stores? Just some color there. Michael D. Casey: Good Janet, 2 questions. Q4, AUR was up low single digits. In terms of Canada, Target Canada, we'd worked hard on that initiative to support them the last 2 years. We did about $10 million of business up there last year, had good sell-throughs, and actually, we were a bright spot in their business. So we felt good about that, but we're going to move forward, expecting the demand over time will shift into other channels. Who knows where exactly, but our best guess would be Walmart would be an opportunity. We're talking to them about that, and then -- and hopefully, in our own stores and direct-to-consumer businesses up there. For Walmart, we launched that in '14. Our first full assortments hit those stores for this fall, so that's going to be a meaningful business for us up there in Canada, and we do plan to expand that as much as we possibly can, and believe that some of that Target business will certainly go in that direction. Anna A. Andreeva - Oppenheimer & Co. Inc., Research Division: Okay. And then have you seen any changes in demographics related to the birth rate? Michael D. Casey: It's modest. The information we have would suggest there's been a slight increase in the number of births, but it's -- I'd say it's comparable year-over-year.

And we go next to Evren Kopelman with Wells Fargo. Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division: Two questions. One is more of a longer term kind of pricing ability to offset question. How do you think about it in the longer term as labor costs continue to go higher? Based on what you have seen historically in the industry with your peers, how people react to -- basically, if you could discuss your view on your ability to continue to offset cost increases. And then the second question, I think you mentioned the brand stores comped better than the outlets. Can you talk about what you anticipate for outlet traffic in 2015? Michael D. Casey: Sure. So first on the pricing. Thankfully, we're entering a more favorable cost environment. Cotton prices are lower. Fuel prices are lower. Capacity in Asia is greater because global demand generally for apparel is not robust. So we don't anticipate that there's going to be much need for raising prices over time. The thing we continue to keep an eye on is rising labor costs in Asia, and so that won't be an issue unique to us. So if we start to see some pressure on cost, we'll be thoughtful in terms of the price increase. Our focus, as you know, was -- is building our operating margin every year. We have no interest in operating a lower margin business. So if costs move up, we'll do our best to cover those costs with price adjustments. But thankfully, near term, we don't anticipate a need to have to do that. And then with respect to traffic to outlet, I think, generally, you have to assume that traffic will be -- is not going to be up. I'm looking at performance in December, thankfully, traffic to our stores was up in December. It was up in January, but what we saw is traffic was down some portion of 4% for both brands last year. We did see a pickup in traffic to the outlets in December with lower gas prices. We saw that for OshKosh, and OshKosh has a heavier mix of outlet stores relative to brand stores. So we saw good traffic for OshKosh, both in December and January. But consumers are making fewer trips to stores. They're more productive trips, they're shopping online, browsing at home, online and then coming into the stores, and well, it's a much more focused visit. So we're anticipating that traffic will still be a bit under pressure, and that's why we're doing some better things this with respect to marketing in the in-store experience.

And with that, ladies and gentlemen, we have no further questions on our roster. Therefore, Mr. Casey, I will turn the conference back over to you for any closing remarks. Michael D. Casey: So thanks very much. Thanks, everybody, for joining us on the call this morning. We appreciate your interest in our business. We look forward to updating you again in April. Thanks very much. Goodbye.

And this will conclude today's conference. Thank you for your participation.