Michael Dennis Casey - Carter's, Inc. Richard F. Westenberger - Carter's, Inc. Brian J. Lynch - Carter's, Inc.

Taposh Bari - Goldman Sachs & Co. Ike Boruchow - Wells Fargo Securities LLC Robert F. Ohmes - Bank of America Merrill Lynch Anna Andreeva - Oppenheimer & Co., Inc. (Broker) Rick Patel - Stephens, Inc. Susan K. Anderson - FBR Capital Markets & Co. Lauren M. Wolff - Piper Jaffray & Co

Ladies and gentlemen, please stand by. We are about to begin. Good day, everyone, and welcome to Carter's Fourth Quarter 2015 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. After today's prepared remarks, we will take questions as time allows. Carter's issued its fourth quarter 2015 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 Annual Report filed with the Securities and Exchange Commission and the presentation materials posted on the company's website. 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. Please go ahead, sir. Michael Dennis Casey - Carter's, Inc.: Thanks very much. Good morning, everyone. Thank you 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 2015. This was our 27th consecutive year of sales growth and a significant year of progress for our company. In 2015, 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 eCommerce capabilities in China, improved our operating margin and negotiated more favorable product costs for 2016. Last year, we continued to gain market share, further strengthening our position as the leader in young children's apparel. We invested in new systems to enable our growth plans and we returned over $150 million in capital to our shareholders for cumulative distributions of over $760 million in the past three years, through share repurchases and dividends. Currency exchange rates worked against us last year. Despite the challenges caused by the stronger dollar and its impact on foreign currency translation and international traffic, it was a very good year for our company. We expect 2016 will be another good year for us. We are planning good growth in sales and profitability this year, including margin expansion. We expect to see continued pressure from less favorable exchange rates on our growth plans in the first half of this year and are hopeful that exchange rates will begin to normalize in year-over-year comparisons in the second half. As we begin a new year, it's good to reiterate that our vision is to be the world's favorite brands in young children's apparel. To achieve that vision, we are focused on three 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 here in North America and in global markets. 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. Millennial Moms say that good value is the most important characteristic when shopping for brands, and last year, Carter's was ranked among the top 100 brands preferred by Millennials. Carter's is the number one brand chosen by new moms with the highest rankings in fit, comfort and value. We believe we continue to outperform our competitors and gain share because our brands have such a well-earned reputation for quality and value not only with Millennials, but with multiple generations of consumers. In terms of brand experience, we believe we made good progress last year strengthening our brand presentation with our top wholesale customers in our stores and online. We also continued to improve our mobile experience, making it easier to shop for the best selection of our brands. Demand on mobile devices more than doubled last year. In the fourth quarter, we launched a new customer loyalty program, called Rewarding Moments, a beautifully branded cross-channel cross-brand rewards program. The consumers' response to this new marketing tool has exceeded our expectations. Over five million shoppers have enrolled in the first four months. The redemption rates and transaction dollars related to earned rewards has improved meaningfully relative to our previous loyalty program. We believe this new initiative has improved the consumers' experience with our brands and strengthened their perception of value. The young children's apparel market in the United States grew about 2% last year to $20.5 billion. Our share of this market continued to grow, up 50 basis points to 17% share by extending the reach of our brands. We continue to see good returns on our new store openings. We plan to open 270 Carter's stores over the next five years with projected incremental sales of over $300 million. Increasingly, we expect most store openings in the United States will be in our new side-by-side store format, which brings together the best-known 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 one convenient location. Just recently we opened our 100th side-by-side store located here in Atlanta, Georgia. Among other benefits, the side-by-side store model has enabled us to strengthen the performance of our OshKosh B'gosh brand. OshKosh achieved its best performance last year in sales, earnings and operating margin. With the success of our new side-by-side store model, we plan to open 250 OshKosh stores over the next five years with projected incremental sales of $200 million. We're also reaching more consumers with the success of our eCommerce business. We continued to see strong demand online for our brands with eCommerce sales up 20% last year driven by growth in traffic and conversion rates. This has been our fastest-growing highest margin business. The stronger dollar made our brands more expensive to international shoppers last year. International demand on our U.S. website dropped about 7%, but domestic demand online last year was strong, up 40%. Given the secular shift to online shopping in recent years and current business trends, we expect our U.S. eCommerce business to contribute an additional $250 million in sales by 2020. Despite the effects of the stronger dollar, we saw good demand for our brands outside the United States last year. International sales represented about 11% of our total sales. Canada continues to be the largest component of our international business, representing over 60% of our total international sales. In local currency, sales in Canada grew 16% last year strengthening our position as the market leader with 16% share of this $2 billion market. We have replicated the strong U.S. multi-channel model in Canada which provides many opportunities to grow and gain share. We plan to open over 70 stores in Canada over the next five years with projected incremental sales of about $100 million and we expect our new eCommerce operations in Canada to contribute nearly $30 million in sales growing to over 10% of store sales by 2020. China is the next big market opportunity for us. Young children's apparel is the fastest-growing apparel segment in China. The market size is estimated to be approximately $12 billion and projected to more than double to $25 billion by 2025. Last June, we launched our Carter's brand on Alibaba's Tmall website. Sales and earnings from this new initiative have exceeded our expectations. We saw over 12 million visits to our China website last year. We've built a team based in Shanghai which is helping us explore additional market opportunities and we now expect our China-related initiatives will provide over $100 million in sales by 2020. We also expanded our international business last year by launching our brands with retailers in India, Brazil, Chile and Europe. Near-term, the contributions from these initiatives will be relatively small, but they provide an opportunity to better understand the longer-term potential of these new markets. Given the strong demand for our brands outside of the United States and our ability to support that demand, we believe we have the potential to double our international sales over the next five years, growing it from 11% to 15% of our total sales by 2020. With respect to improving profitability, we made good progress improving our operating margin last year, which is driven by a higher mix of eCommerce sales, expanded direct sourcing capabilities, more efficient distribution capabilities, lower product costs and continued progress with our OshKosh brand. The outlook for product costs continues to be good. We now have visibility to fall 2016 product costs, which we expect will be lower than the prior year and we expect lower product costs will enable gross margin and operating margin expansion this year. In terms of business trends, we saw sales improve as we moved through the fourth quarter. We had strong demand over the Thanksgiving and Christmas holidays. December was the best month of the quarter and one of the best months of the year. That favorable trend continued into the first two months of this year. January started off strong, then we lost some momentum with the winter storms that rolled up the East Coast. We had a good Presidents' Day weekend and February is shaping up to be better than January. To date, our direct-to-consumer sales are comping positively. January and February typically represent 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, so we will have a better read on spring selling when we update you again in April. In terms of our long-term outlook, we believe our multi-channel business model enables organic growth of about 8% a year on average over the next five years. That's our planning horizon. We plan to grow our sales to over $4 billion by 2020. We are assuming low single digit average annual growth in Carter's wholesale sales, high single digit average annual growth in retail store sales and mid-double digit average annual growth in eCommerce and international sales. With respect to profitability, we are planning our consolidated earnings to grow by more than sales over the next five 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. Earlier this week, our board authorized a new $500 million share repurchase program and a 50% increase in our quarterly dividend. This decision was based on a comprehensive review of our growth plans through 2020 and our capacity to explore new growth opportunities not yet reflected in those plans. As you may know, we have a long track record of delivering good returns for our investors. The expanded capital allocation initiatives announced this morning reflect our belief in the strength of our business model and commitment to return capital to our shareholders. 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 the $20 billion young children's apparel market in the United States. We have been gaining share and we believe we have plenty of room for continued growth. We own two of the best-known and best-performing brands in young children's apparel. To the best of our knowledge, no other company in the world has our brand reach or success in young children's apparel. 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. Despite the near-term challenges related to the stronger dollar, the outlook for our business is good. We have a very talented organization that has demonstrated its ability to deliver exceptional value to consumers in this highly competitive market. We are 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. Richard will now walk you through the presentation on our website. Richard F. Westenberger - Carter's, Inc.: Thank you, Mike. Good morning, everyone. Before I begin, I want to remind everyone that our fourth quarter and fiscal year results in 2015 contained one less week than in 2014. The additional week in 2014 contributed an estimated $44 million in net sales and $0.05 in EPS. Today's press release summarizes the additional week's 2014 net sales contribution by business segment. We encourage you to review this information as you analyze our results. Turning now to our presentation materials, I'll begin on page two with some highlights of our performance in the fourth quarter. As Mike noted, we delivered a very good fourth quarter despite uneven consumer demand, warmer than typical weather and foreign currency exchange trends that continued to work against us. Consolidated net sales were comparable to last year on a reported basis and grew 5% when excluding the extra week in fiscal 2014. Had currency rates been constant with a year ago, we would have added still another percentage point of revenue growth versus what we are reporting today with the U.S. dollar having strengthened significantly over the past year. Adjusted EPS grew 6% with growth of 10% when excluding the extra week in 2014. Relative to our previous expectations, we saw higher wholesale sales in the U.S. and international, stronger performance in Canadian retail and lower spending. This favorability was partially offset by lower than planned demand and margins in our U.S. direct-to-consumer businesses as we continue to experience the effects of lower levels of spend from international consumers. We also saw some favorability in non-operating items, such as gains from FX forward contracts and a lower effective tax rate. A couple of recurring themes today will be the significant effects of foreign currency and lower international consumer demand on our results, which we have estimated had an approximately $75 million negative impact to consolidated net sales for full year 2015. Moving to page three, where we summarize details of our sales performance in the fourth quarter, as I previously noted, overall sales were comparable to a year ago. Our U.S. retail store and eCommerce businesses as well as the international segment posted sales increases in the quarter. Sales in Carter's wholesale and OshKosh wholesale were down year-over-year, in part due to the extra week a year ago as well as some demand which came earlier this year in the third quarter. I'll cover our business segment results in more detail in a moment. Turning to page four, we have our fourth quarter P&L. Consolidated gross margin improved by 100 basis points over the last year to 42%, reflecting lower product costs which were partially offset by a decline in average unit pricing. Our promotional activity was higher than planned in the quarter largely due to a continued meaningful decline in international consumer traffic to our stores and website that resulted in higher promotional activity to manage our inventory position. Adjusted SG&A was managed to growth of just 4% in the fourth quarter with higher expenses driven by the growth in our direct-to-consumer businesses in the U.S. and Canada as well as incremental marketing spend to drive traffic. Overall spending in the fourth quarter was well-controlled and came in better than we had forecasted. Royalty income grew 15% reflecting strong product performance across our licensed product portfolio in our own retail stores and in wholesale. Below operating income, we recorded year-over-year favorability across several items. Our interest and other line reflects $1.7 million gain in the quarter related to favorable settlements and revaluation of foreign currency forward contracts. Our effective tax rate declined 30 basis points compared to the fourth quarter of 2014, in part due to a higher mix of income from our international operations. Our weighted average share count declined approximately 1% versus last year reflecting our share repurchase activity. So again, bottom line adjusted EPS for the fourth quarter was $1.40, growth of 6% on a reported basis and up 10% adjusting for the extra week in 2014. Now, turning to page five to cover a few balance sheet and cash flow highlights. Quarter end inventories increased 6% in dollars compared to a year ago with units up 8%. Business growth drove this increase. Our year-end inventory position was clean heading into the new year. Operating cash flow for the year was strong at $308 million compared to $282 million last year. 2015 capital expenditures were comparable to 2014 at $103 million. Our free cash flow in 2015 improved to over $200 million which was a record level for the company. We are planning for another good year of operating and free cash flow in 2016. In the fourth quarter, we returned a total of $43 million to shareholders, comprised of $32 million in share repurchases and $11 million in dividends. For the full year, we returned a total of $156 million or 76% of our free cash flow. I'll provide more perspective on our plans for returning capital to shareholders in a moment. Page seven provides an overall summary of our business segment results in the quarter. Overall operating income was comparable to last year, while our consolidated adjusted operating margin expanded 10 basis points to 13.5%. We posted higher operating margins in our U.S. wholesale businesses and in international. The operating margins in our Carter's and OshKosh retail segments declined versus last year and corporate expenses were up slightly year-over-year reflecting higher technology and employee benefit expenses. I'll review our individual business segments in more detail, beginning with Carter's wholesale on page eight. Reported net sales for Carter's wholesale for the fourth quarter of 2015 declined 6%, but grew 1% when excluding the extra week in 2014. For the full year, Carter's wholesale segment sales grew 2%, or growth of 4% when excluding the extra week in 2014. This growth reflects the increased demand for seasonal products, the benefits of a new playwear initiative, and favorable replenishment trends. We're pleased with this performance, particularly given the challenging retail environment. We had a good year in Carter's wholesale with segment operating profit improving by $8 million. This gain reflects strong demand in product performance, excellent supply chain performance which allowed us to increase the service level to our wholesale customers, as well as lower product costs, lower excess inventory provisions, and favorable distribution expenses. We're forecasting low single digit net sales growth in this part of our business for fiscal 2016. Spring 2016 bookings are planned up in the mid-single digit range and fall 2016 bookings are forecasted up modestly versus the prior year. Turning to page nine and the Carter's retail segment, total Carter's U.S. retail segment sales increased 3% versus last year with growth of 7% when excluding the extra week in 2014. Our overall Carter's direct-to-consumer comp increased nearly 6% in the quarter. This consisted of a positive eCommerce comp of 34% and a retail store comp decline of 1.7%. Our retail store comp decline reflects lower consumer traffic which we believe is primarily driven by lower demand from international consumers shopping in the U.S. We saw an improvement in consumer traffic in the fourth quarter from the previous year-to-date trend and overall store traffic in the month of December was essentially comparable to last year. In the fourth quarter, we opened 19 new stores and closed two. For the full year end 2015, we opened 63 net new Carter's stores. Our non-outlet brand stores, which are mostly located in convenient strip center locations, now represent about 2/3 of the Carter's store portfolio. These stores continue to provide good returns with an average return on investment above 20%. Carter's retail segment profits were $64 million in the fourth quarter compared to $74 million in the fourth quarter of 2014. Segment operating margin declined by 330 basis points, reflecting the profit effect of down store comps, the extra week in 2014, higher promotional activity due to lower international demand and increased marketing spend. On page 10, we have refreshed the analysis that we originally shared on our third quarter call to show how significantly we believe the stronger U.S. dollar and lower international traffic have affected our U.S. direct-to-consumer businesses. The left side of the page shows the appreciation of the U.S. dollar against several foreign currencies relevant to our historic international customer base. On the right side of the page, our analysis indicates a meaningful decline in demand from international consumers in the fourth quarter, about 17% for Carter's and approximately 20% for OshKosh. These international consumer comp declines were somewhat better than we experienced in our third quarter, but, obviously, still very significant to our business as a whole. It's important to note that demand from domestic consumers was strong in the fourth quarter with both Carter's and OshKosh posting an 11% increase. We're projecting that lower sales to international consumers and our U.S. direct-to-consumer businesses will persist throughout 2016 particularly in the first half of the year. Pages 11 and 12 include selections from a recent Carter's direct mail piece. Page 11 features our latest sleep & play offerings. Those of you with kids know that these particular Carter's products are staples in a baby's wardrobe. Page 12 shows a sampling of our spring playwear collection for boys with an emphasis on outfitting solutions for Easter dressing. Moving to page 13 and our OshKosh B'gosh brand, we had a good fourth quarter and a good year in OshKosh. We expanded the reach of the brand through our new stores; we now have 100 of the side-by-side format stores. Globally, OshKosh is now a $535 million brand with an operating margin of 7%. The largest part of the business continues to be our direct-to-consumer operations. The OshKosh retail segment delivered solid growth of 5% on a reported basis, with growth of nearly 10% when excluding the extra week in 2014. Our overall OshKosh direct-to-consumer comp increased 4% comprised of eCommerce growth of 28% and a retail store comp decline of 2.5%. Consistent with our Carter's retail store experience, the OshKosh retail store comp decline reflects lower consumer traffic, which we believe was primarily driven by lower demand from international consumers shopping in the U.S. In the fourth quarter, we opened 11 new stores and closed two. For the full year end 2015, we opened 41 net new OshKosh stores, all in the side-by-side format. At the end of 2015, side-by-side stores represented 40% of the OshKosh store portfolio. OshKosh side-by-side stores performed well in the quarter comping up in the mid-single digits. These stores are providing an average ROI above 15%. OshKosh retail segment profits for the fourth quarter were comparable to a year ago at $9 million. Segment operating margin declined by 90 basis points, which, like Carter's, reflected the profit effect of down store comps, the comparison to the extra week in 2014, higher promotional activity and increased marketing spend. While profitability dipped in the fourth quarter, full year OshKosh retail segment operating margin improved by 90 basis points and segment income grew 50% to $12 million. We posted lower sales in the wholesale component of OshKosh, but maintained the profitability of this segment in the quarter. Pages 14 through 16 include selections from a recent OshKosh direct mail piece, featuring our spring creative. These pages showcase girls Easter outfitting, footwear and boys active, all of which have been good performers for us. And lastly, on page 16, we have a photo of the spring store set for our iconic world's best overalls and baby B'gosh products. Now, turning to our international segment on page 17, fourth quarter international segment net sales increased 4% on a reported basis and grew 16% on a constant currency basis. Our retail store business in Canada had a tremendous quarter with a direct-to-consumer comp of 14.6%. This reflects a store comp of 12% and an eCommerce comp of 55%. Total retail store net sales in Canada grew 17% in local currency, but were comparable on a reported basis due to negative foreign exchange translation effects. We opened seven new stores in Canada in the fourth quarter, bringing us to a total of 147 stores. We opened a total of 23 new stores in Canada in 2015 and expect to open approximately 20 in 2016. Given the hard work of the team in Canada and the great execution of the brands in our stores and online, we increased our market share in Canada by 200 basis points over the past year. Our international eCommerce business grew to $9 million in the fourth quarter compared to $5 million in the prior year quarter, driven by our business in Canada and the mid-year launch of our eCommerce business in China. Net sales in the wholesale component of our international segment were comparable at $34 million, reflecting growth with partners across multiple regions. It was offset by lost sales related to the Target Canada bankruptcy in early 2015. International segment adjusted operating income in the fourth quarter grew by 24% to $16 million. Segment operating margin improved by 270 basis points to 16.5%, reflecting a higher direct-to-consumer sales mix and expense leverage in Canada, growth with partners in multiple markets and the absence of a Target-related cost that we incurred in 2014. Pages 18 through 22 highlight some of our recent successes in extending the reach of our brands internationally. Page 18 shows our Carter's store on Alibaba's Tmall website in China. We launched this business in the second quarter of 2015 and we're off to a good start. Sales for fiscal 2015 came in ahead of our projections at $6 million. In the fourth quarter, we saw good demand for our products particularly surrounding the November 11 Singles' Day event, which has become one of the largest online promotional events globally. For 2016, we're projecting our Chinese eCommerce business to have good growth and also to be profitable. Pages 19 through 22 highlight some recent store openings from several of our international partners. Our international partners have been delivering good growth in both existing and new markets. This business consists of 26 partners across 54 countries. Our partners opened 132 new retail locations in 2015, bringing our year-end total to 756 retail locations outside of North America. Page 19 shows a shop-in-shop with Riachuelo, a new wholesale customer in Brazil. We currently have Carter's shop-in-shops in 26 of Riachuelo's 250 department store locations. As a result of a strong launch, we anticipate expanding our presence into more of the Riachuelo stores in 2016. Page 20 features our expanded presence in India. Beginning in 2016, we've partnered with the Mahindra Group, a large and diversified company in India, to extend the Carter's brand within its stores and eCommerce site. This partnership builds on our existing presence in India and provides us with new multi-channel capabilities in this growing market. Wrapping up the review of the international segment, on pages 21 and 22, we have photos of new stores recently opened by partners in Dubai and Chile. Pages 23 through 25 summarize our full year results. As we've said, 2015 was a very strong year for our company. We surpassed $3 billion in sales, expanded our operating margin by 90 basis points and increased adjusted earnings per share by 17% versus last year. In addition to our strong financial results, other key milestones in 2015 included market share gains in the U.S. and Canada, continued execution of our direct-to-consumer growth plan, and expanding the product size offering of the Carter's brand. We also entered China with a consumer business and introduced our new customer loyalty program. Now, turning to page 26 for our outlook for the first quarter and fiscal 2016. For fiscal 2016, we expect net sales to grow approximately 6% to 7%, driven by our U.S. direct-to-consumer and international businesses. We are forecasting full year adjusted earnings per share to grow in the range of 8% to 10% compared to 2015's adjusted $4.61 per share. This earnings growth contemplates gross margin expansion, growth in SG&A with some rate deleverage, driven by the increased direct-to-consumer business mix and continued operating margin expansion. From a pacing perspective, we anticipate our growth to be significantly weighted to the second half of the year, as we expect the first half to reflect the adverse effects of a strong U.S. dollar as well as higher first half investments in marketing and technology. For the first quarter, we expect net sales to grow approximately 4% driven by growth in our direct-to-consumer businesses. We are forecasting first quarter adjusted diluted earnings per share growth to be roughly comparable to a year ago, due to expected pressure from unfavorable foreign currency effects and increased investments. Other risks that we are tracking include the relatively inconsistent trends in consumer demand and store traffic, foreign exchange rates and the overall condition of the retail and macroeconomic environments. Now, moving to page 27 with some additional perspective on today's announcements regarding return of capital to shareholders. We are fortunate to have a strong business model which has performed well throughout the recession. We withstood a historic rise in cotton prices several years ago and have rebuilt our operating margins back to industry-leading levels. Our business model generates a meaningful amount of cash, a portion of which we are using to fund our continued growth agenda. In recent years, we have funded meaningful investments, which we believe position the company well for growth for many years to come. These investments included consolidating significant portions of our operations and workforce into a new headquarters facility in Atlanta, in-sourcing much of the infrastructure which supports our rapidly growing eCommerce business, building the Braselton multi-channel distribution center and numerous technology investments intended to strengthen our capabilities across multiple areas. Above these meaningful investments, the business has generated significant cash, which we have been distributing to shareholders. As Mike mentioned, since 2013, we have returned a total of $761 million to shareholders through cash dividends and share repurchases. This represents 185% of our cumulative free cash flow over this same period. Page 28 summarizes our latest thinking with regard to return of capital. As noted in today's press release, our board has authorized a new $500 million share repurchase program. This is incremental to the approximately $60 million remaining from prior authorizations. We intend to execute against this authorization with purpose, absent any other higher priorities for our cash which might emerge. Additionally, our board has authorized a 50% increase to our quarterly dividend to $0.33 per share. On a pro forma basis, our dividend yield will increase from about 1% to approximately 1.5%. Lastly, we are evaluating opportunities to further optimize our capital structure, including assessing the opportunity to increase our level of leverage in order to potentially improve our capital efficiency and provide capacity for the return of capital to shareholders over time. These plans reflect our confidence in our growth plans, our forecast for strong cash flow generation going forward, and our strong commitment to drive increased shareholder value by returning capital, which is above what is required to operate and grow the business to our shareholders. With these remarks, we are ready to take your questions.

Thank you, sir. And for our first question, we go to Taposh Bari with Goldman Sachs. Taposh Bari - Goldman Sachs & Co.: Hey, guys, good morning and congrats on another good year. Michael Dennis Casey - Carter's, Inc.: Thanks very much. Taposh Bari - Goldman Sachs & Co.: I guess, high-level, Mike, I'd love to get your perspective on the category. It seems like your business performed very well in an otherwise very challenging quarter. Particularly, on the domestic side, the DTC comp acceleration for U.S. customers accelerated pretty meaningfully. I'd love to get your perspective on why you think that happened. Michael Dennis Casey - Carter's, Inc.: Sure. Well, I think you probably saw some of the reports at the tail end of the year. The kids' space, children's apparel was regarded as one of the better performers in the fourth quarter. That was our experience. And as we've said over the years, children's apparel is a less discretionary product category. There are four million beautiful babies being born every year in the United States, and we are the number one brand for new children, young children's apparel. So we've done a good job making the brand more accessible. We've improved the presentation of our brands at the national retailers. We've strengthened. We've helped them strengthen their websites. We've strengthened our websites. I am bias, but I think we've got the most beautiful young children's apparel stores in the United States. We have more of them. They are closer to the consumer. So, one of our key priorities has been to extend the reach of the brand, make the brands more convenient, show the value that's inherent in our brands. So I think that's why we had a strong fourth quarter. We had very good performance over the holidays. Despite the, I'd say, unseasonable warm weather, we saw good traffic to our stores. We outperformed that chopper track (36:42), and so we had a strong finish to the year, a good start to the year. And so we think the consumer sees the strength of the brands, and so we're seeing a good response to the initiatives that we've had over the years. Taposh Bari - Goldman Sachs & Co.: Great. Good to hear. And as far as the – regarding that strong start to the year, Richard, maybe, a question on the guidance for first quarter. Is there anything going on in terms of timing around the wholesale shipments for Carter's, because, I guess, I'm just having a hard time getting to that EPS number? And then you mentioned some FX headwinds in the first half. Are you expecting gross margins to be positive in the first quarter, and if you can elaborate? Richard F. Westenberger - Carter's, Inc.: Sure. Well, I think, one of the primary factors that we're considering in our outlook for first quarter is the fact that exchange rates still are unfavorable year-over-year. So we expect that revenue growth is going to be less in the first half of the year than it will be in the second half of the year. We think that international consumer continues to, perhaps, be absent from our U.S. direct-to-consumer business. There is really nothing dramatic from a wholesale point of view. We're actually planning good growth in the Carter's wholesale segment in the first quarter, and we're planning for gross margin expansion as well. Product costs are expected to be lower in the first half and in the first quarter. That will be a benefit to the P&L. Right now, spending is forecasted to be up. We have ongoing initiatives that we've pulled back on in some regards in 2015, as demand was particularly uneven. We have to move forward with a few of those initiatives, technology being one area where we have a couple initiatives that will incur some spending in the first quarter. Taposh Bari - Goldman Sachs & Co.: If I could just squeeze one last one in on pricing, high-level. What did you see in terms of ASP in 2015, if you can just comment on both kind of the wholesale and retail channel and how you are thinking about it into 2016? Michael Dennis Casey - Carter's, Inc.: Sure. So, for our company pricing, I would say, year-over-year was comparable. If it was down a bit for the year, it was largely due to product mix. We had better pricing in the first half than the second half. Richard referenced it in his remarks. The big challenge for our business last year was the impact of the stronger dollar. So we had very strong domestic demand from consumers last year, international demand was weaker. So there is some good information in the presentation Richard walked you through, to show you the impact of the decline in international demand and it was significant. So what worked against us in the second half, we had bought a certain level of inventory for the second half of 2015, assuming that we would continue to have good demand from international consumers and with the stronger dollar, we didn't see that. So we had to get more promotional in the second half of the year, more promotional than we would have liked to have been. And so I would say pricing for our company was probably up some portion of 2% in the first half, down some portion of 2% in the second half and just slightly lower for the year, probably less than 1% for the year. Our objective was not to lower prices in 2015. And our pricing for 2016, we are not planning any price increases, no meaningful price decreases, so we are planning pricing in 2016 to be comparable year-over-year. Taposh Bari - Goldman Sachs & Co.: Best of luck. Michael Dennis Casey - Carter's, Inc.: Thanks, Taposh. Thanks very much.

And for our next question, we go to Ike Boruchow with Wells Fargo. Ike Boruchow - Wells Fargo Securities LLC: Hi, everyone. Good morning and congrats on a nice quarter. Michael Dennis Casey - Carter's, Inc.: Thanks very much. Ike Boruchow - Wells Fargo Securities LLC: I guess, you guys gave some good color on the retail performance over the past couple of months. That was helpful. Just kind of curious, because listening to some of the vendors that have reported already, could you talk about the Carter's wholesale business through the quarter? If you ex the 53rd week, it was still growth, but it was a little less than you had been trending the prior couple of quarters. Just curious reorder activity, what kind of transpired? There was a lot of volatility in November, December. If you could comment there, that would be really helpful. Brian J. Lynch - Carter's, Inc.: Sure. We can give you some color from that. The replenishment business was very good last year and that continued through the fourth quarter. That helped our results. We did have some folks, who did well, who pulled up some orders from spring, but overall, I would say they had the same situations that we had in terms of choppy start to the quarter and then did really well after Christmas. I think the other thing they faced was based on the warmer weather we had pre-Christmas all around the country, they got backed up by some of their cold weather gear and so you saw some more promotions out there. But overall we had booked up, I think, mid-single digits for fall. We had booked up mid-single digits for spring and our replenishment business continued to be good. So, again, overall, if you look at our business in totality in wholesale, our game plan is to grow low single digits to keep that business moving despite some of the headwinds in that market, to support the national retailers as best we can with fixturing and marketing and presentation and investing a good amount of resources and assets and helping them build wonderful eCommerce sites that can showcase our brands and drive mom to their stores. So, overall, we feel good about the business. It's a good low single digit growth business and quarter-to-quarter it usually ends up being timing issues not anything specific to demand within the quarter. Ike Boruchow - Wells Fargo Securities LLC: Got it. Thanks so much.

And for our next question, we go to Robby Ohmes with Bank of America Merrill Lynch. Robert F. Ohmes - Bank of America Merrill Lynch: Oh, hey, Mike. How are you? Michael Dennis Casey - Carter's, Inc.: Good morning, Robby. Robert F. Ohmes - Bank of America Merrill Lynch: A couple of just quick follow-up questions. Just in terms of broadly with your wholesale customers, what happened in the fourth quarter, how do you feel – well, first of all, what was the weather impact on you guys in the fourth quarter, if any? Michael Dennis Casey - Carter's, Inc.: Surprisingly, not as much as we had thought. Keep in mind, we don't have a big outerwear business. What we've read from some of the other retailers reporting is that that they were impacted because of the unusually warm weather rolling into the holidays. I was actually surprised how good our business was with the warmer weather. But it was clear to me as I looked at the results every morning, particularly online and in our stores as it got closer to Christmas, people were spending money. And so thankfully outerwear is a very small percentage of our product offering. We carry the everyday essentials, we carry the things mom gets out of the house and goes shopping for. Children go through multiple wardrobes in those early years of life, and so we saw good traffic. We weren't particularly affected. It did not have the same effects on our business that the national retailers did. Robert F. Ohmes - Bank of America Merrill Lynch: When you look out into the spring here and some of your competitors have excess inventories and maybe it's outside of the baby, kids' portion of their businesses, but is there some concern that they are going to get promotional? And also what's your thought on your large wholesale partners? Is there some concern they are going to be getting promotional with your brands to sort of counteract the malaise they're seeing in other parts of their business? Michael Dennis Casey - Carter's, Inc.: Well, we have visibility to our inventory levels at wholesale, and I would say we're actually in pretty good shape. And so I think if there is any impact on our business because of the tougher business they had in the fourth quarter, it will be probably in more modest fall 2016 bookings. We're still expecting good growth in bookings, probably won't be the growth that we would otherwise had hoped for, but we understand that. We understand that. They did not have the traffic generally that they had hoped for and when you don't do that, you had more inventory than you needed, you had to move through it, you had to be more promotional than you otherwise would have liked to have been. So the message generally I heard during our January Market Week Meetings is they will be more conservative with their buys for fall 2016, fully understandable, actually good business decision. So we want to see them earn higher margins on our brands and when you buy fewer units, the opportunity is you get paid a bit more for those units and the margins are better. And if the margins are better, that's a healthier business going forward. Robert F. Ohmes - Bank of America Merrill Lynch: Got it. That's really helpful. And then just quick last question, eCommerce margins, can you remind us where you guys are at in your ramp-up in eCommerce margins? Is there still more to go or your efficiencies finally there? Where are you guys at? Michael Dennis Casey - Carter's, Inc.: We have the benefit of a very good year in that Braselton distribution center last year, and so we saw particularly good margin improvement. I don't have it in front of me, but I believe the margins are still well over 20%. They had a good year. It is our fastest growing, highest margin business. And as a company, Robby, we still believe there is margin improvement. eCommerce will be a component of that, so we don't feel as though we've peaked out on eCommerce margins in 2015, there is more improvement planned for that business. Robert F. Ohmes - Bank of America Merrill Lynch: That's great. Thanks so much. Michael Dennis Casey - Carter's, Inc.: Thanks, Robby.

For our next question, we go to Anna Andreeva with Oppenheimer. Anna Andreeva - Oppenheimer & Co., Inc. (Broker): Great. Thanks so much. Good morning and congrats, guys. Michael Dennis Casey - Carter's, Inc.: Thank you. Anna Andreeva - Oppenheimer & Co., Inc. (Broker): A question on the foreign tourism drag. Maybe remind us what kind of pressure did you guys see in the first quarter and the second quarter of last year? What kind of a drag are you expecting here in the first half and how are you guys adjusting the buys for international kind of rebasing lower levels at least in the near-term? And you provided a lot of good color on Carter's wholesale. Just a follow-up on the Kohl's playwear initiative, how did that do in the fourth quarter, and are you guys seeing other partners replicate that initiative? Michael Dennis Casey - Carter's, Inc.: Okay. Let me kick it off in terms of international, that was the big challenge in our business, and we saw pressure in all of 2015 with declining international tourism. It became most evident to us in the third quarter last year and that's when exchange rates moved more significantly against us. But we saw some pressure. We will see it still in the first half of this year. By the time we got visibility in the second half of last year, we had already made our spring buys. So we are forecasting some continued pressure in the first half of this year, less pressure in the second half of this year. So just for purposes, our view is we will have good solid positive comps for direct-to-consumer in the first half, second half and for the year. We are planning that we will see some slightly negative store comps in the first half, better comps in the second half and hopefully flat comps, store comps for the year. That's our modeling assumption. We are working hard to make sure we have at least a flat comp going forward. We will see more pressure in the first half this year, hopefully less pressure in the second half. Brian J. Lynch - Carter's, Inc.: And just to follow up on the Kohl's playwear launch, again, we don't normally comment on specific customers, but we have talked about this because it's important for our company. The results, I would say, were very good in the fall. We were pleased, Kohl's was pleased and we are off to a good start in spring there with that expansion. We are going to continue to partner with Kohl's on the opportunity to increase the door count on that thing and we are optimistic that we can continue to have growth there and expand to others. We are talking to other accounts about it. I would say that the playwear expansion is a good opportunity for the company. I think I shared last call about 40% of our business in our stores is playwear and only about 25% of our business in wholesale is playwear-oriented. So it's a key part of our strategy to continue to grow the brand up through toddler and kid age segments. We now have the number one share in toddler in the U.S. which we are proud of and we are continuing to gain share in that 4 to 7 segment. And, Anna, to also share on the sizing, we have commented on size 8; we want to continue to have her (48:31) grow in the brand, so that's going to be a good opportunity for us this year. We think we will do about double the business we did last year in size 8 between our stores and some of our accounts taking that in the Carter's brand. And we are excited about launching size 14 in OshKosh brand as well in the back half of the year. Anna Andreeva - Oppenheimer & Co., Inc. (Broker): Okay. That's great. It's very helpful, guys. And just a quick one for Richard, on the quarter-to-date comps being positive, is that both Carter's and OshKosh? And are you guys embedding any share buyback in the annual guide? Thanks. Richard F. Westenberger - Carter's, Inc.: Our comps have been positive quarter-to-date for both brands. There is some amount that's reflected in our guidance for share repurchase in 2016, yes. Anna Andreeva - Oppenheimer & Co., Inc. (Broker): Thanks so much. Richard F. Westenberger - Carter's, Inc.: You're welcome.

And for our next question, we go to Rick Patel with Stephens. Rick Patel - Stephens, Inc.: Hey, good morning, and I will add my congrats on the solid execution. Michael Dennis Casey - Carter's, Inc.: Thanks, Rick. Rick Patel - Stephens, Inc.: You talked about weaker sales to international customers. How much of that do you attribute to just the stronger U.S. dollar as opposed to launching the website in China which could be stealing some of the thunder of the U.S. business? And given you have a website in China now, do you expect U.S. sales to Chinese tourists to decrease dramatically going forward, or would there be a reason that people would still want to buy from your U.S. website whether it's the product selection or the pricing? Michael Dennis Casey - Carter's, Inc.: Yes, good question. So, I would think it's – the impact was more on the stronger dollar. We had assumed there would be some decrease in the level of demand from Chinese consumers on our U.S. website after we launched in China. But we had spoken with other retailers with similar businesses. The demand from China generally on U.S. websites was lower, which we attribute to the stronger dollar. I'm sure there is a consumer who prefers the broader scope. We only launched with about 25% of the Carter's product offering on Tmall. So there is no question. We actually had fairly healthy level of demand. My guess is – this is directional, but I think the level of demand on our U.S. website from China went from about $16 million down closer to about $13 million. So it dipped. I wouldn't say it dipped significantly. We will keep an eye on that going forward. And we more than recovered what we lost on the U.S. website on that Tmall website. But I think generally speaking, we saw – our estimates are over $40 million of a decrease in international demand on our business because of the stronger dollar last year. It had a significant effect. But we had very strong domestic demand, so we are encouraged by what we are seeing from the demand from domestic consumers for our brands. Rick Patel - Stephens, Inc.: Great. And then also a question on OshKosh, which clearly showing some nice momentum here. So I know much of this is a side-by-side format, but clearly you are doing a pretty good job of winning some moms here. So, my question is, given the strong momentum that it has, why do you think it still continues to be underemphasized in the wholesale channel? Is it something about this age group or is it a brand issue? If you can just update us on why the strength in retail doesn't translate into wholesale? Michael Dennis Casey - Carter's, Inc.: Sure. The feedback I get, they love the brand, the national retailers love the brand. They have given us good feedback on the strength of the product offering. They don't love the margin. The margin is lower than Carter's; it is lower than private label. So in this environment, in this tough retail environment, understandably they will allocate more floor space to the higher-margin brands which are Carter's and private label. So they have been very supportive of the OshKosh brand, but we understand the fact that as they plan their business going forward that they will buy less of OshKosh, they'll focus on the things that are most predictable in terms of demand, the things that they can earn an acceptable margin on. The way forward with OshKosh is direct-to-consumer for us and international. We are seeing good progress there. I think it's important to keep OshKosh wholesale in context; it's about 2% of our total business. It's the smallest component of our business. We will continue to do our best for the national retailers, strengthening the product offering that they are buying. And as we grow OshKosh, we hope it grows from some portion of $535 million, closer to $700 million to $800 million by 2020. And as we grow it, we will have greater scale, greater sourcing leverage, we will improve the cost structure, the margin structure and hopefully regain some of the space we've lost with the national retailers. Rick Patel - Stephens, Inc.: Thank you very much. Michael Dennis Casey - Carter's, Inc.: You're welcome.

We go next to Susan Anderson with FBR. Susan K. Anderson - FBR Capital Markets & Co.: Good morning. Congrats on a great quarter. I was wondering if you could maybe give some more color on the retail operating margin for Carter's, and it looked like OshKosh was down this quarter also after being up the previous quarters. Maybe if you could kind of talk about the drivers of that, just mainly the higher promotions that you guys talked about or is it also expense deleverage? And then on OshKosh, it sounds like you are still pretty confident in the sales opportunity. Do you still think you can get the operating margin there back to where it used to be? Richard F. Westenberger - Carter's, Inc.: Sure. Susan, I would say that the effects on the operating margin in both the Carter's retail segment and the OshKosh retail segment were driven by very similar things. First and foremost, it's the decline in international consumer traffic. We had inventory that was procured and had to be cleared, so higher level of promotional activity to clear that. The negative store comps indicate that we did not leverage the store expenses. Certainly that was a factor in lower operating margin. The comparison to the extra week in 2014 certainly was a factor as well. So I would say those are the primary issues within Carter's retail. We have allocated a bit more towards marketing. We think that had a good effect actually in driving late Q4 traffic and in the month of December as well, but that did burden the operating margin of that business. I would say the outlook for OshKosh's margins going forward continues to be positive. As Mike indicated, we have a lot of good initiatives around sourcing and other things that we think will, as the business gets bigger and has greater scale, that should drive efficiencies to the profitability of the brand, and we are seeing continued good results from the side-by-side format. So I think the long-term prospects for improving that OshKosh operating margin are excellent. Susan K. Anderson - FBR Capital Markets & Co.: Great, that's helpful. And then maybe if you could update us just on – it doesn't really sound like your real estate strategy has changed and it sounds like you expect the stores to at least be flattish next year, but maybe just kind of your thoughts on rolling out stores and the focus on the side-by-side for 2016 and beyond? Brian J. Lynch - Carter's, Inc.: I would say that we still feel really good about building stores. We've got strong domestic demand for our brands. The stores have good returns and we've got a really nice opportunity versus our competitors in the door counts that we have today. So improving that footprint and moving the stores closer to the consumer, is a major strategy of ours. Currently, we've got somewhere around 33% of the Carter's stores and 2/3 of the OshKosh stores in outlets. So over the five-year plan, we plan to improve upon that; those numbers could be 25% of Carter's and 33% of OshKosh stores closer to mom in the brand store, so... Side-by-side, we just opened our 100th as Mike said. We are really pleased with those results. We are going to continue to evolve that model. We will look at making sure the stores are productive and what the right sizes of them are and how we represent those two wonderful brands in the retail boxes. We have good consumer feedback, we've got almost half of the purchasers now buying both brands when they walk into the store, so we feel really good about the model overall and we will continue to build stores as it makes sense for our shareholders. We feel good about it. Susan K. Anderson - FBR Capital Markets & Co.: Great. Yes, I've noticed the combination online has been helpful too. And then one last question on the Canadian business, I may have missed this, did you guys break out how much eCommerce contributed to the comp? Michael Dennis Casey - Carter's, Inc.: We did not. Richard F. Westenberger - Carter's, Inc.: I think we quoted the comp itself, Susan, but not the absolute contribution. Susan K. Anderson - FBR Capital Markets & Co.: Okay, great. Thanks. Good luck next quarter, guys. Michael Dennis Casey - Carter's, Inc.: Thank you. Richard F. Westenberger - Carter's, Inc.: Thank you.

And for our next question, we go to Steph Wissink with Piper Jaffray. Lauren M. Wolff - Piper Jaffray & Co: Hi, this is actually Lauren Wolff for Steph Wissink. A couple of questions for you. First, is there any details you would be able to provide about the new loyalty program on either uptake or spend level versus average or points conversion? And then secondarily, just with the shift of Easter from the second quarter last year to the first quarter this year, do you have any comments just on how we should be thinking about that? Brian J. Lynch - Carter's, Inc.: Two things. On loyalty program, I think Mike had covered before, we feel really good about it. Launched it in the first week, we had one million folks sign up. So far we've got over five million folks that have signed up. It's a cross-channel, cross-brand promotion. Mom loves it. She can use it in our store, she can use it online and our goal is to increase the frequency of transactions and improve our customer retention. So it is early in the program, but to date, it's exceeding our expectations. The percent of earned rewards redeemed and the amount they spend per redeemed reward are both higher than we planned. So we feel good about that, and it's one of the many omni-channel initiatives we have to appeal to our Millennial Moms and overall shoppers. As far as Easter, Easter is about a week earlier this year. It's in Q1; it was in Q1 last year. That was a big shift last year. However, Easter Sunday does fall into Q1 this year, it did not last year. So, that's the way that should shape up.

And with a follow-up question, we return to Taposh Bari with Goldman Sachs. Taposh Bari - Goldman Sachs & Co.: Thanks. I wanted to just hit the capital allocation comment from you this morning. So, what led to the decision to reevaluate cap structure and how should we think about timeline around when we should expect to get an update from you on where you think the right optimal – kind of the optimal cap structure is, cash flow, et cetera? Richard F. Westenberger - Carter's, Inc.: Sure, sure. Well, I would say this is a topic that we continually discuss and reevaluate. It's a constant topic of discussion with our board as it should be. So, it wasn't that it was any kind of a dramatic decision that we reached. It was just part of the ongoing normal evaluation of where we stand. I think the way we've thought about it is that our best first use of cash is to put it back to work in the business and I think we're doing that. So, we have a great organization, very energetic and passionate organization that brings us business cases to accelerate and to grow our business. And I think we're pretty fully funding everything that's brought forward that has a good business case attached to it. The cash that has accumulated on the balance sheet has gotten to the point where it's probably at a point of inefficiency. We think it's appropriate to be a bit more aggressive in distributing that to the shareholders. We took a nice step forward I think a couple of years ago in resetting our capital structure, we added some leverage; we didn't have any immediate need for the proceeds from that additional debt, so we returned that to shareholders. And so this is part of the ongoing evolution and us trying to be attentive to these matters and be good stewards of the capital. The balance sheet clearly is in great shape. We have a lot of liquidity; we define that as both the cash that we have on hand as well as the capacity that we have to borrow. We have a new credit facility that we put in place this year that provides the company with a lot of capacity should we need to tap it. So, we will go through this review as expeditiously as we can. The balance sheet has capacity to add some additional amount of leverage and that's what we would like to determine. But hopefully the message that is being sent today is that we're committed to returning capital and look forward to doing so. Taposh Bari - Goldman Sachs & Co.: And is there a timeline that we should expect? Is it a matter of months, quarters, years? Richard F. Westenberger - Carter's, Inc.: Yes, I think you can imagine that we'll move with some alacrity in this evaluation. I don't think we are talking years and years of further thought on it. Taposh Bari - Goldman Sachs & Co.: Appreciate it. Thanks, Richard. Richard F. Westenberger - Carter's, Inc.: You're welcome.

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 Dennis Casey - Carter's, Inc.: Okay. Well, thank you all for joining us on the call this morning. We appreciate your thoughtful questions, your interest in our business. Look forward to updating you again with our progress in April. Good bye.

And again, ladies and gentlemen, this will conclude today's conference. Thank you for your participation. You may now disconnect.