Good day, everyone, and welcome to the Carter's Fourth Quarter 2017 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 2017 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 those 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.

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 exceptionally good growth in our fourth quarter and a record level of sales and earnings for 2017. This was our 29th consecutive year of sales growth and a significant year of progress for our company. In the fourth quarter, we achieved the sales and earnings goals we shared with you on our last call. We saw very strong demand in each of our business segments with double-digit sales growth in November and December, driven by the strength of our fall and holiday product offerings, and the contribution from our new growth initiatives. In 2017, we outperformed the macro trends in the retail apparel industry and the young children's apparel market. We strengthened our retail store model and omni-channel capabilities. We launched a very successful exclusive brand with Amazon and we added two new growth vehicles to our business, with the acquisition of Skip Hop and our largest international licensee based in Mexico. What we did not expect in the fourth quarter was the significant and positive impact of the new tax law. This new law is expected to lower our previously planned tax provisions by more than $200 million over the next five years. We plan to use that savings to reinvest in our business, create new jobs and accelerate our growth. Like many good companies, we will share a portion of the 2017 tax savings resulting from this historic legislation with our employees. Our Board of Directors has authorized $20 million in special compensation awards to be provided through additional funding of our 401(k) plan and special bonuses to all…

Thank you, Mike. Good morning, everyone. I'll begin on page 2 of today's presentation materials. Pages 2 and 3 include our GAAP income statements for the fourth quarter and the full-year. Most of my comments today will speak to our results on an adjusted basis. This presentation and today's earnings release include a number of important reconciliations of our GAAP results to the adjusted basis of presentation, particularly adjustments that relate to the implementations of the recently passed tax reform legislation and the special employee compensation provisions which we announced today. I encourage you to review these reconciliations as you evaluate our results. Turning to page 4 with some highlights of the fourth quarter and fiscal 2017. As Mike noted, we delivered a strong fourth quarter, which closed out a very good year for us. Consolidated net sales grew 10% over last year, with growth in all business segments and good contributions from Skip Hop and our business in Mexico, both of which were acquired in 2017. Adjusted earnings per share grew 30% in the fourth quarter, driven by strong operating income growth, the benefit of share repurchases, and a lower effective tax rate. For the full-year, net sales grew 6% and adjusted earnings per share grew 12%, both in line with the initial guidance which we provided at this time last year. We also returned $260 million to shareholders through dividends and share repurchases. We achieved these solid full-year results while also investing in new growth vehicles for the future and continuing to invest in technology used across our business. Turning to page 5 with a summary of our sales performance in the fourth quarter. Sales in our U.S. Retail segment grew 7%, total U.S. Retail comparable sales grew 4.5%, which built on a 5.5% comp in the fourth…

Thank you, sir. And for our first question, we go to Kate McShane with Citi Research.

Hi, good morning. Thanks for taking my question.

Good morning.

I guess I'll start with just your exposure to different wholesale channels. I think you've discussed before how big mid-tier department stores represent as a percentage of sales. And as we approach the end of your first year of your relationship with Amazon, what have been some of the learnings with this customer and how might things change in 2018?

A couple things. Again, just to restate what Richard said, we feel confident for 2018. We have good growth in our Wholesale business. We've got it planned up mid-single digits, more back-half loaded, probably up – I'm sorry, low-single digits for the year, more back-half loaded with mid-single digits in the back half of the year. In terms of mid-tier department stores, our exposure to that has continued to be reduced as some of those folks have either cut back or gone out of business. So, about 13% of our Wholesale business is that mid-tier department store channel. I would note that most of our accounts are growing. There are some challenges with some of the bankruptcies and we've talked about that. Toys "R" Us, for instance, has been a very good customer over the years, we're monitoring that situation. For context, they do represent less than 3% of our total sales, so, we'll work with them on their go-forward doors and any other closures that occur out there, but we would expect sales that take place in those closed doors are going be picked up over time by some combination of our Retail business and other Wholesale partners, because I'd say we don't believe moms desire to buy our industry-leading brands would decline based on any closures. And we're well-positioned online and in over 17,000 doors for the transfer of sales that would take place. So, we feel good overall about our Wholesale business. Amazon. You asked about Amazon, we learned a great deal from Amazon. It's a really good customer, we work very closely with their team and meet with them often. After the successful launch of Simple Joys last spring, and the brand does continue to ramp up. The sales have been primarily in the baby and sleepwear categories and our inventories are really well-positioned for 2018 as we learned what key items mom responds to best on the site. And our early reads on OshKosh and Skip Hop businesses remained really strong. We're excited about expanding into playwear on Amazon, we think that that's a good opportunity to age up on the site. And we're going to be adding toddler size ranges for spring 2018 and other accessories, categories, as well. And we think we can continue to grow rapidly with Amazon through our five-year plan, and profitability is expected to increase and be comparable to other top accounts over the next couple of years.

Kate, just to add to that, as we were analyzing the growth plans for 2018, what I found interesting, we've probably got 15 meaningful wholesale relationships. Some are larger than others, obviously. But of those 15, eight we're forecasting growth with this year. That's probably as good as I can recall it in recent years. Two of the customers will have sales comparable year-over-year and we'll show a decline in five of those relationships, and three of the five are mall-based retailers and another is Babies"R"Us, as you might expect, with some of the things that they're working through. So, I'm encouraged. As I shared with you in our January market week meetings, I sensed a bit of a positive inflection point. Best holiday performance, I would say, in the past three years. That's what we were hopeful for, is that, with all the good initiatives that they've put in place in recent years, their business would start to show some progress. And we're sensing that. Not consistently across all of them, but there are certainly some pockets of strength that give us reasons to believe that we'll have a healthier wholesale business going forward.

That's very helpful. Thank you so much.

You're welcome.

And for our next question, we go to Ike Boruchow with Wells Fargo.

Hi. Good morning, everyone. Let me add my congratulations on a great holiday.

Thank you.

So, first question, I guess, Richard, can you discuss the timing shifts that you talked about that are affecting the Q1 Wholesale performance in a little bit more detail? And maybe give the dollar amount that you expect to shift between Q1 and Q2, just so we kind of understand what's going on there?

Sure. The timing shift really has to do with the 53rd week, which pops up every four or five years. It happens to be a 53rd week year for many, at least quite a number of our Wholesale customers. That has the effect of pushing out some amount of volume from Q1 into Q2. We are planning Wholesale growth in the second quarter. I don't know that I'll quantify with precision, but we are forecasting the Wholesale segment to be down high single digits to low double digits and we get a good portion of that back in the second quarter.

Got it. That's helpful. And then just follow-up. So, when we look at the guidance for this year, it seems like you're investing about 50, 60 basis points back into your SG&A due to the tax savings. Given these changes, is there a new margin target the company is thinking about, relative to the 14% that I believe you guys have talked about in the past. You talked about the sales growth opportunity and EPS growth opportunity over the next five years. I'm just curious if there's a margin that we should be thinking about as well?

So we're expecting to see a good return on these investments that we're making this year. Before the news of the new tax law, we would have otherwise been planning growth for 2018 – probably around 5% top line growth, 5% growth in operating income, operating margin comparable to last year, 13% and change and about 10% earnings growth. So, the tax law made us think differently about, were there opportunities to invest to accelerate our growth longer term. And so that's the path we're taking for 2018. The longer-term margin target is more than 13.5%. So, it's not currently – in 2022, it's not showing 14%. I would say it's largely because of the new businesses that we've added this past year that today are lower margin. Our challenge over the next five years is to make them higher margin businesses. But we're fortunate. Carter's is a margin-rich business. It always has been, with opportunities for improvement. Very few brands have the margin structure that Carter's does, with some of the new businesses, near-term will be margin dilutive. But we expect to show meaningful progress in terms of improving their profitability of Skip Hop, Amazon, Mexico, and to some extent China beginning this year.

Thanks, Mike. It's helpful. Congrats.

Thanks very much.

And for our next question, we go to Susan Anderson with B. Riley FBR.

Hi, good morning. Congrats on a nice holiday. I was wondering if you could talk about the expanded size offerings at Carter's, I guess – maybe if you could talk about how these will differentiate from the baby and toddler offerings? And then also from the OshKosh offerings for the same age?

Yeah, Susan, it's Brian. We really see a nice opportunity to grow our business in the toddler/kids' sizes and gain share going forward. We've got the vast majority of new moms and gift givers that buy for babies in our database. We know them well. They love our brands and we like to retain them longer as great customers by addressing their needs for their young children as they grow. And these are those really valuable Millennial Moms. We acquire them first here at Carter's when their first child is born. We've got the largest share of the 0-24 baby business. As Mike shared about four times the closest competitor. And we have the largest share in toddler. We've got a strong and growing kids' business, which we define as ages 5 to 10, where we have a top four share despite, really not offering the Carter's brands in larger sizes in that segment. So, as we evaluated in many ways to grow, we find it encouraging, as Mike had shared, about 60% of our sales in Retail is baby, but 40% is in toddlers and kids' and the toddler/kids' is the fastest growing. So, given the success, we're going to add sizes 10-14 in Carter's for fall of 2018. You asked about differentiation. We've really reoriented our design and marketing efforts to have the right, age-appropriate, creative for each segment. So, we've structured around a baby business, a toddler business, and what we call a kids' business. And believe we can strengthen our share in each of those efforts by going forth with that. And we'll share more about it in the Fall. In terms of OshKosh versus Carter's, we have totally different design teams. They are both incredibly talented, they do a fabulous job every day but we have different design teams and marketing teams that will be making sure that we tailor the assortment and the marketing to the unique characteristics of each brand and we think there's good opportunities to grow both in our co-branded stores that now it gives us the opportunity to offer mom to enter the store and be able to buy from her baby right up through size 14 and maybe even take some Skip Hop product home for fun with the kids.

Great. That sounds good. And then just one follow-up on the Mexico franchise purchase. I know it's still early days, but any learnings from the franchise purchase and then how should we think about growth there in 2018?

Sure, we brought a good business. They're good people. Good management team. We love their stores. We see an opportunity to help them on the sourcing side, the retail store management side. We've got some good initiatives underway to expand the Wholesale business. So, this is a business that we've known for many years, it's been a licensee for over 20 years. I would say the go-to-market strategy was a bit disjointed in years past. Our Mexico partners did some of the work, we did some of the work directly with some of the Wholesale customers down there. So now we're one company with the capacity to make that a much more efficient business. So, our early learnings are good. It should be some portion, of a $30 million business for us this year. And we expect to double it over the next five years.

Great. Sounds good. Good luck this year, you guys.

Thanks very much.

And we go next to Bill Schultz with Goldman Sachs. Bill Schultz - Goldman Sachs & Co. LLC: Thanks, guys. Mike, it's a commendable thing you guys are doing, to take this tax windfall and invest behind your people. So, just want to put that out there before going into my questions.

Thanks, Bill. Bill Schultz - Goldman Sachs & Co. LLC: So, just diving into the reinvestment plans a bit more. I just had two quick ones.

Sure. Bill Schultz - Goldman Sachs & Co. LLC: On the increased marketing spend, how much of those incremental dollars do you guys expect to be in digital? And then two, what sort of capital investments do you guys think are needed so that your infrastructure can support faster eCommerce deliveries? Thanks.

Sure. So, good questions. On the brand marketing, it will be heavily weighted to digital. Richard showed you a terrific slide in terms of how well we're connected to Millennial consumers through social media. So, we've improved our capabilities in recent years so that we can target consumers more effectively, we can personalize the messages. And the good thing is before we knew about the tax law, we had a brand marketing campaign underway for the Carter's brand. That, we'll probably be able to share more with you when we update you again in April. So, it'll be heavily weighted to digital. That's the way that good companies are connecting with consumers today. And then in terms of CapEx, we've got a game plan. You should expect CapEx going forward should be comparable to a level of spend we've had in years past. Some portion of 2.5% to 3% of sales. We will invest in a new West Coast distribution center beginning this year and that's more to support Skip Hop and the growth that we're expecting in Amazon. And then there's other opportunities that are less CapEx related to help expedite the shipment of eCommerce orders. We have some good relationships, some good dialogue going on with our logistics providers that'll enable us to expedite the speed of delivery. Bill Schultz - Goldman Sachs & Co. LLC: Thanks, Mike.

You're welcome.

We go next to Anna Andreeva with Oppenheimer. Anna Andreeva - Oppenheimer & Co., Inc.: Good morning, guys. And let me add my congrats. Great quarter as well.

Thanks very much. Anna Andreeva - Oppenheimer & Co., Inc.: We had two quick questions. Just following up on the 1Q guide, maybe talk about what are you guys seeing quarter-to-date in Retail? And remind us what's the earlier Easter benefits that we should expect? And then secondly on gross margins. So, really strong results in Retail especially. Maybe talk about the puts and takes on the gross margin line as we go through the year. What are you guys seeing? Was it AUC? And what should we expect as part of the guide for 1Q and the year? Thank you so much.

I'll take the second part of the question first, Anna. On gross margin. We've had a continuing trend of lower product costs, which has benefited all of our businesses, Wholesale and Retail, as well. Our projections right now through 2018 show that we've continued to have the benefit of lower product cost. There are some signs for inflation on the horizon for early 2019 and that might have an impact later in the year as we start to ship that spring 2019 product. We're also getting benefits from the continued growth of our direct sourcing operations. So, we filled substantial size and scale to our operations in Hong Kong. Those folks are doing a great job helping us negotiate with factories on a more direct basis than we have in the past. That's also benefiting gross margin. And then, just from a mix point of view, we have the continued growth. Most of our growth is going to come from our U.S. Retail business this year. That is a gross margin rich business, so that should be accretive to the rate, as well. So, we're planning for gross margin expansion, as well, across the year and including the first quarter.

In terms of Q1, Anna, we have positive comp to-date. We had a good start in our Retail business in January. I'd say it was down a tick in February, weather, other issues. And then the biggest month to go in March; we're excited about that. Earlier Easter, you are correct. Usually that's a shift of 1 point, 1.5 point in comp. So we would hope to have a really good strong Q1 in our Retail business. I would note that Wholesale demand is good. We've had good early selling in spring product in Wholesale and replenishment trends have been strong. Anna Andreeva - Oppenheimer & Co., Inc.: Thanks so much, guys. Very helpful. Best of luck.

Thank you.

And we go next to Laurent Vasilescu with Macquarie. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Thank you. Thank you for taking my question. Can you remind us how much China generated revenues for the fourth quarter and the full year? Any expectations for 2018 revenues? And then any color on where you think the EBIT is for 2018 on China?

The growth, we had about $21 million in sales – total sales to China for the year. And I think it's important to keep in mind we're early days on China. It's heavily weighted to eCommerce. And that's – my guess is over the next five years, it'll still be heavily weighted to eCommerce. We have a new – that's with Alibaba's Tmall website. And then we have a new relationship with Pou Sheng, who opened up a total of about 50 stores by the end of the year. And so, we lost some portion of about $4 million last year. We hope that we start to show some more progress on improving the profitability of China in the next couple years. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Okay. Very helpful. And following the integration of the Mexican license business, curious to know if you'd be willing to make any further investments in some licensed partners to further grow your International revenue business.

It's possible. It's possible. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Okay. Very helpful. And then lastly, if I can squeeze one more in. With Skip Hop reaching almost $100 million in revenues for FY 2017, how should we think about that revenue growth for 2018 as growth rate or dollar terms? And how should we think about the EBIT contribution to the overall business in 2018?

Skip Hop is – integration's going well, I'd say. We have had strong sales. The fourth quarter of last year was the largest quarter the Skip Hop team's ever had, so really excited about that. We've got really good robust sales growth planned this year in all channels with Skip Hop. We launched the site last summer and we doubled the online sales from that. We launched in Macy's, we're working with some other key account relationships and it's been very successful as we add it to our stores. And by Easter time we'll have an expanded assortment in our stores as well as the Canadian stores and our Mexico partner, and we're looking at brand extensions and new accounts as we go forth for 2018. So, the outlook is very strong for sales growth in all channels. And we think there's a nice opportunity to improve profitability. There were some things that occurred last year, in the first year, Richard shared some, that dampened the profitability a bit, but we feel it could be a good contributor to the company sales and profitability over time. And that the sales growth is, I would say, robust this year as planned. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Thanks very much and best of luck.

Thank you.

And we go next to Omar Saad with Evercore ISI.

Hi. Good morning. This is Warren Cheng on the line for Omar.

Good morning.

I just wanted to follow-up on Kate's question on the Wholesale business. You gave some excellent detail on the performance by some different buckets, but I wanted to ask, in particular, about your business with your top three Wholesale customers. How has that trended over the last three years and has there been any change recently there?

I typically don't like to give customer-specific information. So, we won't be answering that question this morning. The performance varies from retailer-to-retailer from year-to-year, based on their different strategies. But the thing we're most encouraged by is that we're forecasting good growth in Wholesale this year.

Okay. Got it. And also, it looks like the outlook you gave for the Wholesale contribution on the five-year plan of $200 million, that's ticked up slightly. Is that just driven by Simple Joys or are there other drivers there that we should be aware of?

You have two components. You'd have Skip Hop and you'd have Amazon.

Okay. Got it. Okay. Thank you very much.

You're welcome.

And we go next to Jim Chartier with Monness, Crespi & Hardt (sic) [Monness, Crespi, Hardt & Co.] (55:24). Jim A. Chartier - Monness, Crespi, Hardt & Co., Inc.: Morning. Thanks for taking my question. First, I would just wanted to talk about China, how did their stores that were opened, how did they perform? And does Pou Sheng plan to open any more stores in 2018? And then on the organic line, can you give us a little bit more detail about the organic apparel market for kids, how fast is that growing and how big it is today? Thanks.

Okay. So, with respect to China, just for context, again it's a $21 million business, it grew about 30% last year, 75% of the sales are direct to the consumer through Alibaba's Tmall website. The balance is the Wholesale business with Pou Sheng. Pou Sheng, you might recall, $2 billion publicly traded retailer, it's got about 8,000 stores under management. And it's early days, we're learning how to do business in China. And we're learning the unique consumer preferences for product. It's a big market. It's worth exploring. It's a $12 billion market, it's expected to double over the next 10 years. As we shared with you on calls past, about 16 million children are born every year in China, it's about four times the rate of children born in the United States. Our latest forecast shows some portion of $80 million to $100 million in revenue by 2022. Again, heavily weighted to the eCommerce business. We hope it's got some portion of about a 10% operating margin. It's going to be margin dilutive, near-term in it's early days. And so, we hope to show more progress on the profitability over the next couple years. Pou Sheng, I would say the stores, it's mixed, of the 50 stores, as I understand it, they were opened up in about 24 cities, which is – it would be unlike something we would do in the United States. But, again they have 8,000 stores under management in Tier 1, 2, 3 cities in China. So, they're doing what they think is best to roll those stores out. That's their call. As I look at the store performance, some are doing well, some are not. My guess is this year, that the focus for Pou Sheng will be more on improving store productivity, it'll be less on growth. By this time next year, my guess is we'll have some portion of 60 stores that they're operating. And so, we're on our way toward the 200 potential store openings over the five-year period. But that's highly dependent on whether or not they figure out a model – store model that provides good returns for them. So that's yet to be demonstrated that they consistently open stores that provide good returns on investment.

Jim, the other question you had, on Little Planet, we developed two new brands as sources of growth over the past year. Simple Joys with Amazon, which we've talked about, and also that Little Planet organics line, both made by Carter's. Little Planet is a beautiful line and it really a response to the Millennials wanting organic options. We had really strong engagement on all of our social channels at launch and a positive response to a limited offering. It is very early days. We're looking forward to growing that and monitoring the success. We're excited about the creative because, not only is it organic, but we've been able to achieve some of the vibrant color we have in our others, Carter's brands and working with our supply chain. So, we're excited about that. It's available as an online shop at carters.com and also at Macy's, Target, and Amazon online. Jim A. Chartier - Monness, Crespi, Hardt & Co., Inc.: Thanks. Could you just give us a sense of how big the organic apparel market is in the U.S.?

Yeah, I'd say too early to comment on our business. It's undetermined, in terms of the market size on that. I guess I would hold off on commenting on that until we get a little further into it. Jim A. Chartier - Monness, Crespi, Hardt & Co., Inc.: Okay. Thanks, best of luck.

Thanks very much.

And ladies and gentlemen, this will conclude our question-and-answer session. Mr. Casey, I will turn the conference back over to you for any closing remarks.

Okay. Well, thank you all very much for joining us on the call this morning. We appreciate your interest in the business. And we look forward to updating you again on our progress in April. Bye, everybody.

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