#1carter's, inc. Second Quarter 2013 Business Update July 25, 2013#2Second Quarter Highlights NET SALES $472.2 +10% $517.9 ● $ in millions, except EPS ADJUSTED OPERATING ● $36.2 INCOME* 2012 2013 2012 * Results are stated on an adjusted basis; see reconciliation to GAAP on page 9. 7.7% of Net sales +24% $44.9 8.7% of Net sales 2013 ADJUSTED EPS* $0.37 2012 Carter's brands +9% OshKosh B'gosh brand (5%) International net sales +45%; 10% of total company sales Solid earnings growth driven by sales strength and gross margin expansion +24% Sales growth driven by Carter's Retail, eCommerce, and International businesses U.S. net sales +7% $0.46 2013 2#3Second Quarter 2013 Net Sales $472.2 Q2 2012 Growth vs. 2012 Store Comp +3.9% $30.1 Retail stores $22.2 eCommerce $7.9 Total Carter's +9% Carter's Retail +17.8% $2.2 Note: Results may not be additive due to rounding. Carter's Wholesale +1.1% $ in millions Store Comp (5.1%) ($1.9) Retail stores ($3.3) $1.4 eCommerce Total OshKosh (5%) OshKosh Retail ($1.5) (3.2%) OshKosh Wholesale (11.6%) Canadian Store Comp (1.2%) $16.8 Wholesale $6.6 Canada Retail $4.8 Japan $4.7 $0.6 eCommerce International +44.9% +9.7% $517.9 Q2 2013 +9.7% 3#4Second Quarter Adjusted Results* Net sales Gross profit Adjusted SG&A* Royalty income Adjusted operating income* Interest and other, net Income taxes Adjusted net income* Adjusted diluted EPS* Weighted average shares outstanding $ in millions, except EPS Q2 2013 $517.9 220.2 182.9 (7.5) 44.9 1.6 15.6 $27.7 $0.46 59.2 * Results are stated on an adjusted basis; see reconciliation to GAAP on page 9. Note: Results may not be additive due to rounding. % of Sales 42.5% 35.3% (1.4%) 8.7% 0.3% 3.0% 5.3% Q2 2012 $472.2 183.2 154.5 (7.5) 36.2 1.5 12.4 $22.4 $0.37 58.9 % of Sales 38.8% 32.7% (1.6%) 7.7% 0.3% 2.6% 4.7% Fav/ (Unfav) 10% 20% (18%) 0% 24% (4%) (26%) 24% 24% 4#5Second Quarter Adjusted SG&A* $154.5 32.7% of Net sales Q2 2012 $9.5 U.S. & International Retail Driven by 69 net new stores (51 U.S., 18 Canada) $4.7 Distribution and Freight Driven by sales volume & new multi-channel distribution facility start up costs $4.2 Japan $ in millions Second quarter of new business *Results are stated on an adjusted basis; see reconciliation to GAAP on page 9. $1.9 eCommerce Driven by sales volume $2.4 Employee Benefits/ Stock Based Compensation $5.7 All Other +18.4% +260 bps $182.9 35.3% of Net sales Q2 2013 5#6First Half Adjusted Results* Net sales Gross profit Adjusted SG&A* Royalty income Adjusted operating income* Interest and other, net Income taxes Adjusted net income* Adjusted diluted EPS* Weighted average shares outstanding $ in millions, except EPS 1H 2013 $1,108.9 463.3 358.8 (16.7) 121.3 3.3 * Results are stated on an adjusted basis; see reconciliation to GAAP on page 10. Note: Results may not be additive due to rounding. 42.6 $75.4 $1.26 59.2 % of Sales 41.8% 32.4% (1.5%) 10.9% 0.3% 3.8% 6.8% 1H 2012 $1,023.8 378.0 302.4 (16.2) 91.8 3.8 32.0 $56.0 $0.94 58.8 % of Sales 36.9% 29.5% (1.6%) 9.0% 0.4% 3.1% 5.5% Fav/ (Unfav) 8% 23% (19%) 3% 32% 14% (33%) 35% 34% 6#7First Half 2013 Net Sales $1,023.8 YTD 2012 Store Comp +2.2% $61.3 Total Carter's +8% Carter's Retail Growth vs. 2012 +17.7% $0.9 Note: Results may not be additive due to rounding. Carter's Wholesale +0.2% $ in millions Store Comp (7.3%) ($4.5) Total OshKosh (5%) OshKosh Retail ($3.6) (3.9%) OshKosh Wholesale (10.8%) Canadian Store Comp (2.5%) $30.9 +8.3% +36.8% $1,108.9 International YTD 2013 +8.3% 7#8First Half 2013 Adjusted Business Segment Performance Carter's Wholesale (a) Carter's Retail (b) Total Carter's OshKosh Wholesale OshKosh Retail (b) Total OshKosh Adjusted International (c)(d) Adjusted corporate expenses (d) Total, as adjusted (d) 2013 Note: Results may not be additive due to rounding. $445 408 $853 $29 112 $141 $115 Net Sales $ 2012 Growth $444 346 $790 $33 116 $149 $84 $ in millions $1,109 $1,024 $1 61 $62 ($4) (5) ($8) $31 $85 Adjusted Operating Income (Loss) 2013 $81 73 $155 $3 (11) ($8) $14 (40) $121 2012 $76 50 $126 $1 (17) ($16) $15 (33) $92 $ Growth $6 23 $28 ($1) (7) Adjusted Operating Margin $29 2013 $3 6 (10.0%) $8 (5.4%) 18.3% 17.9% 18.1% 11.8% 12.4% (3.6%) 10.9% 2012 17.0% 14.6% 16.0% 2.1% (14.3%) (10.7%) 17.6% (3.2%) 9.0% (a) Includes U.S. wholesale sales of Carter's, Child of Mine, Just One You, and Precious Firsts. (b) Includes U.S. retail stores and eCommerce sales. (c) Includes international retail, eCommerce and wholesale sales. Adjusted operating income includes international licensing income. (d) See reconciliation of reported (GAAP) results to adjusted results on pg. 10. 8#9Second Quarter 2013 Reconciliation of Reported to Adjusted Earnings Second Quarter of Fiscal 2013 As reported (GAAP) Office consolidation costs (a) Revaluation of contingent consideration (b) Amortization of tradenames (c) As adjusted (e) Second Quarter of Fiscal 2012 As reported (GAAP) Revaluation of contingent consideration (b) Facility closure costs - Hogansville DC (d) As adjusted (e) SG&A $195.0 (10.2) (1.0) (1.0) (12.1) $182.9 SG&A $156.3 (1.1) (0.7) (1.8) $154.5 % of sales 37.7% 35.3% % of sales 33.1% 32.7% $ in millions, except EPS Operating % of Income sales $32.7 10.2 1.0 1.0 12.1 $44.9 Operating Income $34.4 1.1 0.7 1.8 $36.2 6.3% 8.7% % of sales 7.3% 7.7% Net Income $19.7 6.4 1.0 0.6 8.0 $27.7 Net Income $20.8 1.1 0.5 1.6 $22.4 Diluted EPS $0.33 0.10 0.02 0.01 0.13 $0.46 Diluted EPS $0.35 0.01 0.01 0.02 $0.37 Segment Reporting International % of Operating segment Operating net sales Expenses Income $7.4 1.0 1.0 $8.3 $6.1 1.1 13.6% 1.1 $7.2 15.4% Segment Reporting International % of Corporate Operating segment Operating Income net sales Expenses 16.4% Corporate % of 19.3% ($33.8) 10.2 1.0 11.1 ($22.6) segment net sales (6.5%) (4.4%) % of segment net sales ($17.8) (3.8%) 0.7 0.7 ($17.1) (3.6%) (a) Costs related to the office consolidation. (b) Revaluation of the contingent consideration liability associated with the June 2011 acquisition of Bonnie Togs. (c) Amortization of H.W. Carter and Sons tradenames. (d) Costs related to the closure of a distribution facility located in Hogansville, GA, announced in the first quarter of fiscal 2012. (e) The Company has provided adjusted, non-GAAP financial measurements that present SG&A, operating income, net income, and net income on a diluted share basis excluding the adjustments discussed above. The Company believes these adjustments provide a meaningful comparison of the Company's results. The adjusted, non-GAAP financial measurements should not be considered as an alternative to net income or as any other measurement of performance derived in accordance with GAAP. The adjusted, non-GAAP financial measurements are presented for informational purposes only and are not necessarily indicative of the Company's future condition or results of operations. Note: Results may not be additive due to rounding. 9#10First Half 2013 Reconciliation of Reported to Adjusted Earnings First Half of Fiscal 2013 As reported (GAAP) Office consolidation costs (a) Revaluation of contingent consideration (b) Amortization of tradenames (c) Facility closure costs - Hogansville DC (d) As adjusted (e) First Half of Fiscal 2012 As reported (GAAP) Revaluation of contingent consideration (b) Facility closure costs - Hogansville DC (d) SG&A $380.4 (18.2) (1.9) (1.0) (0.6) (21.6) $358.8 SG&A $306.0 % of sales 34.3% 32.4% % of sales 29.9% (1.8) (1.8) (3.6) $302.4 29.5% $ in millions, except EPS Operating Income $99.7 18.2 1.9 1.0 0.6 21.6 $121.3 Operating Income $88.2 1.8 1.8 3.6 $91.8 % of sales 9.0% 10.9% 8.6% Net Income % of Net sales Income $61.1 11.4 1.9 0.6 0.4 14.3 $75.4 9.0% $53.1 1.8 1.2 2.9 Diluted EPS $56.0 $1.02 0.19 0.03 0.01 0.01 0.24 $1.26 Diluted EPS $0.89 0.03 0.02 0.05 $0.94 Segment Reporting International % of Corporate Operating segment Operating net sales Expenses Income As adjusted (e) (a) Costs related to the office consolidation. (b) Revaluation of the contingent consideration liability associated with the June 2011 acquisition of Bonnie Togs. (c) Amortization of H.W. Carter and Sons tradenames. $12.3 1.9 1.9 $14.2 International % of Operating segment Income net sales $13.0 1.8 1.8 10.7% $14.8 12.4% Segment Reporting 15.5% ($59.5) 18.2 17.6% 1.0 0.6 19.7 ($39.8) Corporate Operating Expenses % of segment net sales (5.4%) (3.6%) % of segment net sales ($35.0) (3.4%) 1.8 1.8 ($33.1) (3.2%) (d) Costs related to the closure of a distribution facility located in Hogansville, GA, announced in the first quarter of fiscal 2012. (e) The Company has provided adjusted, non-GAAP financial measurements that present SG&A, ating income, net income, and net income on a diluted share basis excluding the adjustments discussed above. The Company believes these adjustments provide a meaningful comparison of the Company's results. The adjusted, non-GAAP financial measurements should not be considered as an alternative to net income or as any other measurement of performance derived in accordance with GAAP. The adjusted, non-GAAP financial measurements are presented for informational purposes only and are not necessarily indicative of the Company's future condition or results of operations. Note: Results may not be additive due to rounding. 10#11Balance Sheet and Cash Flow Balance Sheet (at Q2 end) Cash Flow (First Half) Cash Accounts receivable Inventory Other assets Accounts payable Long-term debt Operating Cash Flow CapEx Free Cash Flow Note: Results may not be additive due to rounding. 2013 $ in millions $312.1 133.3 429.2 537.5 199.6 186.0 2013 $69.8 (70.6) ($0.7) 2012 $237.6 131.9 377.9 497.6 120.9 186.0 2012 $89.9 (37.7) $52.2 ● Strong liquidity HIGHLIGHTS $312 million cash on hand $174 revolver availability Inventory dollars up in support of strong planned second half sales and store openings - Other assets increase reflects acquisition of H.W. Carter and Sons tradenames for $38 million Assets to be amortized on an accelerated basis over 3 years CapEx reflects growth and infrastructure investments, including: New multi-channel distribution center U.S. / International retail stores Technology initiatives Repurchased 433,402 shares in Q2 for $28.8 million (average price/share $66.49) YTD repurchased $46.2 million (703,902 shares @ average price $65.62) 11#12Acquisition of Tradenames Transaction Strategic Rationale Sweetheart Acquired worldwide rights to Carter's Watch The Wear and H.W. Carter & Sons brands • Purchase price $38 million (cash) ● - Asset acquisition transaction only; no liabilities assumed Value of tradenames to be amortized on an accelerated basis over three years Purchase price <1% of current CRI market capitalization Strengthens the Carter's brand - Reduce possible consumer confusion - Control quality and distribution of products carrying the Carter's name • Facilitates expansion in key international markets where Carter's, Inc. did not have trademark priority CW Since 1859 CARTER'S Watch the Wear CARTER'S the W carterscww.com CARTERS bodysuits 5 pack bodysu CARTER'S CARTER'S chto ikets TM 12#13● ● ● ● Capital Structure Review – Guiding Principles Maintain prudent liquidity Prioritize investment in high-return, organic growth opportunities Selectively pursue bolt-on, tuck-in acquisitions to supplement growth Improve efficiency of capital structure Return excess capital to shareholders ● ● ● ● Target cash on hand and revolver availability equal to approximately one year of EBITDA (currently approximately $350 million) Continue investment in high-return businesses such as Carter's retail stores and eCommerce Disciplined criteria to critically evaluate opportunities Add a reasonable amount of new leverage Maintain financial flexibility Maintain favorable credit rating Target returning 50% of annual free cash flow to shareholders via dividends and share repurchases 13