Chase Coleman’s Tiger Global Takes Near 10% Stake in Children’s Retailer
Coleman’s fund upped its stake in Carter’s by 41.33% last week by purchasing a total of 1,653,031 shares of the company’s stock. The fund bought these shares at an average price of $68.28 per share, and since then the price is down slightly to $68.11 per share.
Tiger Global now holds on to 5,653,031 shares of Carter’s, representing 9.54% of the company’s shares outstanding. Since the guru bought into Carter’s during the first quarter, the company has seen average gains of 12%. Chase Coleman’s holding history as of the close of the second quarter:
Tiger Global Management is the largest guru shareholder of Carter’s stock.
Carter’s is the largest marketer in the U.S. of apparel and related products exclusively for babies and young children. The company owns the Carter’s and OshKosh B’gosh brands, which are two of the most recognized brands in the children’s clothing marketplace. These brands can be found in department stores, national chains and specialty retailers through more than 400 company-operated stores and online.
Carter’s historical revenue and net income:
Recent Happenings at Carter’s
Carter’s released their third quarter financials on Oct. 24 which reported:
· Net sales increased $91.5 million, or 13.7%, to $760 million.
· Operating income was $91.1 million, down 4.5% from last year.
· Net income decreased $2.8 million, or 4.7%, to $56.6 million, or $0.97 per diluted share.
· The adjusted net income increased $4 million, or 6.6%, to $65 million, or $1.12 per share.
Chairman and CEO Michael Casey said regarding the results, “Our growth reflects the strength of our brands and multi-channel business model. We believe we are well-positioned with strong product offerings and compelling promotions heading into the holiday season and expect to achieve our growth objectives this year.”
Earlier in the quarter Carter’s announced a $400 million accelerated share repurchase program. The company announced this as part of its efforts to improve their capital structure and return capital to shareholders. The company will acquire these common shares under the $700 million share repurchase authorization announced on Aug. 22. All of the shares bought under the accelerated program will be retired.
During the quarter, the company bought back 226,400 shares for $16.4 million. Under the accelerated stock repurchase program the company bought back 4.6 million shares worth $328.4 million, as of Sep. 28, 2013.
During the third quarter Carter’s opened 17 new Carter’s retail stores and 7 new OshKosh B’gosh retail stores. This brings the total number of stores to 455 Carter’s and 170 OshKosh B’gosh retail stores in the US.
Insider Trading Lawsuit
On Oct. 29, the Securities Exchange Commission (SEC) filed a civil complaint against retired hedge-fund investment consultant, Dennis Rosenberg for an alleged insider trading scheme involving Carter’s. The complaint states that Rosenberg was able to trade in advance of marketing-moving news based on tips he got from a former executive at the company between 2005 and 2010.
Rosenberg passed these tips along to other investment advisers at two other hedge funds, who also traded based on this information. The tips raked in $500,000 for Rosenberg. The former advisor received unlawful gains, avoided losses and consulting fees based on the information given to him.
All together, the individuals receiving the information supposedly banked about $2 million. While he hasn’t verbally admitted to anything yet, Rosenberg agreed to pay up $500,000, plus $108,000 in interest.
This is the second insider trading case coming from the alleged Carter’s scheme. Another occurred in Aug. 2012, when the SEC sued the company’s former VP of Investor Relations, Eric Martin. Martin’s punishment required him to agree to a consent order banning him from serving as an officer or director at a public company.
The analysis on Carter’s reports that the company has a high Piotroski F-Score, indicating that the company is in a healthy situation.
The Peter Lynch Chart suggests that the company is currently overvalued:
Carter’s dividend yield is currently sitting at a historical high:
According to the 10-Year Financials the company holds cash and cash equivalents of $201.8 million, a long-term debt of $586 million and shareholders’ equity of $658.9 million.
The top guru shareholders of Carter’s:
1. Chase Coleman: 5,653,031 shares, representing 9.54% of the company’s shares outstanding.
2. Andreas Halvorsen: 2,953,095 shares, representing 4.98% of the company’s shares outstanding and 1.2% of his total portfolio.
3. Alan Fournier: 2,740,000 shares, representing 4.63% of the company’s shares outstanding and 3.8% of his total portfolio.
Carter’s has a market cap of $3.79 billion. Its shares are currently trading at around $69.52 with a P/E ratio of 24.50, a P/S ratio of 1.60 and a P/B ratio of 4.00. Carter’s had an annual average earnings growth of 11.80% over the past ten years.