Kids’ apparel maker Carter’s (CRI) got a boost today from Goldman Sachs analyst Nicole Shevins, who upgraded shares to Buy from Neutral.
“CRI is in the early stages of raising prices in its wholesale business (50% of sales) to offset higher input costs. As the spread between average unit retail and average unit cost growth narrows, we expect gross margin trend to improve,” Shevins writes. “Input costs should decline in the second half of 2012, and, assuming CRI can hold pricing constant, it would see a notable increase in gross margins in the second half of 2012.”
Shevins boosted her EPS estimates, which are now 7% above consensus for 2012, as Carter’s should be able to recover 400 basis points of its recent margin erosion by 2013.
Carter’s rose 2.1% in midday trading.
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