StockStory Flags Carter’s Sales and Cash-Flow Risks

StockStory says Carter’s faces pressure from slower same-store sales, a forecast decline in free-cash-flow margin and falling returns on invested capital. The publisher argues these concerns make the children’s apparel retailer less attractive despite its lower share price.

Carter’s same-store sales averaged 1.1% annual growth over the past two years, according to the article. StockStory says analysts expect the company’s free-cash-flow margin to fall from 9.8% over the past 12 months to 4.1% over the next year.

The article also says Carter’s return on invested capital has declined significantly in recent years, but gives no specific figure. StockStory argues the trend, alongside low returns, points to fewer profitable growth opportunities.

The publisher said Carter’s shares had fallen 9.7% over six months, while the S&P 500 gained 21.1%. As of 14:22 UTC Wednesday, shares traded at $31.41, up 0.4% since the previous close.

StockStory described the stock’s valuation of 8.8 times forward earnings as optically cheap, but said it sees substantial downside risk. It said it would favor an unnamed company that owns Taco Bell instead.