Carter's: Supporting a market leader's success
Carter's (NYSE:CRI) is the leading U.S. brand of infant apparel, and, through its 2005 acquisition of Osh Kosh B'Gosh, is the nation's largest branded marketer of children's apparel up to six years old. Carter's and OshKosh B'gosh clothing and accessories are sold in leading department stores, national chains, and specialty retailers domestically and internationally and through more than 400 Company-operated stores and on-line at carters.com and oshkoshbgosh.com. Additionally, the Company has developed several other brands to support its merchandising strategy in partnership with large discount chains. The Company's Child of Mine brand is available at Walmart, and its Genuine Kids, Just One You, and Precious Firsts brands are available at Target. Carter's is headquartered in Atlanta, Georgia.
Carter's operating strength, which enabled it to undertake the Osh Kosh acquisition, resulted from a series of strategic, operating and finance initiatives that enabled management to build Carter's dominant position in infant apparel. The close working partnership between Berkshire and Carter's management led to an early commitment to strategic planning that focused on the right pace and mechanics for offshore sourcing, which then supported alternative channel development through mass merchants, and led to improved financial strength through an initial public offering. The combined momentum provided by these initiatives ultimately made the addition of Osh Kosh an attractive and very achievable goal.
What did Carter's seek from a private equity partner?
When CEO Fred Rowan and his team knew they needed to seek a new financial partner in mid 2001, he had no idea that the sale process initiated by Carter's owners would lead him to Berkshire. Much had already been accomplished in moving Carter's from a high quality but sleepy brand burdened by high domestic production costs, to a more nimble category leader making good progress in the transition to offshore sourcing. Now, with the expected ownership change, Fred had to find a new partner who would not only see the importance of these early achievements but also the potential ahead of this well managed Company.
Berkshire recognized early on the quality of this message and the relevance of prior Berkshire experience to the operating challenges ahead of Carter's. After closing the acquisition in record time, Berkshire used internal and external resources to undertake a thorough planning process that both built a road map to guide management's operating execution, but also served to coalesce the team around the significant potential inherent in the opportunities ahead of their company.
In the early stages of this investment, Berkshire took several actions that helped lay the groundwork for continued strong performance. In addition to the strategic planning exercise, a strong board was developed comprised of executives with relevant operating and brand experience who were able and willing to help the Carter's team pursue the agreed strategy. Berkshire also provided key assistance in helping the Company through the IPO process and has been an ongoing resource to management in thinking through decisions that arise in the normal course of being a public Company.
During 2005, Berkshire was pleased to be able to play a critical role in the Osh Kosh acquisition, both during the original approach to and negotiation with the Osh Kosh management and board, and also during the contract negotiation and financing phase. Berkshire's deep acquisition experience and familiarity with capital markets enabled very attractive financing to be put in place. This transaction provided meaningful new business expansion opportunities for Carter's that continue to be developed.
While the Carter's story continues to unfold, from the very beginning of its partnership with Berkshire, the theme of operational excellence supported by proper planning and execution was the hallmark of this investment. Carter's management has driven the results with the assistance of planning resources, governance talent and experience, and acquisition expertise provided by Berkshire.
Berkshire's ownership position in Carter's was successfully realized in 2006. Berkshire continued to be represented on Carter's board for four years after the realization, proving again that a good, long term relationship can last beyond final determination of the investment outcome. In 2010, Berkshire invested in Carter's for a second time through open market purchase of shares. Berkshire exited its position in Carter's through an open market sale of its shares in 2013.