Financial Analysis: Caleres (NYSE:CAL) versus Carter’s (NYSE:CRI)

Caleres (NYSE:CAL) and Carter’s (NYSE:CRI) are both small-cap consumer discretionary companies, but which is the better stock? We will contrast the two companies based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, analyst recommendations and risk.

Valuation and Earnings

This table compares Caleres and Carter’s”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Caleres	$2.72 billion	0.16	$107.25 million	$1.75	7.29
Carter’s	$2.83 billion	0.40	$185.51 million	$3.77	8.19

Carter’s has higher revenue and earnings than Caleres. Caleres is trading at a lower price-to-earnings ratio than Carter’s, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Caleres and Carter’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Caleres	2.26%	11.91%	3.68%
Carter’s	4.79%	20.68%	7.29%

Insider and Institutional Ownership

98.4% of Caleres shares are held by institutional investors. 3.8% of Caleres shares are held by company insiders. Comparatively, 2.0% of Carter’s shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Volatility & Risk

Caleres has a beta of 1.15, suggesting that its share price is 15% more volatile than the S&P 500. Comparatively, Carter’s has a beta of 1.07, suggesting that its share price is 7% more volatile than the S&P 500.

Dividends

Caleres pays an annual dividend of $0.28 per share and has a dividend yield of 2.2%. Carter’s pays an annual dividend of $1.00 per share and has a dividend yield of 3.2%. Caleres pays out 16.0% of its earnings in the form of a dividend. Carter’s pays out 26.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Analyst Ratings

This is a summary of current ratings for Caleres and Carter’s, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Caleres	2	1	0	0	1.33
Carter’s	3	3	0	0	1.50

Caleres presently has a consensus price target of $14.00, indicating a potential upside of 9.77%. Carter’s has a consensus price target of $30.50, indicating a potential downside of 1.24%. Given Caleres’ higher possible upside, equities analysts clearly believe Caleres is more favorable than Carter’s.

Summary

Carter’s beats Caleres on 10 of the 15 factors compared between the two stocks.

About Caleres

Caleres, Inc. engages in the retail and wholesale of footwear business in the United States, Canada, East Asia, and internationally. It operates through Famous Footwear and Brand Portfolio segments. The company offers licensed, branded, and private-label athletic, casual, and dress footwear products. The company provides brand name athletic, casual, and dress shoes, including Nike, Skechers, adidas, Vans, Crocs, Converse, Puma, Birkenstock, New Balance, Under Armour, Dr. Martens, Asics, Timberland, Bearpaw, Skechers, HeyDude, Franco Sarto, Rykä, Vince, Bzees, Veronica Beard, and Zodiac brands, as well as company-owned and licensed brands, such as LifeStride, Dr. Scholl’s Shoes, Blowfish Malibu, and Naturalizer. The company also operates naturalizer.com, naturalizer.ca, vionicshoes.com, samedelman.com, samedelman.co.uk, allenedmonds.com, allenedmonds.ca, drschollsshoes.com, lifestride.com, francosarto.com, ryka.com, bzees.com, and zodiacshoes.com, as well as Vince.com, blowfishshoes.com, and veronicabeard.com websites. In addition, it designs, sources, manufactures, and markets footwear to retail stores, such as online retailers, national chains, department stores, mass merchandisers, and independent retailers. Further, the company wholesales men’s footwear, apparel, leather goods, and accessories under the Allen Edmonds brand; footwear for women under LifeStride brand; Italian footwear Franco Sarto brand; athletic footwear for women under the Rykä brand; women’s shoe collection under the Vince brand; women’s footwear under the Bzees brand; and women’s footwear collection under Veronica Beard brand. The company was formerly known as Brown Shoe Company, Inc. and changed its name to Caleres, Inc. in May 2015. Caleres, Inc. was founded in 1878 and is headquartered in Saint Louis, Missouri.

About Carter’s

Carter’s, Inc. engages in the business of brand marketing of young children’s apparel. It operates through the following segments: the United States (US) Retail, US Wholesale, and International. The US Retail segment includes selling products through retail stores and ecommerce websites. The US Wholesale segment focuses on wholesale partners. The International segment is involved in selling in retail stores and ecommerce websites in Canada and Mexico, and to international wholesale customers and licensees. The company was founded by William Carter in 1865 and is headquartered in Atlanta, GA.