Carter's shares rise as CEO projects OshKosh B'Gosh cuts

<p>Shares in children's clothing retailer Carter's Inc. rose nearly 12 percent after its chief executive said the company would trim costs at OshKosh B'Gosh Inc., a rival it plans to buy for $312 million.</p><p>Shares in the Atlanta-based retail store operator closed up $4.80 to a 52-week high at $45.75 Wednesday on the New York Stock Exchange.</p><p>"Our mission as two brands should be to find out what can make these two products more competitive," Carter's CEO Fred Rowan said in a conference call Wednesday morning. "There are substantial cost reductions that would ... improve their products."</p><p>Christina De Marval, an investment analyst with New York's Sidoti & Co., said Wall Street bought up the stock after realizing the value in the deal.</p><p>"As people have worked through the numbers, Carter's stock kept rising," she said. "They're better understanding the numbers and realizing there could be significant profitability improvements to capture."</p><p>After the deal, Carter's, the nation's sixth-largest branded marketer of apparel for children up to age 6, should see sales of $1.3 billion annually, control 352 retail stores and sell wholesale to thousands of department stores.</p><p>Tom Harenburg, owner of Carl M. Hennig Investments Inc., said Carter's "made a heck of a buy."</p><p>"They're going to improve margins from 5 to 10 percent and one of the easiest ways to do that is to cut salaries and general administrative (costs)," Harenburg said.</p><p>OshKosh B'Gosh employs 5,100 people, including 1,700 at production facilities in Mexico and Honduras.</p><p>Residents of Oshkosh, where the company was founded in 1895 making men's bib overalls, were worried about losing a major institution.</p><p>Erna Cartwright, 98, who worked at the company from 1924-46, said streamlined operations and reduced costs would be a meager trade off for the potential loss of a locally owned company with deep ties to the community.</p><p>"I just think it's very sad to think the ultimate answer is money," Cartwright said. "It's such a sad thing to go down."</p><p>Shares in OshKosh B'Gosh fell 12.4 percent on the Nasdaq Wednesday to finish at $25.74, just below Carter's cash purchase price.</p><p>Carter's had said Tuesday afternoon it would purchase OshKosh shares for $26 in cash, with the deal expected to close in the third quarter. It said holders of 75 percent of OshKosh class B sharers _ more than the two-thirds needed _ have approved the deal. OshKosh Chairman and CEO Doug Hyde is said to control the majority of the voting shares.</p><p>Carter's Chief Financial Officer Mike Casey told the conference call that the first order of business for Carter's will be to improve OshKosh's standing in the wholesale market.</p><p>OshKosh has some $140 million in wholesale sales, far behind Carter's $400 million.</p><p>"We want to take what we at Carter's have learned over the last 12 years and increase the value of the OshKosh brand," Casey said.</p><p>"Their operating margins have tailed off in the last couple of years for a number of different reasons, but there's no reason that a great brand and good people we met at OshKosh can't return there."</p><p>___</p><p>On the Net:</p><p>Carter's Inc.: www.carters.com</p><p>OshKosh B'Gosh Inc.: www.oshkoshbgosh.com</p><p>___</p><p>HASH(0x1cde944)</p>

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