With respect to business trends, we got off to a good start in July with sales running more than 90% of prior year sales.
We had substantially all of our stores opened heading into the 4th of July weekend and retail sales over that holiday shopping period comped up 7%.
In August, we saw sales trend to about 87% of prior year sales as schools delayed reopening.
September sales ramped up to 95% of prior year sales.
Our Labor Day holiday sales were the strongest in the past three years, with comparable retail sales up 15% during that shopping period.
And in October, sales are trending over 90% of prior year sales.
Our baby apparel and sleepwear contributed about 70% of our total apparel sales.
In the third quarter, our retail sales improved to 97% of third quarter sales last year.
With fewer store visits, we reduced our hours of store operations by over 20% in the quarter.
These stores only represent about 11% of our U.S. stores, but drove about 40% of the decline in comparable sales in the quarter.
In the third quarter, our stores fulfilled 24% of our eCommerce orders.
To improve the convenience of shopping with us, we now offer same-day pickup and curbside pickup services in over 600 of our stores in the United States.
Currently, about 85% of our stores in the United States are located in open air centers, which we believe gives us an advantage relative to our mall-based competitors.
We currently plan to open less than 100 co-branded stores over the next five years.
We also plan to close about 25% of our stores as leases expire.
Nearly 60% of those closures may occur by the end of next year.
80% of those closures are planned by the end of 2022.
Sales in the third quarter were about 86% of prior year sales.
We continue to see good growth with our exclusive brands with sales collectively up 10%.
E-commerce demand for our brands through our wholesale customers was up over 40% in the third quarter, including triple-digit growth rates with some of our exclusive brands.
Together with our wholesale customers, the online purchases of our brands is up over 50% year-to-date.
Within the next few weeks, we expect to achieve a new milestone for our company with annual online purchases of our brands exceeding $1 billion this year.
Our Carter's brand wholesale sales were down about 25% in the quarter, driven by retailers cautiously planning for second half sales and our decision earlier this year to curtail fall and holiday inventory commitments.
Our decision to run lean around inventories may impact second half wholesale sales by as much as $50 million or less than 3% of our total second half sales.
Our sales to off-price retailers were down 18% in the quarter and down over 50% year-to-date.
International sales in the quarter were about 90% of last year's sales and contributed over 13% of our total company sales, which is comparable to last year.
We saw high single-digit growth in our retail sales, driven by a nearly 70% increase in eCommerce sales in Canada and Mexico.
Just for context, these customers contributed less than 2% of our company's annual sales in 2019.
Inventories at the end of September were down over 10% compared to last year.
Our best analysis suggests these surcharges may impact fourth quarter earnings by about $2 million.
Our average price points are less than $10, providing a great value to consumers in a weaker economic environment.
I'll begin on Page 2 with our GAAP income statement for the third quarter.
Net sales in the quarter were $865 million, down 8% from last year.
Reported operating income was $114 million, an increase of 35%.
And reported earnings per share was $1.85 compared to $1.34 a year ago, representing growth of 38%.
Our third quarter and year-to-date results for both 2020 and 2019 contained unusual items, which we've detailed on Page 3.
Moving to Page 4 and our adjusted P&L for the third quarter.
Net sales declined 8% to $865 million, which is a meaningful improvement over the 30% decline we saw in the second quarter.
We continue to see strong demand online with our U.S. eCommerce business achieving a 17% comp and eCommerce comps in Canada up nearly 60%.
While gross profit dollars declined 5% due to lower sales, gross margin rate improved by 180 basis points versus last year to 44.4%.
Royalty income was roughly comparable to last year at $9 million.
Adjusted SG&A declined to $24 million or 8% across a broad range of expense categories.
Adjusted operating income grew 4% to $120 million and adjusted operating margin expanded 160 basis points to 13.8%, driven by our strong gross margin performance and management of spending.
Below line, we had higher net interest expense than last year due to the $500 million in new senior notes which we issued earlier this year.
We had other income of approximately $3 million in the quarter, largely foreign currency gains.
And our effective tax rate was about 19% in the quarter, up from about 18% last year.
Average share count declined 2%, driven by share repurchases in 2019.
So, on the bottom line, adjusted earnings per share grew 5% to $1.96, up from $1.87 last year.
Turning to Page 5 with some balance sheet and cash flow highlights.
Our balance sheet and liquidity remained very strong.
Total liquidity at the end of the third quarter was nearly $1.6 billion, with over $800 million of cash on hand and virtually all of the borrowing capacity under our $750 million credit facility available to us.
As Mike said, we ended the quarter with inventories 11% lower than the year ago.
Our Q3 accounts receivable balance declined 10% compared to last year, which reflects lower wholesale sales.
Accounts payable were $473 million at quarter-end compared to $206 million a year ago.
Long-term debt was $1 billion, up from $770 million in the third quarter of last year, which reflects our successful senior notes financing transaction in May and lower revolver borrowings.
In the third quarter, we repaid $244 million, which represented all of the outstanding borrowings under our credit facility.
When considering our meaningful cash position, net debt at the end of the third quarter was $158 million compared to over $600 million at the end of Q3 last years.
Despite year-to-date net income, which is lower than last year, our operating cash flow was very strong at $320 million compared to $73 million last year.
Turning to Page 7 with a summary of our business segment results for the third quarter.
While sales were down, profitability in each of our business segments improved in the third quarter, and our consolidated adjusted operating margin expanded by 160 basis points over last year.
Turning to Page 8, with third quarter results for our U.S. retail segment.
Total segment sales declined 3% compared to last year.
For the quarter, total retail comparable sales declined 3.5%, reflecting strong eCommerce growth of 17% and lower store sales.
The adjusted operating margin of our retail segment improved by 50 basis points to 11.4%, driven by improved price realization, especially online, and our improved inventory position and good control of spending.
Turning to Page 9.
On Page 10, all of our recent marketing efforts continue to be highly integrated with our presence on social media.
On Page 11, we had particularly high engagement in September with two specific promotional events.
Turning to Page 12.
During our Baby Love event in September, we gave away 10,000 Carter's body suits with the message -- "2021, Looking Bright", to celebrate the happy news of a new baby set to arrive in 2021.
Moving to Page 13.
On Page 15, we've seen strong demand for our holiday products.
On Page 16, Carter's is known for our pajamas, especially Christmas PJs, with sizes for everyone in the family.
On Page 17, we also have extensive offerings for special outfitting, for dress applications for the holidays.
And this year, on Page 18, we have toys from Skip Hop and Carter's.
Moving to Page 19, with a recap of U.S. wholesale results for the third quarter.
Demand for our exclusive brands at Target, Walmart and Amazon was strong in the third quarter, with combined sales growing 10% over last year.
U.S. Wholesale adjusted segment income was $67 million in the third quarter compared to $73 million a year ago.
Adjusted segment margin improved by 140 basis points to 22.3%, reflecting lower inventory-related charges which were partially offset by higher bad debt expense.
On Page 20, we launched our core Little Baby Basics collection annually.
Beginning on Page 21, we've included a few slides that highlight our exclusive brands, which are available at Target, Walmart and Amazon.
On Page 22, on the Child of Mine brand at Walmart.
Finally, on Page 23, our Simple Joys brand continues to resonate with consumers.
Moving to Page 24 and third quarter results for our International segment.
International net sales declined 10% to $114 million.
Canada delivered a very good quarter overall, with retail comparable sales growing 7%.
Online demand continued to be strong with eCommerce comps up 58%.
International adjusted operating margin expanded 270 basis points to 15.8%, driven by strong performance in Canada that was partially offset by a lower contribution from our partners business.
On Page 25, we've included a photo of one of our newest stores in Mexico.
On Page 26, we've included pictures from the first three stand-alone Carter's stores in Brazil, two in Sao Paulo and one in Rio de Janeiro.
Turning to Page 27 with our outlook for the balance of the year.
As with last quarter and given the ongoing market disruption caused by the pandemic, we're not providing sales and earnings guidance today.

Summary:
Net sales in the quarter were $865 million, down 8% from last year.
And reported earnings per share was $1.85 compared to $1.34 a year ago, representing growth of 38%.
So, on the bottom line, adjusted earnings per share grew 5% to $1.96, up from $1.87 last year.
Our balance sheet and liquidity remained very strong.
Total liquidity at the end of the third quarter was nearly $1.6 billion, with over $800 million of cash on hand and virtually all of the borrowing capacity under our $750 million credit facility available to us.
For the quarter, total retail comparable sales declined 3.5%, reflecting strong eCommerce growth of 17% and lower store sales.
As with last quarter and given the ongoing market disruption caused by the pandemic, we're not providing sales and earnings guidance today.