Carter's (CRI) investor relations material

Executive summary

• Q3 net sales were $757.8–$758 million, nearly flat year-over-year, with U.S. Retail and International segments growing but offset by a decline in U.S. Wholesale sales.

• Diluted EPS dropped to $0.32 from $1.62–$1.64 last year; adjusted EPS was $0.74, reflecting higher costs, tariffs, and restructuring charges.

• Productivity initiatives and organizational restructuring, including a 15% reduction in office-based roles and closure of 150 North American stores by end of 2026, target $35M–$45M in annual savings.

• Strong consumer engagement, especially among Gen Z families, and positive response to new products and marketing initiatives.

• Strategic shift in wholesale, reducing focus on Simple Joys and elevating core brands on Amazon.

Financial highlights

• Q3 operating income fell 62% to $29.1M; adjusted operating income was $39M, down 49% year-over-year.

• Gross margin for Q3 was 45.1%, down 180 bps year-over-year; operating margin was 3.8%, adjusted margin 5.2%.

• Net income for Q3 was $11.6M (down 80% YoY); adjusted net income was $26.8M.

• Year-to-date net sales were $1.97B, down 1%; net income was $27.6M, down from $124M last year.

• Cash and cash equivalents at quarter-end were $184M; inventory up 8% YoY to $656M, mainly due to tariffs.

Outlook and guidance

• No formal sales/earnings guidance due to tariff uncertainty; Q4 net adverse pre-tax income impact from new tariffs expected at $25–$35M.

• Q4 gross margin expected to decline to ~43% due to tariffs and product investments; SG&A expected up mid-single digits.

• 2026 plans include sales and earnings growth, driven by price increases, productivity initiatives, and increased marketing spend.

• Store optimization plan to close 150 low-margin stores by end of 2026, with 100 closures expected by then.

• Productivity actions expected to yield $35M in annualized savings from 2026, with additional SG&A reductions targeted at $10M annually.