Carter's (CRI) investor relations material

Executive summary

• Q2 2025 net sales grew 4% year-over-year to $585M, led by U.S. Retail and International, but net income and EPS declined sharply due to higher SG&A, margin pressure, and one-time costs.

• Leadership transition completed with a new CEO and key hires, focusing on long-term growth, brand investments, and operational improvements.

• Profitability was impacted by pricing investments, new stores, performance-based compensation, and higher tariffs.

• Adjusted results exclude $8M in Q2 and $17M in H1 for operating model improvement and leadership transition costs.

• Dividend per share was reduced in Q2 2025 to align with lower profitability and anticipated tariff impacts.

Financial highlights

• Q2 2025 net sales: $585.3M (+3.7% YoY); gross margin: 48.1% (down 200 bps YoY); operating income: $4.0M (down 89.7% YoY); net income: $0.4M ($0.01 EPS).

• Adjusted Q2 operating income: $11.8M (down 70.2% YoY); adjusted net income: $6.3M ($0.17 EPS).

• SG&A rose 10–13.5% to $273–$281M, mainly from higher store expenses, compensation, and improvement costs.

• Inventory up 3% year-over-year, with quality improved and excess inventory reduced.

• Cash and cash equivalents at quarter-end: $338.2M; no borrowings under revolving credit facility.

Outlook and guidance

• Fiscal 2025 guidance suspended due to leadership transition and significant tariff uncertainty.

• New tariffs expected to reduce pre-tax income by ~$35M in H2 2025 and $125–$150M annually; mitigation efforts underway but may not fully offset impact.

• Plans to offset tariff costs through assortment changes, vendor cost sharing, production mix shifts, and price increases.

• Management anticipates continued volatility in cash flows and margin pressure due to trade policy and inflation.

• Positive trends in July and back-to-school sales; expecting revenue growth acceleration in H2, led by DTC.