Carter's (CRI) Q1 2026 earnings summary

Executive summary

• Net sales rose 8.1% year-over-year to $681 million, led by strong U.S. Retail and International growth, with U.S. Retail comparable sales up 10.5%.

• Operating income increased 9% to $28.4 million, but adjusted operating income declined 20% to $28 million and adjusted net income fell 40% to $14 million due to higher tariffs and interest expense.

• Diluted EPS decreased to $0.39 from $0.43 year-over-year; adjusted diluted EPS dropped 41% to $0.39.

• Leadership transition underway: Sharon Price John appointed CEO effective June 2026, following Doug Palladini's departure.

• Profitability was pressured by higher tariffs, investment spending, inflation, and increased interest costs.

Financial highlights

• Gross margin declined over 300 basis points to 43.1%, mainly due to higher tariffs; gross profit was $293.9 million.

• SG&A expenses were flat at $270 million, with the SG&A rate improving by 330 bps to 39.6% due to fixed cost leverage.

• Adjusted EBITDA was $42 million, down 14% year-over-year.

• Interest expense increased significantly, reaching $11.8 million, up 50.4% year-over-year.

• Operating cash flow was $6.4 million, a significant improvement from a $48.6 million outflow last year.

Outlook and guidance

• Full-year 2026 guidance reiterated: net sales and adjusted operating income expected to grow low to mid-single digits over 2025.

• Adjusted diluted EPS projected to decline low double digits to mid-teens from 2025's adjusted $3.47.

• Operating cash flow forecasted at $110–$120 million; CapEx at $55 million, focused on Mexico store expansion, distribution, and technology.

• Second quarter 2026 guidance: low single-digit net sales growth, $11–$13 million adjusted operating income, $0.02–$0.06 adjusted diluted EPS.

• Earnings contributions expected to be weighted to the second half due to tariff impacts and investment spending.