Carter's (CRI) Q4 2025 earnings summary

Executive summary

• Q4 net sales rose 8% year-over-year to $925 million, with all business segments posting growth and strong momentum in D2C channels and new consumer acquisition, especially among Gen Z and millennial families.

• FY25 net sales increased 2% to $2.9 billion, driven by U.S. Retail and International growth, partially offset by U.S. Wholesale decline; the extra week contributed $37 million to net sales.

• Productivity initiatives included store fleet rationalization, workforce rightsizing, and reduced organizational complexity, enabling reinvestment in product and demand creation.

• Operating income and margins declined due to higher tariffs, increased product costs, and restructuring, despite higher pricing and productivity initiatives.

• Adjusted operating income and EPS exceeded prior forecasts but fell year-over-year due to tariff and product cost pressures.

Financial highlights

• Q4 net sales: $925 million, up 8% year-over-year (3% excluding the 53rd week); Q4 adjusted EBITDA: $105 million, down 18% year-over-year.

• Q4 gross margin: 43.2%, down 460 bps year-over-year, pressured by $40 million in tariffs and higher product costs.

• Q4 adjusted operating income: $89 million (margin nearly 10%); Q4 adjusted EPS: $1.90, down from $2.39 last year.

• FY25 adjusted EBITDA: $232 million, down 32%; FY25 gross margin: 45.4%, down from 48.0% in FY24.

• Operating cash flow for FY25: $122 million, down from $299 million in FY24; dividends paid: $56 million.

Outlook and guidance

• FY26 net sales and adjusted operating income expected to grow low to mid-single digits; adjusted EPS projected to decline low double digits to mid-teens due to higher interest and tax rates.

• FY26 operating cash flow guidance is $110–$120 million; capex planned at $55 million, focused on Mexico stores, distribution upgrades, and technology.

• Q1 FY26 net sales expected to grow mid-single digits; adjusted EPS guidance of $0.02–$0.08, down sharply from $0.66 in Q1 FY25.

• First half FY26 profitability planned down due to tariff impacts, with growth in the second half as pricing and mix improvements offset costs.

• Guidance does not reflect potential impacts from recent U.S. Supreme Court and global tariff developments.