Balanced Fundamentals, Limited Upside: Maintaining Hold on Carter’s Amid Execution and Strategic Uncertainties

Analyst Paul Lejuez of Citi maintained a Hold rating on Carter’s, retaining the price target of $34.00.

Paul Lejuez has given his Hold rating due to a combination of factors that balance improving fundamentals with a less compelling near‑term return profile. Management’s ICR updates showed stronger‑than‑expected fourth‐quarter sales across U.S. retail, U.S. wholesale, and international channels, supported by consumers tolerating higher prices and fewer promotions, which likely supports margin upside. The company appears well positioned heading into fiscal 2026, with inventory levels in good shape and key retail partners such as Walmart and Target increasing their focus on the children’s category, where Carter’s remains a core supplier. However, the stock’s expected price move of roughly mid‑single‑digit downside from current levels tempers the upside from these operational positives.

At the same time, Lejuez notes that several structural and execution risks keep the risk/reward balanced rather than clearly attractive. The international strategy has been uneven and is still in transition, with more clarity not expected until around fiscal 2027, while the company plans to close around 150 net stores over the next few years, including about 70 in fiscal 2026, which adds execution risk. The Simple Joys line, particularly on Amazon, remains a headwind into fiscal 2026 even though it should be smaller than in recent quarters and is being actively repositioned. In addition, the company’s plan to maintain higher price points even if tariffs are reduced introduces some uncertainty around competitive responses and long‑term pricing power. Taken together, these factors justify a neutral, Hold stance rather than a more aggressive rating.

Lejuez covers the Consumer Cyclical sector, focusing on stocks such as TJX Companies, Urban Outfitters, and Under Armour. According to TipRanks, Lejuez has an average return of 11.3% and a 60.78% success rate on recommended stocks.