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Carter's (CRI)
NYSE:CRI
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Carter's
(NYSE:CRI)
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Rating:52Neutral
Price Target:
$34.00
▲(1.34% Upside)
Action:ReiteratedDate:02/28/26
The score is held back primarily by weakened profitability and sharply lower cash generation, reinforced by earnings-call guidance for margin pressure and an EPS decline driven largely by tariffs and higher interest. Offsetting factors include improved leverage, supportive valuation (moderate P/E and ~4.6% yield), and moderately positive momentum indicators alongside DTC and international operating momentum.
Positive Factors
Improved leverage
A materially lower debt-to-equity strengthens the capital structure and reduces refinancing and liquidity risk. This improvement gives management durable financial flexibility to fund capex, execute strategic initiatives, sustain the dividend, and absorb shocks over the next several quarters.
Direct-to-consumer momentum
Sustained DTC and retail comp gains signal strengthening brand demand and better economics versus wholesale. Higher traffic, AUR improvement and new customer acquisition support durable revenue mix improvement, margin recovery potential, and higher lifetime value if retention holds.
Productivity & operating actions
Structured productivity and store rationalization programs are expected to permanently lower SG&A and improve operating leverage. If savings are realized, they can offset cost headwinds, fund demand investments, and improve long-term operating margins and cash generation.
Negative Factors
Rising tariff headwind
A persistent, multi-hundred-million dollar tariff burden materially pressures gross margins and forces either higher pricing or margin compression. Given the scale and expected year-over-year increase, this is a structural profit headwind that will depress earnings power until tariffs or sourcing mix change.
Compressed profitability
A sharp decline in net margin signals weaker operating leverage and lower returns on invested capital. Persistently compressed margins reduce reinvestment capacity, weaken ROE, and make the business more sensitive to cost inflation and sales variability over the medium term.
Deteriorating cash generation
Significantly weaker cash conversion constrains the company's ability to fund capex, dividends, and strategic initiatives internally. Lower free cash flow relative to earnings increases reliance on financing and reduces resilience to sustained margin or volume pressure over coming quarters.
Carter's (CRI) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.22B
Dividend Yield4.89%
Average Volume (3M)994.23K
Price to Earnings (P/E)13.6
Beta (1Y)0.78
Revenue Growth-0.34%
EPS Growth-61.00%
CountryUS
Employees15,350
SectorConsumer Cyclical
Sector Strength84
IndustryApparel - Retail
Share Statistics
EPS (TTM)1.90
Shares Outstanding36,447,870
10 Day Avg. Volume1,077,903
30 Day Avg. Volume994,232
Financial Highlights & Ratios
PEG Ratio0.00
Price to Book (P/B)0.00
Price to Sales (P/S)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap1.13
Enterprise Value/Revenue0.48
Enterprise Value/Gross Profit1.05
Enterprise Value/Ebitda6.80
Forecast
1Y Price Target
$36.00Price Target Upside7.30% Upside
Rating ConsensusHold
Number of Analyst Covering4
EPS Forecast (FY)2.98
Revenue Forecast (FY)$2.90B
Carter's Business Overview & Revenue Model
Company DescriptionCarter's, Inc., together with its subsidiaries, designs, sources, and markets branded childrenswear under the Carter's, OshKosh, Skip Hop, Child of Mine, Just One You, Simple Joys, Carter's My First Love, little planet, and other brands in the United States and internationally. The company operates through three segments: U.S. Retail, U.S. Wholesale, and International. Its Carter's products include babies and young children products, such as bodysuits, pants, dresses, knit sets, blankets, layette essentials, bibs, booties, sleep and play products, rompers, and jumpers; and OshKosh brand products comprise playclothes, such as denim apparel products with multiple wash treatments and coordinating garments, overalls, woven bottoms, knit tops, and bodysuits. The company also provides products for playtime, travel, mealtime, bathtime, and homegear, as well as kid's bags and diaper bags under the Skip Hop brand. In addition, it offers bedding, cribs, diaper bags, footwear, gift sets, hair accessories, jewelry, outerwear, paper goods, socks, shoes, swimwear, and toys. The company operates 18,800 wholesale locations, including department stores, national chain stores, and specialty stores. As of December 31, 2021, it operated 980 retail stores. The company also sells its products through its eCommerce websites, such as carters.com, oshkoshbgosh.com, oshkosh.com, and skiphop.com, as well as other international wholesale accounts and licensees. Carter's, Inc. was founded in 1865 and is headquartered in Atlanta, Georgia.
How the Company Makes MoneyCarter's generates revenue through multiple streams, primarily from the sale of its branded apparel and accessories. The bulk of its sales comes from direct-to-consumer channels, including its brick-and-mortar stores and online platforms, which allow the company to reach a broad customer base. Additionally, Carter's benefits from partnerships with major retail chains and department stores that carry its products, enhancing distribution and visibility. The company also engages in seasonal promotions and marketing campaigns to drive sales, and its focus on product quality and brand loyalty contributes to repeat purchases, further solidifying its revenue. Overall, Carter's diversified sales channels and strong brand recognition play a significant role in its financial success.
Carter's Key Performance Indicators (KPIs)
Carter's Earnings Call Summary
Earnings Call Date:Feb 27, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 24, 2026
Earnings Call Sentiment Neutral
The call presented a balanced picture: positive operational momentum (return to consolidated revenue growth, multi‑quarter comp gains, DTC strength, improved AURs, expanding consumer file, and strong liquidity) alongside substantial headwinds (large and rising tariff costs, meaningful margin pressure, EPS decline, higher inventories, and elevated interest/tax costs). Management is taking productivity and demand‑creation actions and is guiding for low‑to‑mid single‑digit sales and operating income growth in 2026, but expects near‑term profit pressure (first half) driven largely by tariffs and financing/tax impacts.Q4-2025 Updates
Positive Updates
Return to Year‑Over‑Year Revenue Growth
Q4 net sales of $925,000,000, up 8% versus prior year; on a comparable 13‑week basis (ex. 53rd week) consolidated net sales rose 3% year‑over‑year. This marks the first year‑over‑year revenue growth since 2021 (even excluding the 53rd week).
U.S. Retail Momentum and Comp Strength
U.S. Retail net sales increased 9% in Q4 with comparable sales up 4.7% (third consecutive quarter of comp growth). Ecommerce channel drove strength with double‑digit traffic increases in Q4. Baby category grew for the sixth consecutive quarter.
Improved Realized Pricing and AUR Gains
Consolidated average unit retails (AURs) rose low single digits in Q4 and mid single digits in U.S. Retail. Management attributes roughly half of the AUR improvement to reduced promotions and the other half to less clearance and higher‑price assortment penetration.
Direct‑to‑Consumer and Customer Acquisition
Active consumer counts grew in 2025 (first year of growth since 2021). Management reported meaningful new consumer acquisition, especially among Gen Z and millennial families, with new customers skewing to higher‑income cohorts and adopting higher‑priced 'better and best' product tiers.
International Outperformance
International reported net sales growth of 10% in Q4 (8% constant currency). Mexico grew nearly 30% driven by new stores and double‑digit comps; Canada comps roughly even despite a prior‑year tax holiday.
Profitability and Adjusted Operating Income
Q4 adjusted operating income was $89,000,000 with an adjusted operating margin of ~9.7% (nearly 10%). Management expects adjusted operating income to grow in 2026 (guidance: low‑to‑mid single‑digit growth) as productivity savings and demand investments realize benefits.
Strong Liquidity and Balance Sheet Actions
Year‑end liquidity exceeded $1,000,000,000, including just under $500,000,000 cash on hand. Management completed debt refinancing: issued $575,000,000 of 5‑year senior notes at 7.375% and secured a new $750,000,000 asset‑based revolving credit facility.
Productivity, Fleet Optimization and Operating Improvements
Company executed productivity initiatives (store rationalization, workforce rightsizing, operating model improvements). Plans to close ~60 stores in 2026 (approx. 150 through 2028) and expects ~$35,000,000 in organizational savings this year plus additional savings from store closures and discretionary reductions. Reported faster development cycle (3 months) and a 20%–30% reduction in product choices in key brands.
2026 Top‑Line Guidance
Full‑year 2026 net sales guidance: growth in the low‑to‑mid single digits versus 2025 with all segments expected to grow (U.S. Retail low single‑digit, comps mid single‑digit; U.S. Wholesale mid single‑digit; International mid single‑digit). Q1 net sales expected to increase mid single digits.
Cash Flow and Capital Allocation
Operating cash flow for 2025 was $122,000,000. 2026 operating cash flow is planned at $110,000,000–$120,000,000; CapEx planned at approximately $55,000,000 (Mexico stores, distribution center upgrades, technology). Dividends of $56,000,000 were paid in 2025.
Negative Updates
Material Tariff Headwind
Tariffs meaningfully pressured gross margins. Q4 gross margin was 43.2%, down 460 basis points year‑over‑year, with a gross tariff impact of ~$40,000,000 in the quarter. Management estimates the gross tariff impact was ~$60,000,000 in 2025 and expects the gross impact to rise to over $200,000,000 in 2026 (roughly $150,000,000 increase vs. 2025).
Profitability Compression and EPS Decline
Q4 adjusted operating margin declined to 9.7% from 13.4% a year ago (down ~370 bps) and adjusted operating income declined by $26,000,000 year‑over‑year. Q4 adjusted EPS was $1.90 vs. $2.39 a year ago (down ~20.5%). 2026 adjusted EPS is expected to be down low double digits to down mid teens versus 2025's $3.47.
Wholesale Profit Pressure and Inventory Actions
Wholesale profitability was negatively affected by tariffs and higher product costs, higher inventory provisions, and a greater mix of excess inventory sales. Q4 Wholesale net sales grew 3% (with part of the benefit from an extra week), but margin deterioration was driven largely by tariff exposure and clearance activity.
Higher Inventories and Working Capital Impact
Year‑end net inventories were $545,000,000, up 8% year‑over‑year; inventory units were 4% lower. Incremental tariffs increased year‑end inventory value by approximately $50,000,000. Higher inventories and lower earnings contributed to a year‑over‑year decline in operating cash flow.
Elevated SG&A and Near‑Term Spending
Q4 adjusted SG&A increased 5% to $315,000,000 (driven by the 53rd week, demand‑creation investments, wage and rent inflation, and higher performance‑based compensation). Full‑year 2026 spending is planned roughly comparable to slightly up, with SG&A benefits from productivity (~$40,000,000) offsetting investments in marketing, technology and wage inflation.
Higher Interest and Tax Rate Headwinds
Net interest expense for 2026 expected to be just under $40,000,000 (higher due to debt refinancing); higher interest will reduce EPS by approximately $0.30. Full‑year effective tax rate planned at ~22% for 2026 (up from 19% in 2025); Q1 tax rate unusually high (~37%) due to stock‑based compensation timing.
First‑Half Profitability Softness and Q1 Low EPS
2026 is expected to be back‑half weighted: first‑half profitability planned down (tariff timing, weaker pricing offsets early in year, timing of investments and higher interest). Q1 adjusted operating income guidance is $12,000,000–$15,000,000 and Q1 EPS guidance is $0.02–$0.08.
Company Guidance
Carter's 2026 guidance targets net sales growth of low- to mid-single-digits versus 2025, with U.S. Retail up low-single-digits (comp sales mid-single-digits; Q1 Retail growth expected high-single-digits with comps mid-single-digits), U.S. Wholesale up mid-single-digits for the year but down low-single-digits in Q1, and International up mid-single-digits for the year (double-digit in Q1); adjusted operating income is expected to grow low- to mid-single-digits year-over-year but be back‑half weighted (Q1 adjusted operating income $12M–$15M); full-year gross margin is expected to decline somewhat vs. 2025 with Q1 gross margin down ~400 bps; the company assumes a gross tariff impact of over $200M in 2026 (vs. ~$60M in 2025) offset materially by planned mid-single-digit pricing gains and supply‑chain mitigation; net interest expense is expected at just under $40M for the year (≈$9M in Q1) with a ~ $0.30 EPS headwind from higher interest, the full-year effective tax rate is planned at ~22% (Q1 ~37% due to stock‑comp effects), adjusted EPS is expected to be down low‑double‑digits to down mid‑teens vs. 2025’s $3.47, operating cash flow is planned at $110M–$120M, CapEx about $55M, and productivity actions (including ~60 store closures in 2026, ~$35M of workforce savings and roughly $40M of SG&A productivity benefit) are expected to largely offset investments in demand creation and technology.Carter's Financial Statement Overview
Summary
Financials are pressured: profitability has weakened with net margin around ~3% in 2026 versus ~8–10% in 2021–2023, and operating/free cash flow fell sharply with weaker cash conversion. The main offset is an improved balance sheet, with debt-to-equity dropping to below 1x in 2026, reducing leverage risk.Income Statement
Revenue has been relatively flat-to-down over the past several years (declines in 2022–2024 and a modest rebound in 2026), but profitability has weakened meaningfully. Gross margin remains solid for retail, yet operating and net margins have compressed sharply versus prior years (2026 net margin ~3% vs ~8–10% in 2021–2023), reflecting lower operating leverage and/or higher costs. Overall, the income statement shows pressure on earnings power despite stable sales.44
Neutral
Balance Sheet
Leverage has improved: debt-to-equity fell from very elevated levels in 2020–2022 to below 1x in 2026, indicating a cleaner capital structure and reduced balance-sheet risk. Equity has also grown modestly versus 2023–2024. The key offset is profitability-driven: return on equity has declined substantially in 2026 compared with 2021–2023, suggesting weaker returns even with lower leverage.61
Positive
Cash Flow
Cash generation has deteriorated in the latest period. Operating cash flow and free cash flow dropped sharply in 2026 versus 2023–2024, and free cash flow growth is materially negative. Free cash flow covers only about half of net income in 2026, pointing to weaker cash conversion and less financial flexibility than in 2023–2024 when free cash flow more consistently tracked earnings.36
Negative
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 2.90B | 2.84B | 2.95B | 3.21B | 3.49B |
| Gross Profit | 1.31B | 1.37B | 1.40B | 1.47B | 1.66B |
| EBITDA | 203.32M | 343.49M | 400.35M | 424.79M | 592.69M |
| Net Income | 91.80M | 185.51M | 232.50M | 250.04M | 339.75M |
Balance Sheet | |||||
| Total Assets | 2.57B | 2.43B | 2.38B | 2.44B | 3.19B |
| Cash, Cash Equivalents and Short-Term Investments | 487.07M | 412.93M | 351.21M | 211.75M | 984.29M |
| Total Debt | 644.95M | 1.13B | 1.08B | 1.18B | 1.57B |
| Total Liabilities | 1.64B | 1.58B | 1.53B | 1.64B | 2.24B |
| Stockholders Equity | 925.05M | 854.56M | 845.25M | 796.41M | 950.19M |
Cash Flow | |||||
| Free Cash Flow | 68.63M | 242.62M | 469.27M | 48.00M | 230.82M |
| Operating Cash Flow | 122.33M | 298.79M | 529.13M | 88.36M | 268.26M |
| Investing Cash Flow | -53.70M | -56.16M | -59.86M | -40.36M | -32.44M |
| Financing Cash Flow | 2.04M | -174.82M | -332.64M | -819.27M | -352.71M |
Carter's Technical Analysis
Negative
33.55
Price Trends
36.15
Negative
33.56
Negative
31.48
Positive
Market Momentum
1.22
Positive
36.18
Neutral
44.74
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CRI, the sentiment is Negative. The current price of 33.55 is below the 20-day moving average (MA) of 39.17, below the 50-day MA of 36.15, and above the 200-day MA of 31.48, indicating a neutral trend. The MACD of 1.22 indicates Positive momentum. The RSI at 36.18 is Neutral, neither overbought nor oversold. The STOCH value of 44.74 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CRI.
Carter's Risk Analysis
Carter's disclosed 39 risk factors in its most recent earnings report. Carter's reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Carter's Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | $5.03B | 30.75 | 31.50% | ― | 2.97% | 9.85% | |
63 Neutral | $293.99M | -147.88 | -0.13% | ― | 2.76% | 96.01% | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% | |
52 Neutral | $1.22B | 13.61 | 10.27% | 4.89% | -0.34% | -61.00% | |
49 Neutral | $446.88M | -15.08 | -14.67% | ― | -0.08% | 73.05% | |
44 Neutral | $88.67M | -1.52 | ― | ― | -10.09% | 81.44% |
* Consumer Cyclical Sector Average
CRI
Carter's
33.55
-6.61
-16.46%
GCO
Genesco
27.24
-7.37
-21.29%
PLCE
Children's Place
4.00
-3.76
-48.45%
SFIX
Stitch Fix
3.33
-1.09
-24.66%
VSCO
Victoria's Secret
62.70
38.69
161.14%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.