CRI · Carter's, Inc.

Carter’s, Inc. delivered strong top-line growth in Q1 fiscal 2026, with net sales rising 8.1% to $681.1 million, fueled by double-digit increases across U.S. Retail (12.8%), International (14.3%), and modest U.S. Wholesale (0.5%) growth. U.S. Retail comparable sales surged 10.5%, marking the fourth straight quarter of expansion, supported by robust Easter holiday demand, marketing investments boosting store and eCommerce traffic, and favorable foreign exchange adding 0.9%. Management highlighted strong brand demand across channels. However, profitability faced headwinds: GAAP operating income edged up 9.0% to $28.4 million (4.2% margin), but adjusted figures declined 19.6% due to higher tariffs, store expense inflation, and elevated interest from Q4 2025 senior notes refinancing. No Q1 2026 adjustments versus $9.3 million prior-year costs for leadership transition and operating model improvements. Diluted EPS fell to $0.39 from $0.43 (adjusted from $0.66), with net income at $14.3 million. Operating cash flow swung positive to $6.4 million from a $48.6 million use, aided by better inventory sell-through and lower supply days. The company returned $9.2 million via dividends ($0.25/share), with no repurchases. Reiterating FY2026 outlook assumes H2 earnings weighting, lower gross margins from tariffs (offset by pricing and savings), low-single-digit SG&A rise, $40 million net interest, 22% tax rate, and ~36 million shares. Q2 guides low-single-digit sales growth, $11-13 million adjusted operating income, and $0.02-0.06 adjusted EPS, factoring earlier Easter and tariff impacts. Upcoming CEO Sharon Price John transition next month signals continuity in transformation efforts amid cost pressures.