CRI

Carter's (CRI) is back in focus after its board declared a quarterly dividend of $0.25 per share. The dividend is payable on September 25, 2026, to shareholders of record as of September 1. The dividend news arrives after a period of pressure on Carter's share price, which is down 12.49% on a 1 month share price return and 13.85% on a 3 month share price return, although the year to date share price return is 2.14%. Over the past year the stock’s 28.90% total shareholder return contrasts with a 45.57% total shareholder return decline over three years and a 59.74% total shareholder return decline over five years, pointing to some recent improvement in sentiment but a weaker longer term record. Spot opportunities around Carter's by scanning a hand picked group of resilient companies in our 74 resilient stocks with low risk scores. With Carter's under pressure in recent months yet offering a fresh dividend and some signs of shifting sentiment, the real question is whether you commit at today’s price or wait for a cleaner entry. The valuation picture comes next. The most followed narrative currently places Carter's fair value at $42.67, which is above the last close at $33.91. That gap underpins a thesis built on modest growth assumptions and a specific earnings profile. Read the complete narrative. Read the complete narrative. The fair value story for Carter's leans heavily on gentle revenue growth, a lift in profit margins and a lower future earnings multiple than many peers. The narrative connects these threads into a detailed cash flow outlook and a valuation path that does not require aggressive assumptions. If you want to see exactly how those moving parts are expected to line up over time, the full breakdown lays it out step by step. Result: Fair Value of $42.67 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, Carter's could exceed this cautious narrative if international markets like Brazil scale faster or if loyalty and new premium sub brands lift margins more than expected. Find out about the key risks to this Carter's narrative. Given this mix of pressure and potential around Carter's, it helps to move quickly and look through the numbers yourself rather than rely on headlines. To see the full balance between concerns and bright spots, review the 3 key rewards and 2 important warning signs. If Carter's has your attention, do not stop here. Use the screener to quickly line up other stocks that match your risk, income, and value goals. Target resilient dividend payers by reviewing the 12 dividend fortresses that may help balance income needs with capital preservation. Spot potential bargains early by scanning the 18 high quality undiscovered gems before they attract broader market attention. Prioritise financial strength and sleep easier at night by focusing on companies from the list of solid balance sheet and fundamentals (51 results). This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include CRI. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Carter’s, Inc. CRI delivered a better-than-expected second-quarter fiscal 2026 performance, supported by retail gains, wholesale strength and productivity initiatives. However, investors must assess how much of the recent improvement reflects sustainable operating momentum versus temporary benefits from tariff recoveries and cost actions.The company currently carries a Zacks Rank #2 (Buy) and a VGM Score of A. Its Style Scores include a Value Score of A, Growth Score of B and Momentum Score of A. Shares have gained 25% over the past three months, outperforming the industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Image Source: Zacks Investment Research Carter’s reported adjusted earnings of 26 cents per share in the second quarter, topping the Zacks Consensus Estimate of 2 cents and increasing 52.9% year over year. Net sales rose 5.2% to $615.5 million, exceeding the consensus mark of $609 million.Growth was broad-based across the company’s segments. U.S. Retail sales increased 1.7% year over year, with comparable sales rising 5.1% for the fifth consecutive quarter. U.S. Wholesale sales jumped 11.7%, helped by earlier fall product shipments, while International sales increased 2.7%, supported by gains in Canada and Mexico.Adjusted operating income increased 54.1% to $18.1 million, as productivity and supply-chain initiatives offset tariff costs, marketing investments and inflationary pressures. Adjusted SG&A declined 1.1%, with store closures and efficiency actions helping generate nearly 300 basis points of expense leverage. Carter's, Inc. price-consensus-chart | Carter's, Inc. Quote A key factor behind Carter’s improved financial position was the recovery of $132 million in previously paid import duties and related interest. The benefit included $128 million recorded through gross profit and $4 million recorded as interest income.The tariff recovery significantly increased reported earnings, but adjusted results provide a clearer view of underlying operations. Reported operating income surged to $139.8 million from $4 million in the prior-year quarter, while adjusted operating income increased to $18.1 million from $11.8 million.The company continues to face tariff-related uncertainty. Incremental tariff costs reduced second-quarter gross profit by about $28 million before mitigation efforts. Management noted that new Section 301 tariffs represent an incremental 10% to 12.5% above Carter’s historical tariff baseline, although current rates could provide some upside versus previous assumptions if they remain unchanged. Carter’s improving sales trends are encouraging, but management has moderated expectations for the second half of 2026. The company revised its full-year sales outlook to 2%-3% growth, citing lighter-than-planned second-half wholesale demand and more cautious consumer behavior around pricing.Wholesale demand remains a key variable. While second-quarter wholesale sales benefited from customers pulling forward fall merchandise, some partners adopted more conservative inventory plans for the second half. Management expects full-year wholesale sales growth in the low-single-digit range.Consumer pricing power also remains under pressure. Carter’s noted that broader market data showed price resistance and lower unit velocity at higher prices, prompting the company to moderate its average unit retail assumptions. Caleres CAL operates in the footwear retail space, making it a comparable name within the broader retail apparel and footwear industry, while Steven Madden, Ltd. SHOO competes in branded footwear and accessories, providing a comparison point for Carter’s valuation and retail execution. Carter’s continues to invest in its omnichannel strategy. U.S. e-commerce comparable sales increased at a double-digit rate in the quarter, supported by higher traffic, improved customer engagement and digital enhancements such as AI-optimized product reviews and improved consumer chat functionality.The company also continues to benefit from brand recognition in children’s apparel, including Carter’s and OshKosh B’gosh. Its portfolio spans company-operated stores, e-commerce platforms, wholesale relationships and international channels. CRI trades at 12.34X forward 12-month earnings, below the Zacks sub-industry average of 19.67X and the S&P 500 multiple of 20.8X. The five-year median forward earnings multiple for the stock is 11.29X. Image Source: Zacks Investment Research The valuation reflects both the company’s improving fundamentals and the risks surrounding tariff costs, consumer spending and earnings normalization after the tariff recovery benefit. Carter’s second-quarter results demonstrated meaningful operational progress, with retail momentum, improved productivity and better liquidity supporting the business. However, investors should focus on whether earnings growth can continue after the impact of tariff recoveries fades.The company’s ability to sustain comparable sales growth, protect margins and manage consumer sensitivity to pricing will likely determine whether recent gains represent a longer-term recovery trend or a temporary improvement. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Carter's, Inc. (CRI) : Free Stock Analysis Report Steven Madden, Ltd. (SHOO) : Free Stock Analysis Report Caleres, Inc. (CAL) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Friday, July 31, 2026 at 8:30 a.m. ET Chief Executive Officer and President - Sharon Price John Chief Financial Officer and Chief Operating Officer - Richard Westenberger Chief Retail and Digital Officer - Allison Peterson Vice President, Investor Relations - Thomas Robillard Operator: Welcome to Carter's Second Quarter Fiscal 2026 Earnings Conference Call. On the call are Sharon Price John, Chief Executive Officer and President; Richard Westenberger, Chief Financial Officer and Chief Operating Officer; Allison Peterson, Chief Retail and Digital Officer; and T.C. Robillard, Vice President, Investor Relations. Please note that today's call is being recorded. I'll now turn the call over to T.C. Robillard. Thomas Robillard: Thank you. Good morning, everyone. We issued our second quarter 2026 earnings release earlier today. The release and presentation materials for today's call are available on our investor relations website at ir.carters.com. Note that statements on today's call about items such as the company's expectations and plans are forward-looking statements. For a discussion of factors that could cause actual results to vary from those contained in the forward-looking statements, please see our most recent SEC filings as well as the earnings release and presentation materials posted on our website. In these materials, you will also find reconciliations of various non-GAAP financial measurements referenced during this call. After today's prepared remarks, we will take questions as time allows. I will now turn the call over to Sharon. Sharon John: Thank you, T.C. Good morning, everyone, and welcome. I'm delighted to be here with you for my first earnings call with Carter's. The team did a great job in the second quarter, delivering solid results against the backdrop of a complex macroeconomic environment. Richard and Allison will walk you through our performance in more detail, but at a high level, we exceeded our second quarter outlook. Net sales grew for the third consecutive quarter, up 5% over prior year, and adjusted operating profit increased 54%. We continued our positive momentum in U.S. Retail, delivering comparable sales growth of 5%, and we continue to add new consumers, including the important Gen Z demographics, which grew mid-teens in the quarter. Having spent essentially my entire career in the children's market, I have enormous respect for Carter's. I want to thank the team and the board, not only for the opportunity to lead this historic company to new heights, but for the foundational work that's been done, including research, strategic evaluations, and key transformational initiatives. While there is still more to be done as we move forward, this has allowed me to hit the ground running. In fact, over the past 6 weeks, I've been digging into the business and getting to know the key leaders, and it's strengthened my conviction about what initially attracted me to this role, namely that Carter's is a well-established, diversified company with a solid foundation for expansion. And in my view, we have significant opportunities that can contribute to generating consistent profitable growth. These opportunities include a number of powerful assets that I believe we can further leverage to continue to elevate the business, as well as expand the brand promise and footprint, which in turn should create value and generate consistent long-term shareholder returns. These include iconic brands, great consumers, the leading market share position, a multi-channel business model, and a passionate-driven organization. Touching on each of these briefly, first, we have a number of the strongest brands in our space. Our namesake Carter's brand, as well as OshKosh have high awareness, consumer trust, and a deep heritage that's been woven into the fabric of families' lives for generations. We also have additions to our brand family that are filling other consumer needs, such as Little Planet, which focuses on natural, sustainable fabrics. Second, we have great consumers. We hold a unique position in their lives, sitting at the intersection of caregivers and children, while being present for every single moment through their early years. Being able to serve both moms and kids is a special responsibility, and we do not take that earned trust lightly. When we can deliver products and exceptional experiences that improve their lives, we create an emotional bond between our brands and our consumers. Third, we're the market share leader in our industry, including the most important segment, Baby. Essentially from their very first day. We begin our all-important journey with our families that often lasts a lifetime, even evolving into a multi-generational relationship when grandparents become gift givers. Fourth, our multi-channel business model has diverse revenue streams, including an emerging global footprint, multiple brand and product segments, as well as extraordinary distribution breadth. Families can buy our products at over 20,000 global points of presence that span multiple consumer tiers from department stores to mass stores to our own omnichannel solution consisting of our high-touch specialty retail stores and carters.com. Being available where, when, and how our consumers want to shop is an important competitive advantage. And finally, we have a lot of talented people located around the world at Carter's, from our headquarters to our distribution centers to our associates in the field, and we have a culture that's passionate about our brand and our consumers. Equally as important, there is a general recognition and willingness internally of the need to evolve as an organization, so we can meet our consumers where they are today, as well as adapt when their needs change. As you can see, this is a powerful confluence of assets. And as I mentioned earlier, this is what attracted me to Carter's, and it's what gives me so much confidence in our future. At its simplest level, our objective is to deliver consistent, profitable growth. And while early, we intend to start with the following tenets. We will become a company that is consumer-centric and data-driven, recognizing that we have multiple consumers, from the caregiver to the gift giver and the child. This will be the heart of everything we do, from designing products to providing engaging, memorable shopping experiences to creating impactful marketing, all aimed at building relationships and expanding the total lifetime value. We will be brand building, leveraging our assets in a manner designed to monetize the enormous equity, name recognition, and important trust of our portfolio, especially for our namesake brand, Carter's. Through proper brand building, we can strengthen our relationship with consumers, increase our market share, optimize our total addressable market, and improve our profitability. To do this, we will need to consistently evolve to meet the needs of the marketplace as change is happening even faster. Given we are the market leader, it is fitting that we also lead change within our industry. In closing, it's an honor to be leading Carter's through this next chapter of its storied history. I believe we have significant opportunities to unlock value, drive profitable growth, deliver top-tier shareholder values, and I look forward to getting to know each of you over the coming months. With that, I'll turn the call over to Richard. Richard Westenberger: Thank you, Sharon, and welcome to Carter's. We're very happy to have you here with us. I'll speak for the rest of our leadership team in reporting that Sharon has jumped in with both feet and is off to a strong start. Good morning, everyone. I want to begin by also thanking our thousands of employees for their resilience, commitment, and teamwork. Over the last 18 months, a period marked by a range of challenges and a significant amount of change, our team has remained focused on execution, has helped to stabilize the business, return to top line growth, and deliver another quarter of strong performance. As Sharon has already experienced, our team exhibits tremendous passion and dedication, and we're very grateful. This morning we will give you a recap of our second quarter performance, which exceeded our previous outlook. Overall, we delivered growth in both sales and earnings in the quarter, and our balance sheet and liquidity strengthened significantly through the recovery of approximately $130 million of previously paid tariffs and related interest. Consumer and retail businesses like ours are operating in a continued challenging environment. Overall, our business has performed well amid this backdrop for the first half of the year. The children's apparel market has proven resilient in the first 6 months of the year, with total sales up about 2%. In this same time period, our overall share of the age 0 to 10 market has remained stable, with share gains in baby and kid offset by a decline in toddler. In discussing our second quarter performance and our outlook, our comments this morning will track along with the presentation posted to the investor relations portion of our website. Turning to our presentation materials, on page 2, we have our GAAP basis P&L. Net sales in the second quarter were $615 million. Reported operating income was $140 million, inclusive of the tariff recoveries, which I'll discuss in a moment, and our reported earnings per share were $2.87. Our first half GAAP basis P&L is on page 3. First half net sales increased 7% over the prior year to $1.3 billion. Reported operating income for the first half was $168 million, which included the tariff recovery as well as other non-recurring charges. First half reported EPS was $3.26 compared to $0.43 in 2025. On the following page, we've summarized our non-GAAP adjustments. We had no adjustments to our reported results in the first quarter, so our second quarter and first half 2026 adjustments are the same. A significant adjustment to our reported results in Q2 related to our recovery of previously paid tariffs and related interest. In the second quarter we received $132 million back from the U.S. government. $128 million benefited gross profit and $4 million was recorded as interest income. These tariff recoveries and interest are taxable. As such, we recorded a tax provision in our Q2 reported results, roughly $30 million, which we will pay in September. We also recorded approximately $6 million in charges in the quarter, the majority of which related to our recent leadership transition. Last year, we had adjustments related to operating model improvement costs and leadership transition costs, which reduced our reported profitability. Our comments today will speak to our performance on an adjusted basis, which excludes these unusual items. On page 5, we have our second quarter adjusted P&L. Our Q2 net sales of $615 million represented growth of $30 million or 5% over last year. Adjusted gross margin on these sales was 46.3%, a decrease of 180 basis points compared to prior year. As expected, tariffs pressured our gross margin rate in the quarter with a gross impact incremental to our historical tariff baseline of $28 million. Investments in product make also pressured gross margin compared to prior year. These headwinds were partially offset by increased pricing as well as tariff mitigation actions and productivity initiatives. On a consolidated basis, AURs improved in the mid-single digits and units were up low single digits. In U.S. Retail, second quarter AURs were comparable to prior year, and we improved realized pricing in our U.S. Wholesale and International segments. Allison will comment further on U.S. Retail pricing trends in a moment. Second quarter adjusted SG&A of $270 million decreased 1% versus prior year as the benefits from our productivity initiatives, including store closures, more than offset incremental spend on marketing and year-over-year inflationary pressures in wages and rent. On a rate basis, we achieved nearly 300 basis points of SG&A leverage in the quarter. Second quarter adjusted operating income increased 54% to $18 million and adjusted operating margin increased 90 basis points to 2.9%. Higher sales and lower spending led to this operating income performance, which was above our previous outlook. Below the line, net interest and other expenses increased over prior year, driven by higher interest costs from last year's debt refinancing and a foreign exchange loss due to the strengthening of the U.S. dollar since the end of the first quarter. The effective tax rate for the second quarter was 23% compared to 74% last year. This year's tax rate was largely driven by our tariff refunds, which were taxable, as I mentioned. This Q2 effective tax rate was not comparable to last year's rate, which was negatively impacted by stock-based compensation and a lower level of pre-tax income. For the full year, we're forecasting an effective tax rate of approximately 23%. All of this netted to second quarter adjusted earnings per share of $0.26, an increase of 53% over last year's $0.17. A summary of our second quarter business segment results is on page 6. In the second quarter, net sales grew in each of our segments, with U.S. Wholesale contributing the majority of year-over-year growth. The year-over-year expansion in operating income in the quarter was pretty evenly driven by Wholesale and International. Allison will now provide some additional perspective on our U.S. Retail business, beginning on page 7. Allison Peterson: Thank you, Richard. Our U.S. Retail business continued its momentum, delivering another strong performance in the second quarter. Total U.S. Retail net sales grew 2% and operating profit increased over prior year. We delivered sales growth across all of our core age segments, with our baby products continuing to be the primary driver. Comparable retail sales increased 5% versus last year, the fifth consecutive quarter of comp sales growth. Comps grew in both channels during the quarter. For the first half, comp sales increased 8% over last year. Similar to the first quarter, we saw the consumer focus on value. When we delivered the right balance of newness, style, and quality at a great price, the consumer responded well. We continue to see good returns on our marketing investments. That said, we did see a divergence in channel performance relative to Q1. Within the eCom channel, growth accelerated in the quarter. We believe this is a combination of our outsized opportunity to win with the consumer online as well as the benefits of our investments, which I'll touch on in a moment. In our stores, traffic was comparable to prior year. While this slowed from the first quarter, we believe our marketing investments are working as our traffic performance outpaced the industry and accelerated on a 2-year basis. With respect to our comp performance, the growth in the second quarter was driven by units as AUR was comparable to prior year. We experienced higher clearance in the quarter related to soft performance of select seasonal product offerings, which weighed on AUR and gross margin. As we enter the second half of the year, we're comfortable with our inventory position having cleared through these seasonal goods. Conversely, we are encouraged by the consumer response and our success in driving higher realized pricing in our key destination categories within our Baby business. On the following page, we highlight some recent enhancements in our eCommerce experience, which is a key part of our omnichannel portfolio. As I mentioned earlier, eCom growth accelerated in the second quarter, building on the momentum we've seen over the past several quarters. eCom comp sales increased double digits, our fourth consecutive quarter of growth. This growth was driven by strong traffic and was profitable. Our marketing investments have been very effective at bringing Gen Z families to our digital platforms. They are engaging with the website and app and they are also gravitating to our higher AUR products. We're benefiting from the investments we've made in our platform and user experience, which are delivering improvements in the consumer journey and increased site engagement. We've launched several new features, including enhanced outfitting functionality, AI-optimized product reviews, and passwordless login. For consumers that engage with these features, we're seeing increased visits, higher conversion, and more units per transaction. We've also enhanced the user experience with a new and improved AI consumer chat. This functionality now manages 1/3 of our contacts, allowing us to reinvest the productivity gains into premium high-touch care for our best consumers. We're pleased with the response to these new capabilities and the returns they're driving. Turning to page 9. Over the first half of the year, we continue to see our marketing performance improve, driving measurable gains in marketing's contribution to the business. Our marketing investments are intentionally balanced to drive near-term performance while strengthening the long-term relevance of our brand. As I mentioned earlier, we are seeing the success of these efforts increasing customer acquisition through the partnerships we choose, the cultural moments we engage in, and the stories we tell. A great example is our collaboration with Umbro, which we launched during the second quarter to participate in the excitement surrounding the World Cup. This initiative was integrated throughout all of our consumer touch points and included activations like jersey personalization events in World Cup markets. The products associated with this cultural moment drove strong engagement with our brand and over-penetrated with Gen Z as well as the growing multicultural market. Those who purchased Umbro products bought higher AUR items and added more units to their transaction. As we move into the back half, we are excited about Q3 for several reasons. As we have previously shared, we will continue to invest in marketing given the strong returns we are seeing. This will help to increase our share of voice with the consumer. We are continuing to build new ways to improve the consumer experience across all of our channels. And finally, we feel good about the way our assortment is positioned based on the current signals we are seeing in the business. For example, we will lean into our strength in Baby, our position in opening price points, OshKosh denim for back-to-school, and the importance of sleepwear that begins building in Q3 and increases in relevance throughout the back half of the year. I will now turn the call back to Richard. Richard Westenberger: Thank you, Allison. Turning to page 10 for a summary of our U.S. Wholesale and International segment performance. In U.S. Wholesale, we had strong growth in the quarter. Net sales increased 12% over last year, with growth in both AUR and units. These sales were higher than we had previously forecasted, with the upside largely driven by earlier demand for fall product, primarily with mass channel customers. Exclusively wholesale brand sales grew in total versus last year, driven by Carter's Child of Mine and Just One You. We also saw good growth in both Little Planet and our Skip Hop business. Wholesale operating profit increased 10% over prior year, while segment operating margin was roughly comparable. From a margin standpoint, higher realized pricing, tariff mitigation actions, and expense leverage essentially offset higher tariff and product costs. Turning to International. Total reported International net sales increased 3% over last year, which was also above the outlook we provided on our last call. Reported sales growth in the quarter benefited from favorable movements in currency exchange rates on a constant currency basis, International segment net sales were comparable to last year. Within our International segment, we had sales growth in Canada and Mexico, which offset lower sales in our international partners business. In the largest component of our International business, Canada, net sales increased 1% over prior year in the second quarter, driven by a 1% increase in comp sales. Net sales in Mexico increased 22% over last year, driven by favorable movements in exchange rates, timing of shipments within the wholesale channel, and the benefit of new store openings. Comp sales were essentially flat in Mexico in the quarter. Q2 comps were affected by the shift of Easter-related volume into March and traffic slowed in late June, in part due to consumers focusing on the World Cup. Our year-to-date comp in Mexico is up 9%, and we've seen demand rebound strongly post-World Cup in July. International operating income increased 50% over last year to more than $5 million, while segment operating margin increased 180 basis points to 5.7%. The improved profitability was driven by productivity savings as well as lower product costs, resulting from favorable changes in FX rates. On page 11, we have some balance sheet and cash flow highlights. Our balance sheet is in very good shape. We ended the quarter with significant liquidity with cash on hand of over $650 million. Our cash balance was boosted by the receipt of the tariff recoveries as mentioned earlier. We're projecting good liquidity over the balance of the year. Our cash balance is expected to decrease in coming months as we purchase inventory for the second half, pay taxes, including those due on the tariff recoveries, and make the first accrued interest payment on the senior notes, which we issued last year. Net inventories declined 7% compared to prior year to $578 million. Inventory units were 9% lower at quarter end and our inventory quality is strong heading into the second half of the year. For the first half, we generated operating cash flow of over $200 million compared to a use of cash of $8 million last year. This improved cash flow was driven by the tariff recoveries, improved working capital, including a lower inventory balance, as well as favorable timing of interest payments versus the prior year. We've continued to return capital to shareholders in 2026 and have paid $18 million in dividends in the first half. Pages 12 and 13 summarize our first half adjusted P&L and segment results. This information is provided for your reference. Turning to our outlook for the balance of the year beginning on page 15 of our materials. It's worth a reminder that fiscal 2025 included a 53rd week, which does not repeat this year. This additional week contributed an estimated $37 million in net sales. Our plans for 2026 reflect growth in net sales and operating profit on top of this 53-week performance in the prior year. While there have been puts and takes relative to our expectations, we've had a good start overall to the year. We've incorporated our learnings from the first half and our best read on the market environment in updating our outlook for Q3 and Q4. The second half has historically represented the majority of our annual sales and earnings, and we expect the balance of the year will be equally significant this year. Turning to our outlook for the top line, we've narrowed our outlook for full year net sales a bit from low to mid-single-digit growth previously to a revised projection of 2% to 3% growth. This revision reflects 2 key factors. First, we expect second half Wholesale demand will be a bit lighter than we had originally planned. Q2 Wholesale sales included some pull forward of sales initially planned to occur in the third quarter. Additionally, certain customers have adopted a more conservative outlook on second half inventory commitments. We're expecting full year Wholesale net sales growth in the low single-digit range, with growth in our flagship Carter's brand, the Carter's exclusive wholesale brands, and Skip Hop. Second, we've moderated our AUR assumptions for the second half a bit. We're still planning for improved year-over-year realized pricing in U.S. Retail, which would build on the gains we've made in pricing in the second half last year. Data from the broader market in second quarter indicated some price resistance from consumers with an accompanying loss of unit velocity. We think it's prudent to plan for a more value-conscious consumer. We continue to plan for growth in U.S. Retail with full year sales up in the low single-digit range and full year comparable sales up in the mid-single-digit range. These are obviously planning assumptions at this point. We aren't deep into fall selling yet. We'll continue to read the business, evaluate our performance, and adjust accordingly. In International, our outlook for full year net sales is unchanged at mid-single-digit growth over last year. On profitability, as indicated in our press release this morning, we have reiterated our previous guidance for adjusted operating income growth in the low to mid-single digits over 2025. In maintaining our operating profit outlook, we've assumed that our higher-than-planned clearance activity in the second quarter and our more modest outlook for second half Wholesale demand and Retail AUR will be offset by lower-than-planned tariff costs. Last week brought additional news on the tariff front. The Section 122 tariffs, which implemented an incremental 10% above our historical tariff baseline, had been in place since the Supreme Court's February ruling, which invalidated the previous IEEPA tariffs. These Section 122 tariffs expired last Friday and were replaced with new Section 301 tariffs, which reflects an incremental 10% to 12.5% tariff above our historical baseline. If these new tariff rates remain unchanged on our balance of year imports and all other factors remain constant, we may have some upside to our earnings outlook. It is possible the administration will raise these new tariff rates. For instance, some of our sourcing countries are currently subject to ongoing Section 301 overcapacity reviews. As we've discussed in the past, changes in tariff rates do not have an immediate impact on the P&L. Tariffs become part of inventory costs on the balance sheet and flow into cost of goods sold when items are sold. Below the line, we have improved our outlook for interest income based on our better-than-planned cash balance. This has allowed us to improve our expected adjusted EPS outlook to a more modest decline of down high single digit to low double digits as compared to last year. As discussed on previous calls, higher interest costs from our senior notes refinancing will weigh on full year EPS by approximately $0.30 per share. Also, with our net tariff recovery and an improved outlook for year-end inventory, we have increased our expectation for operating cash flow to a range of $230 million to $240 million. We've also revised our expectation for CapEx downward slightly and are expecting to spend approximately $50 million this year, mostly on enhancements to our distribution centers and on strategic technology initiatives. Our outlook for the third quarter is summarized on page 16. Third quarter net sales are expected to be approximately $750 million comparable with a year ago. By segment, we're expecting U.S. Wholesale sales down high single digits in part due to the earlier demand for fall product, which benefited this year's second quarter, low single-digit growth in U.S. Retail, and mid- to high single-digit growth in International segment net sales. We're expecting third quarter gross margin expansion driven by a greater mix of higher margin U.S. Retail sales and the anniversary of higher tariffs, which began in the third quarter of 2025. We're forecasting adjusted operating income of approximately $50 million compared to $39 million a year ago, and adjusted EPS of approximately $0.85 compared to $0.74 in Q3 last year. It's worth noting the historical significance of September in our business. September is expected to represent the majority of third quarter sales and is typically one of our largest volume months of the year. We expect that September will be similarly significant to this year's third quarter and annual sales. With our first half performance in the books and these updated guidance elements for Q3 and the full year, it's possible to infer our assumptions for the fourth quarter. Again, fourth quarter comparisons will be affected by the absence of the extra week we had last year. Adjusting for the 53rd week, our outlook implies low- to mid-single-digit growth in consolidated net sales for the fourth quarter. Risks we're monitoring include the level of promotional activity across the marketplace, especially during the upcoming holiday season, the level of consumer sentiment, particularly in the context of sustained higher gas prices and persistent inflation across many important consumer purchase categories. And with these remarks, we're ready to take your questions. Operator: [Operator Instructions] Our first question for today comes from the line of Paul Lejuez from Citi. Paul Lejuez: First one, I just wanted to understand the Wholesale dynamic a little bit better. I'm curious just if you could help connect the dots between Wholesale partners wanting product earlier and your comments, Richard, about them being more conservative. So, if you could maybe just help with that. And then second, I wanted to understand the, just the tariff refund, what the accounting for that was? Was there a reduction in inventory that was tied to that tariff refund? I know that I saw on your slide that you had $18 million in inventory from higher tariffs, what was that $18 million from? Is that the 10%? Or was there still something in there in the inventory balance tied to IEEPA tariffs? Richard Westenberger: Yes, sure. So I'll start with the tariffs. So the accounting did not reduce inventory. At this point, we have sold through the goods that were brought into the country and tariffed at the higher IEEPA level of tariff rates. So since late February, we have been importing product at the -- primarily the plus 10% rates. And so at this point, our assumption is that we have sold through those previous goods. So there is some portion of year-over-year balance in inventory that relates to higher than historical tariffs, and that would be related to the plus 10% tariffs that were put in place after IEEPA left. As to your question on Wholesale, I would say in general, a few things are at work. One, we have had good reception for fall product. The reception to the fall line was improved over the spring assortment, so we were encouraged by that. And given our broad customer portfolio, different customers are at different points in terms of how they feel on their own businesses and their outlook for the second half. So it's not unusual for us to have some puts and takes in terms of demand, I think that's what we're seeing here. I feel good about the forward demand. Fall bookings were up year-over-year. Winter bookings were up even more than that. And then the demand for early spring '27 demand was notably above a year ago. So I think the forward profile looks good. I think as a starting point coming into the year, we had an aggressive plan and we've just not seen all of that demand materialize, but we're still going to have good growth, we're planning very good growth in the fourth quarter in particular and full year growth will be up as I said in that low single digit range. So I think the outlook for Wholesale is good overall. You just have some puts and takes by customers. Paul Lejuez: Got it. And then maybe Sharon, just one for you. Just kind of curious what your first order of business would be? What's first on your list, something you can get done this year to impact the organization? And same question for '27. Sharon John: Yes, thank you so much. Clearly, there's still quite a bit to sort through on what all the opportunities are for Carter's. I tried to outline much of what we'll be focusing on from a strategic perspective in the remarks, and we'll be sharing a lot more about what our expectations are and how we plan to look toward the future and monetizing so much of this extraordinary brand equity that Carter's has and all of these assets that we have available to us on future calls and as we go. But clearly, my first order of business is outlined, as I spoke, to get to know the leadership team, understand what's going on from a financial perspective, understand our customer base and where we stand and look to where our core competencies are, our brand assets from a consumer perspective, and find those intersections and build a strategy to be able to optimize those opportunities. Operator: And our next question comes from the line of Jay Sole from UBS. Jay Sole: Great. Sharon, I'd love to ask you more about what you just said. Can you just sort of define what you think success will look like for yourself, for the organization, as you come in as CEO. Give us a little bit idea of what your ambition is, why you took the job, in terms of like some financial outlook and just goals that you have even more qualitatively. Sharon John: Yes. Thanks so much. Well, one of the reasons I took the job and I tried to cover some of that in the remarks is I've spent basically my entire career in the youth and kids business and that's -- I almost hate to say it, 30 years at this point. And it is an extremely important consumer base. It's my favorite consumer base, I have to say. And in my opinion, the most important consumer base, the service of kids and their caregivers. So I believe there's a tremendous amount of opportunity. And when you combine that with the enormous brand awareness and more importantly in some ways, the trust that Carter's has and OshKosh has, there's a lot of value to unlock. And at least what I found in the past working on a lot of other historic story brands with high brand awareness and trust, when you can get the business model, which, by the way, the operational structures here are very strong, I've been very pleased to see some of that. When you can get the company to operate on multiple cylinders, understanding -- putting the consumer in the center, which it's difficult sometimes, because the consumer evolves so rapidly in this particular type of marketplace and different generational aspects of the way the consumers work. And that we're dealing with multiple generations in the way we have to think about things. I mentioned this on the call as well. From the new mom to the mom of second and third kids to the grandparents, as well as in some ways shifting a little more kids focus. We have multiple ways to engage with this consumer, leveraging this trust, leveraging this operational expertise. So all of that is to say, back to your original question, clearly our objective is to drive shareholder value. We're going to focus on profitable growth. And that's not growth for growth's sake, but it's also not always entirely focused on the bottom line, because we believe that market share is going to be a very important part of how we win in the long run, not just in the markets that we're in, but even at some point when it's right, and we're ready to look at this on a more global basis. Jay Sole: Got it, that's very helpful. Maybe if I can just follow up on that one other one. What's the biggest thing you think you can do different from what maybe Carter's was in the past? Like where's an opportunity, maybe an out-of-the-box idea that you have that you think can really work and unlock some of that profitable growth you're talking about? Sharon John: Well, I think that some -- what's going to be a little bit interesting here is some of the words that we're going to say, like consumer-centric, brand building, data-driven, are going to be similar words because there's absolutely nothing wrong with that strategy. In fact, when you can find the appropriate convergence of these things and you can understand not just where the consumer is that where we expect to see them going. If you can find the interlink of what our brand means and what it can mean to the consumer, find a way to service their needs in a -- as well as drive ongoing relationship, the engagement piece is important. I'm not so certain that we've optimized that opportunity. Some of that has to do with the advancements that we've made in our communication strategy, our marketing strategy, our loyalty program, and always thinking about that what's next, the anticipatory aspect of being a great brand, as well as the fact that we have, again, this great infrastructure and organizational structure. I believe that we have to look at that intersection of all 3 of those things. So where's the big idea? Although a lot of that language is there, it's not just the what from a strategy, it's the how. And the magic is often in the how. And just 5 weeks in, haven't sat with the board yet. I'm going to be a little bit reticent to sit and start laying out my very next step, but we definitely have some great ideas on how to work with all of these extraordinary assets, as I mentioned, to drive this business. Operator: And our next question comes from the line of Ike Boruchow from Wells Fargo. Irwin Boruchow: Sharon, can I ask about the gross margin specifically? Can you quantify the clearance activity that you guys took in the second quarter, just how much of a drag was that to either the retail gross margin or the total gross margin of the company? And then for Q3, you said gross margin is up. Could you give any more detail there and what the drivers are? And then kind of similar question to 4Q, like, should there be a lot of variability? Should they both be up by a decent amount? Just kind of curious if you could kind of give us a little bit more detail there. Sharon John: Ike, thanks. Good morning. I'll give you some generalized feedback, given that I've only been here 5 weeks, but I'm going to let the experts in the area answer that question. But obviously, like many, many companies going into the quarter, we still were holding on to some of the pricing increases. And as we were responding to the marketplace, we did modify some of those that in certain sectors of the business, not across the board. This is very scaled approach, including some seasonal items that Allison mentioned. So that, of course, would impact our gross margin in the quarter, but I'll hand that over to both Richard and Allison to give you a little more color. Richard Westenberger: I think that's a good overview. There are a lot of moving pieces in gross margin in the second quarter. It was probably 80-or-so basis points worse than our forecast. I think the additional discounting in U.S. Retail was a portion of that. I think also just having a higher balance of Wholesale sales given the pull forward of volume we saw there. So some portion of those two factors drove some portion of that 80 basis points. I don't know that I'll parse it out beyond that. We do have gross margin expansion planned in Q3. I'd say a considerable amount, just under 200 basis points by our forecast. That has a lot to do with anniversarying the tariffs which began, the IEEPA level tariffs which began in Q3 of last year. We're lapping that now. Obviously with the plus 10-ish percent tariffs versus what was put in place a year ago. That's a major benefit. We're forecasting improved contribution from Retail, continued gains in pricing, as Allison said in her remarks in Q3. We do have expansion planned in fourth quarter, I would say, much less than what I just articulated for Q3. And again, mix has a major element of that as well. We'll have a bigger proportion of wholesale volume that typically happens in the fourth quarter. So you have a bit of a mix dynamic shift between Q3 and Q4. Irwin Boruchow: If I can just sneak one more in there. We've heard a lot about volatility across retail in the month of July. Obviously, you guys have been comping very nicely for the last year plus. Can you just comment, quarter to date, anything that stands out at you? Any more detail there might be helpful. Allison Peterson: Ike, it's Allison. Thanks for the question. I would say that we are seeing flat comps on the month of July, which is very much in line with our expectations. Sharon John: And just don't forget though, when you think about the quarter, it's a back-end weighted quarter for us. July is a difficult month in the Retail to make any reasonable projections. So September has an overweighted position. So I wouldn't really -- we just -- this is a wait-and-see kind of thing, and it's usually a discount month and all of you guys know that. Operator: And our next question comes from the line of Tom Nikic from Needham. Tom Nikic: And, Sharon, welcome aboard. Looking forward to working with you. So I want to ask about U.S. Retail. So it sounds like eCommerce accelerated while store traffic decelerated. Do you think that's a function of the inflation in gas prices and people kind of trying to -- not wanting to kind of hop in their car and make a trip to the mall or a trip to the outlet center or whatever and then just kind of staying home and shopping online. And I'm just wondering if that dynamic is part of your thinking for 2H as well? Allison Peterson: Yes, thanks for the question. I think we are -- as we mentioned in our remarks, we are seeing growth in both channels, and we are feeling good about the traffic outcomes, even though we did see a decel in stores quarter-over-quarter. Even though we saw that decel in stores, as I mentioned in my remarks, we did outpace the industry pretty significantly from a traffic perspective in stores. So we definitely saw there was something happening with the consumers more broadly in terms of where they were choosing to shift, which I -- or choosing to shop, which I think is kind of the crux of your question. I do think we believe that part of inflation and some of those pressures are people wanting the convenience of eCommerce and the ability to, yes, just order it online, pick it up in a store, have it shipped directly to them. So yes, I think that is part of what we're thinking. We also see that in some of our omnichannel metrics, which is buy online and pick up in store was up from a year ago, year-over-year perspective. So I do think that there is some consumer behavior to the convenience of the online channel and potentially not needing to get in their cars and drive. Now that being said, we still saw very strong performance in our outlet stores, which are generally those stores that people are driving the farthest to get to. Sharon John: I think it's important to understand, part of this is reflective of the underlying power of having an omnichannel strategy. We are, as I mentioned in the remarks, our objective is to be there with the consumer when they want it, how they want it, under the circumstances that they want it. And having a robust eCom organization allows us to be there if the consumer wants to shift the way they want it, they want to shop. Also, as we work on this with our enhancements on the loyalty program and some of the things that we've done, we know that the consumer that shops in both of those channels, both of our high-touch retail as well as omni, those are more valuable consumers to us. So it's great when we see somebody that may have originally engaged in a store and then wants to shop online, does that because we're going to end up in statistically greater lifetime value and greater AUR with that particular consumer. So it's good for us when consumers move from one channel to the other. And basically we're fairly agnostic on how they shop from the direct perspective. On the macro front, this category tends to be pretty resilient. I mean, clearly there isn't a category that's completely resistant to economic volatility, but kids need clothes. They just keep growing. So we're here for them. Operator: And our next question comes from the line of Kendall Toscano from Bank of America. Kendall Toscano: I'm curious if you could just remind us how margins compare between stores and eCommerce? And how sales are shifting to eCommerce would impact your overall margin rate? Richard Westenberger: Well, I would say they tend to be lower gross margin sales because you've got the shipping cost to the end consumer, but it's a very good operating margin business for us. We often hear that from folks when we comment on it that they're surprised by it. But we have -- typically, it's a bigger basket size online than it is in store. People are buying multiples to leverage the shipping and also we have a very low return rate and a very highly automated efficient distribution operation, so all of which combine to give us, I think, a better-than-average operating margin profile for the eCommerce business. So... Kendall Toscano: That's helpful. And then also just as a follow-up, I'm curious if you haven't already quantified this, just how much potential EPS upside exists if tariff rates remain unchanged through the year-end? And also what the plans are for using the cash you're getting from tariff refunds. Richard Westenberger: Well, I have. I'm not going to share with you, Kendall, what I think the upside is. It's just too early in the year, and we've given ourselves some room here. There is clearly some upside relative to the original tariff assumptions that we entered the year with. I think we articulated that the gross tariff amount was something like $200 million over our historic baseline. We think that's probably lower to the extent of something along the lines of $75 million. Now we've used some portion of that with the lower Wholesale volume that we're projecting and the additional discounting that we've done to clear some inventory. But beyond that, there is still some portion of that, that we've not flowed through yet. That would be the amount that's upside to the year, hopefully all other things being equal. As it relates to the cash, we're certainly happy to receive the refunds back. There was some speculation in the market that the government was going to resist that and not return that money, so we're thrilled to have it back on our balance sheet. I think there is still continued uncertainty, though, that we have to consider. Certainly from a tariff point of view, as I mentioned, the senior administration officials multiple times have said that their intention is to return the tariff rates to that IEEPA level, if not higher. So we're cautious that we're out of the woods as it relates to tariffs. Second, the lion's share of our business is ahead of us. It's a very uncertain market. And I think to maintain more liquidity in this environment is absolutely the prudent thing to do. We have a long record of maintaining a very efficient balance sheet. I have no interest in having an inefficient balance sheet. We are also in our planning season with a new leader. And so as we go through the coming months here and lay out our plans for the coming years and we'll have a better line of sight to the investment needs for the business, I think that's the time to perhaps do something with the cash. But at the moment, running with a bit more liquidity I think makes a lot of sense. Operator: This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Sharon Price John for any further remarks. Sharon John: Thank you all so much for joining us today on this morning's call, and we look forward to giving you an update on our progress on the next call. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day. Before you buy stock in Carter's, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Carter's wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $397,405!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,344,091!* Now, it’s worth noting Stock Advisor’s total average return is 953% — a market-crushing outperformance compared to 214% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 7, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends Carter's. The Motley Fool has a disclosure policy. Carter's (CRI) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Carter’s, Inc. CRI delivered solid second-quarter 2026 results, wherein earnings and revenues beat the Zacks Consensus Estimate and increased year over year. The company posted adjusted earnings of 26 cents per share, topping the Zacks Consensus Estimate of 2 cents. Earnings rose 52.9% from 17 cents in the year-ago quarter.Net sales increased 5.2% year over year to $615.5 million and surpassed the consensus mark of $609 million by 1%. Growth across all three business segments, including a 5.1% increase in U.S. Retail comparable sales, supported the top line. Carter's, Inc. price-consensus-eps-surprise-chart | Carter's, Inc. Quote U.S. Retail segment sales increased 1.7% year over year to $304.7 million. Comparable sales rose 5.1%, marking the fifth consecutive quarter of comparable-sales growth. Sales increased across the company’s core age segments, led by continued strength in baby products.U.S. Wholesale net sales rose 11.7% year over year to $215.6 million, surpassing our model’s estimate of $204.1 million for the segment and also contributing the largest portion of consolidated sales growth. The increase reflected gains in both units and average unit revenues, as some mass-channel customers requested fall merchandise earlier than expected.International segment sales increased 2.7% to $95.3 million. Favorable currency translation added about $2.4 million, while constant-currency sales were nearly flat. Growth in Canada and Mexico offset lower revenues from international partners. Adjusted gross margin contracted 180 basis points to 46.3%. Incremental tariff costs of $28 million and investments in product quality weighed on profitability. Higher pricing, tariff-mitigation measures and productivity initiatives provided partial offsets.Adjusted selling, general and administrative expenses declined 1.1% to $270.2 million. Store closures and other productivity actions more than offset higher marketing spending, wage inflation and rent costs, resulting in nearly 300 basis points of expense leverage.Adjusted operating income rose 54.1% to $18.1 million, and adjusted operating margin expanded 90 basis points to 2.9%. The improvement reflected sales growth and lower operating spending despite gross-margin pressure. Carter’s ended the quarter with $653.6 million in cash and cash equivalents, up from $338.2 million a year earlier. The balance included a $132 million recovery of previously paid import duties and related interest, equal to roughly $100 million after taxes.Inventories declined 6.7% year over year to $577.7 million, while inventory units fell 9%. Operating cash flow totaled $202.3 million in the first half, compared with an $8.3 million cash use in the prior-year period.The company paid $18.3 million in dividends during the first half and did not repurchase shares. Management plans to retain additional liquidity amid tariff uncertainty, seasonal inventory purchases and future investment planning under the new leadership team. Carter’s expects net sales to increase 2-3% in 2026 from $2.90 billion reported in 2025. Adjusted operating income is projected to grow in the low-single-digit to mid-single-digit range from $176 million in 2025, while adjusted earnings per share are anticipated to decline in the high-single-digit to low-double-digit range from $3.47 in 2025. The company forecasts operating cash flow of $230-$240 million and capital expenditures of nearly $50 million.The outlook assumes a lower gross margin due to incremental tariff costs, partly offset by pricing actions, tariff-mitigation initiatives and productivity savings. SG&A expenses are expected to rise in the low-single digits, while net interest expense and the effective tax rate are projected at approximately $35 million and 23%, respectively.For the third quarter of 2026, CRI expects net sales of nearly $750 million compared with $758 million in the prior-year quarter. Adjusted operating income is projected at approximately $50 million, up from $39 million, while adjusted earnings are anticipated to be about 85 cents per share compared with 74 cents a year ago. The outlook assumes gross-margin expansion on a higher mix of U.S. Retail sales and the anniversary of elevated tariff costs, along with comparable SG&A expenses and a net interest expense of about $9 million.The Zacks Rank #3 (Hold) stock gained 16.3% in the past three months against the industry’s 0.6% drop. Image Source: Zacks Investment Research Duluth Holdings Inc. DLTH sells casual wear, workwear, outdoor apparel, and accessories for men and women in the United States. It offers shirts, pants, shorts, underwear, outerwear, footwear, accessories and hard goods. At present, DLTH sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for current fiscal-year sales and earnings implies a decline of 9.6% and 267%, respectively, from the year-ago reported figures. DLTH delivered a trailing four-quarter earnings surprise of 107.5%, on average.Revolve Group, Inc. RVLV operates as an online fashion retailer for millennial and generation z consumers in the United States and internationally. It currently carries a Zacks Rank of 2 (Buy).The Zacks Consensus Estimate for Revolve Group’s current fiscal-year sales implies growth of 10.6% from the year-ago figures. RVLV delivered a trailing four-quarter average earnings surprise of 52.1%.Vince Holding Corp. VNCE provides luxury apparel and accessories in the United States and internationally. It operates through Vince Wholesale and Vince Direct-to-Consumer segments. At present, VNCE carries a Zacks Rank of 2.The Zacks Consensus Estimate for current fiscal-year sales and earnings implies growth of 7.2% and 34.1%, respectively. VNCE has delivered a trailing four-quarter earnings surprise of 635.7%, on average. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Carter's, Inc. (CRI) : Free Stock Analysis Report Vince Holding Corp. (VNCE) : Free Stock Analysis Report Duluth Holdings Inc. (DLTH) : Free Stock Analysis Report Revolve Group, Inc. (RVLV) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Track your investments for FREE with Simply Wall St, the portfolio command center trusted by over 7 million individual investors worldwide. Carter's (CRI) is back in focus after reporting its second quarter and first half 2026 results, alongside fresh guidance for the rest of the year. Investors now have updated sales and earnings figures to assess. See our latest analysis for Carter's. Carter's share price has pulled back with a 30 day share price return of 6.25% and a 7 day share price return of 0.46%, although the 1 year total shareholder return of 68.34% contrasts with weaker 3 and 5 year total shareholder returns. If Carter's earnings news has you rethinking your watchlist, this can be a good moment to broaden your search with 18 top founder-led companies Carter's just delivered stronger earnings, yet the stock has cooled after a big 1-year run and mixed multi-year returns. Does that recent pullback leave enough potential reward for the risk you would be taking now? The most followed narrative currently puts Carter's fair value at $42.67 a share, compared with the last close of $38.57. That gap is small enough that the details behind the model really matter. Read the complete narrative. The fair value call rests on a careful mix of modest revenue growth, slightly higher margins, and a lower earnings multiple than many peers. Curious which assumptions carry the most weight in that calculation and how they tie back to Carter's recent earnings beat and new CEO? The full narrative lays out the numbers behind that 10% discount in plain sight. Result: Fair Value of $42.67 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, Carter's could surprise this narrative if international markets with higher birth rates scale faster than expected and if newer premium or sustainable ranges gain stronger traction. Find out about the key risks to this Carter's narrative. With mixed signals around Carter's valuation and growth drivers, it makes sense to check the underlying data yourself rather than rely on a single story. To see how the current optimism and concerns balance out, review the 3 key rewards and 2 important warning signs If Carter's has sharpened your focus on quality opportunities, do not stop here. The next strong addition to your watchlist could be just a few clicks away. Target steadier growth potential by scanning companies with healthy balance sheets and consistent fundamentals through the solid balance sheet and fundamentals stocks screener (45 results). Spot potential value opportunities early by checking stocks that combine quality metrics with attractive pricing using the 55 high quality undervalued stocks. Prioritize income and resilience by reviewing companies that offer higher yields and robust payout profiles via the 9 dividend fortresses. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include CRI. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Carter’s, Inc. reported past second-quarter 2026 results with net sales rising to US$615.49 million and net income jumping to US$104.96 million, alongside a tariff recovery that left it holding more than US$650 million in cash. Despite tightening its full-year outlook to a modest 2%–3% net sales increase, Carter’s delivered its fifth straight quarter of comparable retail sales growth and a very large increase in adjusted operating profit. We’ll now examine how Carter’s stronger-than-expected earnings and sizeable tariff recovery may influence its longer-term investment narrative. Find 55 companies with promising cash flow potential yet trading below their fair value. To own Carter’s, you have to believe its baby and young children’s brands can stay relevant even as birth rates and competition pressure growth. The latest quarter’s stronger earnings, cash boost from the US$132 million tariff recovery, and ongoing retail comp gains support that view, but the tightened full year outlook keeps soft demand and margin pressure as the key near term risk. The most relevant update here is management’s new guidance for 2026 net sales growth of only 2% to 3%, despite a strong second quarter. That contrast between robust recent performance and cautious full year expectations goes straight to the heart of the debate about Carter’s growth ceiling and margin resilience, especially as it invests in product, marketing, and supply chain while juggling cost inflation and shifting consumer behavior. Yet beneath the strong quarter, investors should be aware that concentrated exposure to baby apparel and slower expected revenue growth could still leave Carter’s vulnerable if ... Read the full narrative on Carter's (it's free!) Carter's narrative projects $3.1 billion revenue and $134.4 million earnings by 2029. This requires 1.9% yearly revenue growth and a roughly $46 million earnings increase from $88.2 million today. Uncover how Carter's forecasts yield a $42.67 fair value, a 11% upside to its current price. Some of the lowest ranked analysts were assuming roughly flat revenue at about US$3.0 billion and earnings of only US$127.1 million by 2029, so compared with the upbeat impact of the recent tariff recovery and better than expected Q2, their view of margin and growth risk is far more pessimistic and highlights how differently you and other investors might assess Carter’s path from here. Explore 3 other fair value estimates on Carter's - why the stock might be worth 22% less than the current price! Don't just follow the ticker - dig into the data and build a conviction that's truly your own. A great starting point for your Carter's research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision. Our free Carter's research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Carter's overall financial health at a glance. Our daily scans reveal stocks with breakout potential. Don't miss this chance: Uncover the next big thing with 21 elite penny stocks that balance risk and reward. Capitalize on the AI infrastructure supercycle with our selection of the 55 best 'picks and shovels' of the AI gold rush converting record-breaking demand into massive cash flow. Outshine the giants: these 16 early-stage AI stocks could fund your retirement. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include CRI. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Revenue growth of 23% was driven by broad-based performance across business lines, supported by prior investments in technology and AI. Organic growth improved to 5% from 1% in the prior year, with management targeting double-digit organic growth in the second half of 2026 through expanded cross-selling. The Enterprise Payroll Tax platform reached a major milestone with 2 million employees from Vensure Employer Solutions now live on the system. Management is pivoting the sales force toward a consultative 'full solution' model to drive multi-product adoption, moving away from legacy transactional point-solution selling. The AsureCentral platform now hosts a majority of the 30,000 direct clients, providing a foundation for increased attach rates and automated trigger-based cross-selling. AI agent 'Luna' saw a 30% increase in platform adoption, serving as both a cost-efficiency driver and a revenue accelerator through intent-data analysis. The AsureWorks ASO offering is gaining traction among Main Street businesses, offering a flexible alternative to traditional PEO models without co-employment risk. Full-year 2026 revenue guidance is set at $159 million-$163 million, assuming flat headcount growth within the existing client base as a conservative measure. Management expects a shift in revenue mix as the Lathem acquisition transitions to a Hardware-as-a-Service (HaaS) model, creating a $600,000 headwind in early 2027 but improving long-term recurring value. The company is targeting a sales force of 150 reps by year-end 2026, focusing on 'up-skilling' to support more complex, high-value managed service sales. Backlog conversion is projected at approximately 41% over the next 12 months from a total contracted backlog of $80 million. Medium-term targets remain at $180 million-$200 million in revenue with adjusted EBITDA margins of 30% or better, driven by AI-enabled scale and reduced cost-to-serve. Second-half 2026 revenue comparisons face a headwind due to approximately $10 million in non-recurring professional services and tax deals recorded in the prior year. The company is no longer forecasting any interest rate cuts for the remainder of 2026 based on current market sentiment. Management noted that while the M&A pipeline is active, they remain 'discerning' and did not complete any reseller acquisitions in the second quarter. Regulatory complexity in payroll and tax management is cited as a significant moat, protecting the business from disruption by generic AI models. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Revenue is driven by AI identifying 'trigger events' (e.g., a company reaching 20 employees) to automatically prompt cross-selling of services like COBRA or 401(k). Cost efficiencies are being realized through sentiment analysis and automated call transcription, allowing staff to focus on strategic rather than transactional support. Management clarified that while total revenue growth may look muted due to high non-recurring comps from 2025, the underlying recurring organic growth is expected to reach double digits. Confidence is supported by the current sales motion and the transition of the client base to the AsureCentral platform. The emerging pipeline is described as 'extraordinarily strong,' though management is conservative and has not factored significant new tax deals into current 2026 guidance. New partner acquisitions and press releases regarding growth in this area are expected over the next quarter.

Interested in Carter's, Inc.? Here are five stocks we like better. Carter’s exceeded its Q2 outlook: Net sales rose 5% to $615 million, while adjusted operating income increased 54% to $18 million and adjusted EPS climbed 53% to $0.26. Results benefited from U.S. retail comparable-sales growth, strong wholesale demand and cost savings. Tariff recovery significantly boosted reported results and liquidity: The company recognized a $132 million recovery of previously paid tariffs and related interest, ending the quarter with more than $650 million in cash. However, incremental tariffs reduced adjusted gross profit by $28 million. Full-year sales expectations were narrowed: Carter’s now expects net-sales growth of 2% to 3%, citing softer second-half wholesale demand and cautious consumer pricing. It maintained its adjusted operating-income growth outlook, raised operating-cash-flow guidance to $230 million-$240 million and expects Q3 sales to be roughly flat year over year. Carter's (NYSE:CRI) reported second-quarter fiscal 2026 results that exceeded its prior outlook, with net sales rising 5% from a year earlier to $615 million and adjusted operating income increasing 54% to $18 million. The company also narrowed its full-year sales outlook while maintaining its forecast for low- to mid-single-digit adjusted operating-income growth. Sharon Price John, who recently joined Carter's as chief executive officer and president, said the company delivered solid results despite a complex macroeconomic environment. She highlighted a fifth consecutive quarter of comparable-sales growth in U.S. retail and continued customer gains among Gen Z consumers, whose sales grew in the mid-teens during the quarter. → Why SK hynix Could Be the Best AI Chip Stock to Buy Now “Our objective is to deliver consistent, profitable growth,” John said, describing plans to emphasize consumer-centric, data-driven decision-making, brand building and continued adaptation to changing consumer behavior. On a reported basis, Carter's recorded operating income of $140 million and earnings per share of $2.87 in the second quarter. Those figures included a $132 million recovery of previously paid tariffs and related interest from the U.S. government. Of that amount, $128 million benefited gross profit and $4 million was recorded as interest income, according to Chief Financial Officer and Chief Operating Officer Richard Westenberger. → Microsoft Just Flipped the AI Spending Narrative Overnight The tariff recovery was taxable, prompting the company to record an approximately $30 million tax provision that it expects to pay in September. Carter's also recorded roughly $6 million in charges during the quarter, primarily tied to its leadership transition. Excluding unusual items, adjusted earnings per share rose 53% to $0.26 from $0.17 a year earlier. Adjusted operating margin improved 90 basis points to 2.9%, supported by sales growth and lower spending. → Carrier Earnings Could Send the Stock to a New All-Time High Adjusted gross margin declined 180 basis points to 46.3%. Westenberger said incremental tariffs pressured gross margin by $28 million during the quarter, while investments in product make also weighed on profitability. Higher pricing, tariff-mitigation actions and productivity initiatives partially offset those effects. Adjusted selling, general and administrative expenses fell 1% to $270 million. Savings from productivity efforts and store closures more than offset higher marketing spending and inflationary pressures on wages and rent, the company said. U.S. retail net sales increased 2% in the quarter, while comparable sales rose 5%. Comparable sales increased in both stores and e-commerce, with baby products remaining the primary driver of growth across the retailer's core age segments. Chief Retail and Digital Officer Allison Peterson said e-commerce comparable sales rose by double digits for the fourth consecutive quarter, fueled by strong traffic and marketing investments aimed at Gen Z families. The company has introduced enhanced outfitting functions, AI-optimized product reviews, passwordless login and an updated AI chat tool. Peterson said consumers who use the new digital features have shown higher visit frequency, conversion and units per transaction. The AI chat function now handles about one-third of customer contacts, enabling Carter's to redirect productivity savings toward higher-touch service for its top customers. Store traffic was comparable with the prior year, though it slowed from the first quarter. Peterson said the company's traffic performance outpaced the industry and accelerated on a two-year basis. She also noted that second-quarter retail growth was driven by units, as average unit retail was comparable with the prior year. Higher clearance activity related to softer performance in selected seasonal products weighed on retail pricing and gross margin. Carter's said it had cleared through those goods and entered the second half with inventory in a comfortable position. Inventory units were down 9% at quarter-end, while total net inventories fell 7% to $578 million. The company plans to focus its second-half retail assortment on baby products, opening price points, OshKosh denim for back-to-school and sleepwear. Peterson also cited positive consumer engagement from the company's Umbro collaboration, which was launched during the quarter around World Cup-related activity. U.S. wholesale sales increased 12% in the quarter, exceeding Carter's expectations as some fall-product demand arrived earlier than planned, primarily from mass-channel customers. Sales rose in both average unit retail and units. Exclusive wholesale brands, including Carter's Child of Mine and Just One You, grew from a year earlier, while Little Planet and Skip Hop also posted growth. Wholesale operating profit increased 10%, with higher realized pricing, tariff mitigation and expense leverage offsetting tariff and product-cost pressures. International reported net sales increased 3%, though sales were comparable with the prior year on a constant-currency basis. Growth in Canada and Mexico offset declines in the company's international partners business. International operating income rose 50% to more than $5 million, aided by productivity savings and favorable foreign-exchange-related product costs. Carter's ended the quarter with more than $650 million in cash, boosted by the tariff recovery. First-half operating cash flow exceeded $200 million, compared with an $8 million use of cash a year earlier. The company paid $18 million in dividends during the first half. Carter's revised its full-year net-sales forecast to growth of 2% to 3%, compared with its previous outlook for low- to mid-single-digit growth. The company cited lighter expected wholesale demand in the second half and more conservative assumptions for retail pricing as consumers remain value-conscious. The company continues to expect low-single-digit full-year sales growth in both U.S. retail and U.S. wholesale, with retail comparable sales expected to increase in the mid-single digits. International sales are still projected to rise in the mid-single digits. Management maintained its forecast for low- to mid-single-digit growth in full-year adjusted operating income. It improved its adjusted earnings-per-share outlook to a decline in the high-single-digit to low-double-digit percentage range, citing stronger interest income from its higher cash balance. Carter's also raised its operating cash flow outlook to $230 million to $240 million and reduced expected capital expenditures to about $50 million. For the third quarter, Carter's expects net sales of approximately $750 million, comparable with the prior year, adjusted operating income of about $50 million and adjusted earnings per share of approximately $0.85. The company expects U.S. wholesale sales to decline by a high-single-digit percentage, partly reflecting second-quarter pull-forward demand, while U.S. retail sales are expected to grow in the low single digits and international sales are projected to increase by a mid- to high-single-digit percentage. Carter's, Inc (NYSE: CRI) is a leading designer and marketer of infant and young children's apparel in North America. Headquartered in Atlanta, Georgia, the company's core business focuses on creating clothing and accessories for babies and children, including bodysuits, sleepwear, layette, outerwear and accessories that blend comfort, safety and style. Carter's flagship brand is complemented by its OshKosh B'gosh line, which offers heritage-inspired designs and durable fabrics for toddlers and young kids. The company distributes its products through a diversified platform that includes wholesale partnerships with major department stores and mass merchandisers, direct‐to‐consumer e-commerce sites, and an extensive network of company-operated retail stores. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Carter's Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

Children’s apparel manufacturer Carter’s (NYSE:CRI) beat Wall Street’s revenue expectations in Q2 CY2026, with sales up 5.2% year on year to $615.5 million. On the other hand, next quarter’s revenue guidance of $750 million was less impressive, coming in 6.1% below analysts’ estimates. Its non-GAAP profit of $0.26 per share was significantly above analysts’ consensus estimates. Is now the time to buy Carter's? Find out in our full research report. Revenue: $615.5 million vs analyst estimates of $605.7 million (5.2% year-on-year growth, 1.6% beat) Adjusted EPS: $0.26 vs analyst estimates of $0.06 (significant beat) Adjusted EBITDA: $30.8 million vs analyst estimates of $26.43 million (5% margin, 16.5% beat) Revenue Guidance for Q3 CY2026 is $750 million at the midpoint, below analyst estimates of $798.5 million Adjusted EPS guidance for Q3 CY2026 is $0.85 at the midpoint, below analyst estimates of $0.89 Operating Margin: 22.7%, up from 0.7% in the same quarter last year Free Cash Flow Margin: 30.8%, up from 4.1% in the same quarter last year Same-Store Sales rose 5.1% year on year (2.2% in the same quarter last year) Market Capitalization: $1.39 billion “Demonstrating continued momentum, the Company posted positive results for the second quarter as net sales increased 5% and adjusted operating profit increased 54%, exceeding the prior outlook. While there were a number of moving parts in the quarter, we believe these results are largely reflective of improved marketing efforts, the early benefit of productivity initiatives, and continued progress in the critical Baby segment,” said Sharon Price John, Chief Executive Officer & President. Rumored to sell more than 10 products for every child born in the United States, Carter's (NYSE:CRI) is an American designer and marketer of children's apparel. Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Carter’s demand was weak over the last five years as its sales fell at a 2.5% annual rate. This wasn’t a great result and suggests it’s a low quality business. We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Carter’s annualized revenue growth of 1.8% over the last two years is above its five-year trend, which is encouraging. We can dig further into the company’s revenue dynamics by analyzing its same-store sales, which show how much revenue its established locations generate. Over the last two years, Carter’s same-store sales averaged 1.1% year-on-year growth. This number doesn’t surprise us as it’s in line with its revenue growth. This quarter, Carter's reported year-on-year revenue growth of 5.2%, and its $615.5 million of revenue exceeded Wall Street’s estimates by 1.6%. Company management is currently guiding for a 1% year-on-year decline in sales next quarter. Looking further ahead, sell-side analysts expect revenue to grow 1.9% over the next 12 months, similar to its two-year rate. This projection doesn’t excite us and implies its newer products and services will not catalyze better top-line performance yet. ONE MORE THING: The $21 AI Application Stock Wall Street Forgot. While Wall Street obsesses over who’s building AI, one company is already using it to print money. And nobody’s paying attention. AI chip stocks trade at ridiculous valuations. This company processes a trillion consumer signals monthly using AI and trades at a third of the price. The gap won’t last. The institutions will figure it out. You need to see this first. Read the FREE Report Before They Notice. Carter’s operating margin has risen over the last 12 months and averaged 8.1% over the last two years. The company’s higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports inadequate profitability for a consumer discretionary business. In Q2, Carter's generated an operating margin profit margin of 22.7%, up 22 percentage points year on year. This increase was a welcome development and shows it was more efficient. Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions. Sadly for Carter's, its EPS declined by 16.4% annually over the last five years, more than its revenue. We can see the difference stemmed from higher interest expenses or taxes as the company actually improved its operating margin and repurchased its shares during this time. In Q2, Carter's reported adjusted EPS of $0.26, up from $0.17 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Carter’s full-year EPS to grow 6.2% from $3.29 to $3.50. It was good to see Carter's beat analysts’ EPS expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter missed and its EPS guidance for next quarter fell short of Wall Street’s estimates. Overall, this print could have been better. The market seemed to be hoping for more, and the stock traded down 3.2% to $36.59 immediately after reporting. So do we think Carter's is an attractive buy at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.