Carter's, Inc.

What they do

Carter's designs and sells baby and young children's apparel and baby essentials through three segments: U.S. Retail, U.S. Wholesale, and International. U.S. Retail sells through company-operated stores, eCommerce and a mobile app (1,068 North American stores at fiscal 2025 year-end). U.S. Wholesale sells to wholesale customers including exclusive Carter's brands developed for Walmart, Target and Amazon, reaching roughly 19,500 North American wholesale locations. International sells through stores and eCommerce in Canada and Mexico plus wholesale accounts and licensees in over 90 countries.

Revenue drivers

• U.S. Retail — Retail stores, eCommerce and mobile app in the U.S.; largest segment at 49.1% of consolidated net sales ($636.9 million in the first two quarters of fiscal 2026).
• U.S. Wholesale — U.S. sales to wholesale customers including exclusive Carter's brands for Walmart, Target and Amazon; 36.0% of consolidated net sales ($467.0 million in the first two quarters of fiscal 2026).
• International — Sales outside the U.S., largely retail and eCommerce in Canada and Mexico plus international wholesale and licensees; 14.9% of consolidated net sales ($192.7 million in the first two quarters of fiscal 2026).

Recent performance

Second quarter fiscal 2026 net sales were $615 million versus $585 million in Q2 2025, up 5%, with U.S. Retail comparable sales up 5.1%. Q2 2026 GAAP operating income was $139.8 million and diluted EPS was $2.87, versus $4.0 million and $0.01 in Q2 2025; results included a $127.7 million tariff refund recovery ($100.1 million after tax). Adjusted operating income rose 54% to $18.1 million and adjusted diluted EPS rose 53% to $0.26 in Q2 2026. For the first half of fiscal 2026, net sales were $1,296.6 million (up 6.7%) and consolidated operating income was $168.3 million versus $30.1 million, with segment operating income of $89.4 million versus $91.8 million. U.S. Wholesale segment operating income fell 19.2% to $66.5 million in the first half on a 14.2% margin.

Strategy

Carter's operates a multichannel, global model across retail stores, eCommerce, mobile app, wholesale and omni-channel capabilities in the U.S. and Canada. Management cites improved marketing efforts, early benefits from productivity initiatives, and continued progress in the Baby segment. The company has an organizational restructuring plan referenced in its risk factors, alongside prior operating model improvement initiatives, and leadership transition costs reflect the retirement of former CEO Michael D. Casey and the departure of former CEO Douglas C. Palladini in Q2 2026. Sharon Price John, who recently joined the organization, is now CEO and President. Carter's returned $18 million to shareholders through dividends in the first half of fiscal 2026.

Risks

• Consumer spending sensitivity — The business is sensitive to overall consumer spending, confidence and sentiment, particularly in the young children's apparel market.
• Trade and tariff uncertainty — Risk factors cite uncertainty over international trade agreements, incremental IEEPA tariffs and their roll-back, and related actions including Section 122 tariffs, plus the ability to recover tariff refunds.
• Wholesale customer concentration — Financial difficulties for, or loss of, one or more major wholesale customers could result in a material loss of revenues.
• Leadership and restructuring execution — Risks include the ability to achieve expected savings from the organizational restructuring plan, which involves two CEO transitions in fiscal 2025 and fiscal 2026.

Outlook

The company updated its full year 2026 outlook in its July 31, 2026 earnings release; the release states net sales growth and adjusted operating profit exceeded prior outlook for the second quarter. Management attributes results to improved marketing, early productivity initiative benefits, and progress in the Baby segment, and says it sees opportunity to unlock value and drive profitable growth. Results in the near term include the effects of the $132 million pre-tax tariff refund recovery ($100 million after tax) and interest recognized on IEEPA tariff refund recoveries.