Carter's U.S. same-store sales rose 2.1%, the first positive quarter in a year, but earnings missed estimates and full-year guidance trailed consensus. The stock fell 3.8% after hours. Back-to-school orders will test whether retail momentum can translate into profit recovery.
CARTERS INC currently carries an Alpha Score of n/a, giving AlphaScala's model a neutral read on the setup.
Carter's Inc. (CRI) reported a mixed quarter that left investors weighing better retail demand against still-weak earnings. The children's apparel company posted adjusted earnings of $0.72 per share for the first quarter, missing the $0.78 consensus estimate. Revenue came in at $694 million, slightly below the $701 million analysts had expected.
The bright spot was U.S. retail. Same-store sales in Carter's own stores rose 2.1% year over year, the first positive print in four quarters. The company said traffic improved in March and April, and that its new spring collections were resonating with parents. Online sales through Carter's direct-to-consumer channel also grew, up 4.3%.
Wholesale, however, remained a drag. Sales to department stores and other third-party retailers fell 6.8%, reflecting ongoing inventory discipline among those partners. International revenue dropped 5.2%, hurt by weaker demand in Canada and Mexico.
Gross margin narrowed to 44.1% from 45.3% a year earlier, squeezed by higher cotton costs and promotional activity in the wholesale channel. The company said it expects margins to improve in the second half as input costs ease.
Management guided for full-year adjusted earnings of $5.60 to $5.90 per share, below the $6.12 consensus. The midpoint implies a 4% decline from 2025. Revenue guidance of $2.85 billion to $2.92 billion also trailed the $2.94 billion Street estimate.
Carter's ended the quarter with $178 million in cash and $450 million drawn on its credit facility. The company repurchased $25 million in stock during the quarter and said it would continue buybacks at a measured pace.
The stock fell 3.8% in after-hours trading following the report. At $62, Carter's trades at roughly 11 times forward earnings, a discount to its five-year average of 14 times. The valuation suggests the market is pricing in further earnings pressure before the retail improvement flows through to the bottom line.
The next catalyst is back-to-school season. Carter's said it has already shipped its fall assortment to retailers and that early orders are tracking ahead of last year. If that momentum holds through the July and August selling period, the second-half margin recovery the company is banking on becomes more credible. If it stalls, the earnings miss cycle could extend into 2027.
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