Carter's (NYSE:CRI) Issues Quarterly Earnings Results

Key Points

• Strong second-quarter performance: Carter’s reported adjusted EPS of $0.26, beating the $0.06 consensus, while revenue rose 5.2% year over year to $615.5 million. Adjusted operating income increased 54%, supported by stronger U.S. retail and digital sales.
• Outlook became more cautious: Management lowered full-year sales-growth guidance to 2%–3% as wholesale customers take more conservative inventory positions, while third-quarter revenue guidance came in below analyst expectations.
• Financial flexibility remains solid: Carter’s received $132 million in tariff refunds and ended the quarter with more than $650 million in cash, raising projected full-year operating cash flow to $230 million–$240 million. However, second-quarter gross margin declined 180 basis points due to tariffs, product investments and clearance activity.

Carter's (NYSE:CRI - Get Free Report) announced its earnings results on Friday. The textile maker reported $0.26 earnings per share (EPS) for the quarter, topping analysts' consensus estimates of $0.06 by $0.20, FiscalAI reports. Carter's had a net margin of 3.07% and a return on equity of 13.06%. The company had revenue of $615.49 million during the quarter, compared to analysts' expectations of $605.68 million. During the same quarter in the previous year, the business posted $0.17 earnings per share. The firm's quarterly revenue was up 5.2% compared to the same quarter last year.

Here are the key takeaways from Carter's' conference call:

• Second-quarter results exceeded outlook: Net sales rose 5% to $615 million, adjusted operating income increased 54%, and adjusted EPS grew 53% to $0.26. U.S. retail comparable sales increased 5%, extending the company’s streak to five consecutive quarters of growth.
• Digital and customer acquisition trends were strong. E-commerce comparable sales grew double digits for the fourth consecutive quarter, while Gen Z customers increased at a mid-teens rate; management also cited higher engagement and profitability from website, app, marketing, and AI investments.
• Wholesale demand is expected to soften in the second half because some fall sales were pulled forward into the second quarter and customers are taking more cautious inventory positions. Carter’s reduced full-year sales growth guidance to 2%–3% from its prior low- to mid-single-digit outlook.
• Gross margin declined 180 basis points to 46.3% in Q2, pressured by tariffs, product investments, and additional clearance activity. Management expects roughly 200 basis points of gross-margin expansion in Q3 as higher tariffs anniversary, but expects less expansion in Q4 due partly to a greater wholesale mix.
• The company received $132 million in tariff refunds and ended the quarter with more than $650 million of cash, lifting projected full-year operating cash flow to $230 million–$240 million. Management improved its adjusted EPS outlook to a high-single-digit to low-double-digit decline, while retaining cash because tariff policy and consumer demand remain uncertain.

Carter's Trading Up 2.3%

Shares of Carter's stock traded up $0.86 during trading hours on Friday, reaching $38.65. 2,427,314 shares of the company's stock were exchanged, compared to its average volume of 1,138,816. Carter's has a 52-week low of $23.38 and a 52-week high of $44.44. The firm has a market capitalization of $1.42 billion, a price-to-earnings ratio of 15.59 and a beta of 0.86. The company has a fifty day moving average of $39.82 and a 200-day moving average of $37.61. The company has a current ratio of 2.80, a quick ratio of 1.72 and a debt-to-equity ratio of 0.61.

Carter's Dividend Announcement

The firm also recently declared a quarterly dividend, which was paid on Friday, June 5th. Shareholders of record on Tuesday, May 26th were issued a $0.25 dividend. The ex-dividend date was Tuesday, May 26th. This represents a $1.00 annualized dividend and a yield of 2.6%. Carter's's payout ratio is 40.32%.

Wall Street Analyst Weigh In

Several research analysts recently issued reports on CRI shares. Zacks Research downgraded Carter's from a "strong-buy" rating to a "hold" rating in a research report on Monday, May 25th. Citigroup reiterated a "buy" rating on shares of Carter's in a report on Tuesday, July 21st. Monness Crespi & Hardt raised their price target on Carter's from $45.00 to $50.00 and gave the stock a "buy" rating in a research report on Thursday, May 7th. Wells Fargo & Company raised Carter's from an "underweight" rating to an "equal weight" rating and boosted their price target for the stock from $30.00 to $42.00 in a report on Wednesday, June 17th. Finally, UBS Group restated a "buy" rating on shares of Carter's in a research report on Wednesday, July 8th. Four equities research analysts have rated the stock with a Buy rating, three have issued a Hold rating and two have assigned a Sell rating to the stock. According to MarketBeat, the stock presently has a consensus rating of "Hold" and a consensus target price of $41.17.

More Carter's News

Here are the key news stories impacting Carter's this week:

• Positive Sentiment: Carter’s reported second-quarter adjusted earnings of $0.26 per share, substantially above analyst estimates of approximately $0.02–$0.06 and up from $0.17 a year earlier. Carter's Beats Q2 Earnings and Revenue Estimates
• Positive Sentiment: Revenue increased 5.2% year over year to $615.5 million, exceeding the roughly $605.7 million consensus estimate. Management also said adjusted operating profit rose 54% and that results exceeded its prior outlook. Carter's Reports Second Quarter Fiscal 2026 Results
• Neutral Sentiment: Full-year 2026 revenue guidance was maintained or updated at approximately $3.0 billion, broadly in line with consensus. The available guidance report did not provide a comparable full-year EPS figure. Carter's Q2 2026 Earnings Call Transcript
• Negative Sentiment: Third-quarter revenue guidance of approximately $750 million fell well below the analyst consensus of $797 million. The shortfall creates concern about near-term sales momentum despite the strong second-quarter performance. Carter's Q2 Sales and Guidance

Institutional Investors Weigh In On Carter's

Hedge funds and other institutional investors have recently made changes to their positions in the business. Syon Capital LLC acquired a new stake in Carter's in the 4th quarter worth about $283,000. Hsbc Holdings PLC increased its stake in shares of Carter's by 71.5% during the 2nd quarter. Hsbc Holdings PLC now owns 9,390 shares of the textile maker's stock valued at $282,000 after acquiring an additional 3,915 shares during the last quarter. VARCOV Co. purchased a new position in shares of Carter's during the 4th quarter worth about $274,000. Graham Capital Management L.P. purchased a new position in shares of Carter's during the 4th quarter worth about $264,000. Finally, Cresset Asset Management LLC purchased a new position in shares of Carter's during the 3rd quarter worth about $255,000.

About Carter's

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.

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