Bear of the Day: Carter's (CRI)

When it comes to identifying potential short candidates or stocks to steer clear of, apparel brands are often high on my list. The industry is notoriously difficult, as consumer trends shift quickly, brand loyalty can be fleeting, and managing seasonal inventory is a constant balancing act. Even the strongest names stumble when demand softens or fashion trends miss the mark.

Carter’s (CRI), the well-known children’s apparel maker with numerous brands, is a clear example of these challenges in action. The company has been grappling with declining sales, a share price stuck in a prolonged downtrend, and another wave of downward revisions to its earnings estimates. These headwinds, combined with a tough retail environment, make Carter’s a stock that investors may want to avoid for now.

Carter’s Stock Slumps on Earnings Downgrades

Investor sentiment toward Carter’s has weakened further as analysts slash their earnings forecasts. Over the past month, estimates for the current quarter have been cut by 13.45%, while full-year 2025 projections have fallen 5.86%. Looking ahead, 2026 earnings estimates have dropped even more sharply, down 10.5%, which together gives the stock a Zacks Rank #5 (Strong Sell) rating.

On the top line, the outlook remains sluggish. Sales are now expected to decline 0.15% in 2025, followed by only a modest 1.71% rebound in 2026. This combination of downward earnings revisions and muted growth expectations underscores the headwinds facing the company.

Carter’s Stock Chart Offers a Glimmer of Hope

Carter’s has faced persistent headwinds, with stagnant sales growth, muted earnings momentum, and generally cautious analyst sentiment weighing on the stock. Yet despite these challenges, the technical picture offers a measure of optimism and may be hinting at an early stage bottoming process.

While the trend has pointed lower all year, the stock has been carving out a broad six-month consolidation pattern, a potential base that often forms ahead of a reversal. The key level to watch is the $33.40 resistance zone. A decisive breakout above this level would mark the stock’s first meaningful higher high in months and could signal that a bottom is finally in place.

So far, however, this level has proven stubborn. Every attempt to retest $33.40 has been met with selling pressure, sending shares back into the range. A clean breakout with strong volume would be an important confirmation that sentiment is turning and that a more durable recovery may be underway.

Should Investors Avoid CRI Stock for Now?

Given the steady stream of earnings downgrades, weak sales outlook, and a prolonged downtrend in the stock, Carter’s remains a challenged name with limited near-term visibility. While the chart shows early signs of a potential bottom, the technical setup is still unconfirmed, and the fundamental pressures have yet to ease. Until the company delivers clearer signs of stabilization, both in its financial results and in analyst expectations, investors may be better off staying on the sidelines.

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This article originally published on Zacks Investment Research (zacks.com).

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