Carter's Wholesale Weakness: Temporary Reset or Structural Shift?

Carter’s, Inc. CRI experienced weakness in the U.S. Wholesale segment, which saw a decline in net sales in the third quarter of 2025. The decline was mainly due to lower sales of the Simple Joys brand on Amazon. Management noted that Amazon has changed its brand management approach, leading to increased pressure and decreased demand for this exclusive brand. Higher net product costs and a significant tariff burden also hurt profitability in the Wholesale segment.

While the brand saw rapid growth following its launch in 2017, supported by Amazon’s positioning of Simple Joys, Amazon’s evolving brand management approach has increased competitive pressure within this channel. The company views this weakness as a strategic structural shift rather than a temporary reset, which prompted the company to adopt a revised strategy in close collaboration with Amazon.

Under the new framework, the company expects its core brands—Carter’s, OshKosh, Little Planet and Otter Avenues—to gain more prominence over time. Management indicated that Amazon remains a crucial distribution channel and plans to share more detailed growth initiatives and strategic plans with this key partner in the future.

Meanwhile, the Simple Joys brand is expected to decline in relative importance. The company anticipates that department stores will account for less than 20% of total Wholesale channel sales for 2025, reflecting a more diversified wholesale mix. This suggests a reduced reliance on department store partners and a broader distribution strategy across other wholesale channels.

The company expects wholesale sales to decline by low single digits in the fourth quarter, mainly due to ongoing weakness in demand for the Simple Joys brand. Conversely, sales across the rest of the U.S. Wholesale segment are projected to increase, partially offsetting the pressure from Simple Joys. Management remains confident that the company’s core value proposition remains strong, even as it raises prices to offset tariff pressures.

The Zacks Rundown for CRI

Carter’s shares have gained 36.3% in the past six months against the industry’s decline of 17.7%. CRI presently carries a Zacks Rank #3 (Hold).

From a valuation standpoint, CRI trades at a forward price-to-earnings ratio of 14.3X, lower than the industry’s average 26.45X.

The Zacks Consensus Estimate for CRI’s 2025 and 2026 earnings implies year-over-year declines of 44.4% and 28.5%, respectively.

Stocks to Consider

Some better-ranked stocks have been discussed below:

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, the company 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 VNCE’s current fiscal-year sales and earnings implies growth of 2.1% and 26.3%, respectively, from the year-ago figures. VNCE has delivered a trailing four-quarter earnings surprise of 229.6%, on average.

Advantage Solutions, Inc. ADV, provides business solutions to the consumer-packaged goods companies and retailers in North America, Asia Pacific, and Europe. At present, Advantage Solutions carries a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for Advantage Solutions’ current fiscal-year sales implies a decline of 2.2%, and the same for earnings implies growth of 107.1% from the year-ago figures. ADV has delivered a trailing four-quarter negative earnings surprise of 128.1%, on average.

Under Armour, Inc. UAA, together with its subsidiaries, engages in developing, marketing, and distributing performance apparel, footwear, and accessories for men, women, and youth. At present, Under Armour sports a Zacks Rank of 1.

The Zacks Consensus Estimate for Under Armour’s current fiscal-year sales and earnings implies a decline of 3.9% and 83.9%, respectively, from the year-ago figures. UAA has delivered a trailing four-quarter earnings surprise of 44.5 %, on average.

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

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