Carter's, Inc. Reports Second Quarter Fiscal 2026 Results

• Net sales $615 million vs. $585 million in Q2 2025; growth of 5%
• U.S. Retail comparable sales increased 5.1%
• Operating income $140 million vs. $4 million in Q2 2025; Adjusted operating income $18 million vs. $12 million in Q2 2025, growth of 54%
• Diluted EPS $2.87 vs. $0.01 in Q2 2025; Adjusted diluted EPS $0.26 vs. $0.17 in Q2 2025, growth of 53%
• Received $132 million ($100 million after-tax) recovery of previously paid import duties and related interest
• Returned $18 million to shareholders through dividends in the first half of fiscal 2026
• Updates full year 2026 outlook

ATLANTA--(BUSINESS WIRE)--Carter’s, Inc. (NYSE:CRI), North America’s largest and most-enduring apparel company exclusively for babies and young children, today reported its second quarter fiscal 2026 results.

“Demonstrating continued momentum, the Company posted positive results for the second quarter as net sales increased 5% and adjusted operating profit increased 54%, exceeding the prior outlook. While there were a number of moving parts in the quarter, we believe these results are largely reflective of improved marketing efforts, the early benefit of productivity initiatives, and continued progress in the critical Baby segment,” said Sharon Price John, Chief Executive Officer & President. “Separately, having recently joined the organization, I look forward to leading this historic company into its next exciting chapter. Carter’s is the market share leader in its category fueled by a well-established, diversified business model and powerful assets including its iconic brands, providing a wealth of opportunity to unlock value, drive profitable growth and deliver meaningful shareholder returns.”

Adjustments to Reported GAAP Results

In addition to the results presented in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements, as presented below. The Company believes these non-GAAP financial measurements provide a meaningful comparison of the Company’s results and afford investors a view of what management considers to be the Company’s underlying performance. These measures are presented for informational purposes only. See “Reconciliation of Adjusted Results to GAAP” section of this release for additional disclosures and reconciliations regarding these non-GAAP financial measures.

Second quarter and first half fiscal 2026 results included a benefit related to the receipt of a refund of previously paid import duties and related interest as well as expenses associated with leadership transition and intellectual property litigation costs. Second quarter and first half fiscal 2025 results included expenses related to operating model improvement initiatives and leadership transition costs.

Consolidated Results

Second Quarter of Fiscal 2026 compared to Second Quarter of Fiscal 2025

Net sales increased $30.2 million, or 5.2%, to $615.5 million, compared to $585.3 million in the second quarter of fiscal 2025, reflecting growth in each segment. Net sales in the U.S. Wholesale, U.S. Retail, and International segments grew 11.7%, 1.7%, and 2.7%, respectively. U.S. Retail comparable net sales increased 5.1%. Changes in foreign currency exchange rates used for translation had a favorable effect on consolidated net sales of approximately $2.4 million, or 0.4% in the second quarter of fiscal 2026, as compared to the second quarter of fiscal 2025.

Operating income increased $135.8 million to $139.8 million, compared to $4.0 million in the second quarter of fiscal 2025, reflecting a recovery of previously paid import duties and benefits from productivity and supply chain initiatives, partially offset by net incremental tariff costs, investments in demand creation, general inflationary cost pressure, as well as costs related to leadership transition. Operating margin increased to 22.7%, compared to 0.7% in the prior year.

Adjusted operating income (a non-GAAP measure) increased $6.4 million, or 54.1% to $18.1 million, compared to $11.8 million in the second quarter of fiscal 2025, principally due to the benefits of productivity and supply chain initiatives, which more than offset net incremental tariff costs, investments in demand creation and general inflationary cost pressure. Adjusted operating margin increased to 2.9%, compared to 2.0% in the prior year period.

Net income was $105.0 million, or $2.87 per diluted share, compared to $0.4 million, or $0.01 per diluted share, in the second quarter of fiscal 2025.

Adjusted net income (a non-GAAP measure) was $9.4 million, compared to $6.3 million in the second quarter of fiscal 2025. Adjusted earnings per diluted share (a non-GAAP measure) was $0.26, compared to $0.17 in the prior-year quarter.

First Half of Fiscal 2026 compared to First Half of Fiscal 2025

Net sales increased $81.5 million, or 6.7%, to $1.30 billion, compared to $1.22 billion in the first half of 2025, reflecting growth in each segment. Net sales in the U.S. Retail, U.S. Wholesale, and International segments grew 7.2%, 5.4%, and 8.2%, respectively. U.S. Retail comparable net sales increased 7.8%. Changes in foreign currency exchange rates used for translation had a favorable effect on consolidated net sales of approximately $8.0 million, or 0.7% in the first half of fiscal 2026, as compared to the first half of fiscal 2025.

Operating income increased $138.1 million to $168.3 million, compared to $30.1 million in the first half of fiscal 2025, reflecting a recovery of previously paid import duties and benefits from productivity and supply chain initiatives, partially offset by net incremental tariff costs, investments in demand creation, general inflationary cost pressure, and costs related to leadership transition. Operating margin increased to 13.0%, compared to 2.5% in the prior year period.

Adjusted operating income (a non-GAAP measure) decreased $0.6 million, or 1.3% to $46.5 million, compared to $47.1 million in the first half of fiscal 2025, principally due to net incremental tariff costs, incremental investments in demand creation and general inflationary cost pressure, partially offset by benefits from productivity and supply chain initiatives. Adjusted operating margin decreased to 3.6%, compared to 3.9% in the prior year period.

Net income was $119.3 million, or $3.26 per diluted share, compared to $16.0 million, or $0.43 per diluted share, in the first half of fiscal 2025.

Adjusted net income (a non-GAAP measure) was $23.7 million, compared to $30.1 million in the first half of fiscal 2025. Adjusted earnings per diluted share (a non-GAAP measure) was $0.65, compared to adjusted earnings per diluted share of $0.83 in the first half of fiscal 2025.

Net cash provided by operations in the first half of fiscal 2026 was $202.3 million, compared to net cash used in operations of $8.3 million in the first half of fiscal 2025. The improved operating cash flow was primarily driven by the receipt of a refund of previously paid import duties, improved working capital and favorable timing of interest payments as compared to prior year.

See “Reconciliation of Adjusted Results to GAAP” sections of this release for additional disclosures regarding non-GAAP measures.

Return of Capital

In the second quarter of fiscal 2026, the Company paid a cash dividend of $0.25 per common share totaling $9.1 million. In the first half of fiscal 2026, the Company paid cash dividends totaling $18.3 million. No shares were repurchased in the first half of fiscal 2026.

Future declarations of quarterly dividends and the establishment of future record and payment dates will be at the discretion of the Company’s Board of Directors based on a number of factors, including business conditions, the Company’s future financial performance, investment priorities, and other considerations.

2026 Business Outlook

We do not reconcile forward-looking adjusted operating income or adjusted diluted earnings per share to their most directly comparable GAAP measures because we cannot predict with reasonable certainty the ultimate outcome of certain components of such reconciliations that are not within our control due to factors described above, or others that may arise, without unreasonable effort. For these reasons, we are unable to assess the probable significance of the unavailable information, which could materially impact the amount of future operating income or diluted EPS, the most directly comparable GAAP metrics to adjusted operating income and adjusted diluted earnings per share, respectively.

The Company’s fiscal year 2025 included a 53rd week, which contributed approximately $37 million in consolidated net sales.

The Company’s outlook (and related assumptions) for the third quarter 2026 include an anticipated non-GAAP adjustment related to IP litigation costs of approximately $1 million. The Company’s full-year fiscal 2026 outlook (and related assumptions) includes an anticipated non-GAAP adjustment related to leadership transition costs and IP litigation costs of approximately $8 million and a recovery of previously paid import duties of $132 million.

For fiscal year 2026 (a 52 week fiscal year), the Company projects approximately:

• 2% to 3% growth in net sales ($2.898 billion in fiscal 2025);
• Low single-digit to mid-single-digit percentage growth in adjusted operating income ($176 million in fiscal 2025);
• High single-digit to low double-digit percentage decline in adjusted diluted earnings per share ($3.47 in fiscal 2025);
• Operating cash flow of $230 million to $240 million; and
• Capital expenditures of $50 million.

The Company's outlook for fiscal year 2026 assumes (comparisons vs. prior year unless otherwise noted):

• Earnings contributions weighted to the second half due to greater projected net impact of tariffs and investment spending in the first half relative to the second half;
• Lower gross margin rate, reflecting incremental tariff costs partially offset by higher pricing, tariff mitigation actions, and productivity savings;
• Low-single digit increase in SG&A, reflecting organizational restructuring and store fleet rationalization savings offset by investments in demand creation, information technology, and other cost inflation across the business;
• Net interest expense of approximately $35 million, reflecting higher principal amount and coupon rate associated with the refinancing of its senior notes in Q4 2025;
• Effective tax rate of approximately 23%; and
• Average number of shares outstanding of approximately 36 million.

For the third quarter of fiscal 2026, the Company projects approximately:

• ~$750 million in net sales ($758 million in Q3 fiscal 2025);
• ~$50 million in adjusted operating income ($39 million in Q3 fiscal 2025); and
• ~$0.85 in adjusted diluted earnings per share ($0.74 in Q3 fiscal 2025).

The Company's outlook for third quarter fiscal 2026 assumes (comparisons vs. prior year unless otherwise noted):

• Higher gross margin rate, reflecting a greater mix of U.S. Retail sales and the anniversary of higher incremental tariff costs, which began in third quarter 2025;
• Comparable SG&A expense, reflecting organizational restructuring savings offset by investments in demand creation and other cost inflation across the business;
• Net interest expense of approximately $9 million, reflecting higher principal amount and coupon rate associated with the refinancing of its senior notes in Q4 2025;
• Average number of shares outstanding of approximately 36 million.

Conference Call

The Company will hold a conference call with investors to discuss second quarter fiscal 2026 results and its business outlook on July 31, 2026 at 8:30 a.m. Eastern Time (ET). To listen to a live webcast and view the accompanying presentation materials, please visit ir.carters.com and select links for “News & Events” followed by “Events.” To access the call by phone, please preregister on https://register-conf.media-server.com/register/BIb8dc4f4a67174f73b0b09efe73477c87 to receive your dial-in number and unique passcode. A presentation of second quarter results will be available in the “Events” section at ir.carters.com at approximately 7:00 a.m. ET. Important information may be disseminated initially or exclusively via the website; investors should consult the site to access this information.

A webcast replay will be available shortly after the conclusion of the call at ir.carters.com.

About Carter’s, Inc.

Carter’s, Inc. is North America’s largest and most-enduring apparel company exclusively for babies and young children. The Company’s core brands are Carter’s and OshKosh B’gosh, iconic and among the sector’s most trusted names. These brands are sold through more than 1,000 Company-operated stores in the United States, Canada, and Mexico, and online at www.carters.com, www.oshkosh.com, www.cartersoshkosh.ca, and www.carters.com.mx. Carter’s also is the largest supplier of baby and young children’s apparel to North America’s biggest retailers. The Company’s Child of Mine brand is available exclusively at Walmart, its Just One You brand is available at Target, and its Simple Joys brand is available on Amazon.com. The Company’s emerging brands include Little Planet, crafted with organic fabrics and sustainable materials, Otter Avenue, a toddler-focused apparel brand, and Skip Hop, baby essentials from tubs to toys. Carter’s is headquartered in Atlanta, Georgia. Additional information may be found at www.carters.com.

Forward Looking Statements

Statements in this press release that are not historical fact and use predictive words such as “estimates”, “outlook”, “guidance”, “expect”, “believe”, “intend”, “designed”, “target”, “plans”, “may”, “will”, “opportunities”, “are confident” and similar words are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements and related assumptions involve risks and uncertainties that could cause actual results and outcomes to differ materially from any forward-looking statements or views expressed in this press release. These risks and uncertainties include, but are not limited to, those disclosed in Part II, Item 1A. “Risk Factors” of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 2026 and Part I, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2026, and otherwise in our reports and filings with the Securities and Exchange Commission, as well as the following factors: changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits; risks related to public health crises; risks related to the organizational restructuring plan, including, but not limited to, our ability to achieve the expected savings from the plan and to fully implement the plan; risks related to consumer tastes and preferences, as well as fashion trends; the failure to protect our intellectual property; the diminished value of our brands, potentially as a result of negative publicity or unsuccessful branding and marketing efforts; delays, product recalls, or loss of revenue due to a failure to meet our quality standards; risks related to uncertainty regarding the future of international trade agreements and the United States’ position on international trade, as well as significant political, trade, and regulatory developments and other circumstances beyond our control; the roll-back of incremental tariffs imposed under the International Emergency Economic Powers Act (the “incremental tariffs”) and any additional actions taken in response to their roll-back, including, but not limited to, tariffs imposed pursuant to Section 122 of the Trade Act of 1974 and tariffs imposed under Section 301 of the Trade Act of 1974; our ability to recover refunds of incremental tariff amounts or other tariff amounts paid; increased competition in the marketplace; ongoing political and economic conflicts that could impact our global and domestic operations, including, but not limited to, the conflict between the United States, Israel, and Iran; financial difficulties for one or more of our major customers; identification of locations and negotiation of appropriate lease terms for our retail stores; distinct risks facing our eCommerce business; failure to forecast demand for our products and our failure to manage our inventory; increased margin pressures, including increased cost of materials and labor and our inability to successfully increase prices to offset these increased costs; continued inflationary pressures with respect to labor and raw materials and global supply chain constraints that have, and could continue, to affect freight, transit, and other costs; fluctuations in foreign currency exchange rates; unseasonable or extreme weather conditions; risks associated with corporate responsibility issues; our foreign sourcing arrangements; a relatively small number of vendors supply a significant amount of our products; disruptions in our supply chain, including increased transportation and freight costs; our ability to effectively source and manage inventory; problems with our Braselton, Georgia distribution facility; pending and threatened lawsuits; a breach of our information technology systems and the loss of personal data or a failure to implement new information technology systems successfully; unsuccessful expansion into international markets; failure to comply with various laws and regulations; failure to properly manage strategic initiatives; retention of key individuals; acquisition and integration of other brands and businesses; failure to achieve sales growth plans and profitability objectives to support the carrying value of our intangible assets; our continued ability to meet obligations related to our debt; changes in our tax obligations, including additional customs, duties or tariffs; our continued ability to declare and pay a dividend; volatility in the market price of our common stock; and the cost or effort required for our shareholders to bring certain claims or actions against us, as a result of our designation of the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings. Except for any ongoing obligations to disclose material information as required by federal securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The inclusion of any statement in this press release does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

T.C. Robillard
Vice President, Investor Relations
tc.robillard@carters.com