Carter's Stock Trades at a P/E Discount: Should You Buy, Hold or Sell?

Core Insights - Carter's, Inc. (CRI) is currently trading at a discount compared to its historical and industry benchmarks, with a forward 12-month P/E ratio of 11.15, below its median of 11.49X and significantly lower than the industry average of 26.32X, indicating potential undervaluation and investment opportunity [1] Financial Performance - In the third quarter of fiscal 2024, Carter's reported a 4.2% year-over-year decline in sales, following a 5.9% decline in the previous quarter, impacted by macroeconomic challenges and adverse currency rates that reduced net sales by $3.1 million [10] - The U.S. Retail segment experienced a 5.8$800 million and $840 million, indicating a decline from$858 million in the same quarter last year [11] Growth Strategies - Carter's has implemented a revised pricing strategy to better align with market conditions, which has been positively received by consumers [3] - The company has seen success from its OshKosh back-to-school campaign and its sustainable brands, Little Planet and PurelySoft, which appeal to environmentally conscious consumers [4] - The U.S. Wholesale business achieved an operating margin above 21%, benefiting from leaner inventories and strong demand for exclusive brands, alongside lower product costs and an efficient supply chain [5] Omni-Channel and Digital Strategies - Carter's is leveraging its omni-channel capabilities, with nearly 38% of digital orders fulfilled through stores, up from 35% the previous year, which has helped reduce shipping costs and improve margins [7] - Investments in AI-driven marketing personalization have led to improved conversion rates and mid-single-digit growth in key metrics like units per transaction [8] Market Challenges - The suspension of pandemic-related stimulus payments to child-care centers has negatively impacted families with children, leading to reduced demand for Carter's brands [10] - The company's shares have fallen 19.6% over the past three months, contrasting with a 1% decline in the industry [12]