Financial Data and Key Metrics Changes - In Q4 2025, the company reported net sales of $925 million, an 8% increase year-over-year, with a 3% increase on a comparable 13-week basis excluding the additional week of sales [11][12] - Gross margin was 43.2%, down 460 basis points from the previous year, primarily due to tariffs impacting $40 million [12][14] - Adjusted operating income was $89 million, with an adjusted operating margin of nearly 10%, down from 13.4% the previous year [13][15] - Adjusted earnings per share were $1.90, compared to $2.39 last year [14] Business Line Data and Key Metrics Changes - U.S. retail net sales grew 9% in Q4, with comparable sales increasing 4.7%, marking the third consecutive quarter of comp sales gains [16] - U.S. wholesale net sales increased 3%, benefiting from the additional week in the calendar [18] - International segment reported a 10% increase in net sales year-over-year, with a strong performance in Canada and Mexico [19] Market Data and Key Metrics Changes - The company experienced broad-based demand across its business segments during the holiday season, indicating a positive consumer shopping environment [10] - The active consumer count continued to grow, particularly among Gen Z and millennial families, indicating a shift in consumer demographics [8] Company Strategy and Development Direction - The company aims to return to sustainable and profitable growth by reducing promotional activity and focusing on higher-priced products [5][24] - Strategic pillars include consumer-led initiatives, brand focus, and a direct-to-consumer model to enhance consumer connectivity and brand loyalty [24] - Plans to close approximately 150 lower-margin stores by 2028, with 60 closures planned for 2026 to improve fleet productivity [26] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's path forward despite uncertainties related to tariffs, indicating that the recent tariff news could be net positive for the company [4][30] - The outlook for 2026 includes expected net sales growth in the low to mid-single digits, with adjusted operating income also projected to grow in the same range [32][36] Other Important Information - The company ended the year with strong liquidity of over $1 billion, including nearly $500 million in cash [19][20] - The effective tax rate for 2026 is planned at approximately 22%, up from 19% in 2025, reflecting changes in global tax policies [35] Q&A Session Summary Question: Can you talk more about your full price realization and the drag from tariffs? - Management noted that full price realization is improving, with less promotional activity and higher average unit retail (AUR) prices being achieved [45][46] Question: Can you provide more detail on U.S. wholesale margins in Q4? - The decline in wholesale margins was primarily driven by the net impact of tariffs, with a significant portion of the decline attributed to inventory provisions [58][59] Question: What is the expected impact of the early Easter on sales? - Management indicated that the earlier Easter could provide a benefit of one or two percentage points to comp sales [85] Question: How does the pricing at wholesale take effect? - Pricing increases are planned across the year, with more significant benefits expected in the second half compared to the first half [67][68] Question: What is the assumption on AUR growth for the full year? - The assumption is for a mid-single digit increase in full year pricing, reflecting the pricing increases initiated in the second half of 2025 [76]

Financial Data and Key Metrics Changes - In Q4 2025, the company reported net sales of $925 million, an 8% increase compared to the previous year, with a 3% increase on a comparable 13-week basis [11][12] - Gross margin was 43.2%, down 460 basis points year-over-year, primarily due to tariffs impacting $40 million [12][14] - Adjusted operating income was $89 million, with an adjusted operating margin of nearly 10%, down from 13.4% the previous year [13][15] - Adjusted earnings per share were $1.90, compared to $2.39 last year [14] Business Segment Data and Key Metrics Changes - U.S. retail net sales grew 9% in Q4, with comparable sales increasing 4.7%, marking the third consecutive quarter of comp sales gains [16] - U.S. wholesale net sales increased 3%, benefiting from an additional week in the fiscal calendar [18] - International segment reported a 10% increase in net sales, with a constant currency growth of 8% [19] Market Data and Key Metrics Changes - The company experienced broad-based demand across its business segments during the holiday season, indicating a strong consumer shopping environment [10] - The active consumer count continued to grow, particularly among Gen Z and millennial families, indicating a shift in consumer demographics [5][8] Company Strategy and Development Direction - The company aims to return to sustainable and profitable growth by reducing promotional activity and focusing on higher-priced products [5][24] - Strategic pillars include consumer-led initiatives, brand focus, and a direct-to-consumer model to enhance consumer connectivity and brand loyalty [24] - Plans to close approximately 150 lower-margin stores by 2028 to improve fleet productivity and profitability [26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertainty surrounding tariffs but expressed optimism about the company's path forward, citing strong consumer demand and improved financial outcomes [4][9] - The outlook for 2026 includes expected net sales growth in the low to mid-single digits, with adjusted operating income also anticipated to grow in the same range [32][36] Other Important Information - The company ended the year with strong liquidity of over $1 billion, including nearly $500 million in cash [19][20] - Operating cash flow for 2025 was $122 million, reflecting a decline due to lower earnings and higher inventories [22] Q&A Session Summary Question: Can you talk more about your full price realization and the drag from tariffs? - Management noted an increase in full price realization with less promotional activity, particularly in emerging brands like Little Planet [42][44] - The gross impact of tariffs is expected to be over $200 million for the year, with pricing increases planned to offset this [46][47] Question: Can you provide details on U.S. wholesale margins in Q4? - The primary driver of margin decline was the net impact of tariffs, with approximately $20 million of the $40 million impact attributed to this factor [54][55] Question: What is the timing of pricing at wholesale? - Pricing increases are planned across the year, with more significant benefits expected in the second half [62][64] Question: How does the early Easter impact sales? - Early Easter is expected to provide a benefit of one to two percentage points in comp sales [80][82] Question: What are the key drivers underpinning your confidence in the sales guidance? - The assumption includes a mid-single digit increase in pricing, with strong growth planned in e-commerce and retail channels [74][76]

Core Insights - Carter's, Inc. (CRI) has faced a decline in net sales within its U.S. Wholesale segment during Q3 2025, primarily due to reduced demand for the Simple Joys brand on Amazon [1][9] - The company perceives the slowdown of Simple Joys as a structural shift rather than a temporary issue, prompting a strategic realignment with Amazon [2][9] - Management anticipates a low single-digit decline in wholesale sales for Q4 2025, although growth in other brands is expected to partially offset this decline [5][9] U.S. Wholesale Segment Performance - The U.S. Wholesale segment's decline is attributed to lower sales of the Simple Joys brand, which has been impacted by Amazon's new brand management strategy [1][2] - The company expects department stores to contribute less than 20% of total Wholesale channel sales in 2025, indicating a shift towards a more diversified wholesale mix [4] Strategic Adjustments - Under the revised strategy, core brands such as Carter's, OshKosh, Little Planet, and Otter Avenues are expected to gain more prominence [3] - The company plans to enhance collaboration with Amazon and share detailed growth initiatives moving forward [3] Financial Outlook - The Zacks Consensus Estimate indicates a significant year-over-year decline in earnings for CRI, with expected decreases of 44.4% for 2025 and 28.5% for 2026 [15] - CRI's shares have increased by 36.3% over the past six months, contrasting with a 17.7% decline in the industry [6]

Core Insights - Carter's, Inc. (CRI) is experiencing overall growth constraints due to weaknesses in U.S. Wholesale, particularly from the Simple Joys brand, which has offset gains in U.S. Retail and International markets [1][3] - The company's net sales slightly declined by 0.1% to $757.8 million in Q3 2025 compared to the same quarter last year, with U.S. Wholesale declines neutralizing the growth from U.S. Retail and International [1][8] - Adjusted operating income fell by $40 million year-over-year, driven by weaker results in both U.S. Retail and U.S. Wholesale, indicating balanced pressure across these segments [2] U.S. Wholesale Performance - U.S. Wholesale sales decreased due to softer performance from the Simple Joys brand, which has seen moderated demand on Amazon throughout the year [3] - The brand's rapid growth post-launch in 2017 has been impacted by recent shifts in Amazon's brand management strategy, intensifying pressure on this business [3] Future Outlook - The company is developing a framework to better align with Amazon's operating model across its brand portfolio, aiming for a more sustainable long-term business beyond Simple Joys [4] - Management anticipates low-single-digit declines in U.S. Wholesale sales for Q4, while expecting gains in the rest of the U.S. Wholesale portfolio to partially mitigate the overall decline [4] Stock Performance - Carter's shares have increased by 20.8% over the past six months, contrasting with an 8.7% decline in the industry [5] - The current forward price-to-earnings ratio for CRI is 17.04X, which is lower than the industry average of 28.16X [7] Earnings Estimates - The Zacks Consensus Estimate indicates a year-over-year earnings decline of 44.4% for the current year and 28.5% for the next year [10]

Company Overview - Carter's is undergoing a transformation under new CEO Douglas Palladini, focusing on profitability and growth [3][4] - The company has seen strong consumer response to new products, particularly among young Gen Z families [4] Financial Performance - In Q3, net sales were approximately $758 million, with U.S. retail sales increasing by 2.6% and international sales rising by 4.9% [5] - However, Q2 profits dropped nearly 60%, leading the company to withdraw its annual guidance [4] - Net income for Q3 fell 80% year-on-year to $11.6 million, and operating income decreased over 60% to $29 million [8] Impact of Tariffs - Tariffs have significantly affected the company's profitability, with operating margin contracting to 3.8% from 10.2% a year ago [6] - Gross margin decreased by 180 basis points to 45.1%, with tariffs costing the company $20 million [6] - Tariffs have also negatively impacted wholesale profitability [7] Strategic Changes - Carter's plans to lay off about 300 corporate employees, representing 15% of its workforce, to achieve annualized savings of approximately $35 million starting next year [8] - The company intends to close about 150 North American stores over the next three years, increasing the number of closures from previous plans [8] Challenges in Sales Channels - Sales on Amazon have declined due to changes in the e-commerce giant's sales approach regarding Carter's "Simple Joys" brand [7] - Department store sales also experienced a decline during the period [7]

Core Viewpoint - Carter's, Inc. announced a proposed offering of $500 million in senior notes due 2031 to refinance existing debt and cover related expenses [1][2]. Group 1: Offering Details - The offering will consist of $500 million aggregate principal amount of senior notes due 2031 [1]. - The net proceeds will be used to redeem all outstanding 5.625% senior notes due 2027 and to pay related fees and expenses [2]. - The notes are being offered to qualified institutional buyers under Rule 144A and to non-U.S. persons outside the United States under Regulation S [3]. Group 2: Company Overview - Carter's, Inc. is North America's largest apparel company exclusively for babies and young children, with core brands including Carter's and OshKosh B'gosh [5]. - The company operates over 1,000 stores across the U.S., Canada, and Mexico, and sells online through multiple platforms [5]. - Carter's is also the largest supplier of baby and young children's apparel to major North American retailers [5].

Financial Data and Key Metrics Changes - For Q3 2025, the company reported net sales of $758 million, with operating income of $29 million and earnings per share (EPS) of $0.32, compared to EPS of $1.62 in the previous year [4][10] - Year-to-date sales approached $2 billion, with an operating income of $59 million, reflecting a 3% operating margin and year-to-date EPS of $0.75 [4][10] - Adjusted EPS for Q3 was $0.74, down from $1.64 a year ago, with adjusted operating income of $39 million compared to $77 million in the prior year [10][11] Business Line Data and Key Metrics Changes - U.S. retail net sales grew by 3% in Q3, with a positive 2% comparable sales growth, while U.S. wholesale sales declined, particularly in the Simple Joys brand [11][12] - International segment sales increased by 5%, with strong performance in Mexico, achieving a 16% comparable sales growth [17][18] - The U.S. retail business saw improved inventory management, contributing to better sales performance during key promotional periods [12][13] Market Data and Key Metrics Changes - The company faced significant tariff impacts, estimating an annualized incremental impact of $200 to $250 million due to higher tariffs, with a net impact on operating income projected between $25 to $35 million for Q4 [30][31] - The effective duty rate increased to the high 30% range, significantly affecting cost structures [30] Company Strategy and Development Direction - The company is undergoing a transformation to enhance productivity, reduce costs, and streamline operations, targeting $45 million in gross savings for 2026 [24][25] - Plans include closing approximately 150 stores in North America, with expectations of sales transfer benefits to nearby stores and e-commerce channels [25][49] - The company aims to focus on core brands and reduce reliance on the Simple Joys brand, which has seen declining demand [16][62] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to sustainable growth, emphasizing the importance of managing tariff impacts through pricing strategies and cost reductions [22][39] - The company is preparing for a strong holiday season, with expectations of low single-digit comparable sales growth in U.S. retail for Q4 [33][34] - Concerns were raised about macroeconomic indicators, including inflation and consumer confidence, which could impact future performance [37][38] Other Important Information - The company ended Q3 with $184 million in cash and significant borrowing capacity, maintaining a strong balance sheet amid uncertainties [19][20] - The company plans to invest more in demand creation and marketing, with a projected increase of nearly 20% in marketing spend for 2026 [27][28] Q&A Session Summary Question: What is happening with the Simple Joys brand and its future? - Management indicated that the Simple Joys brand is being reduced in significance as they focus on core brands like Carter's and OshKosh B'gosh, which are expected to perform better on platforms like Amazon [41][43][62] Question: Can you elaborate on the expected sales transfer from store closures? - The company expects a 20% sales transfer rate to nearby stores and e-commerce from the 150 stores planned for closure, which generated about $110 million in revenue over the last 12 months [49] Question: What is the confidence level for sales growth in 2026? - Management noted that sales growth will be driven more by pricing than unit sales, with expectations that the entire industry will raise prices in response to tariff challenges [55][71] Question: How will the company manage the impact of tariffs on margins? - The company plans to cover most of the incremental tariff impact through pricing strategies and operational efficiencies, while also monitoring cotton and freight costs [76][80]