Carter's, Inc. reported its financial results for the first quarter of fiscal 2026, revealing a consolidated net sales increase of $51.3 million, or 8.1%, reaching $681.1 million compared to $629.8 million in the same period last year. The growth was driven by higher sales across all segments, with U.S. Retail sales rising by $37.8 million due to increased unit volume and average unit retail prices. The company also noted a 10.5% increase in comparable net sales, marking the fourth consecutive quarter of positive growth. However, net income decreased by $1.2 million, or 7.7%, to $14.3 million, primarily due to increased interest expenses.
The company's gross profit increased slightly by $2.8 million, or 1.0%, to $293.9 million, but the gross margin fell by 310 basis points to 43.1%. This decline was attributed to higher average unit costs driven by incremental tariff-related costs, which negatively impacted the cost of goods sold by approximately $50 million. Selling, general, and administrative (SG&A) expenses decreased marginally by $0.3 million, or 0.1%, to $270.0 million, resulting in an SG&A rate of 39.6%, down 330 basis points from the previous year.
Carter's also experienced operational changes, including the opening of three new stores and the closure of nine in the U.S. during the quarter. The company’s international segment saw a notable sales increase of $12.2 million, or 14.3%, driven by growth in Mexico and Canada, alongside favorable foreign currency exchange rates. As of April 4, 2026, Carter's operated 1,062 retail stores in North America and approximately 19,500 wholesale locations, with international operations extending to over 1,100 locations in more than 90 countries.
In terms of strategic developments, the company is navigating a leadership transition, with Sharon Price John set to become the new CEO on June 15, 2026. This follows the departure of Douglas C. Palladini, who resigned as CEO and President effective April 28, 2026. Additionally, Carter's is pursuing potential refunds of approximately $130 million related to previously paid tariffs under the International Emergency Economic Powers Act, following a recent Supreme Court ruling that deemed these tariffs unlawful.
Looking ahead, Carter's management expressed confidence in its financial position and liquidity, with $473.4 million in cash and cash equivalents as of the end of the quarter. The company plans to continue investing in its retail store fleet and distribution facilities, with an estimated $55 million earmarked for capital expenditures in fiscal 2026. However, the ongoing impacts of trade policies and market conditions remain a focus, as they could affect future performance and operational strategies.
About CARTERS INC
Carter’s, Inc. is North America’s largest branded marketer of young children’s apparel, offering apparel and accessories for newborns to age 14 through its Carter’s and OshKosh B’gosh brands. It operates a multichannel business model including retail stores, eCommerce, and wholesale distribution across the U.S., Canada, Mexico, and international markets. The company emphasizes quality, value, brand strength, and broad distribution to serve families with young children.
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