Carter's, Inc. reported a slight decline in its financial performance for the third quarter of fiscal 2025, with net sales totaling $757.8 million, a decrease of $0.6 million or 0.1% compared to the same period last year. The company's gross profit also fell by 4.0% to $341.6 million, resulting in a gross margin of 45.1%, down from 46.9% in the prior year. The decrease in gross profit was attributed to higher average costs per unit sold, driven by incremental tariffs and investments in product manufacturing. Operating income saw a significant decline of 62.2%, dropping to $29.1 million, while net income fell by 80.1% to $11.6 million, reflecting the impact of a non-cash pension settlement charge of $8.8 million.
In comparison to the previous fiscal period, Carter's experienced notable changes in its operational metrics. The U.S. Retail segment reported a 2.6% increase in sales to $362.3 million, driven by higher average selling prices, while the U.S. Wholesale segment saw a decline of 5.1% to $283.8 million, primarily due to decreased sales of the Simple Joys brand. International sales increased by 4.9% to $111.7 million, largely due to growth in Mexico. The company also reported an increase in selling, general, and administrative (SG&A) expenses, which rose by 11.7% to $318.0 million, reflecting costs associated with organizational restructuring and leadership transition.
Strategically, Carter's has initiated an organizational restructuring plan aimed at reducing its office-based workforce by approximately 15%, which is expected to generate annual savings of around $35 million starting in fiscal 2026. The company also appointed Douglas C. Palladini as CEO in April 2025, succeeding Richard F. Westenberger. Additionally, Carter's has been focusing on enhancing its operating model to improve product development processes and responsiveness to consumer preferences, with associated costs of $3.7 million recorded in the third quarter.
Operationally, the company reported a decrease in customer counts and engagement metrics, with a low-single digit percentage decrease in units sold across its segments. As of September 27, 2025, Carter's operated 1,065 retail stores in North America and approximately 19,500 wholesale locations. The company also noted an increase in inventories to $656.1 million, driven by incremental tariffs and investments in product make. The total liabilities increased to $1.6 billion, while shareholders' equity rose to $864.6 million.
Looking ahead, Carter's anticipates continued challenges due to market conditions, including the impact of tariffs and evolving consumer preferences. The company is focused on stabilizing its business performance and increasing productivity through various initiatives, including store portfolio optimization and targeted marketing efforts. Despite the current challenges, Carter's remains committed to long-term growth and shareholder value creation.
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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