Carter's, Inc. Q4 FY2025 earnings call

• Doug mentioned Carter's returning to long-term, sustainable, profitable growth, with momentum in business, decreasing promotional activity, growing ability to price up, and emotion-driven brand storytelling. • Richard discussed fourth quarter and full-year performance, including sales, gross margin, SG&A, operating income, and business segment results. • Focus on three strategic pillars: consumer-led, brand-focused, D2C first. • Actions to drive performance in 2026 include investing in demand creation, addressing cost structure via store closures, workforce right-sizing, and operating model improvements.

In Q4, consolidated net sales were $925 million, up 8% year-over-year. On a comparable 13-week basis, up 3%. Gross margin was 43.2%, down 460 basis points from last year due to tariffs and product costs. Adjusted operating income was $89 million with an adjusted operating margin of nearly 10%. U.S. retail net sales grew 9%, comparable sales increased 4.7% (third consecutive quarter of comp sales gains), AURs improved mid-single digits. U.S. wholesale net sales increased 3%, benefited from an additional week, but profitability impacted by higher product costs and tariffs. International reported net sales increased 10% year-over-year, 8% on constant currency basis, operating profit increased slightly over prior year.

• Expect net sales growth in low to mid-single digits in 2026, anniversarying the extra week in 2025. • U.S. retail planned low single-digit sales growth with mid-single-digit comp sales. U.S. wholesale planned mid-single-digit net sales growth. International planned mid-single-digit sales growth. • Adjusted operating income expected to grow low to mid-single digits. First quarter net sales expected to increase mid-single digits, U.S. retail high single-digit growth with mid-single-digit comp, U.S. wholesale planned low single-digit net sales decline, international double-digit net sales growth. • First quarter gross margin expected down ~400 basis points, adjusted operating income $12M - $15M, net interest expense ~$9M, effective tax rate ~37%, EPS range $0.02 - $0.08. • Full-year adjusted EPS expected down low double digits to down mid-teens.

• Overall macroeconomic conditions with employment and consumer confidence metrics signaling caution. • Potential for continued changes in tariff policies which may significantly affect the business.

Q: Can you talk more about full price realization and quantify drag from tariffs?

A: Doug and Richard discussed less promotional activity, better and best product offerings attracting new consumers, and tariffs having a gross impact over $200 million in 2026 with significant pricing offsets.

Q: Detail on U.S. wholesale margins in Q4 and SG&A guidance?

A: Richard explained wholesale margins impacted by tariffs and excess inventory, SG&A planned flat with productivity benefits from store closures and organizational savings offsetting investment spending.

Q: When does pricing at wholesale take effect and impact on sales?

A: Pricing planned up across year, spring sell-ins had less pricing offsetting tariffs, 53rd week a comparison issue, retail sales growth driven by pricing, store closures, and e-commerce.

Q: Impact of new 15% universal rate and AUR growth?

A: Waiting for tariff details, AUR growth mid-single digits for full year.

Q: Retail comps, weather impact, and early Easter benefit?

A: Doug said weather affects everyone, retail comps positive mid-single digit, early Easter historically worth a point or two of comp.

Q: Wholesale sales cadence, SimpleJoys headwind, and Amazon changes?

A: Timing and demand profile impact wholesale sales, SimpleJoys shift underway, Amazon shift to own brands.

Q: Marketing cadence and new customers?

A: John was told marketing ROI increasing, new customers from higher income cohorts.

Q: Price increases at wholesale, shelf space, and private label competition?

A: No changes to shelf space, collaborative with wholesale partners, pricing gap with private label similar to before.