Key Points – Q1 results beat expectations as Carter’s reported $681 million in net sales, up 8%, with stronger demand across retail, wholesale and international channels.
However, profitability was pressured, with adjusted EPS down to $0.39 from $0.66 a year ago and gross margin falling more than 300 basis points. – Tariffs remain the biggest headwind, with management saying incremental tariff costs hurt gross margin and wholesale profitability
Carter’s has filed for about $130 million in tariff refunds, but it is not recognizing them yet because cash has not been received and the outlook remains uncertain. – U.S. retail and international sales stayed strong, with U.S. retail comparable sales up more than 10% for the fourth straight quarter and international sales rising 14% reported, led by Canada and especially Mexico. The company reaffirmed full-year guidance and expects low- to mid-single-digit sales growth for fiscal 2026. Carter’s (NYSE:CRI) reported stronger-than-expected first-quarter fiscal 2026 sales and earnings, with growth across its retail, wholesale and international businesses, but management said tariffs, higher spending and interest costs continued to weigh on profitability.
Interim Chief Executive Officer and President, Chief Financial Officer and Chief Operating Officer Richard Westenberger said the year was “off to a good start,” with first-quarter sales and earnings exceeding the expectations the company had provided on its prior earnings call. He also addressed a leadership transition, noting that Doug Palladini had departed as CEO and that Carter’s expects to welcome Sharon Price John as its new CEO next month. “We saw higher year-over-year demand for our brands across all of our channels in the first quarter,” Westenberger said, adding that an earlier Easter holiday benefited demand and that consumers appeared to be shopping broadly during the period. First-Quarter Sales Rise, But EPS Declines Carter’s reported first-quarter net sales of…