Carter's Inc. reported its third‑quarter fiscal 2025 results, with consolidated net sales of $757.8 million, a 0.1% decline from $758.5 million a year earlier. Adjusted diluted earnings per share were $0.74, below analysts’ consensus of $0.78, and net income was $11.6 million, or $0.32 per diluted share, short of the $0.44 estimate.
Operating income fell to $29.1 million, a 62.2% decline from $77.0 million in Q3 2024, and adjusted operating income dropped 48.9% to $39.4 million. Gross margin contracted 180 basis points to 45.1% from 46.9% a year earlier.
The company cited higher product costs driven by additional import duties and ongoing investments in product make‑as‑you‑go. It reported that it incurred roughly $110 million in duties on imported products in 2024 and estimates the annualized pre‑tax earnings impact of the new tariffs to be $200‑$250 million.
Carter's suspended its fiscal 2025 guidance amid uncertainty over incremental tariffs. It plans to close approximately 150 low‑margin North American stores over the next three years and reduce its office‑based workforce by about 300 positions, or 15%, by the end of 2025, with the workforce reduction expected to generate annualized savings of about $35 million starting in 2026.
The company also highlighted operational initiatives to accelerate productivity, including the deployment of AI‑enabled allocation tools and a streamlined concept‑to‑consumer process that has shortened product development timelines by three months. These measures, combined with store closures and workforce reductions, are expected to generate significant cost savings and improve the cost structure in coming quarters.
Segment performance: U.S. Retail net sales increased 2.6%, U.S. Wholesale net sales decreased 5.1%, and International segment sales increased 4.9%. Carter's returned $47 million to shareholders through dividends in the first three quarters of fiscal 2025, with $9.1 million paid in Q3 2025, and no share repurchases were made.
The company’s supply‑chain strategy continues to shift toward Vietnam, Cambodia, Bangladesh, and India, which are expected to account for nearly 75% of product sourcing expenditure in 2025, with China less than 3%.
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