Carter’s, Inc. (NYSE:CRI), North America’s largest and most-enduring apparel company exclusively for babies and young children, today reported its third quarter fiscal 2026 results.

“I am pleased with the significant progress of the company’s profitability improvement initiatives in the third quarter, especially in light of delivering slight growth in U.S. Retail comparative sales and overall net sales that were slightly above our outlook amid an uneven macroeconomic environment. As the quarter unfolded, the U.S. Retail team quickly and effectively worked to adjust our marketing and promotional efforts in response to the challenges to help deliver these results. Our solid third quarter performance is currently expected to contribute to another year of growth in net sales, U.S. Retail comparable sales, and operating profit for fiscal 2026, even as we moderate our revenue outlook to reflect the continued pressure on our consumers from the ongoing economic and geopolitical uncertainty,” said Sharon Price John, Chief Executive Officer & President. “Separately, over the past several months in my new role, we have continued to define a strategic framework based on our tenets of keeping the consumer at the center of all that we do, leveraging the power of our market-leading brands, and utilizing our meaningful data and insights to drive innovation and decision making while staying focused on delivering profitable sales. Indicative of our intent to take significant and rapid steps to improve the business, for the first time in 25 years, during the quarter we successfully launched a comprehensive initiative for our flagship Carter’s brand, including a reimagined logo and brand promise of “let every child's light shine”, with the goal of increasing appeal and relevance to today’s generation of parents. Separately, we announced the evolution of our leadership structure designed to increase synergy, improve processes, and better align with our go-forward strategy. While early, I’m encouraged by our progress and believe we are well positioned to continue to unlock this iconic company's potential to deliver meaningful shareholder returns over time,” Ms. John concluded.

Adjustments to Reported GAAP Results

In addition to the results presented in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements, as presented below. The Company believes these non-GAAP financial measurements provide a meaningful comparison of the Company’s results and afford investors a view of what management considers to be the Company’s core performance. These measures are presented for informational purposes only. See “Reconciliation of Adjusted Results to GAAP” section of this release for additional disclosures and reconciliations regarding these non-GAAP financial measures.

Third quarter fiscal 2026 results included expenses associated with intellectual property litigation costs. Results for the first three quarters of fiscal 2026 included a benefit related to the receipt of a refund of previously paid import duties and related interest as well as expenses associated with leadership transition and intellectual property litigation costs. Third quarter and the first three quarters of fiscal 2025 results included expenses related to organizational restructuring initiatives, operating model improvement costs, leadership transition costs, a non-cash charge for settlement of the OshKosh B’Gosh Pension Plan, and a tax charge associated with the termination of the Company’s deferred compensation plan.

Consolidated Results

Third Quarter Fiscal 2026 compared to Third Quarter Fiscal 2025

Net sales decreased $5.4 million, or 0.7%, to $752.5 million, compared to $757.8 million in the third quarter of fiscal 2025. Net sales increased 4.5% in the International segment, were comparable to prior year in U.S. Retail, and decreased 3.8% in U.S. Wholesale. U.S. Retail comparable net sales increased 0.4%. Changes in foreign currency exchange rates used for translation had a favorable effect on consolidated net sales of approximately $0.9 million, or 0.1% in the third quarter of fiscal 2026, as compared to the third quarter of fiscal 2025.

Operating income increased $26.7 million, or 91.7%, to $55.8 million, compared to $29.1 million in the third quarter of fiscal 2025, reflecting higher realized pricing, benefits from productivity initiatives, and the non-recurrence of organizational restructuring and operating model improvement costs in the prior year period. These benefits were partially offset by increased marketing investments as well as general cost inflation. Operating margin increased to 7.4%, compared to 3.8% in the prior year.

Adjusted operating income (a non-GAAP measure) increased $17.6 million, or 44.6% to $56.9 million, compared to $39.4 million in the third quarter of fiscal 2025, principally due to higher realized pricing and benefits from productivity initiatives, which more than offset increased marketing investments and general cost inflation. Adjusted operating margin increased to 7.6%, compared to 5.2% in the prior year period.

Net income was $36.6 million, or $1.00 per diluted share, compared to $11.6 million, or $0.32 per diluted share, in the third quarter of fiscal 2025.

Adjusted net income (a non-GAAP measure) was $37.5 million, compared to $26.8 million in the third quarter of fiscal 2025. Adjusted earnings per diluted share (a non-GAAP measure) was $1.03, compared to $0.74 in the prior-year quarter.

First Three Quarters of Fiscal 2026 compared to First Three Quarters of Fiscal 2025

Net sales increased $76.1 million, or 3.9%, to $2.05 billion, compared to $1.97 billion in the first three quarters of fiscal 2025, reflecting growth in each segment. Net sales in the International, U.S. Retail, and U.S. Wholesale segments grew 6.8%, 4.5%, and 1.8%, respectively. U.S. Retail comparable net sales increased 5.0%. Changes in foreign currency exchange rates used for translation had a favorable effect on consolidated net sales of approximately $8.9 million, or 0.5% in the first three quarters of fiscal 2026, as compared to the first three quarters of fiscal 2025.

Operating income increased $164.8 million to $224.0 million, compared to $59.2 million in the first three quarters of fiscal 2025, reflecting a recovery of previously paid import duties, benefits from productivity initiatives, and the non-recurrence of organizational restructuring and operating model improvement costs in the prior year period. These benefits were partially offset by incremental tariff costs, increased marketing investments, and general cost inflation. Operating margin increased to 10.9%, compared to 3.0% in the prior year period.

Adjusted operating income (a non-GAAP measure) increased $17.0 million, or 19.6% to $103.5 million, compared to $86.5 million in the first three quarters of fiscal 2025, principally due to higher net sales and the benefits from productivity initiatives, which more than offset incremental tariff costs, increased marketing investments, and general cost inflation. Adjusted operating margin increased to 5.0%, compared to 4.4% in the prior year period.

Net income was $155.9 million, or $4.27 per diluted share, compared to $27.6 million, or $0.75 per diluted share, in the first three quarters of fiscal 2025.

Adjusted net income (a non-GAAP measure) was $61.2 million, compared to $56.9 million in the first three quarters of fiscal 2025. Adjusted earnings per diluted share (a non-GAAP measure) was $1.68, compared to adjusted earnings per diluted share of $1.57 in the first three quarters of fiscal 2025.

Net cash provided by operations in the first three quarters of fiscal 2026 was $101.8 million, compared to net cash used in operations of $136.3 million in the first three quarters of fiscal 2025. The improved operating cash flow was primarily driven by the receipt of a refund of previously paid import duties and improved working capital.

See “Reconciliation of Adjusted Results to GAAP” sections of this release for additional disclosures regarding non-GAAP measures.

Return of Capital

In the third quarter of fiscal 2026, the Company paid a cash dividend of $0.25 per common share totaling $9.1 million. In the first three quarters of fiscal 2026, the Company paid cash dividends totaling $27.5 million. No shares were repurchased in the first three quarters of fiscal 2026.

Future declarations of quarterly dividends and the establishment of future record and payment dates will be at the discretion of the Company’s Board of Directors based on a number of factors, including business conditions, the Company’s future financial performance, investment priorities, and other considerations.

2026 Business Outlook

The Company does not reconcile forward-looking adjusted operating income or adjusted diluted earnings per share to its most directly comparable GAAP measures because it cannot predict with reasonable certainty the ultimate outcome of certain components of such reconciliations that are not within its control due to factors described above, or others that may arise, without unreasonable effort. For these reasons, the Company is unable to assess the probable significance of the unavailable information, which could materially impact the amount of future operating income or diluted EPS, the most directly comparable GAAP metrics to adjusted operating income and adjusted diluted earnings per share, respectively.

The Company’s fiscal year 2025 and fourth quarter of 2025 included a 53rd week, which contributed approximately $37 million in consolidated net sales.

The Company’s outlook (and related assumptions) for the fourth quarter 2026 includes an anticipated non-GAAP adjustment for third-party legal costs related to IP litigation of approximately $1 million to $2 million. The Company’s full-year fiscal 2026 outlook (and related assumptions) includes anticipated non-GAAP adjustments for leadership transition costs and third-party legal costs related to IP litigation of approximately $8 million to $9 million and a recovery of previously paid import duties and related interest of $132 million.

For fiscal year 2026 (a 52 week fiscal year), the Company projects approximately:

• $2.91 billion to $2.93 billion in net sales ($2.898 billion in fiscal 2025, a 53 week fiscal year);
• $178 million to $187 million in adjusted operating income, reflecting low-single digit to mid-single digit percentage growth ($176 million in fiscal 2025);
• $3.05 to $3.23 in adjusted diluted earnings per share, reflecting a high-single digit to low-double digit percentage decline ($3.47 in fiscal 2025);
• Operating cash flow of $240 million to $250 million; and
• Capital expenditures of $50 million.

The Company’s outlook for fiscal year 2026 assumes (comparisons vs. prior year unless otherwise noted):

• Slightly lower gross margin rate;
• Comparable SG&A expense;
• Net interest expense of approximately $32 million;
• Effective tax rate of approximately 23%; and
• Average number of shares outstanding of approximately 36 million.

For the fourth quarter of fiscal 2026 (a 13 week fiscal quarter), the Company projects approximately:

• $860 million to $880 million in net sales ($925 million in Q4 fiscal 2025, a 14 week fiscal quarter);
• $74 million to $83 million in adjusted operating income ($89 million in Q4 fiscal 2025); and
• $1.37 to $1.55 in adjusted diluted earnings per share ($1.90 in Q4 fiscal 2025).

The Company’s outlook for fourth quarter fiscal 2026 assumes (comparisons vs. prior year unless otherwise noted):

• Higher gross margin rate;
• Comparable to low-single digit decrease in SG&A expense;
• Net interest expense of approximately $10 million;
• Average number of shares outstanding of approximately 36 million.

Conference Call

The Company will hold a conference call with investors to discuss third quarter fiscal 2026 results and its business outlook on October 30, 2026, at 8:30 a.m. Eastern Time (ET). To listen to a live webcast and view the accompanying presentation materials, please visit ir.carters.com and select links for “News & Events” followed by “Events.” To access the call by phone, please preregister on https://register-conf.media-server.com/register/BI7875ac900b784e79b5a34e479a9e48d7 to receive your dial-in number and unique passcode. A presentation of third quarter results will be available in the “Events” section at ir.carters.com at approximately 7:00 a.m. ET. Important information may be disseminated initially or exclusively via the website; investors should consult the site to access this information.

A webcast replay will be available shortly after the conclusion of the call at ir.carters.com.