Carter’s Stock Presents a Complex Picture Amid Strategic Shifts

Carter's US1462291097

The investment case for Carter's, the children's apparel retailer, is sending mixed messages to the market. As the company concludes its 2025 fiscal year, preliminary data reveals revenue growth, yet underlying operational challenges and a divided analyst community cloud the outlook. The strategic roadmap, involving significant store closures and price adjustments, is now under intense scrutiny.

A major operational shift is underway. Management has outlined a plan to shutter approximately 150 underperforming retail locations over the coming years. This initiative aims to streamline the physical store network, enhance overall efficiency, and improve the company's cost structure. Complementing this strategic pivot is a key executive appointment. In January 2026, David B. Tichiaz assumed the role of Chief Brand Officer, tasked with revitalizing product design and merchandising efforts.

Revenue Growth: A Nuanced Story

Preliminary figures for the fourth quarter indicate sales advanced at a high single-digit percentage rate. However, a unique calendar effect played a substantial role. The 2025 fiscal year, which ended on January 3, 2026, contained a 53rd week, which management stated contributed roughly $33 million to the top line. For the full fiscal year, this results in a low single-digit percentage revenue increase.

Beneath these figures, a positive digital trend is emerging. The company has now reported growth in comparable retail sales for three consecutive quarters, suggesting its recent marketing investments and heightened e-commerce focus are gaining traction.

Pricing Power and Cost Pressures

In a direct response to increased tariff costs, Carter's implemented moderate price hikes in the mid-single-digit percentage range during the final quarter of 2025. Concurrently, promotional activities were scaled back, a move that helped stabilize the average price per item sold. A critical question for investors is whether these pricing actions can sustainably offset rising operational expenses and potential trade barriers over the long term.

The Analyst Divide

Despite these operational developments, Wall Street remains cautious. The prevailing analyst consensus continues to recommend "Reduce." While some optimism surfaced in January—notably from Citigroup, which upgraded the stock to "Buy"—other influential firms like Goldman Sachs and Barclays have maintained their more guarded stance.

With a market capitalization of approximately $1.40 billion and a recent closing share price of $38.46, the market's attention is firmly fixed on the upcoming detailed annual report. The full financial results, expected by the end of February 2026, will provide crucial evidence. They will reveal the true extent to which profit margins have benefited from the strategic price increases and reduced discounting. Only then can a clearer assessment be made of the company's momentum as it enters the new fiscal year.

@ boerse-global.de | US1462291097 CARTER’S