Carter’s Q4 EPS Tops Estimates at $1.90; Shares Drop 15% on Soft Guidance
Carter’s reported Q4 adjusted EPS of $1.90, beating estimates by $0.20 while net sales rose 7.6% to $925.5 million. Shares fell over 15% after management issued Q1 EPS guidance of $0.02–$0.08 and projected low-single-digit sales growth for 2026.
1. Q4 Earnings and Sales Beat
Carter’s delivered adjusted EPS of $1.90 in Q4, topping estimates by $0.20, while consolidated net sales rose 7.6% to $925.5 million, driven by an extra reporting week and comparable sales growth of 3.4%.
2. Segment Performance
U.S. Retail sales increased 9.4% to $509.8 million with comparables up 4.7%, U.S. Wholesale grew 3.4% to $274.4 million, and International sales jumped 10.2% to $141.2 million, all exceeding internal forecasts.
3. Margin and Cost Pressures
Gross profit declined 2.6% to $400.2 million, with gross margin contracting 460 basis points to 43.2%, while adjusted operating income fell 22.2% to $89.5 million due to higher tariffs, mix investments and performance-based compensation.
4. Outlook and Share Reaction
Management guided Q1 adjusted EPS of $0.02–$0.08 and FY2026 net sales growth in the low- to mid-single-digit range, forecasting EPS down low-double-digit to mid-teens, prompting a 15% share price decline on the soft outlook.