Carter's Q4 Net Sales Climb 8% to $925M; EPS Falls to $1.90 on Tariffs
Carter's Q4 net sales rose 8% to $925m (3% comp) while adjusted gross margin fell 460 bps to 43.2% due to a $40m tariff impact. Management forecasts fiscal 2026 low-mid single-digit sales and operating income growth but expects adjusted EPS to fall low-double-digits due to tariffs, interest and higher taxes.
1. Q4 Financial Performance
Carter's reported net sales of $925 million, up 8% year-over-year and 3% on a 13-week comparable basis, driven by a 53rd week and low-single-digit AUR gains. Adjusted gross margin declined by 460 basis points to 43.2% due to a $40 million tariff impact and higher product costs, resulting in adjusted EPS of $1.90 versus $2.39 a year ago.
2. Fiscal 2026 Outlook
Management expects low- to mid-single-digit net sales and adjusted operating income growth in fiscal 2026, but anticipates adjusted EPS to fall by low-double-digits as tariffs (>$200 million assumed), higher interest expense (~$0.30 EPS headwind) and a ~22% tax rate weigh on early-year profitability, with results back-end weighted.
3. Liquidity and Cost Management
The company ended fiscal 2025 with over $1 billion in liquidity, comprising roughly $500 million in cash and a $750 million asset-based revolving credit facility, and refinanced $575 million of senior notes at 7.375%. Management plans approximately 60 store closures in 2026, productivity measures to keep SG&A roughly flat, and expects inventory levels to remain elevated from tariff-related cost headwinds.