Carter’s Shares Slide 11% Pre-Market After FY25 Margin Squeeze and Lower 2026 EPS Outlook

Overview

• The stock fell to about $37.35 before the open as investors reacted to weaker profitability and cash generation.
• Q4 net sales reached $925 million, up 8% with a 53rd week adding about $37 million, or 3% growth on a comparable 13‑week basis.
• Profitability weakened as adjusted gross margin fell 460 basis points to 43.2% and full‑year operating margin landed near 5.0%, with Q4 diluted EPS at $1.76 (adjusted $1.90) and FY at $2.53 (adjusted $3.47).
• Operating cash flow dropped to $122 million from $298.8 million, which management linked to elevated inventories and softer earnings.
• FY26 guidance projects low‑ to mid‑single‑digit growth in sales and adjusted operating income but a low double‑digit to mid‑teens decline in adjusted EPS, reflecting higher interest, a higher tax rate and ongoing tariff headwinds; the company ended FY25 with over $1 billion in liquidity after refinancing $575 million of notes and securing a new $750 million ABL.