• Net Sales: $630 million, down 5% from last year.
• Adjusted Operating Income: $35 million, with an adjusted operating margin of 5.6%.
• Adjusted EPS: $0.66, compared to $1.04 in the first quarter of last year.
• Gross Margin: 46.2%, a decline of 140 basis points versus last year.
• SG&A Expenses: $261 million, down 2% from last year.
• US Retail Sales: Declined 4% with comp sales down about 5%.
• US Wholesale Sales: Declined 5% year over year.
• International Sales: Declined 5%, with a $6 million headwind from foreign currency exchange rates.
• Operating Income: $26 million reported, including $9 million of charges.
• Cash on Hand: Over $300 million.
• CapEx: $10 million, down $2 million from last year.
• Dividend Distribution: $29 million for the quarterly dividend.

• Warning! GuruFocus has detected 5 Warning Signs with BELFA.

Release Date: April 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Carter's Inc (NYSE:CRI) achieved its first-quarter sales and earnings plan, with sales slightly higher than forecasted.
• The US retail segment, the largest part of the business, met its sales and earnings targets for the quarter.
• Strong sell-through of seasonal spring and summer products was observed, with the baby category achieving a 4% comp increase.
• April month-to-date comps in US retail are running up about 13%, indicating strong momentum.
• The company has a solid balance sheet with over $1 billion in liquidity and over $300 million in cash on hand.

Negative Points

• First-quarter results were below last year's performance, with a 5% decline in net sales compared to 2024.
• The gross margin declined by 140 basis points due to pricing investments in US retail and negative FX impacts.
• Operating income decreased from $55 million last year to $35 million this year, reflecting lower sales and pricing investments.
• The international segment posted a slight loss in the first quarter, impacted by unfavorable foreign currency exchange rates.
• Carter's Inc (NYSE:CRI) suspended forward-looking guidance due to leadership transition and economic uncertainty related to proposed tariffs.

Q & A Highlights

Q: Doug, as the new CEO, what are your initial thoughts on Carter's and the opportunities for financial improvement? A: Douglas Palladini, CEO, expressed his honor in leading Carter's and highlighted the brand's strong assets, market distribution, and consumer equity. He is optimistic about future success and plans to share a revised strategy soon.

Q: Can you explain the estimated annual effective tariff rates on slide 13? Are these current or hypothetical rates? A: Richard Westenberger, CFO, clarified that the rates are hypothetical, based on proposed reciprocal tariffs. While they are not currently in effect, they would significantly increase product costs if implemented.

Q: Can Carter's further reduce its reliance on China for production? A: Richard Westenberger, CFO, noted that Carter's has already minimized its China exposure, primarily in accessories and licensed products. While further reduction is possible, it will take time, especially for Skip Hop products that rely on Chinese manufacturing.

Q: How is Carter's planning to mitigate the impact of tariffs, and will you raise prices? A: Richard Westenberger, CFO, mentioned ongoing mitigation efforts, including price increases on some items, vendor partnerships, and shifting production to lower-tariff regions. Pricing adjustments are being considered, but the extent depends on consumer tolerance.

Q: What is the status of Carter's inventory and how are you adjusting for potential order cancellations? A: Richard Westenberger, CFO, stated that most current inventory is for Spring/Summer, with Fall/Winter and holiday products yet to arrive. Adjustments are modest and primarily affect Carter's own retail business. Wholesale momentum remains strong, with no significant order cancellations observed.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.