Carter's experiences sales growth in Q1 despite profitability challenges

US-based childrenswear group Carter’s has announced its financial results for the first quarter of fiscal 2026, reporting a rise in net sales across all business segments. The company, which is the largest apparel firm for infants and young children in the US, saw net sales increase by 51.3 million dollars to reach 681.1 million dollars, representing an 8.1 percent climb compared to the first quarter of fiscal 2025.

Growth was particularly robust within the US Retail and International divisions, which saw increases of 12.8 percent and 14.3 percent respectively. The US Wholesale segment recorded a more modest rise of 0.5 percent. Within the domestic market, US Retail comparable net sales grew by 10.5 percent, supported by an early Easter holiday period and strategic marketing investments that improved traffic across both brick and mortar stores and e-commerce platforms.

Profitability impacted by macro-economic pressures

Despite the top-line growth, the group faced significant headwinds regarding profitability. Operating income for the period rose 9 percent to 28.4 million dollars, with an operating margin of 4.2 percent. However, adjusted operating income fell by 19.6 percent to 28.4 million dollars, down from 35.4 million dollars in the previous year.

The decline in adjusted margins was attributed to incremental tariff costs, inflationary pressures on store-related expenses, and higher interest costs. These factors were only partially mitigated by higher pricing strategies and a more favourable channel mix. Net income subsequently decreased to 14.3 million dollars, or 0.39 dollars per diluted share, compared to 15.5 million dollars in the first quarter of fiscal 2025.

New leadership to guide future growth

Carter’s interim chief executive officer, president, chief financial officer and chief operating officer, Richard F. Westenberger, noted that while costs remained high, the impact is expected to moderate throughout the year. Westenberger also highlighted the upcoming appointment of Sharon Price John, who will take over the role of CEO next month.

“Sharon’s extensive industry experience, especially in the children’s space, and her demonstrated record of success position her well to lead the next chapter of Carter’s transformation and growth,” Westenberger stated. The group has reiterated its full-year outlook for 2026, forecasting low single-digit to mid-single-digit percentage growth in both net sales and adjusted operating income.

Fiscal 2026 projections and dividends

For the full fiscal year 2026, the group expects operating cash flow to range between 110 million dollars and 120 million dollars, with capital expenditures planned at 55 million dollars. For the second quarter (Q2), the company anticipates low-single-digit sales growth and adjusted operating income between 11 million dollars and 13 million dollars.

During the first quarter, the group returned value to shareholders by paying a cash dividend of 0.25 dollars per common share, totalling 9.2 million dollars.