Key Highlights

  • Net sales were USD 752.5 million, essentially flat, despite the net closure of more than 30 North American stores.
  • Adjusted Operating Income rose 45% to USD 57 million, and adjusted Operating Margin expanded 240 basis points.
  • Net income was USD 36.6 million, or USD 1.00 per share, versus USD 11.6 million, or USD 0.32.
  • The company slightly lowered its fourth-quarter Revenue outlook after noting softness in Quarter-to-date sales trends.

Profit Up on Flat Sales

Carter's, Inc. (NYSE:CRI) reported fiscal third-quarter 2026 net sales of USD 752.5 million, compared with USD 757.8 million a year earlier, as the closure of more than 30 North American stores offset retail gains. Gross Profit rose to USD 354.8 million from USD 341.6 million, and operating income increased to USD 55.8 million from USD 29.1 million. Adjusted operating income was USD 57 million, up 45%.

Net income was USD 36.6 million, or USD 1.00 per diluted share, against USD 11.6 million, or USD 0.32. Selling, general and administrative expenses fell to USD 304.2 million from USD 318.0 million.

Drivers

Management cited healthy gross margin expansion, productivity improvements, closure of unprofitable stores and positive U.S. retail comparable sales, with September delivering double-digit retail comp growth after a soft start. September is known internally as Baby Month and was pivotal to the quarter.

For the first three fiscal quarters, net sales were USD 2,049.1 million versus USD 1,973.0 million, Net Income was USD 155.9 million, or USD 4.27 per share, versus USD 27.6 million, or USD 0.75, and operating income included a Tariff recovery benefit recorded in the second quarter. Interest expense rose to USD 11.8 million from USD 7.2 million.

Outlook and Organization

The chief executive said the company is taking a prudent approach with a slight downward adjustment to fourth-quarter revenue given softness in quarter-to-date sales and the historical tendency for heightened consumer concern in election years. Even so, management said full-year 2026 results continue to show improvement in net sales growth, positive U.S. retail comparable sales and operating margin expansion.

The company announced a new organizational structure: a Chief Product Officer joining early next year, a Chief Marketing Officer role broadened to Chief Brand Officer, an expanded Chief Strategy and Business Development Officer role, a new Chief Commercial Officer uniting its more than 1,000-door retail business, E-commerce and 20,000-location wholesale division, and a search for a Chief Operating Officer ahead of a retirement in the late first quarter of 2027.

Holiday Quarter Indicators

For the fourth quarter, the company forecasts net sales of USD 860 million to USD 880 million, adjusted operating income of USD 74 million to USD 83 million versus USD 89 million a year ago, and adjusted EPS of USD 1.37 to USD 1.55 versus USD 1.90. Full-year net sales are guided to USD 2.91 billion to USD 2.93 billion, about 1% growth at the midpoint. Year-to-date results included a tariff recovery of roughly USD 130 million recorded in the second quarter. Dividends were USD 0.25 per share. Items to track include fourth-quarter holiday sales, store rationalization effects on revenue, the brand relaunch response and consumer spending trends. Basic and Diluted Earnings per Share were both USD 1.00 in the quarter and USD 4.27 for the first three fiscal quarters.