Highlights

  • Carter's shows 42.86% basic EPS growth, a P/E of 6.08 and PEG of -8.20.
  • Fiscal second quarter net income was $105.0 million; diluted earnings per share were $2.87.
  • Carter's received IEEPA tariff refund payments of approximately $132 million, including interest.
  • Net sales were $615.5 million, up 5.2%; no shares were repurchased in two fiscal quarters.

Basic earnings per share growth of 42.86% over one year, a trailing twelve-month P/E of 6.08 and a PEG of -8.20 on an expected basis define Carter's (NYSE:CRI) as an undervalued growth stock, with shares trading at USD 30.88 on October 28, 2026, down 1.69%. Alongside those figures, the childrenswear company announced on May 1 that Sharon Price John would become Chief Executive Officer & President effective June 15, received IEEPA tariff refund payments of approximately $132 million, including interest, in its fiscal second quarter, and reported fiscal second quarter 2026 net income of $105.0 million.

Based in Atlanta, Georgia, and incorporated in Delaware, Carter's designs, sources and markets branded childrenswear under the Carter's, OshKosh B'gosh, Skip Hop, Child of Mine, Just One You, Simple Joys, Little Planet and Otter Avenue brands. It reports three segments: U.S. Retail, U.S. Wholesale and International. At July 4, 2026, it operated 1,042 retail stores in North America. Its fiscal 2026 year ends January 2, 2027.

Growth: Fiscal Second Quarter Earnings, Sales and Segments

Net income was $105.0 million in the fiscal second quarter against $0.4 million a year earlier, and basic and diluted net income per common share were each $2.87 against $0.01. The company said the quarterly increase was primarily due to factors that included $128 million of IEEPA tariff refund recoveries recorded as a reduction of cost of goods sold.

Consolidated net sales increased 5.2% to $615.5 million. Comparable net sales were up 5.1%. U.S. Wholesale net sales were $215.6 million, up 11.7%, and International net sales were $95.3 million, up 2.7%. SG&A expenses were $276.1 million, down 1.7%.

Operating income was $139.8 million against $4.0 million. Adjusted operating income, a non-GAAP measure, was $18.1 million, up 54.1%, and adjusted diluted net income per common share, also non-GAAP, was $0.26 against $0.17.

Valuation: P/E of 6.08, PEG of -8.20 and Cash Flow

The P/E ratio of 6.08 is measured on trailing twelve-month earnings, and the PEG ratio of -8.20 is stated on an expected basis. Net cash provided by operating activities was $202.3 million for the first two fiscal quarters against net cash used of $8.3 million.

On the fiscal second quarter call, Chief Financial Officer Richard Westenberger said the balance sheet and liquidity strengthened through the tariff recoveries and that the company has continued to return capital to shareholders in 2026.

Capital Returns, Debt and Liquidity

Cash and cash equivalents were $653.6 million at July 4, 2026. The board declared and the company paid a cash dividend of $0.25 per share in each of the first two fiscal quarters, $0.50 in total against $1.05 a year earlier. The company did not repurchase shares in the first two quarters of fiscal 2026 or 2025, and $599.0 million remained under repurchase authorizations totaling $1.00 billion, which have no expiration dates.

Debt consisted of $575 million of 7.375% senior notes due February 15, 2031. The $750.0 million secured asset-based revolving credit facility had no borrowings outstanding, with $568.6 million available. Interest expense was $11.3 million, up 44.0%.

Disclosed Risks and Fiscal 2026 Outlook

The company disclosed that incremental tariff-related costs affected cost of goods sold by approximately $28 million in the quarter. Section 122 tariffs expired on July 24, 2026. Section 301 tariffs ranging from 10% to 12.5% on imports from approximately 60 countries took effect July 24, 2026. The company sources substantially all products from third-party suppliers, primarily in Asia. Income taxes on the refunds are expected to be paid in the third fiscal quarter.

Carter's is a defendant in an intellectual property infringement matter; it said a loss is reasonably possible but it cannot estimate the likelihood or range. It opened 4 stores and closed 29 in the United States in the first two quarters.

On the call, management revised fiscal 2026 net sales growth to 2% to 3%, from low to mid-single digits, and guided adjusted earnings per share to down high single digits to low double digits. It raised operating cash flow expectations to $230 million to $240 million, and reiterated adjusted operating income growth of low to mid-single digits. For the third fiscal quarter, management expects net sales of approximately $750 million and adjusted earnings per share of approximately $0.85.