Carter's (CRI) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 2025 declined 4.8% year-over-year to $629.8 million, reflecting lower demand across channels amid inflation, declining consumer confidence, and new tariffs.

• Net income fell 59.1% to $15.5 million, with diluted EPS down to $0.43; adjusted diluted EPS was $0.66, down 36.5%.

• Operating income dropped 52.6% to $26.1 million, with operating margin decreasing to 4.1%.

• Leadership transition occurred with the retirement of the former CEO and appointment of Douglas C. Palladini as CEO in April 2025.

• Forward guidance suspended due to CEO transition and tariff uncertainty.

Financial highlights

• Gross margin declined 140 basis points to 46.2%, mainly due to pricing investments and FX impacts.

• Adjusted operating income was $35.4 million (5.6% margin), down 35.7% year-over-year.

• Adjusted net income was $23.8 million, down from $38.0 million.

• EBITDA for Q1 2025 was $39.3 million; adjusted EBITDA was $48.6 million.

• Net cash used in operations was $48.6 million, compared to $25.6 million in Q1 2024.

Outlook and guidance

• Forward-looking guidance suspended due to leadership transition and significant tariff uncertainty.

• Management expects continued macroeconomic pressures, including inflation, elevated interest rates, and new tariffs, to negatively impact consumer demand and financial results in 2025.

• Additional operating model improvement costs of $8–10 million anticipated for the remainder of 2025.