Carter's’s Q1 Earnings Call: Our Top 5 Analyst Questions

Carter’s faced a challenging first quarter as market reaction was negative despite revenue and profit exceeding Wall Street expectations. Management cited ongoing softness in U.S. retail traffic and heightened promotional activity as key headwinds. CEO Doug Palladini, new to the role, highlighted the need to balance financial efficiency with targeted investment, emphasizing that recent pricing actions in U.S. retail were aimed at driving unit growth and customer retention. CFO Richard Westenberger noted that while the company’s core baby segment showed resilience, older kid categories and store foot traffic lagged, and rising tariffs added further complexity to the operating environment.

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While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions Carter's’s Q1 Earnings Call

• Jay Sole (UBS) asked CEO Doug Palladini about his initial impressions and strategic opportunities for Carter’s; Palladini said he sees brand strength and plans to share detailed strategy updates in the future.
• Jay Sole (UBS) also requested clarity on tariff rate calculations; CFO Richard Westenberger explained the figures are hypothetical and based on proposed reciprocal rates, which would materially increase costs if implemented.
• Ike Boruchow (Wells Fargo) inquired about the feasibility of further reducing China sourcing and the timeline for mitigation; Westenberger said further reductions are possible but will take time, especially for categories like accessories and electronics.
• Paul Lejuez (Citi) asked about inventory pullbacks and wholesale partner behavior; Westenberger clarified the reductions are modest and mostly affect internal retail, with no significant order cancellations from wholesale partners yet.
• Christopher Nardone (Bank of America) sought details on the drivers of recent retail comp improvement and changes to strategy; Chief Creative and Growth Officer Kendra Krugman cited sharper pricing, new customer acquisition, and ongoing investments in the kid category for the back half of the year.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) how Carter’s executes on further supply chain diversification and tariff mitigation, (2) signals of sustained momentum in the core baby segment versus recovery in older kids’ apparel, and (3) any updates on the company’s revised strategic roadmap from the new CEO. Monitoring consumer response to potential price increases and ongoing shifts in retail traffic will also be key to assessing near-term performance.

Carter's currently trades at $30.89, down from $38.21 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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