Net Sales Growth
First quarter net sales of $681 million, representing growth of 8% year-over-year.
Carter's
· CRI
May 6th, 2026
Summary
- Earnings Call Date:
- 2026-05-06
- Change Since:
- +15.74%
- Next Earnings Date:
- 2026-07-24
Earnings Call Sentiment
NeutralThe call presents mixed but resilient operational performance: top-line momentum was clear (8% consolidated sales growth, strong U.S. Retail comps, double-digit unit growth in Retail, and robust international results) and productivity and cash flow improved. However, substantial margin and earnings pressure driven by higher tariffs, increased interest expense, and near-term SG&A increases constrain profitability and EPS, and policy uncertainty around tariffs remains a material risk. Management reiterated guidance and emphasized plans for second-half profit recovery, but near-term risks keep the tone cautious.
Company Guidance
Management reiterated full‑year 2026 guidance: net sales up low‑ to mid‑single digits versus 2025, with U.S. Retail sales up low single‑digits (comps up mid‑single digits), U.S. Wholesale sales up mid‑single digits and International sales up mid‑single digits; adjusted operating income expected to grow low‑ to mid‑single digits (with more profit in H2), adjusted EPS expected down low‑double‑digits to down mid‑teens versus 2025 adjusted EPS of $3.47, operating cash flow $110–$120M, CapEx ~ $55M and a full‑year effective tax rate of ~22%. For Q2 they expect net sales up low single‑digits (U.S. Retail comps mid‑single digits, U.S. Wholesale up mid‑to‑high single‑digits, International roughly flat), gross margin down ~100 bps, adjusted operating income $11–$13M and adjusted EPS $0.02–$0.06. Guidance assumes the lower 10% incremental tariff through Q2 (management notes roughly a $30M potential benefit) but assumes higher IEEPA‑level tariffs could resume midyear.
U.S. Retail Strength and Comp Growth
Total U.S. Retail net sales grew nearly 13% in Q1. Comparable retail sales increased over 10% year-over-year and nearly 5% on a 2-year basis — fourth consecutive quarter of comp growth; comps driven by higher traffic and higher average transaction values.
Unit and AUR Momentum
Consolidated AURs improved in the high single digits and units were up low single digits. In U.S. Retail specifically, AURs were up low single digits and units increased double digits in Q1.
International Outperformance
International net sales increased 14% reported and 8% on a constant-currency basis. Mexico sales grew over 40% (with comps +21%) and the company plans to open 12 new stores in Mexico this year.
Productivity and Cost Savings
Productivity initiatives delivered roughly $6 million of cost reduction in Q1 across COGS and SG&A, and SG&A achieved ~180 basis points of leverage despite incremental investments.
Positive Operating Cash Flow and Inventory Position
Generated positive operating cash flow of $6 million in Q1 versus a use of $49 million a year earlier. Ending net inventories of $466 million (down 2% year-over-year and >14% from year-end) with inventory units down 9% year-over-year.
Successful Marketing & Collaborations Driving New Consumers
Incremental marketing investments increased traffic and grew the consumer file including new Gen-Z consumers. High-profile collaborations (e.g., Disney x OshKosh Winnie-the-Pooh and Umbro) performed well; the Winnie-the-Pooh product had an average AUR more than double the U.S. Retail average.
Guidance Affirmation and Segment Growth Plans
Company reiterated full-year guidance: net sales growth expected in low- to mid-single digits with adjusted operating income growth in low- to mid-single digits; expects operating income growth to be weighted to second half of 2026.
Operator
Welcome to Carter's First Quarter Fiscal 2026 Earnings Conference Call. On the call are Richard Westenberger, Interim Chief Executive Officer and President; Chief Financial Officer and Chief Operating Officer; Allison Peterson, Chief Retail & Digital Officer; and T.C. Robillard, Vice President, Investor Relations. Please note that today's call is being recorded. I'll now turn the call over to T.C. Robillard.
Thomas Robillard
Thank you. Good morning, everyone. We issued our first quarter 2026 earnings release earlier today. The release and presentation materials for today's call are available in our Investor Relations website at ir.carters.com. Note that the statements on today's call about items such as the company's expectations and plans are forward-looking statements. For a discussion of factors that could cause actual results to vary from those contained in the forward-looking statements, please see our most recent SEC filings as well as the earnings release and presentation materials posted on our website. In these materials, you will also find reconciliations of various non-GAAP financial measurements referenced during this call. After today's prepared remarks, we will take questions as time allows.
I will now turn the call over to Richard.
Richard Westenberger
Thank you, T.C. Good morning, everyone. We appreciate you joining us on the call this morning for an update on our business, and I'm pleased to have my colleague, Allison Peterson, who leads our North American direct-to-consumer businesses, joining me today to provide her thoughts. As usual, we have a lot going on here at Carter's. As I'm sure many ...
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