Carter’s Adjusts 2026 Sales Outlook After Third-Quarter Profit Jump

The Tip Desk · November 10, 2026 · 4 min read

Adjusted operating income reached $56.9 million as net sales slipped 0.7% to $752.5 million.

Carter’s, Inc. (CRI), North America’s largest apparel company exclusively for babies and young children, reported third-quarter fiscal 2026 net sales of $752.5 million, down 0.7% from $757.8 million a year earlier, after 5% growth in the second quarter and 8.1% growth two quarters earlier.

The sales contraction marked a break from two consecutive quarters of year-over-year growth. U.S. Retail comparable sales rose 0.4%, down from 5.1% in the second quarter and 10.5% in the first.

GAAP operating income increased 91.7% to $55.8 million from $29.1 million a year earlier, lifting operating margin to 7.4% from 3.8%. Adjusted operating income rose 44.6% to $56.9 million from $39.4 million, with adjusted operating margin at 7.6% versus 5.2%. Diluted earnings were $1.00 a share versus $0.32; adjusted diluted earnings were $1.03 versus $0.74.

The company said the GAAP increase reflected higher realized pricing, productivity initiatives, and the non-recurrence of organizational restructuring and operating model improvement costs in the year-ago period, partially offset by increased marketing investments and general cost inflation. Adjusted results, it said, were principally due to higher realized pricing and productivity benefits that more than offset those same marketing and inflation pressures. Third-quarter results included $1.2 million of intellectual property litigation costs.

Gross profit was $354.8 million, or 47.1% of net sales, versus $341.6 million, or 45.1%, a year earlier.

By segment, U.S. Retail net sales were $362.6 million, essentially unchanged from $362.3 million a year earlier, and rose to 48.2% of consolidated sales from 47.8%. U.S. Wholesale net sales decreased 3.8% to $273.1 million from $283.8 million. International net sales increased 4.5% to $116.7 million from $111.7 million.

U.S. Retail segment operating income rose to $19.3 million, or 5.3% of segment sales, from $10.0 million, or 2.8%. U.S. Wholesale segment operating income was $48.7 million, or 17.8%, versus $44.0 million, or 15.5%. International segment operating income was $11.7 million, or 10.0%, versus $9.2 million, or 8.2%.

Chief Executive Officer Sharon Price John said the company delivered slight growth in U.S. Retail comparative sales and overall net sales slightly above its outlook amid an uneven macroeconomic environment, and that the U.S. Retail team adjusted marketing and promotional efforts as the quarter unfolded. She said the third-quarter performance is currently expected to contribute to another year of growth in net sales, U.S. Retail comparable sales, and operating profit for fiscal 2026, even as the company moderates its revenue outlook to reflect continued consumer pressure from economic and geopolitical uncertainty.

The company updated its full-year 2026 outlook to $2.91 billion to $2.93 billion in net sales, $178 million to $187 million in adjusted operating income, and $3.05 to $3.23 in adjusted diluted earnings per share. Fiscal 2025 net sales were $2.898 billion in a 53-week year; adjusted operating income was $176 million and adjusted diluted earnings were $3.47 a share. The full-year outlook assumes a recovery of previously paid import duties and related interest of $132 million and anticipated non-GAAP adjustments for leadership-transition and IP legal costs of approximately $8 million to $9 million.

For the fourth quarter of fiscal 2026, a 13-week period, the company projects $860 million to $880 million in net sales, $74 million to $83 million in adjusted operating income, and $1.37 to $1.55 in adjusted diluted earnings per share, versus $925 million, $89 million, and $1.90 in the 14-week fourth quarter of fiscal 2025. Fourth-quarter assumptions include a higher gross margin rate, comparable to a low-single-digit decrease in SG&A, net interest expense of approximately $10 million, and an anticipated non-GAAP adjustment for third-party IP legal costs of approximately $1 million to $2 million.

In the quarter the company announced a strategic evolution of its leadership structure and, for the first time in 25 years, launched a comprehensive Carter’s brand initiative including a reimagined logo and the brand promise “let every child’s light shine.” It paid a cash dividend of $0.25 a share totaling $9.1 million in the third quarter and $27.5 million in the first three quarters of fiscal 2026. No shares were repurchased in the first three quarters.