Carter's stock: A fight for survival

Children's clothing manufacturer Carter's is closing 150 stores and cutting 300 office jobs after a 49 percent drop in profits. Higher customs costs are costing the company $200 million annually.

Carter's stock is in its deepest crisis in years. After disappointing quarterly results and a massive drop in profits, the children's clothing manufacturer is resorting to drastic measures: 150 store closures and the elimination of 300 office jobs are intended to save the company. But can these emergency measures stop the downward trend?

Tariff shock destroys profits

The latest figures read like a nightmare for investors. While adjusted earnings per share slightly exceeded expectations at $0.74 compared to the projected $0.72, revenue fell short of the forecast $771 million at $758 million. The real drama unfolded with profitability: adjusted operating income plummeted by 48.9 percent to just $39.4 million.

Exploding tariff costs are responsible for this slump. Carter's anticipates additional annual costs of $200 to $250 million due to higher import duties. The markets punished this development mercilessly – the stock lost almost 9 percent on the day of publication.

Radical austerity measures initiated

In response to the crisis, Carter's is launching an unprecedented restructuring plan. Up to 150 low-margin stores are slated for closure within the next three years, with approximately 100 of these closures planned for 2025-2026. Simultaneously, the company is reducing its office workforce by 15 percent – eliminating around 300 positions.

Planned closure of 150 branches
Reduction of 300 office jobs
Expected savings: US$45 million annually from 2026

These drastic measures are having an effect: The expected savings of 45 million US dollars annually should stabilize the battered profit margins from 2026 onwards.

Financial shampered by a sham financial bluff secured

In a surprising turn of events, Carter's was even able to increase its bond issue. Instead of the planned $500 million, the company placed $575 million in senior notes with an interest rate of 7.375 percent. The proceeds will be used to pay off older, cheaper bonds early.

Should investors sell immediately? Or is it still worth investing in Carter's ?

But at what cost? The significantly higher interest rate of 7.375 percent, compared to the previous 5.625 percent, reflects investors' increased risk awareness. Financing is still forthcoming, but at considerably more expensive terms.

Where is the stock headed now?

The suspension of the annual forecast speaks volumes: Carter's is navigating unpredictable trade waters blindly. While the US retail business remained surprisingly robust with a 3 percent increase in sales, the tariff issue continues to hang like a sword of Damocles over the stock.

Can new CEO Douglas Palladini turn things around? The planned cost savings and the strengthened balance sheet theoretically offer room to maneuver. But high interest expenses and persistent trade uncertainties could stifle any recovery. November will be crucial – that's when the multi-billion-dollar bond issue closes, revealing whether Carter's can actually achieve a turnaround.

Carter's stock: Buy or sell?! New Carter's analysis from November 3rd provides the answer:

Carter's latest figures speak volumes: Carter's shareholders need to take immediate action. Is it worth buying in, or should you sell? Our free analysis from November 3rd will tell you what to do now.

Carter's: Buy or sell? Read more here...

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