Carter’s, Inc. (NYSE:CRI) reported third-quarter adjusted earnings on Monday that came in slightly ahead of expectations, but revenue missed forecasts and profit margins were squeezed by rising tariff costs. Shares plunged 14.5% after the company suspended its fiscal 2025 guidance, citing uncertainty around additional import duties.
The children’s apparel retailer posted adjusted earnings per share of $0.74, beating analyst projections of $0.72. Revenue reached $758 million, below the $771.17 million consensus and roughly flat compared with the same quarter last year.
Adjusted operating income dropped 48.9% year over year to $39.4 million, with operating margins sliding to 5.2% from 10.2% in the prior-year period. Carter’s pointed to higher tariffs, investments in product quality, and new store openings as the main factors dragging on profitability.
“Our third quarter performance reflected continued improvement in U.S. Retail business demand as we achieved positive comparable sales and improved pricing for the second consecutive quarter,” said Douglas C. Palladini, Chief Executive Officer & President. “However, elevated product costs, in part due to the impact of higher tariffs, as well as additional investment, weighed meaningfully on our profitability.”
In response, Carter’s announced a series of cost-saving initiatives, including plans to cut approximately 300 office-based roles (15%) by the end of 2025 and close about 150 stores in North America over the next three years. These steps are expected to generate annual savings of roughly $35 million starting in 2026.
The company also estimated that additional tariffs could reduce pre-tax earnings by $200 million to $250 million annually, with a $25 million to $35 million impact anticipated in the fourth quarter alone. Due to “ongoing and significant uncertainty surrounding incremental tariffs,” Carter’s withdrew its fiscal 2025 guidance.
During the first nine months of fiscal 2025, the company returned $47.2 million to shareholders through dividends but did not execute any share repurchases.