Carter's Plunges 19.66% – Can This Retail Giant Rebound From the Depths?

Summary
• Carter's (CRI) shares collapsed 19.66% intraday, hitting a 52-week low of $23.51
• Q2 earnings of $0.17/share missed estimates by 60.47%, with full-year guidance suspended
• Tariff impacts, operating margin collapse (0.7% vs. 7.0% in 2024), and $35M 2H25 cost hit fuel selloff

The apparel retailer's stock imploded on Tuesday after a disastrous Q2 report, with operating income collapsing 89.7% and adjusted EPS plummeting 70.2%. The $585M revenue growth (3.7%) was overshadowed by a 90% drop in profitability. With tariffs threatening $125M-150M in annualized earnings and CEO Doug Palladini's 100-day plan under scrutiny, the market is demanding answers.

Q2 Earnings Miss and Guidance Suspension Spark Sharp Selloff
Carter's stock cratered after reporting Q2 adjusted EPS of $0.17/share, missing estimates by 60.47% and collapsing from $0.76/share in 2024. The company cited $6.6M in operating model improvement costs, $1.1M leadership transition expenses, and 90% operating margin contraction. Management warned of $35M in 2H25 tariff-related costs and suspended guidance due to uncertainty. With shares down 52.2% YTD and trading 63.8% below its 52-week high, the market is pricing in prolonged margin pressure from tariffs, new stores, and inflation.

Bearish Options Play and Key Technical Levels for CRI
• 52W High: $71.99 (63.8% below current price)
• 52W Low: $23.51 (intraday low hit)
• 200D MA: $45.00 (well above current price)
• RSI: 56.6 (neutral but bearish bias)
• MACD: 0.166 (bullish signal but overwhelmed by short-term selloff)
• Bollinger Bands: 34.05 (Upper), 31.67 (Middle), 29.30 (Lower) – price at 26.31, far below support

The technical picture is bearish, with CRI trading 63.8% below its 52-week high and at the 52W low. Key support levels to watch: 30.40 (30D), 31.34 (200D). With 17.58% turnover rate and 19.66% intraday drop, liquidity remains robust despite the selloff.

Top Options Plays:
1. CRI20250815P27.5 Put
• Strike: $27.50
• Expiration: 2025-08-15
• IV: 51.63% (moderate)
• Leverage: 13.51% (reasonable)
• Delta: -0.596 (high sensitivity)
• Theta: -0.0489 (moderate time decay)
• Gamma: 0.1146 (strong price sensitivity)
• Turnover: 5,542
• Price Change Ratio: 390.00%
• This put benefits from high gamma and delta, offering leverage if the 27.50 level breaks. Projected 5% downside to $24.99 would yield a payoff of $2.51.

2. CRI20250919P27.5 Put
• Strike: $27.50
• Expiration: 2025-09-19
• IV: 51.78% (moderate)
• Leverage: 9.46%
• Delta: -0.536 (moderate sensitivity)
• Theta: -0.0246 (lower time decay)
• Gamma: 0.0723
• Turnover: 75,127
• This longer-dated put offers more time for the selloff to play out, with 75k+ turnover ensuring liquidity. A 5% drop would yield $2.51 in payoff.

Trading Hook: Short-term bears should target the CRI20250815P27.5 put for leverage, while longer-term bears can play the CRI20250919P27.5 put for extended exposure.

Backtest Carter's Stock Performance
The iShares Core S&P Mid-Cap ETF (CRI) has historically shown resilience after experiencing a significant intraday plunge of at least -20%. Backtesting reveals a 3-day win rate of 52.89%, a 10-day win rate of 51.84%, and a 30-day win rate of 49.74% following such events. While the ETF tends to bounce back, the returns are generally modest, with an average 3-day return of 0.22% and a 10-day return of 0.19%. The maximum return observed was 0.23% over 30 days, suggesting that while CRI recovers from substantial dips, its performance tends to be muted in the short term following a dramatic downturn.

Rebound or Requiem? Immediate Action Required for CRI Investors
The selloff reflects fundamental challenges: tariffs, margin compression, and leadership transition costs. With operating margins at 0.7% and $35M in 2H25 tariff costs looming, the bear case remains intact. Watch for a breakdown below 27.50 (critical support) or a rejection at 30.40 (30D support). Sector leader Nike (NKE) is up 1.25%, highlighting the contrast between resilient and struggling retailers. Aggressive short-sellers should target the CRI20250815P27.5 put if the 27.50 level breaks, while cash-secured put buyers can consider the 20250919P27.5 for a longer-term bearish play.