Carter's (CRI) Plunges 9.11% on 2025 Earnings Outlook

Carter's (CRI) shares plummeted 9.11% intraday, marking the lowest level since October 2011, with a cumulative decline of 11.51% over the past two days.

Carter's faced a challenging first quarter of 2025, with its stock value significantly declining due to several financial and operational hurdles. The company reported fourth-quarter earnings that exceeded guidance but projected a decline in profits for 2025, with earnings per share (EPS) expected to range between $3.20 and $3.80. This projection fell short of the anticipated range of $4.00-$5.00 by Palm Valley Capital Fund, contributing to investor disappointment.

Management highlighted ongoing promotional pricing in the Retail division and rising costs as key factors impacting profitability. Higher freight and product costs, along with plans to restore the variable compensation program, were cited as significant contributors to increased labor expenses. These factors, combined with a challenging market environment characterized by sluggish consumer discretionary spending and elevated promotions, led to a reduction in operating margin assumptions from 9% to 7%.

In response to these challenges, Palm Valley Capital Fund adjusted its valuation of Carter’s, reducing its weighting in the company after lowering assumptions for normalized results. Despite these setbacks, Carter’s improved its balance sheet in 2024 and holds over $400 million in cash, which is expected to sufficiently fund its dividend, currently yielding 7.8%.