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On Wednesday, Citi analysts, led by Paul Lejuez, adjusted the price target for Carter’s (NYSE:CRI) to $45.00, a decrease from the previous $50.00, while retaining a Neutral rating on the stock. The revision follows Carter’s recent financial disclosures. The stock, currently trading at $43.67, has declined nearly 16% in the past week alone. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value assessment.
Carter’s, known for its children’s apparel, surpassed earnings per share (EPS) expectations for the fourth quarter, attributed to stronger U.S. direct-to-consumer (DTC) comparable sales and gross margin. The company maintains a healthy 48% gross profit margin and trades at an attractive P/E ratio of 6.9x. Despite this performance, the company faces challenges, as reflected by its weak fiscal year 2025 (F25) guidance.
The company’s first-quarter-to-date (1QTD) trends are showing a 7% decline, which is a slight improvement compared to the 8% decline in the same period last year. However, the forecast for F25 assumes comparable sales will decrease in the low-single-digit to mid-single-digit range, continuing a trend of weak performance over the past three years.
Citi’s analysts have expressed caution regarding management’s expectations for the second half of the year, which suggest an acceleration in comparable sales as the company cycles past the pricing investments made in the latter half of the previous year.
Additionally, Citi noted disappointment in management’s decision not to close a more significant number of U.S. stores, given the current uncertain trajectory of the U.S. DTC business. With modest growth expected in the U.S. wholesale segment and an ongoing search for a new CEO, the level of uncertainty surrounding Carter’s is considered high by the analysts. This stance comes in the wake of a substantial drop in Carter’s share price following the fourth-quarter earnings announcement. Despite these challenges, InvestingPro data shows the company maintains a "GOOD" overall financial health score and offers a significant 7.3% dividend yield, having maintained dividend payments for 13 consecutive years. For deeper insights into Carter’s financial health and growth prospects, including 10+ additional ProTips and comprehensive analysis, check out the detailed Pro Research Report available on InvestingPro.
In other recent news, Carter’s Inc. reported its fourth-quarter 2024 earnings, outperforming analyst expectations with an earnings per share (EPS) of $2.39, compared to the projected $1.88. The company also surpassed revenue forecasts, achieving $860 million against the anticipated $833.38 million. Despite these positive financial results, Carter’s experienced a 3% decrease in full-year net sales, totaling $2.8 billion. The company’s operating income also saw a decline of 13% to $287 million, reflecting broader industry challenges. Carter’s has introduced new product lines and strategic initiatives to address these market conditions. Looking forward, the company has set its 2025 net sales guidance between $2.78 billion and $2.855 billion, with operating income expected to range from $180 million to $210 million. Analyst firms have not recently upgraded or downgraded the stock. Carter’s continues to focus on strengthening its position in the baby and toddler segments amidst a competitive retail environment.
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