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Investing.com -- Carter’s, Inc. (NYSE:CRI) reported third-quarter adjusted earnings that narrowly beat analyst expectations, but revenue fell short of estimates as the retailer grapples with rising tariff costs. Shares plunged 14.5% following the announcement, with investors reacting to the company’s suspended fiscal 2025 guidance amid tariff uncertainties.
The North American children’s clothing company posted adjusted earnings per share of $0.74 for the third quarter, slightly above the analyst estimate of $0.72. However, revenue came in at $758 million, below the consensus estimate of $771.17 million and comparable to the same period last year.
Carter’s adjusted operating income fell sharply by 48.9% to $39.4 million, with adjusted operating margin declining to 5.2% from 10.2% in the prior year period. The company cited higher tariff costs, investments in product quality, and new store investments as key factors weighing 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."
The company announced significant productivity improvement actions, including plans to reduce office-based roles by approximately 300 positions (15%) by the end of 2025 and close about 150 stores in North America over the next three years. These measures are expected to generate annual savings of approximately $35 million beginning in 2026.
Carter’s estimates that additional import duties could impact pre-tax earnings by approximately $200 million to $250 million on an annualized basis, with a $25 million to $35 million hit expected in the fourth quarter alone. The company has suspended its fiscal 2025 guidance due to "ongoing and significant uncertainty surrounding incremental tariffs."
In the first three quarters of fiscal 2025, Carter’s returned $47.2 million to shareholders through dividends, while no shares were repurchased during this period.