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Investing.com -- Moody’s Ratings has changed The William Carter Company’s outlook to negative from stable while affirming its Ba2 corporate family rating, the agency announced Monday.
The outlook change reflects ongoing pressure on Carter’s operating income and free cash flow as the company deals with a challenging consumer environment while working to improve its product offerings and stabilize market position.
Carter’s faces significant challenges from higher tariffs, estimated at $200-250 million annually, which will require price increases amid constrained consumer discretionary income. The company is also contending with secular pressure from declining birth rates.
Despite having low funded debt and implementing balanced financial strategies, including a recent dividend reduction, Moody’s expects Carter’s EBITA/Interest ratio to weaken to between 2.0x-2.8x over the next 12-18 months.
The Ba2 rating reflects Carter’s leading market position in baby and toddler apparel, with approximately 11% market share in the baby and young children’s market as of June 2025. The company’s debt-to-EBITDA ratio stands at approximately 2.9x as of September 2025 and is projected to range between 2.7x and 3.2x over the next 12-18 months.
To address these challenges, Carter’s is restructuring operations and plans to close approximately 150 stores. The company has also reduced its annual dividend to $36 million.
For an upgrade to occur, Carter’s would need to maintain lease-adjusted debt/EBITDA below 3.75 times, EBITA/interest expense above 4.0 times, and double-digit EBITA margins. Conversely, the ratings could be downgraded if debt/EBITDA is sustained above 4.5 times or EBITA/Interest falls below 3.0x.
Based in Atlanta, Georgia, Carter’s owns the "Carter’s," "OshKosh B’gosh," "Skip Hop" and "Little Planet" brands. The company reported approximately $2.8 billion in revenue for the twelve months ended September 2025.
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