NYSE:CRI
CARTERS INC
A premier North American specialty apparel retailer specializing in high-quality children's clothing across digital and brick-and-mortar channels.
Key Metrics
Investment Thesis
Bull Case
Investors might consider CRI as a value play given its strong brand moat in the essential children's apparel category which ensures recurring demand regardless of economic cycles. The company's substantial cash reserves and positive operating cash flow provide a solid foundation for potential strategic acquisitions or share buybacks if management chooses to return capital to shareholders. Its diversified sales mix between e-commerce and retail offers resilience against channel-specific disruptions common in the retail industry.
Bear Case
The bear case centers on the consistent multi-year revenue contraction and sharp decline in profitability which suggests a loss of market share or an inability to pass through cost inflation. Significant non-operating losses and other expenses totaling over $100M have materially eroded returns, making it difficult for the stock to achieve meaningful multiple expansion without a clear turnaround strategy. The heavy reliance on operating leases and long-term debt increases financial leverage risks in a high-interest rate environment that could further suppress free cash flow.
About CARTERS INC
CARTERS INC (CRI) is a leading designer and retailer of specialty apparel for children, primarily serving the North American market through its flagship Carter's brand. The company operates across multiple channels including e-commerce and physical retail locations, offering a comprehensive range of clothing, shoes, and accessories for infants, toddlers, and kids. Its diverse product portfolio includes core private label brands alongside licensed collaborations that drive consistent revenue generation.
Analysis
Management Discussion
Recent financial performance reflects a challenging environment with revenue declining to $2.90B from over $3.21B in 2022, while net income compressed significantly from $250M to $91.8M over the same period. Despite these declines, the company maintains a healthy cash position of $487.1M and generated strong operating cash flow of $122.3M, providing liquidity to service its substantial long-term debt of $567.2M and fund capital expenditures of $53.7M. The widening gap between cost of revenue ($1.58B) and gross profit ($1.31B) highlights the need for continued operational efficiency improvements.
Industry Overview
The children's apparel industry is highly competitive with low barriers to entry but significant brand differentiation requirements driven by safety standards, fabric quality, and design innovation. Market dynamics are increasingly influenced by e-commerce penetration rates, fast fashion trends, and the shifting preferences of modern parents who value sustainability and ethical manufacturing practices. Consolidation continues as larger retailers and private label brands gain share from traditional specialty stores facing margin compression.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 | 2026 |
|---|---|---|---|---|
| Revenue | $3.21B | $2.95B | $2.84B | $2.90B |
| Cost of Revenue | $1.74B | $1.55B | $1.48B | $1.58B |
| Gross Profit | $1.47B | $1.40B | $1.37B | $1.31B |
| Operating Expenses | $1.09B | $1.07B | $1.11B | $1.17B |
| Operating Income | $379.2M | $323.4M | $254.7M | $143.9M |
| G&A | $1.11B | $1.09B | $1.10B | $1.19B |
| Stock-Based Comp | $21.9M | $19.5M | $17.8M | $20.2M |
| D&A | $61.5M | $60.4M | $54.2M | $51.5M |
| Depreciation | — | — | $57.9M | $55.3M |
| Amortization | $3.7M | $3.7M | $3.7M | $3.7M |
| Other OpEx | $-16.8M | $-21.4M | $10.7M | $-18.1M |
| Non-Operating Income | $-62.4M | $-21.2M | $-23.9M | $-30.1M |
| Interest Expense | $42.8M | $34.0M | $31.3M | $34.2M |
| Interest Income | $1.3M | $4.8M | $11.0M | $13.5M |
| Pre-Tax Income | $316.7M | $302.2M | $230.8M | $113.8M |
| Income Tax | $66.7M | $69.7M | $45.3M | $22.0M |
| Continuing Ops | $250.0M | $232.5M | $185.5M | $91.8M |
| Discontinued Ops | $0 | $0 | $0 | $0 |
| Net Income | $250.0M | $232.5M | $185.5M | $91.8M |
| Minority Interest | $0 | $0 | $0 | $0 |
| Net to Common | $250.0M | $232.5M | $185.5M | $91.8M |
| Metric | 2022 | 2023 | 2024 | 2026 |
|---|---|---|---|---|
| Current Assets | $1.19B | $1.10B | $1.14B | $1.27B |
| Cash & Equivalents | $211.7M | $351.2M | $412.9M | $487.1M |
| Inventory | $744.6M | $537.1M | $502.3M | $544.6M |
| Prepaid Expenses | $33.8M | $29.1M | $32.6M | $60.5M |
| Other Current Assets | $198.6M | $183.8M | $194.8M | $178.6M |
| Long-Term Assets | $1.25B | $1.28B | $1.29B | $1.29B |
| PP&E (Net) | $189.8M | $183.1M | $181.0M | $186.3M |
| Intangibles | $298.4M | $298.2M | $268.0M | $268.7M |
| Goodwill | $209.3M | $210.5M | $206.9M | $209.0M |
| Operating Leases | $492.3M | $528.4M | $577.1M | $591.8M |
| Other LT Assets | $61.1M | $57.1M | $57.5M | $38.9M |
| Total Assets | $2.44B | $2.38B | $2.43B | $2.57B |
| Current Liabilities | $528.9M | $511.9M | $508.8M | $506.0M |
| Accounts Payable | $264.1M | $242.1M | $248.2M | $235.7M |
| Current Leases | $142.4M | $135.4M | $130.6M | $136.5M |
| Deferred Revenue | $29.3M | $29.2M | $28.3M | $28.4M |
| Taxes Payable | $17.5M | $12.7M | $13.8M | $635.0K |
| Other Current Liab | $75.7M | $92.4M | $87.9M | $104.8M |
| Long-Term Liabilities | $1.11B | $1.02B | $1.07B | $1.13B |
| Long-Term Debt | $616.6M | $497.4M | $498.1M | $567.2M |
| LT Operating Leases | $421.7M | $448.8M | $501.5M | $508.5M |
| Other LT Liab | $74.6M | $74.6M | $70.2M | $58.8M |
| Total Liabilities | $1.64B | $1.53B | $1.58B | $1.64B |
| Shareholders' Equity | $796.4M | $845.2M | $854.6M | $925.0M |
| Paid-In Capital | $0 | $0 | $3.9M | $19.6M |
| Retained Earnings | $830.4M | $868.8M | $894.0M | $929.5M |
| AOCI | $-34.3M | $-23.9M | $-43.7M | $-24.4M |
| Total L&E | $2.44B | $2.38B | $2.43B | $2.57B |
| Metric | 2022 | 2023 | 2024 | 2026 |
|---|---|---|---|---|
| Net Income (CFO) | $250.0M | $232.5M | $185.5M | $91.8M |
| Non-Cash Adjustments | $7.7M | $556.3M | $120.5M | $27.8M |
| Working Capital Changes | $-169.4M | $-259.6M | $-7.3M | $2.8M |
| Cash from Operations | $88.4M | $529.1M | $298.8M | $122.3M |
| Capital Expenditures | $40.4M | $59.9M | $56.2M | $53.7M |
| Cash from Investing | $-40.4M | $-59.9M | $-56.2M | $-53.7M |
| Debt Issuances | $0 | — | — | — |
| Share Buybacks | $299.7M | $100.0M | $50.5M | $0 |
| Dividends Paid | $118.1M | $112.0M | $116.2M | $56.4M |
| Cash from Financing | $-819.3M | $-332.6M | $-174.8M | $2.0M |
| FX Effect | $-1.3M | $2.8M | $-6.1M | $3.5M |
| Net Change in Cash | $-772.5M | $139.5M | $61.7M | $74.1M |
| Beginning Cash | $984.3M | $211.7M | $351.2M | $412.9M |
| Ending Cash | $211.7M | $351.2M | $412.9M | $487.1M |
Frequently Asked Questions
How does CARTERS INC make money?
The company derives revenue from three primary streams: its e-commerce platform which has seen significant growth, a network of physical retail stores offering an immersive shopping experience, and wholesale distribution partnerships that extend market reach. Revenue is generated through the sale of core private label products as well as licensed merchandise featuring popular characters and brands.
What are the main risks for CRI?
Declining revenue trends over the past three years indicate potential headwinds from shifting consumer preferences or increased competition in the value apparel sector. The company faces exposure to foreign exchange rate fluctuations that can impact costs from international suppliers, as evidenced by significant FX adjustments in recent cash flows. High levels of long-term debt and operating lease liabilities create fixed cost obligations that could pressure margins during economic downturns or periods of reduced sales volume.
What is CRI's competitive advantage?
CARTERS INC leverages its extensive proprietary design capabilities to rapidly respond to fashion trends while maintaining a strong brand loyalty among parents seeking affordable, quality children's wear. The company benefits from a robust digital infrastructure that supports high-conversion e-commerce operations and efficient inventory management across its distributed retail network. Strong supply chain relationships and economies of scale in manufacturing allow for competitive pricing and consistent margin protection.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.