Carter's: Going Against The Market's Narrative As Sales Turn

Summary

• Carter’s, Inc. has reported consistent sales declines over the past few years. Competition from Temu and Shein has pressured Carter's competitive positioning.
• Tariff changes have deteriorated Temu's and Shein's business model in the U.S. Carter's Q2 report underlines the change's benefit, as U.S. sales growth suddenly turned positive.
• The Q2 report did come with negatives as profitability faltered. Tariffs add pressure to upcoming quarters, although Carter's should manage to increasingly mitigate tariffs.
• The market is overly focused on short- to mid-term earnings uncertainty. While volatile, I estimate Carter's stock to have 69% upside to $44.5 in a base scenario.

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Carter’s, Inc. (NYSE:CRI) retails and wholesales branded childrenswear. The company owns the Carter’s and OshKosh brands alongside other names, primarily selling in the U.S. but also having operations internationally.

The stock’s past few years’ return reflects Carter’s deep issues. Same-store sales have

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in CRI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.