CARTERS INC
For the period ended Apr 4, 2026. Filed May 6, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Apr 4, 2026 · Filed May 6, 2026
CRI$32.01-1.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-27; filed 2025-10-27.
0001060822-25-000158
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-04-04; filed 2026-05-06.
0001060822-26-000071
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 212 previous paragraphs and 138 current paragraphs.
49 unchanged; 45 reworded; 40 added; 108 removed; 10 previous and 4 current paragraphs rearranged.
Tables are not compared: 6 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (40)
Current report
Gross Profit and Gross Margin
Current report
Executive Leadership Transition
Current report
On May 1, 2026, subsequent to April 4, 2026, the Company announced that the Board of Directors (the “Board”) approved the appointment of Sharon Price John as Chief Executive Officer & President of the Company and a member of the Board effective June 15, 2026. In connection with the appointment of Ms. John, Douglas C. Palladini has departed the Company as Chief Executive Officer & President and resigned as a member of the Board effective April 28, 2026. Effective April 28, 2026, Richard F. Westenberger, the Company’s Chief Financial Officer & Chief Operating Officer, was appointed as Interim Chief Executive Officer & President. Mr. Westenberger will maintain his existing responsibilities in addition to serving as interim Chief Executive Officer & President until Ms. John’s start date. Additional information regarding these management changes and related arrangements is included in the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2026.
Current report
During the first quarter of fiscal 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unlawful. Subsequent to April 4, 2026, following the April 20, 2026 launch of U.S. Customs and Border Protection’s Consolidated Administration and Processing of Entries (“CAPE”) process, the Company submitted claims seeking approximately $130 million of refunds of previously paid IEEPA tariffs through the CAPE system.
Current report
The Company has elected to apply a gain contingency model in accordance with ASC 450-30,“Gain Contingencies” to account for potential recoveries of previously paid IEEPA tariffs. Under this model, a gain contingency is not recognized in the financial statements until the gain is realized or realizable. Any recovery, when recognized, would be reflected as a reduction of inventory to the extent the related goods remain on hand, or as a reduction of Cost of goods sold for amounts related to goods already sold.
Current report
As of April 4, 2026, the Company had not received any refund payments, and uncertainty remained regarding the timing, amount, and ultimate receipt of any refunds. Accordingly, no gain has been recognized in the condensed consolidated financial statements for the fiscal quarter ended April 4, 2026.
Current report
•Consolidated net sales increased $51.3 million, or 8.1%, to $681.1 million.
Current report
◦U.S. Wholesale sales increased $1.3 million, driven by increased sales of our exclusive Carter’s brands, primarily offset by lower demand from department stores.
Current report
◦International sales increased $12.2 million, driven by growth in Mexico and Canada, as well as favorable changes in foreign currency exchange rates used for translation.
Current report
•Consolidated gross profit increased $2.8 million, or 1.0%, to $293.9 million, driven by increased net sales, which were primarily offset by increased product costs. Consolidated gross margin decreased 310 bps to 43.1%, primarily due to higher average unit cost (“AUC”) driven by incremental tariff-related costs, partially offset by higher AUR.
Current report
•Consolidated SG&A expenses decreased $0.3 million, or 0.1%, to $270.0 million. SG&A as a percentage of consolidated net sales (“SG&A rate”) decreased 330 bps to 39.6%, driven by fixed cost leverage on higher net sales and costs related to leadership transition and operating model improvements in the first quarter of fiscal 2025 that did not reoccur in the first quarter of fiscal 2026.
Current report
•Consolidated net income decreased $1.2 million, or 7.7%, to $14.3 million driven by the factors we discuss in detail below, including an increase in interest expense of $3.9 million.
Current report
FIRST FISCAL QUARTER ENDED APRIL 4, 2026 COMPARED TO FIRST FISCAL QUARTER ENDED MARCH 29, 2025
Current report
Consolidated net sales increased $51.3 million, or 8.1%, to $681.1 million, driven by increased net sales in each of our U.S. Retail, U.S. Wholesale, and International segments. AUR increased by a high-single digit percentage, reflecting higher pricing to mitigate incremental tariff-related costs and the favorable impact of changes in foreign currency exchange rates used for translation. Unit volume increased by a low-single digit percentage driven by growth across our U.S. Retail and International segments, partially offset by unit volume decline in U.S. Wholesale. Changes in foreign currency exchange rates used for translation had a favorable effect on our consolidated net sales of $5.6 million.
Current report
Gross Profit and Gross Margin
Current report
Consolidated gross profit increased $2.8 million, or 1.0%, to $293.9 million and consolidated gross margin decreased 310 bps to 43.1%. The increase in consolidated gross profit was driven by higher net sales and favorable channel mix. The decrease in consolidated gross margin was driven by higher AUC, partially offset by favorable channel mix. AUC increased by a low-teens digit percentage, driven by incremental tariff-related costs and investments in product make. Incremental tariff-related costs unfavorably impacted Cost of goods sold by approximately $50 million.
Current report
Consolidated SG&A expenses decreased $0.3 million, or 0.1%, to $270.0 million and SG&A rate decreased 330 bps to 39.6%. This decrease in the SG&A rate was driven by fixed cost leverage on higher net sales, as well as costs related to leadership transition and operating model improvements in the first quarter of fiscal 2025 that did not reoccur in the first quarter of fiscal 2026.
Current report
Consolidated operating income increased $2.3 million, or 9.0%, to $28.4 million and consolidated operating margin increased 10 bps to 4.2%, primarily due to the factors previously discussed.
Current report
Interest Expense
Current report
Consolidated interest expense increased $3.9 million, or 50.4%, to $11.8 million, reflecting the impact of the Company’s fourth quarter of fiscal 2025 issuance of $575.0 million principal amount of 7.375% senior notes due 2031 and redemption of $500.0 million principal amount of 5.625% senior notes due 2027.
Current report
Consolidated income tax provision decreased $0.3 million, or 5.0%, to $5.5 million, and the effective tax rate increased 60 bps to 27.8%. The increase in the effective tax rate was primarily driven by incremental tax expense related to the applicability of the global minimum tax in Hong Kong. This was partially offset by lower incremental tax expense associated with the vesting of restricted stock awards compared to the prior period.
Current report
Consolidated net income decreased $1.2 million, or 7.7%, to $14.3 million, primarily due to the factors previously discussed.
Current report
(3)Primarily related to third-party consulting costs to support operating model improvements. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.
Current report
U.S. Retail segment net sales increased $37.8 million, or 12.8%, to $332.2 million. The increase in net sales was driven by higher unit volume and higher AUR. Unit volume increased by a double-digit percentage driven by higher traffic and transactions in both stores and eCommerce. AUR increased by a low-single digit percentage, reflecting pricing actions to mitigate incremental tariff-related costs, partially offset by product mix, which reflects a higher proportion of opening price point product and clearance sales compared to the prior period. In addition, the first quarter of fiscal 2026 benefited from the timing of the Easter holiday.
Current report
U.S. Retail segment operating income increased $6.7 million, or 291.6%, to $9.0 million, due to an increase in gross profit of $13.9 million, partially offset by an increase in SG&A expenses of $7.1 million. Segment operating margin increased 190 bps to 2.7%, primarily driven by a 460 bps decrease in SG&A rate, partially offset by a 250 bps decrease in gross margin. The decrease in gross margin was driven by a high-single digit percentage increase in AUC as a result of incremental tariff-related costs, which was partially offset by increased AUR. The decrease in the SG&A rate reflected fixed cost leverage on higher net sales, partially offset by inflationary pressure in store-related expenses.
Current report
U.S. Wholesale segment net sales increased $1.3 million, or 0.5%, to $251.4 million, driven by increased sales of our exclusive Carter’s brands, primarily offset by lower demand from department stores. AUR increased by a high-single digit percentage, reflecting pricing actions to mitigate incremental tariff-related costs. Unit volume decreased by a mid-single digit percentage primarily driven by lower demand from department stores.
Current report
U.S. Wholesale segment operating income decreased $18.5 million, or 33.5%, to $36.8 million, due to a decrease in gross profit of $19.8 million, partially offset by a decrease in SG&A expenses of $1.7 million. Segment operating margin decreased 750 bps to 14.6%, driven by an 810 bps decrease in gross margin, partially offset by a 70 bps decrease in SG&A rate. The decrease in gross margin was driven by higher AUC and customer mix, partially offset by higher AUR. AUC increased by a high-teen digit percentage as a result of incremental tariff-related costs and investments in product make. The decrease in the SG&A rate was driven by lower distribution costs on lower unit volume and lower bad debt expense.
Current report
International segment net sales increased $12.2 million, or 14.3%, to $97.5 million, driven by growth in Mexico and Canada. In Mexico, net sales growth reflected higher AUR, the contribution from new retail stores, and higher unit volume. Canadian comparable net sales, including retail store and eCommerce, increased 4.0%, driven by higher unit volume and the favorable impact of foreign currency exchange rates.
Current report
Unallocated corporate expenses decreased $0.5 million, or 2.2%, to $21.5 million. Unallocated corporate expenses, as a percentage of consolidated net sales, decreased 30 bps to 3.2%, driven by lower consulting costs.
Current report
Inventories at April 4, 2026 were $465.9 million compared to $474.1 million at March 29, 2025 and $544.6 million at January 3, 2026. The decrease of $8.2 million, or 1.7%, at April 4, 2026 compared to March 29, 2025 was driven by lower days of supply, partially offset by incremental tariffs imposed on products imported into the United States.
Current report
Prepaid expenses and other current assets at April 4, 2026 were $75.7 million compared to $50.2 million at March 29, 2025 and $60.5 million at January 3, 2026. The increase of $25.5 million, or 50.8%, at April 4, 2026 compared to March 29, 2025 was driven by the reclassification of Rabbi Trust assets from long-term to current to align with the anticipated settlement of associated deferred compensation liabilities in fiscal 2026.
Current report
Other current liabilities at April 4, 2026 were $111.3 million compared to $84.7 million at March 29, 2025 and $133.8 million at January 3, 2026. The increase of $26.6 million, or 31.4%, at April 4, 2026 compared to March 29, 2025 was primarily driven by the timing of interest payments on long-term debt and the reclassification of deferred compensation liabilities from long-term to current to reflect the anticipated settlement of plan participant balances.
Current report
Other long-term liabilities at April 4, 2026 were $16.4 million compared to $33.0 million at March 29, 2025 and $19.4 million at January 3, 2026. The decrease of $16.5 million, or 50.1%, at April 4, 2026 compared to March 29, 2025 was primarily driven by the reclassification of deferred compensation liabilities from long-term to current to reflect the anticipated settlement of plan participant balances.
Current report
ABL Facility
Current report
On November 17, 2025, the Company, through its wholly-owned subsidiary, The William Carter Company (“TWCC”), entered into a new five-year ABL facility of up to $750.0 million. The ABL facility replaced the Company’s existing $850.0 million secured cash-flow-based revolving credit facility due April 2027. Borrowings under the ABL facility will mature, and lending commitments thereunder will terminate, in November 2030.
Current report
The ABL facility contains various covenants, including those that restrict the Company’s ability and the ability of its restricted subsidiaries to incur certain indebtedness, pay dividends or make distributions or other restricted payments, or to grant certain liens on their respective property or assets, among other things. The ABL facility also includes a springing financial covenant, consisting of, if the excess availability falls below certain thresholds, a fixed charge coverage ratio not to be less than 1.00 to 1.00.
Current report
The availability under the ABL facility was $605.2 million and $743.7 million as of April 4, 2026 and January 3, 2026, respectively. Availability is determined using borrowing base calculations of eligible inventory, accounts receivable, and intellectual property balances, less availability reserves, current outstanding borrowings under the ABL facility, and outstanding letters of credit. Availability may fluctuate throughout the year principally based on changes in eligible inventory and accounts receivable balances. As of April 4, 2026, the borrowing rate for a term Secured Overnight Financing Rate (“SOFR”) loan would have been 4.90%, which includes an excess availability-based adjustment of 1.25%.
Current report
On November 13, 2025, TWCC issued the $575.0 million principal amount of senior notes due 2031. TWCC received net proceeds from the offering of the senior notes of approximately $567.0 million, after deducting underwriting fees and other expenses, which TWCC used to redeem the senior notes discussed below and for other general corporate purposes. Approximately $8.0 million, including both bank fees and other third-party expenses, was capitalized in connection with the issuance and is being amortized over the term of the senior notes.
Current report
On November 27, 2025, TWCC redeemed $500.0 million principal amount of senior notes, bearing interest at a rate of 5.625% per annum, and originally maturing on March 15, 2027. Pursuant to the optional redemption provisions described in the indenture dated as of March 14, 2019, TWCC paid the outstanding principal plus accrued and unpaid interest.
Current report
The Company believes that the assumptions used in our impairment tests are reasonable and supportable as of April 4, 2026, and therefore, there were no impairment charges recorded in the first quarter of fiscal 2026. As of April 4, 2026, the carrying value of the goodwill ascribed to the Canada reporting unit was $38.0 million.
Removed paragraphs (108)
Previous report
Organizational Restructuring
Previous report
In the third quarter of fiscal 2025, we initiated an organizational restructuring of our offices-based workforce to right-size our cost structure and improve future profitability. The plan is expected to reduce offices-based roles by approximately 15% and to generate approximately $35 million in annual savings beginning in fiscal 2026 primarily related to reduced compensation and employee benefit costs.
Previous report
As a result, we recorded $6.1 million in severance and other termination benefits during the third quarter of fiscal 2025. We expect to record an additional $4.0 million to $5.0 million in severance and other termination benefits in the fourth quarter of fiscal 2025. We expect to pay substantially all of these costs in the first two quarters of fiscal 2026. Refer to Note 14, Organizational Restructuring in the condensed consolidated financial statements for additional information.
Previous report
Operating Model Improvement
Previous report
Throughout the second half of fiscal 2024 and continuing into fiscal 2025, with the assistance of external industry experts, we conducted a comprehensive assessment of our business with the goal of identifying long-term growth opportunities and to scope the strategies and investments needed to realize them in the coming years.
Previous report
This review highlighted many strengths, including our brand assets, significant awareness and equity with consumers, and the unique reach of our multi-channel business model. It also identified several opportunities to improve the focus and appeal of our product offerings, enabling us to capture new customer segments and market share going forward.
Previous report
Based on learnings from the review, we are pursuing enhancements to our operating model, which include improving our product and brand development processes to be faster, nimbler, and more responsive to changing consumer preferences. We believe this operating model work is very foundational to improving our capabilities and will better position us for future growth.
Previous report
Operating model improvement costs, primarily related to third-party consulting fees, were $3.7 million and $13.5 million for the fiscal quarter and three fiscal quarters ended September 27, 2025, respectively. These costs were included in SG&A expenses in our condensed consolidated statement of operations. We anticipate incurring additional costs of approximately $1 million to $2 million for the remainder of fiscal 2025.
Previous report
Dividend Update
Previous report
In each of the second and third quarters of fiscal 2025, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.25, which represented a 69% reduction when compared to the cash dividend per common share paid of $0.80 in the first quarter of fiscal 2025. The action was taken to realign our dividend with our current level of profitability, especially against the backdrop of a challenging market environment and the significantly higher product costs the Company will incur as the result of the incremental tariffs on products imported into the United States.
Previous report
Leadership Transition
Previous report
On March 26, 2025, the Company announced the appointment of Douglas C. Palladini as Chief Executive Officer and President and a member of the Board of Directors, effective April 3, 2025. Mr. Palladini brings extensive leadership and brand-building experience to the role and succeeded Richard F. Westenberger, then serving as Interim Chief Executive Officer. Mr. Westenberger continues to serve as our Chief Financial Officer & Chief Operating Officer.
Previous report
Known or Anticipated Trends
Previous report
Following its inauguration in January 2025, the second Trump Administration has made numerous announcements and taken action to increase tariffs assessed on products imported into the United States, which introduced heightened uncertainty across the global economy. Given that we source all of our apparel and other products from a global network of third-party suppliers—primarily located in Asia—any new or increased tariffs, quotas, embargoes, or other trade barriers have the potential to adversely affect our supply chain, cost structure, margins, and competitiveness. Additionally, retaliatory actions taken by impacted countries could further disrupt global trade and create additional inflationary pressures in raw materials and logistics. We estimate that Vietnam, Cambodia, Bangladesh, and India will collectively represent approximately 75%, and China less than 3%, of our product sourcing spend in fiscal 2025. In fiscal 2024, 60% of the fabric used in the manufacture of our products was sourced from China; however, the fibers used to produce that fabric were sourced from outside of China.
Previous report
While these recently announced tariffs did not have a material impact on the Company’s financial results during the first three quarters of fiscal 2025, we expect incremental tariffs related to imports from Vietnam, Cambodia, Bangladesh, India, and other countries to have a net unfavorable impact to our pre-tax income of approximately $25 million to $35 million in the fourth quarter of fiscal 2025. On an annualized basis, the Company estimates gross incremental costs of approximately $200 million to $250 million related to these incremental tariffs. While the Company expects pressure on gross margin in fiscal 2026, the Company is pursuing actions to mitigate the impact, which include, but are not limited to, changes to our product assortments, cost sharing with our vendor partners, changes to the mix of production by country, and raising prices to end consumers and our wholesale customers. These actions that we take may not fully offset the impact of tariffs and, as a result, our revenues, gross margins, and overall financial performance may be materially harmed.
Previous report
Business Strategies and Outlook
Previous report
Notwithstanding the factors described above, we remain focused on returning to consistent, profitable growth, recapturing market share, and creating long‑term shareholder value through initiatives designed to (i) stabilize business performance, (ii) increase near‑term productivity, and (iii) invest to enable long‑term growth.
Previous report
Stabilize Business Performance
Previous report
We have prioritized stabilizing business performance in response to recent market challenges, including declining birth rates, inflationary pressures, evolving consumer preferences and the imposition of incremental tariffs. Initiatives to stabilize our business performance include revisions to our product assortments, investing in marketing to drive demand, implementing pricing strategies to reinforce our value proposition for consumers, and pursuing actions to mitigate the impact of incremental tariffs, which include, but are not limited to, changes to our product assortments, cost sharing with our vendor partners, changes to the mix of production by country, and raising prices to end consumers and our wholesale customers. We are already seeing improved trends in U.S. Retail as a result of these initiatives, achieving two consecutive quarters of positive comparable net sales, a second consecutive quarter of year-over-year growth in customer count, and continued strength in our core baby assortment.
Previous report
Increase Near-Term Productivity
Previous report
In order to position the Company for consistent profitable growth, we have implemented a comprehensive productivity agenda that includes the following:
Previous report
•Store portfolio optimization - We have identified opportunities to rationalize our store portfolio by closing approximately 150 low-margin stores primarily at lease expiration in North America during fiscal years 2025 through 2028. We currently expect to close approximately 100 stores across fiscal 2025 and fiscal 2026. The 150 stores collectively represent approximately $110 million in annual net sales. We expect these actions, assuming anticipated sales transfer to nearby company-operated stores and our eCommerce channel and the elimination of fixed store expenses, to favorably impact our profitability. Additionally, we are suspending new store openings in the U.S. under our current store model. These actions allow us to focus on improving the productivity of our existing retail store fleet and to advance our fleet segmentation strategy to create more differentiated consumer experiences.
Previous report
•Organizational restructuring - In the third quarter of fiscal 2025, we initiated an organizational restructuring of our offices-based workforce to right-size our cost structure and improve future profitability. The plan is expected to reduce offices-based roles by approximately 15% by the end of the second quarter of fiscal 2026 and to generate approximately $35 million in annual savings beginning in fiscal 2026.
Previous report
•Reduction in discretionary spending - We are targeting approximately $10 million of reductions in discretionary spending, deferring non-critical expenditures where possible.
Previous report
•Process efficiency - Our operating model improvement initiative has shortened our product development calendar by approximately three months, improved responsiveness to changing consumer and market trends, and reduced assortment over-development. In addition, we are rationalizing our product choices by approximately 20-30% to create a more unified, global product assortment across all of our brands.
Previous report
Invest to Enable Long-term Growth
Previous report
We are investing in foundational investments to drive long-term growth:
Previous report
•Marketing and demand creation - We are increasing marketing spend to drive traffic and strengthen consumer loyalty, while continuously measuring our return on these investments.
Previous report
•Store format testing - Although we are pausing further expansion of our current U.S. store model, we plan to invest in new store-type testing, in-store experiences, and real estate strategy development as we seek greater productivity from our retail store fleet.
Previous report
•Infrastructure and Technology - We continue to invest in modernizing our distribution network and enhancing technology capabilities. These initiatives include upgrading equipment and systems, digitizing aspects of our product design and development process, migrating certain applications to cloud-based platforms, and consolidating systems and platforms.
Previous report
•Consolidated net sales decreased $0.6 million, or 0.1%, to $757.8 million.
Previous report
◦U.S. Wholesale sales decreased $15.2 million, driven largely by lower sales of our Simple Joys brand.
Previous report
◦International sales increased $5.2 million, primarily driven by growth in Mexico and higher average selling prices per unit.
Previous report
•Consolidated gross profit decreased $14.4 million, or 4.0%, to $341.6 million, and consolidated gross margin decreased 180 basis points (“bps”) to 45.1%, primarily due to higher average cost per unit sold driven by incremental tariffs and investments in product make.
Previous report
•Consolidated SG&A expenses increased $33.2 million, or 11.7%, to $318.0 million. SG&A as a percentage of consolidated net sales (“SG&A rate”) increased 450 bps to 42.0%, driven by factors that include costs related to organizational restructuring, operating model improvements and leadership transition, investments in new and remodeled retail stores, and increased performance-based compensation.
Previous report
•Consolidated net income decreased $46.7 million, or 80.1%, to $11.6 million, driven by the factors discussed in detail below, including a pre-tax, non-cash pension settlement charge of $8.8 million.
Previous report
THIRD FISCAL QUARTER ENDED SEPTEMBER 27, 2025 COMPARED TO THIRD FISCAL QUARTER ENDED SEPTEMBER 28, 2024
Previous report
(1)Pension plan settlement charge for the fiscal quarter ended September 28, 2024 has been reclassified to the Pension plan settlement line item. This charge was previously included in Other expense (income).
Previous report
Consolidated net sales decreased $0.6 million, or 0.1%, to $757.8 million. The decrease in net sales was driven by lower demand in U.S. Wholesale, offset by growth in our U.S. Retail and International segments.
Previous report
Average selling prices per unit increased by a low-single digit percentage and units sold decreased by a low-single digit percentage. Changes in foreign currency exchange rates used for translation had an unfavorable effect on our consolidated net sales of $0.2 million.
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Reworded paragraphs (45)
Previous wording
Statements in this Quarterly Report on Form 10-Q that are not historical fact and use predictive words such as “estimates”, “outlook”, “guidance”, “expect”, “believe”, “intend”, “designed”, “target”, “plans”, “may”, “will”, “are confident” and similar words are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements and related assumptions involve risks and uncertainties that could cause actual results and outcomes to differ materially from any forward-looking statements or views expressed in this Form 10-Q. These risks and uncertainties include, but are not limited to, those disclosed in Part II, Item 1A. “Risk Factors” of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 2025 and Part I, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2024, and otherwise in our reports and filings with the Securities and Exchange Commission, as well as the following factors: changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits; risks related to public health crises; risks related to the organizational restructuring plan, including, but not limited to, our ability to achieve the expected savings from the plan and to fully implement the plan; risks related to consumer tastes and preferences, as well as fashion trends; the failure to protect our intellectual property; the diminished value of our brands, potentially as a result of negative publicity or unsuccessful branding and marketing efforts; delays, product recalls, or loss of revenue due to a failure to meet our quality standards; risks related to uncertainty regarding the future of international trade agreements and the United States’ position on international trade, as well as significant political, trade, and regulatory developments and other circumstances beyond our control; increased competition in the marketplace; financial difficulties for one or more of our major customers; identification of locations and negotiation of appropriate lease terms for our retail stores; distinct risks facing our eCommerce business; failure to forecast demand for our products and our failure to manage our inventory; increased margin pressures, including increased cost of materials and labor and our inability to successfully increase prices to offset these increased costs; continued inflationary pressures with respect to labor and raw materials and global supply chain constraints that have, and could continue, to affect freight, transit, and other costs; fluctuations in foreign currency exchange rates; unseasonable or extreme weather conditions; risks associated with corporate responsibility issues; our foreign sourcing arrangements; a relatively small number of vendors supply a significant amount of our prod…
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Current wording
Statements in this Quarterly Report on Form 10-Q that are not historical fact and use predictive words such as “estimates”, “outlook”, “guidance”, “expect”, “believe”, “intend”, “designed”, “target”, “plans”, “may”, “will”, “are confident” and similar words are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements and related assumptions involve risks and uncertainties that could cause actual results and outcomes to differ materially from any forward-looking statements or views expressed in this Form 10-Q. These risks and uncertainties include, but are not limited to, those disclosed in Part II, Item 1A. “Risk Factors” of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 4, 2026 and Part I, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2026, and otherwise in our reports and filings with the Securities and Exchange Commission, as well as the following factors: changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits; risks related to public health crises; risks related to the organizational restructuring plan, including, but not limited to, our ability to achieve the expected savings from the plan and to fully implement the plan; risks related to consumer tastes and preferences, as well as fashion trends; the failure to protect our intellectual property; the diminished value of our brands, potentially as a result of negative publicity or unsuccessful branding and marketing efforts; delays, product recalls, or loss of revenue due to a failure to meet our quality standards; risks related to uncertainty regarding the future of international trade agreements and the United States’ position on international trade, as well as significant political, trade, and regulatory developments and other circumstances beyond our control; the roll-back of incremental tariffs imposed under the International Emergency Economic Powers Act (the “incremental tariffs”) and any additional actions taken in response to their roll-back, including tariffs imposed pursuant to Section 122 of the Trade Act of 1974 (the “122 tariffs”); our ability to recover refunds of incremental tariff amounts or other tariff amounts paid; increased competition in the marketplace; financial difficulties for one or more of our major customers; identification of locations and negotiation of appropriate lease terms for our retail stores; distinct risks facing our eCommerce business; failure to forecast demand for our products and our failure to manage our inventory; increased margin pressures, including increased cost of materials and labor and our inability to successfully increase prices to offset these increased costs; continued inflationary pressures with respect to labor and raw materials…
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Previous wording
We are North America’s largest and most-enduring apparel company exclusively for babies and young children. Our core brands are Carter’s and OshKosh B’gosh (or “OshKosh”), iconic and among the sector’s most trusted names. Our exclusive Carter’s brands are developed for Walmart, Target, and Amazon. Our emerging brands include Little Planet, crafted with organic fabrics and sustainable materials, Otter Avenue, a toddler-focused apparel brand, and Skip Hop, baby essentials from tubs to toys.
Current wording
We are North America’s largest and most-enduring apparel company exclusively for babies and young children. Our core brands are Carter’s and OshKosh B’gosh (or “OshKosh”), iconic and among the sector’s most trusted names. Our exclusive Carter’s brands, which consist of Child of Mine, Just One You, and Simple Joys, are developed for Walmart, Target, and Amazon. Our emerging brands include Little Planet, crafted with organic fabrics and sustainable materials, Otter Avenue, a toddler-focused apparel brand, and Skip Hop, baby essentials from tubs to toys.
Previous wording
Our purpose is to embrace the wonder of childhood and uplift those shaping the future. We believe our brands are complementary to one another in product offering and aesthetic. Each brand is uniquely positioned in the marketplace and offers great value to families with young children. Our multichannel, global business model, which includes retail stores, eCommerce, mobile app, and wholesale distribution channels, as well as omni-channel capabilities in the United States and Canada, enables us to reach a broad range of consumers around the world. As of September 27, 2025, our channels included 1,065 company-operated retail stores in North America, eCommerce websites, approximately 19,500 wholesale locations in North America, as well as our international wholesale accounts and licensees who operate in over 1,100 locations outside of North America in over 90 countries.
Current wording
Our purpose is to embrace the wonder of childhood and uplift those shaping the future. We believe our brands are complementary to one another in product offering and aesthetic. Each brand is uniquely positioned in the marketplace and offers great value to families with young children. Our multichannel, global business model, which includes retail stores, eCommerce, mobile app, and wholesale distribution channels, as well as omni-channel capabilities in the United States and Canada, enables us to reach a broad range of consumers around the world.
Previous wording
The Company operates on a 52 or 53 week fiscal calendar. Fiscal 2025 will end on January 3, 2026 and includes 53 weeks. Fiscal 2024 ended on December 28, 2024 and included 52 weeks. The fiscal quarters ended September 27, 2025 and September 28, 2024 each included 13 weeks.
Current wording
The Company operates on a 52 or 53 week fiscal calendar. Fiscal 2026 will end on January 2, 2027 and includes 52 weeks. Fiscal 2025 ended on January 3, 2026 and included 53 weeks. The fiscal quarters ended April 4, 2026 and March 29, 2025 each included 13 weeks.
Previous wording
We have three operating and reportable segments: U.S. Retail, U.S. Wholesale, and International. Our U.S. Retail segment consists of revenue primarily from sales of products in the United States through our retail stores, eCommerce websites, and mobile app. Similarly, our U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale customers. Our International segment consists of revenue primarily from sales of products outside the United States, largely through our retail stores and eCommerce websites in Canada and Mexico, and sales to our international wholesale customers and licensees. The Company sells similar products in each of its three segments.
Current wording
We have three operating and reportable segments: U.S. Retail, U.S. Wholesale, and International. Our U.S. Retail segment consists of revenue primarily from sales of products in the United States through our retail stores, eCommerce websites, and mobile app. Our U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale customers. Our International segment consists of revenue primarily from sales of products outside the United States, largely through our retail stores and eCommerce websites in Canada and Mexico, and sales to our international wholesale customers and licensees. The Company sells similar products in each of its three segments.
Previous wording
In fiscal 2024, the Company changed its measure of segment profitability to segment operating income. Segment operating income includes net sales, royalty income, and related cost of goods sold and selling, general, and administrative (“SG&A”) expenses attributable to each segment. Segment operating income excludes unallocated corporate expenses as well as specific charges that are not directly attributable to segment operations, including restructuring costs, operating model improvement costs, leadership transition costs, and impairment charges related to goodwill and indefinite-lived intangible assets, which were included in our previous measure of segment profitability. This change has no impact on our consolidated operating income. Management believes this updated presentation more accurately reflects how the business is managed and provides better insight into segment performance. Prior period segment operating income for the fiscal quarter and three fiscal quarters ended September 28, 2024 have been recast to conform to the current presentation.
Current wording
The Company’s chief operating decision maker is the Chief Executive Officer. The chief operating decision maker evaluates the operating performance of the segments based upon each segment’s net sales and segment operating income. Segment operating income includes net sales, royalty income, and related cost of goods sold and selling, general, and administrative expenses attributable to each segment. Segment operating income excludes unallocated corporate expenses as well as specific charges that are not directly attributable to segment operations, including operating model improvement costs, restructuring costs, leadership transition costs, and impairment charges related to goodwill and indefinite-lived intangible assets.
Previous wording
Gross profit is calculated as consolidated net sales less cost of goods sold. Gross margin is calculated as gross profit divided by consolidated net sales. Cost of goods sold includes expenses related to the merchandising, design, and procurement of product, including inbound freight, purchasing, receiving, and inspection costs. Also included in costs of goods sold are the costs of shipping eCommerce product to end consumers. Retail store occupancy costs, distribution expenses, and generally all other expenses other than interest and income taxes are included in SG&A expenses. Distribution expenses that are included in SG&A primarily consist of payments to third-party shippers and handling costs to process product through our distribution facilities, including eCommerce fulfillment costs, and delivery to our wholesale customers and to our retail stores. Our gross profit and gross margin may not be comparable to other entities that define their metrics differently.
Current wording
Gross profit represents consolidated net sales less cost of goods sold. Gross margin is calculated as gross profit divided by consolidated net sales. Cost of goods sold includes the cost of products, as well as changes in inventory reserves and expenses related to the merchandising, design, and procurement of product, including inbound freight costs, purchasing and receiving costs, and inspection costs. Costs of goods sold also includes the costs of shipping eCommerce orders directly to end consumers. For omni-channel transactions, Costs of goods sold includes the costs of shipping product to end consumers or to retail stores. Our gross profit and gross margin may not be comparable to other entities that define their metrics differently.
Previous wording
We present comparable sales metrics because we consider them an important supplemental measure of our U.S. Retail and International performance, and the Company uses such information to assess the performance of the U.S. Retail and
Current wording
We present comparable sales metrics because we consider them an important supplemental measure of our U.S. Retail and International performance, and the Company uses such information to assess the performance of the U.S. Retail and International segments. Additionally, we believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of our business.
Previous wording
Our comparable sales metrics include sales for all stores and eCommerce sites, including the mobile app, that were open and operated by us during the comparable fiscal period, including stand-alone format stores that converted to multi-branded format stores and certain remodeled or relocated stores. A store or site becomes comparable following 13 consecutive full fiscal months of operations. If a store relocates within the same center with no business interruption or material change in square footage, the sales of such store will continue to be included in the comparable store metrics. If a store relocates to another center more than five miles away, or there is a material change in square footage, such store is treated as a new store. Stores that are closed during the relevant fiscal period are included in the comparable store sales metrics up to the last full fiscal month of operations.
Current wording
Our comparable sales metrics include sales for all stores and eCommerce sites that were open and operated by us during the comparable fiscal period, including stand-alone format stores that converted to multi-branded format stores and certain remodeled or relocated stores. A store or site becomes comparable following 13 consecutive full fiscal months of operations. If a store relocates within the same center with no business interruption or material change in square footage, the sales of such store will continue to be included in the comparable store metrics. If a store relocates to another center more than five miles away, or there is a material change in square footage, such store is treated as a new store. Stores that are closed during the relevant fiscal period are included in the comparable store sales metrics up to the last full fiscal month of operations. In fiscal years that include a 53rd week, we adjust the prior year comparable period to include a 53rd week so comparable sales reflect an equivalent number of weeks in each period.
Previous wording
Third Fiscal Quarter 2025 Financial Highlights
Current wording
First Fiscal Quarter 2026 Financial Highlights
Previous wording
Unless otherwise stated, comparisons are to the third quarter of fiscal 2024:
Current wording
Unless otherwise stated, comparisons are to the first quarter of fiscal 2025:
Previous wording
◦U.S. Retail sales increased $9.3 million, driven by higher average selling prices per unit. U.S. Retail comparable net sales increased 2.0%, a second consecutive quarter of positive comparable net sales.
Current wording
◦U.S. Retail sales increased $37.8 million driven by higher unit volume and average unit retail (“AUR”) in both retail stores and eCommerce channels. Comparable net sales, including retail stores and eCommerce, increased 10.5% for the period, reflecting a fourth consecutive quarter of positive comparable net sales growth.
Previous wording
•Consolidated operating income decreased $47.9 million, or 62.2%, to $29.1 million and adjusted consolidated operating income, a non-GAAP financial measure, decreased $37.7 million, or 48.9%, to $39.4 million. Operating margin decreased 640 bps to 3.8%, and adjusted operating margin decreased 500 bps to 5.2%, driven by the factors discussed in detail below.
Current wording
•Consolidated operating income increased $2.3 million, or 9.0%, to $28.4 million and adjusted operating income, a non-GAAP financial measure, decreased $6.9 million, or 19.6%, to $28.4 million. Operating margin increased 10 bps to 4.2%, primarily due to the factors discussed in detail below.
Previous wording
•Diluted net income per common share decreased $1.30, or 80.2%, to $0.32, and adjusted diluted net income per common share decreased $0.90, or 54.9%, to $0.74.
Current wording
•Diluted net income per common share decreased $0.04, or 9.3%, to $0.39, and adjusted diluted net income per common share decreased $0.27, or 40.9%, to $0.39.
Previous wording
•During the first three quarters of fiscal 2025, we opened 19 stores and closed 15 stores in the United States.
Current wording
•During the first quarter of fiscal 2026, we opened 3 stores and closed 9 stores in the United States.
Previous wording
•As a result of our strong financial position and available liquidity, we returned $9.1 million in cash dividends to our shareholders in the third quarter of fiscal 2025.
Current wording
•As a result of our strong financial position and available liquidity, we returned $9.2 million to our shareholders in cash dividends.
Previous wording
(2)Effective tax rate is calculated by dividing the provision for income taxes by income before income taxes.
Current wording
(*)Effective tax rate is calculated by dividing the provision for income taxes by income before income taxes.
Previous wording
Results by Segment - First Three Quarters of Fiscal 2025 compared to First Three Quarters of Fiscal 2024
Current wording
Results by Segment - First Quarter of Fiscal 2026 compared to First Quarter of Fiscal 2025
Previous wording
The following table summarizes net sales by segment and segment operating income for the third quarter of fiscal 2025 and the third quarter of fiscal 2024:
Current wording
The following table summarizes net sales by segment and segment operating income for the first quarter of fiscal 2026 and the first quarter of fiscal 2025:
Previous wording
(2)Related to costs associated with the transition of our former CEO, including accelerated vesting of outstanding time-based restricted stock awards pursuant to a retirement agreement approved by the Board of Directors, executive recruiting costs, and other related costs.
Current wording
(2)Related to costs associated with the transition of our former CEO, including accelerated vesting of outstanding time-based restricted stock awards pursuant to a retirement agreement approved by the Board, executive recruiting costs, and other related costs. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.
Previous wording
Comparable net sales, including retail store and eCommerce, increased 2.0% primarily driven by the factors mentioned above. As of September 27, 2025, we operated 808 retail stores in the U.S. compared to 804 as of December 28, 2024, and 795 as of September 28, 2024.
Current wording
Overall, demand trends continued to improve in the first quarter of fiscal 2026 as comparable net sales, including retail stores and eCommerce, increased 10.5% and delivered a fourth consecutive quarter of positive comparable net sales growth. As of April 4, 2026, we operated 798 retail stores in the U.S. compared to 804 as of January 3, 2026, and 802 as of March 29, 2025.
Previous wording
These factors were partially offset by decreased average selling prices per unit. Average selling prices per unit decreased by a low-single digit percentage, driven by the unfavorable impact of foreign currency exchange rates and product mix. Changes in foreign currency exchange rates used for translation had a $9.7 million unfavorable effect on International segment net sales.
Current wording
AUR increased by a high-single digit percentage, driven by pricing and the favorable impact of foreign currency exchange rates. International segment unit volume increased by a mid-single digit percentage, reflecting growth across the segment. Changes in foreign currency exchange rates used for translation had a $5.6 million favorable effect on International segment net sales.
Previous wording
As of September 27, 2025, we operated 192 stores and 65 stores in Canada and Mexico, respectively. As of December 28, 2024, we operated 191 and 62 stores in Canada and Mexico, respectively. As of September 28, 2024, we operated 188 and 56 stores in Canada and Mexico, respectively.
Current wording
As of April 4, 2026, we operated 191 and 73 retail stores in Canada and Mexico, respectively. As of January 3, 2026, we operated 192 and 72 retail stores in Canada and Mexico, respectively. As of March 29, 2025, we operated 191 and 64 retail stores in Canada and Mexico, respectively.
Previous wording
International segment operating income decreased $1.1 million, or 10.4%, to $9.2 million, primarily due to an increase in SG&A expenses of $4.5 million, partially offset by an increase in gross profit of $3.0 million and an increase in royalty income of $0.4 million. Segment operating margin decreased 140 bps to 8.2%, driven by a 220 bps increase in the SG&A rate, partially offset by a 40 bps increase in gross margin and a 40 bps increase in royalty income. The increase in gross margin was driven by higher average selling prices per unit and product mix, partially offset by higher average cost per unit sold. Average cost per unit sold increased by a mid-single digit percentage, reflecting the impact of incremental tariffs in Mexico and product mix. The increase in the SG&A rate was driven by increased performance-based compensation expense, retail store rent, and retail store employee costs, partially offset by decreased bad debt expense and fixed cost leverage on increased net sales.
Current wording
International segment operating income was $4.2 million in the first quarter of fiscal 2026 compared to segment operating loss of $0.2 million in the first quarter of fiscal 2025. This change was driven by an increase in gross profit of $8.7 million, partially offset by an increase in SG&A expenses of $4.1 million. Segment operating margin increased 460 bps to 4.3%, driven by a 340 bps increase in gross margin and a 150 bps decrease in the SG&A rate. The increase in gross margin was driven by higher AUR and product mix, partially offset by a low-single digit percentage increase in AUC. The decrease in the SG&A rate was driven by fixed cost leverage on increased net sales, partially offset by higher retail store rent and retail store employee costs.
Previous wording
(3)Related to costs associated with the transition of our former CEO, including accelerated vesting of outstanding time-based restricted stock awards pursuant to a retirement agreement approved by the Board of Directors, executive recruiting costs, and other related costs.
Current wording
(1)Related to costs associated with the transition of our former CEO, including accelerated vesting of outstanding time-based restricted stock awards, executive recruiting costs, and other related costs.
Previous wording
(1)Primarily related to third-party consulting costs to support operating model improvements.
Current wording
(2)Primarily related to third-party consulting costs to support operating model improvements.
Previous wording
Our ongoing cash needs are primarily for working capital (consisting primarily of inventory), capital expenditures, employee compensation, interest on debt, the return of capital to our shareholders, and other general corporate purposes. We expect that our primary sources of liquidity will be cash and cash equivalents on hand, cash flow from operations, and available borrowing capacity under our secured revolving credit facility. We believe that our sources of liquidity are sufficient to meet our cash requirements for at least the next twelve months. However, these sources of liquidity may be affected by events described in “Forward-Looking Statements” section of this Form 10-Q, including, but not limited to, our risk factors discussed under the heading “Risk Factors” in Part II, Item 1A. of this Quarterly Report on Form 10-Q, the risk factors discussed under the heading “Risk Factors” in our most recently filed Annual Report on Form 10-K, and in other reports filed with the Securities and Exchange Commission from time to time.
Current wording
Our ongoing cash needs are primarily for working capital (consisting primarily of inventory), capital expenditures, employee compensation, interest on debt, the return of capital to our shareholders, and other general corporate purposes. We expect that our primary sources of liquidity will be cash and cash equivalents on hand, cash flow from operations, and available borrowing capacity under our secured asset-based revolving credit facility. We believe that our sources of liquidity are sufficient to meet our cash requirements for at least the next twelve months. However, these sources of liquidity may be affected by events described in “Forward-Looking Statements” section of this Form 10-Q, including, but not limited to, our risk factors discussed under the heading “Risk Factors” in Part II, Item 1A. of this Quarterly Report on Form 10-Q, the risk factors discussed under the heading “Risk Factors” in our most recently filed Annual Report on Form 10-K, and in other reports filed with the Securities and Exchange Commission from time to time.
Previous wording
As discussed under the heading “Known or Anticipated Trends” in this Quarterly Report on Form 10-Q, the impacts of new tariffs or trade restrictions will have an adverse impact on our cost structure and could have an adverse impact on our supply chain, which may impact our working capital needs in the near term. We are pursuing actions to mitigate the impact, but we expect some volatility in cash flows in near term. However, we believe that our sources of liquidity, including the available borrowing capacity under our secured revolving credit facility, will be sufficient to manage these recent developments.
Current wording
As discussed under the heading “Known or Anticipated Trends” in our most recently filed Annual Report on Form 10-K, the impacts of new tariffs and other trade measures have had and may continue to have an adverse impact on our cost structure and supply chain, which may impact our working capital needs in the near term. While recent developments, including a decision by the U.S. Supreme Court that invalidated certain incremental tariffs, may affect our future exposure to these tariffs, the trade policy environment remains dynamic and the ultimate impacts are uncertain. We continue to evaluate and mitigate these impacts and may experience volatility in cash flows in the near term. However, we believe our sources of liquidity, including cash and available borrowing capacity under our secured asset-based revolving credit facility, will be sufficient to manage these developments.
Previous wording
As of September 27, 2025, we had $184.2 million of cash and cash equivalents held at major financial institutions, including $52.2 million held at financial institutions located outside of the United States. We maintain cash deposits with major financial institutions that exceed the insurance coverage limits provided by the Federal Deposit Insurance Corporation in the United States and by similar insurers for deposits located outside the United States. To mitigate this risk, we utilize a policy of allocating cash deposits among major financial institutions that have been evaluated by us and third-party rating agencies as having acceptable risk profiles.
Current wording
As of April 4, 2026, we had $473.4 million of cash and cash equivalents held at major financial institutions, including $78.0 million held at financial institutions located outside of the United States. We do not expect any material restrictions on our ability to access or use cash held outside of the United States. We maintain cash deposits with major financial institutions that exceed the insurance coverage limits provided by the Federal Deposit Insurance Corporation in the United States and by similar insurers for deposits located outside the United States. To mitigate this risk, we utilize a policy of allocating cash deposits among major financial institutions that have been evaluated by us and third-party rating agencies as having acceptable risk profiles.
Previous wording
Net accounts receivable at September 27, 2025 were $237.9 million compared to $247.0 million at September 28, 2024 and $194.8 million at December 28, 2024. The decrease of $9.1 million, or 3.7%, at September 27, 2025 compared to September 28, 2024 primarily reflects the timing of wholesale customer shipments. Due to the seasonal nature of our operations, the net accounts receivable balance at September 27, 2025 is not comparable to the net accounts receivable balance at December 28, 2024.
Current wording
Net accounts receivable at April 4, 2026 were $196.6 million compared to $203.9 million at March 29, 2025 and $178.6 million at January 3, 2026. The decrease of $7.3 million, or 3.6%, at April 4, 2026 compared to March 29, 2025 primarily reflects the timing of wholesale customer shipments. Due to the seasonal nature of our operations, the net accounts receivable balance at April 4, 2026 is not comparable to the net accounts receivable balance at January 3, 2026.
Previous wording
Inventories at September 27, 2025 were $656.1 million compared to $607.4 million at September 28, 2024 and $502.3 million at December 28, 2024. The increase of $48.8 million, or 8.0%, at September 27, 2025 compared to September 28, 2024 was driven by $34.0 million of incremental tariffs imposed on products imported into the United States and investments in product make. Days of supply were comparable to September 28, 2024. Due to the seasonal nature of our operations, the inventory balance at September 27, 2025 is not comparable to the inventories balance at December 28, 2024.
Current wording
Accounts payable at April 4, 2026 were $188.7 million compared to $199.1 million at March 29, 2025 and $235.7 million at January 3, 2026. The decrease of $10.3 million, or 5.2%, at April 4, 2026 compared to March 29, 2025 was driven by the timing of payments for purchases of inventory. Due to the seasonal nature of our operations, the accounts payable balance at April 4, 2026 is not comparable to the accounts payable balance at January 3, 2026.
Previous wording
Net cash used in operating activities was $136.3 million for the first three quarters of fiscal 2025 compared to net cash provided by operating activities of $11.3 million in the first three quarters of fiscal 2024. Our cash flow provided by operating activities is driven by net income and changes in our working capital. The change in net cash from operating activities was primarily driven by decreased net income and increased inventory purchases driven by incremental tariffs imposed on products imported into the U.S.
Current wording
Net cash provided by operating activities for the first quarter of fiscal 2026 was $6.4 million compared to net cash used in operating activities of $48.6 million in the first quarter of fiscal 2025. Our cash flows from operating activities are driven by net income and changes in our net working capital. The increase in operating cash flow was primarily driven by higher sell through of inventory during the period, resulting in reduced days of supply, and the timing of interest payments on our senior notes.
Previous wording
Net cash used in investing activities was $42.7 million for the first three quarters of fiscal 2025 compared to $39.6 million in the first three quarters of fiscal 2024. The increase in net cash used in investing activities was driven by increased capital expenditures. Capital expenditures in the first three quarters of fiscal 2025 was driven by U.S. and international retail store openings and remodels and investments in our distribution facilities.
Current wording
Net cash used in investing activities for the first quarter of fiscal 2026 was $7.0 million compared to $10.3 million in the first quarter of fiscal 2025. The decrease in net cash used in investing activities was driven by decreased capital expenditures. Capital expenditures in the first quarter of fiscal 2026 were driven by U.S. and international retail store openings and remodels and investments in our distribution facilities. We plan to invest approximately $55 million in capital expenditures in fiscal 2026, primarily for our retail store fleet, distribution facilities, and strategic information technology initiatives.
Previous wording
Net cash used in financing activities was $52.1 million in the first three quarters of fiscal 2025 compared to $145.1 million in the first three quarters of fiscal 2024. This change in cash flow from financing activities was primarily driven by open market repurchases of common stock in the first three quarters of fiscal 2024 that did not reoccur in the first three quarters of fiscal 2025 and a decrease in cash dividends distributed to shareholders.
Current wording
Net cash used in financing activities was $12.2 million in the first quarter of fiscal 2026 compared to $33.6 million in the first quarter of fiscal 2025. This change in cash flow from financing activities was primarily driven by lower cash dividends distributed to shareholders during the period.
Previous wording
The Company did not repurchase and retire shares in open market transactions in the first three quarters of fiscal 2025. In the first three quarters of fiscal 2024, we repurchased and retired 736,423 shares in open market transactions for $50.5 million, at an average price of $68.61 per share.
Current wording
The Company did not repurchase and retire shares in open market transactions in either of the first quarters of fiscal 2026 and fiscal 2025.
Previous wording
The total remaining capacity under outstanding repurchase authorizations as of September 27, 2025 was $599.0 million, based on settled repurchase transactions. The share repurchase authorizations have no expiration dates.
Current wording
The total remaining capacity under outstanding repurchase authorizations as of April 4, 2026, was approximately $599.0 million, based on settled repurchase transactions. The share repurchase authorizations have no expiration dates.
Previous wording
Future repurchases may occur from time to time in the open market, in privately negotiated transactions, or otherwise. The timing and amount of any repurchases will be at the discretion of the Company subject to restrictions under the Company’s secured revolving credit facility and considerations given to market conditions, stock price, other investment priorities, and other factors.
Current wording
Future repurchases may occur from time to time in the open market, in privately negotiated transactions, or otherwise. The timing and amount of any repurchases will be at the discretion of the Company subject to restrictions under the Company’s secured asset-based revolving credit facility and considerations given to market conditions, stock price, other investment priorities, excise taxes, and other factors.
Previous wording
In the first, second, and third quarters of fiscal 2025, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.80, $0.25, and $0.25, respectively (for an aggregate cash dividend per common share of $1.30 for the first three quarters of fiscal 2025). Additionally, in each of the first three quarters of fiscal 2024, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.80 (for an aggregate cash dividend per common share of $2.40 for the first three quarters of fiscal 2024). Our Board of Directors will evaluate future dividend declarations based on a number of factors, including restrictions under the Company’s secured revolving credit facility, business conditions, the Company’s financial performance, and other considerations.
Current wording
In the first quarter of fiscal 2026, the Company’s Board declared, and the Company paid, a cash dividend per common share of $0.25. Additionally, in the first quarter of fiscal 2025, the Board declared, and the Company paid, a cash dividend per common share of $0.80. Our Board will evaluate future dividend declarations based on a number of factors, including restrictions under our secured asset-based revolving credit facility, business conditions, our financial performance, and other considerations.
Previous wording
Provisions in our secured revolving credit facility could have the effect of restricting our ability to pay cash dividends on, or make future repurchases of, our common stock, as further described in Note 6, Long-term Debt, to the condensed consolidated financial statements.
Current wording
Provisions in our secured asset-based revolving credit facility could have the effect of restricting our ability to pay cash dividends on, or make future repurchases of, our common stock, as further described in Note 6, Long-term Debt, to the condensed consolidated financial statements.
Previous wording
As of September 27, 2025, December 28, 2024, and September 28, 2024, there was $843.1 million, $845.3 million, and $844.3 million available for future borrowing, respectively. All outstanding borrowings under our secured revolving credit facility are classified as non-current liabilities on our condensed consolidated balance sheets due to contractual repayment terms under the credit facility. However, these repayment terms also allow us to repay some or all of the outstanding borrowings at any time.
Current wording
As of April 4, 2026 and January 3, 2026, we had no outstanding borrowings under our secured asset-based revolving credit facility (“ABL facility”), exclusive of $5.5 million and $6.3 million of outstanding letters of credit, respectively. As of March 29, 2025, we had no outstanding borrowings under our secured cash-flow-based revolving credit facility, exclusive of $6.4 million of outstanding letters of credit. As of April 4, 2026, January 3, 2026, and March 29, 2025, there was approximately $605.2 million, $743.7 million, and $843.6 million available for future borrowing, respectively. Any outstanding borrowings under our ABL facility and secured cash-flow-based revolving credit facility are classified as non-current liabilities on our condensed consolidated balance sheets due to contractual repayment terms under the credit facility. However, these repayment terms also allow us to repay some or all of the outstanding borrowings at any time.
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Current report — wording carried from elsewhere
As of April 4, 2026, our channels included 1,062 company-operated retail stores in North America, eCommerce websites, approximately 19,500 wholesale locations in North America, as well as our international wholesale accounts and licensees who operate in over 1,100 locations outside of North America in over 90 countries.
Current report — wording carried from elsewhere
Retail store occupancy costs, distribution expenses, and generally all other expenses other than interest and income taxes are included in Selling, general, and administrative (“SG&A”) expenses. Distribution expenses included in SG&A primarily consist of payments to third-party shippers and handling costs to process product through the Company’s distribution facilities, including eCommerce fulfillment costs, and delivery of product to wholesale customers and to our retail stores.
Current report — wording carried from elsewhere
(1)Unallocated corporate expenses include corporate overhead expenses that are not directly attributable to one of our business segments and include unallocated accounting, finance, legal, human resources, and information technology expenses, occupancy costs for our corporate headquarters, and other benefit and compensation programs, including performance-based compensation.
Current report — wording carried from elsewhere
Net Cash Provided by (Used in) Operating Activities
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Previous report — wording carried elsewhere
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
Previous report — wording carried elsewhere
International segments. Additionally, we believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of our business.
Previous report — wording carried elsewhere
Refer to the risk factor under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and the risk factors disclosed under the heading, “Risk Factors” in our most recently filed Annual Report on Form 10-K for further information on risks related to the uncertainty of future global trade relations.
Previous report — wording carried elsewhere
The following table summarizes our results of operations.
Previous report — wording carried elsewhere
(2)Effective tax rate is calculated by dividing the provision for income taxes by income before income taxes.
Previous report — wording carried elsewhere
Note: Results may not be additive due to rounding. Percentage changes that are not considered meaningful are denoted with “nm”.
Previous report — wording carried elsewhere
Note: Results may not be additive due to rounding.
Previous report — wording carried elsewhere
Net Cash (Used in) Provided by Operating Activities
Previous report — wording carried elsewhere
We plan to invest $60.0 million in capital expenditures in fiscal 2025, which primarily relates to U.S. and international retail store openings and remodels, investments in our distribution facilities, and strategic information technology initiatives.
Previous report — wording carried elsewhere
The assessment indicated that the fair value of assets for the U.S. Retail, Canada, and Other International reporting units exceeded its carrying values by approximately 4%, 7%, and 4%, respectively. Sensitivity tests on the Canada reporting unit showed that a 100 bps increase in the discount rate, 50 bps decrease in the long-term revenue growth rate, a 250 bps decrease in revenue growth rates, or a 50 bps decrease in operating margins would not change the conclusion and would not result in an impairment charge.