CARTERS INC

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 July 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, but not limited to, tariffs imposed pursuant to Section 122 of the Trade Act of 1974 and tariffs imposed under Section 301 of the Trade Act of 1974; 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…

Excerpt shortened here; the source contains the full paragraph.

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 this Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 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, but not limited to, tariffs imposed pursuant to Section 122 of the Trade Act of 1974 and tariffs imposed under Section 301 of the Trade Act of 1974; our ability to recover refunds of incremental tariff amounts or other tariff amounts paid; increased competition in the marketplace; ongoing political and economic conflicts that could impact our global and domestic operations, including, but not limited to, the conflict between the United States, Israel, and Iran; 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 i…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

As of July 4, 2026, our channels included 1,042 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

As of October 3, 2026, our channels included 1,035 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.

Previous 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 and the impact of tariff refund recoveries, as well as specific charges that are not directly attributable to segment operations, including operating model improvement costs, restructuring costs, leadership transition costs, specific intellectual property litigation costs, and impairment charges related to goodwill and indefinite-lived intangible assets.

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 and the impact of IEEPA tariff refund recoveries, as well as specific charges that are not directly attributable to segment operations, including operating model improvement costs, restructuring costs, leadership transition costs, specific intellectual property litigation costs, and impairment charges related to goodwill and indefinite-lived intangible assets.

Previous wording

On May 1, 2026, the Company announced that the Board of Directors (the “Board”) appointed 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 departed the Company as Chief Executive Officer & President and resigned as a member of the Board effective April 28, 2026. 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 wording

On May 1, 2026, the Company announced that the Board of Directors (the “Board”) appointed Sharon Price John as Chief Executive Officer (“CEO”) & 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 departed the Company as CEO & President and resigned as a member of the Board effective April 28, 2026. 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.

Previous wording

In response to the ruling on IEEPA tariffs, the U.S. Administration imposed a new 10% global tariff under Section 122 of the Trade Act of 1974 (“Section 122”), effective February 24, 2026. In May 2026, the U.S. Court of International Trade issued a ruling finding the Section 122 tariffs unlawful, although this ruling is currently stayed pending appeal. During the first two quarters of fiscal 2026, the Company paid approximately $26 million of incremental Section 122 tariffs related to imports from Vietnam, India, Bangladesh, Cambodia, and other countries. As of July 4, 2026, approximately $18 million of these tariffs remained capitalized within the Company’s inventory balances.

Current wording

In response to the ruling on IEEPA tariffs, the U.S. Administration imposed a new 10% global tariff under Section 122 of the Trade Act of 1974 (“Section 122”), effective February 24, 2026. In May 2026, the U.S. Court of International Trade issued a ruling finding the Section 122 tariffs unlawful, although this ruling is currently stayed pending appeal. The Section 122 tariffs imposed effective February 24, 2026 expired on July 24, 2026. Effective July 24, 2026, the U.S. Administration imposed additional tariffs under Section 301(b) of the Trade Act of 1974 (“Section 301”) as a result of the Administration’s investigations into forced labor practices of various foreign countries. These tariffs range from 10% to 12.5% and apply to imports from approximately 60 countries and territories. During the first three quarters of fiscal 2026, the Company paid approximately $53 million of incremental Section 122 and Section 301 tariffs related to imports from Vietnam, India, Bangladesh, Cambodia, and other countries. As of October 3, 2026, approximately $24 million of these tariffs remained capitalized within the Company’s inventory balances.

Previous wording

The Section 122 tariffs imposed effective February 24, 2026 expired on July 24, 2026. Effective July 24, 2026, the U.S. Administration imposed additional tariffs under Section 301(b) of the Trade Act of 1974 (“Section 301”) as a result of the Administration’s investigations into forced labor practices of various foreign countries. These tariffs range from 10% to 12.5% and apply to imports from approximately 60 countries and territories. In addition, the U.S. Administration is continuing its separate investigation, under Section 301(b), into excess capacity and production in manufacturing sectors in foreign countries, signaling its intent to maintain tariff levels comparable to those previously in effect under the IEEPA tariffs. As of the date of this filing, no proposed tariffs have been imposed as a result of the excess capacity investigation. Because the Company sources substantially all of its 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 its supply chain, cost structure, margins, and competitiveness. Retaliatory actions taken by impacted countries could further disrupt global trade and create additional inflationary pressures in raw materials and logistics.

Current wording

In addition, the U.S. Administration is continuing its separate investigation, under Section 301(b), into excess capacity and production in manufacturing sectors in foreign countries, which could result in tariff levels comparable to those previously in effect under the IEEPA tariffs. As of the date of this filing, no tariffs have been proposed or imposed as a result of the excess capacity investigation.

Previous wording

Second Fiscal Quarter 2026 Financial Highlights

Current wording

Third Fiscal Quarter 2026 Financial Highlights

Previous wording

Unless otherwise stated, comparisons below are to the second quarter of fiscal 2025. References below to adjusted operating income, adjusted net income, and adjusted diluted net income per common share are non-GAAP financial measures; see “Reconciliation of Non-GAAP Financial Measures to GAAP Measures.”

Current wording

Unless otherwise stated, comparisons below are to the third quarter of fiscal 2025. References below to adjusted operating income, adjusted net income, and adjusted diluted net income per common share are non-GAAP financial measures; see “Reconciliation of Non-GAAP Financial Measures to GAAP Measures.”

Previous wording

◦U.S. Retail sales increased $5.1 million driven by higher unit volume. Comparable net sales, including retail stores and eCommerce, increased 5.1% for the period, reflecting a fifth consecutive quarter of positive comparable net sales growth.

Current wording

◦U.S. Retail sales increased $0.3 million driven by higher average unit retail (“AUR”), partially offset by lower unit volume. Comparable net sales, including retail stores and eCommerce, increased 0.4% for the period.

Previous wording

•Consolidated SG&A expenses decreased $4.8 million, or 1.7%, to $276.1 million. SG&A as a percentage of consolidated net sales (“SG&A rate”) decreased 310 bps to 44.9%, driven by fixed cost leverage on higher net sales, costs related to operating model improvements in the second quarter of fiscal 2025 that did not reoccur in the second quarter of fiscal 2026, reduced costs resulting from previously implemented restructuring actions, lower performance-based compensation, and lower distribution costs, partially offset by higher leadership transition costs, incremental marketing investments, and inflationary pressure in retail store-related expenses.

Current wording

•Consolidated SG&A expenses decreased $13.8 million, or 4.3%, to $304.2 million. SG&A as a percentage of consolidated net sales (“SG&A rate”) decreased 160 bps to 40.4%, driven by costs related to organizational restructuring and operating model improvements in the third quarter of fiscal 2025 that did not reoccur in the third quarter of fiscal 2026, reduced costs resulting from these previously implemented restructuring actions, lower distribution and transportation costs, and lower bad debt expense, partially offset by incremental marketing investments and inflationary pressure in retail store-related expenses.

Previous wording

•Consolidated operating income increased $135.8 million to $139.8 million and adjusted operating income increased $6.4 million, or 54.1%, to $18.1 million. Operating margin increased 2,200 bps to 22.7%, primarily due to the factors discussed in detail below, including $128 million of IEEPA tariff refund recoveries.

Current wording

•Consolidated operating income increased $26.7 million to $55.8 million and adjusted operating income increased $17.6 million, or 44.6%, to $56.9 million. Operating margin increased 360 bps to 7.4%, and adjusted operating margin increased 240 bps to 7.6%, driven by the factors discussed in detail below.

Previous wording

•Diluted net income per common share increased $2.86 to $2.87 and adjusted diluted net income per common share increased $0.09, or 52.9%, to $0.26.

Current wording

•Diluted net income per common share increased $0.68 to $1.00 and adjusted diluted net income per common share increased $0.29, or 39.2%, to $1.03.

Previous wording

•During the first two quarters of fiscal 2026, we opened 4 stores and closed 29 stores in the United States.

Current wording

•During the first three quarters of fiscal 2026, we opened 5 stores and closed 40 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 second quarter of fiscal 2026.

Current 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 2026.

Previous wording

SECOND FISCAL QUARTER ENDED JULY 4, 2026 COMPARED TO SECOND FISCAL QUARTER ENDED JUNE 28, 2025

Current wording

THIRD FISCAL QUARTER ENDED OCTOBER 3, 2026 COMPARED TO THIRD FISCAL QUARTER ENDED SEPTEMBER 27, 2025

Previous wording

Consolidated net sales increased $30.2 million, or 5.2%, to $615.5 million. The increase in net sales was driven by increased net sales in each of our U.S. Wholesale, U.S. Retail, and International segments. AUR increased by a mid-single digit percentage, primarily reflecting higher realized pricing and sales leverage in U.S. Wholesale, as well as 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 in U.S. Wholesale and U.S. Retail, partially offset by unit volume decline in our International segment. Changes in foreign currency exchange rates used for translation had a favorable effect on our consolidated net sales of $2.4 million.

Current wording

Consolidated net sales decreased $5.4 million, or 0.7%, to $752.5 million. The decrease in net sales was driven by the U.S. Wholesale segment, partially offset by increased net sales in the International segment. Unit volume decreased by a mid-single digit percentage, primarily driven by U.S. Wholesale. AUR increased by a mid-single digit percentage, primarily reflecting higher realized pricing in each of our segments. Changes in foreign currency exchange rates used for translation had a favorable effect on our consolidated net sales of $0.9 million.

Previous wording

Consolidated operating income increased $138.1 million to $168.3 million and increased as a percentage of net sales by 1,050 bps to 13.0%, primarily due to the factors previously discussed.

Current wording

Consolidated operating income increased $26.7 million, or 91.7%, to $55.8 million and increased as a percentage of net sales by 360 bps to 7.4%, primarily due to the factors previously discussed.

Previous wording

Consolidated interest expense increased $3.5 million, or 44.0%, to $11.3 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 wording

Consolidated interest expense increased $4.7 million, or 64.9%, 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.

Previous wording

Consolidated income tax provision increased $30.4 million to $31.7 million and the effective tax rate decreased to 23.2% from 73.8% in the prior period. The increase in the consolidated income tax provision was driven by higher pre-tax income, while the decrease in the effective tax rate was primarily attributable to discrete tax items recognized in the prior comparable period, including incremental tax expense related to expiring stock-based compensation, which had a disproportionate impact on the effective tax rate given the lower level of pre-tax income in that period.

Current wording

Consolidated income tax provision increased $8.6 million to $11.8 million and the effective tax rate increased to 24.4% from 21.8% in the prior period. The increase in the consolidated income tax provision was driven by higher pre-tax income, while the increase in the effective tax rate for the period was driven by a higher estimated annual effective tax rate, reflecting a larger proportion of income generated in higher tax jurisdictions, including income from IEEPA tariff refunds in the U.S., as well as net unfavorable discrete tax items compared to the prior-year period.

Previous wording

The following table summarizes net sales by segment and segment operating income for the second quarter of fiscal 2026 and the second quarter of fiscal 2025:

Current wording

The following table summarizes net sales by segment and segment operating income for the third quarter of fiscal 2026 and the third quarter of fiscal 2025:

Previous wording

(4)Reflects third-party legal defense costs incurred in connection with a specific intellectual property litigation matter not in the ordinary course of business described in Note 15, Commitments and Contingencies to the condensed consolidated financial statements. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.

Current wording

(2)Reflects third-party legal defense costs incurred in connection with a specific intellectual property litigation matter not in the ordinary course of business described in Note 15, Commitments and Contingencies, to the condensed consolidated financial statements. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.

Previous wording

(5)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 wording

(4)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.

Previous wording

Comparable net sales, including retail stores and eCommerce, increased 5.1%, reflecting a fifth consecutive quarter of positive comparable net sales growth. Comparable net sales grew in both retail stores and eCommerce, driven by higher average transaction size. As of July 4, 2026, we operated 779 retail stores in the U.S. compared to 804 as of January 3, 2026, and 809 as of June 28, 2025.

Current wording

Comparable net sales, including retail stores and eCommerce, increased 0.4% driven by higher average transaction size, reflecting higher AUR and higher units per transaction, partially offset by lower traffic and conversion. As of October 3, 2026, we operated 769 retail stores in the U.S. compared to 804 as of January 3, 2026, and 808 as of September 27, 2025.

Previous wording

AUR increased by a mid-single digit percentage, driven by the favorable impact of foreign currency exchange rates and pricing. International segment unit volume decreased by a low-single digit percentage driven by lower shipments to our international partners. Changes in foreign currency exchange rates used for translation had a $2.4 million favorable effect on International segment net sales.

Current wording

International segment AUR increased by a mid-single digit percentage, driven by higher realized pricing, the favorable impact of foreign currency exchange rates, and favorable product mix. International segment unit volume decreased by a low-single digit percentage, primarily driven by Canada. Changes in foreign currency exchange rates used for translation had a $0.9 million favorable effect on International segment net sales.

Previous wording

As of July 4, 2026, we operated 190 stores and 73 stores in Canada and Mexico, respectively. As of January 3, 2026, we operated 192 and 72 stores in Canada and Mexico, respectively. As of June 28, 2025, we operated 192 and 64 stores in Canada and Mexico, respectively.

Current wording

As of October 3, 2026, we operated 189 stores and 77 stores in Canada and Mexico, respectively, compared to 192 and 72 as of January 3, 2026, and 192 and 65 as of September 27, 2025.

Previous wording

Unallocated corporate expenses decreased $1.9 million, or 4.2%, to $42.8 million. Unallocated corporate expenses, as a percentage of consolidated net sales, decreased 40 bps to 3.3% driven by reduced costs resulting from previously implemented restructuring actions and lower consulting costs.

Current wording

Unallocated corporate expenses decreased $1.0 million, or 4.1%, to $22.8 million. Unallocated corporate expenses, as a percentage of consolidated net sales, decreased 10 bps to 3.0%, driven by reduced costs resulting from previously implemented restructuring actions and lower severance, relocation, and recruiting costs, partially offset by higher legal costs.

Previous wording

TWO FISCAL QUARTERS ENDED JULY 4, 2026 COMPARED TO TWO FISCAL QUARTERS ENDED JUNE 28, 2025

Current wording

THREE FISCAL QUARTERS ENDED OCTOBER 3, 2026 COMPARED TO THREE FISCAL QUARTERS ENDED SEPTEMBER 27, 2025

Previous wording

Note: Results may not be additive due to rounding. Percentage changes that are not considered meaningful are denoted with “nm”.

Current wording

Note: Results may not be additive due to rounding. If applicable, percentage changes that are not considered meaningful are denoted with “nm”.

Previous wording

Consolidated net sales increased $81.5 million, or 6.7%, to $1.30 billion. The increase in net sales was driven by increased net sales in each of our U.S. Retail, U.S. Wholesale, and International segments. AUR increased by a mid-single digit percentage, primarily reflecting higher realized pricing and sales leverage in U.S. Wholesale, as well as 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 in our U.S. Retail and International segments, partially offset by unit volume decline in our U.S. Wholesale segment. Changes in foreign currency exchange rates used for translation had a favorable effect on our consolidated net sales of $8.0 million.

Current wording

Consolidated net sales increased $76.1 million, or 3.9%, to $2.05 billion. The increase in net sales was driven by growth in each of our U.S. Retail, U.S. Wholesale, and International segments. AUR increased by a mid-single digit percentage, primarily reflecting higher realized pricing in each of our segments, as well as the favorable impact of changes in foreign currency exchange rates used for translation. Unit volume decreased by a low-single digit percentage driven by U.S. Wholesale, partially offset by growth in our U.S. Retail segment. Changes in foreign currency exchange rates used for translation had a favorable effect on our consolidated net sales of $8.9 million.

Previous wording

Consolidated gross profit increased $130.8 million, or 46.4%, to $412.6 million and consolidated gross margin increased 1,890 bps to 67.0%. The increase in consolidated gross profit and gross margin was driven by approximately $128 million of IEEPA tariff refund recoveries and higher AUR, partially offset by higher AUC and channel mix. AUC, which excludes the impact of tariff refund recoveries, increased by a low-double digit percentage, driven by incremental domestic and international tariff-related costs and investments in product make. Incremental tariff-related costs, which represent tariff costs in excess of the duty rates in effect prior to the tariff actions initiated in fiscal 2025, unfavorably impacted Cost of goods sold by approximately $28 million.

Current wording

Consolidated gross profit increased $146.8 million, or 16.0%, to $1.06 billion, reflecting increased net sales and a higher gross margin. Consolidated gross margin increased 540 bps to 51.8%, driven by $128 million of IEEPA tariff refund recoveries, higher AUR, and favorable channel mix, partially offset by higher AUC. AUC, which excludes the impact of IEEPA tariff refund recoveries, increased by a high-single digit percentage, driven by incremental domestic and international tariff-related costs and investments in product make, partially offset by negotiated vendor cost concessions. Incremental tariff-related costs, which represent tariff costs in excess of the duty rates in effect prior to the tariff actions initiated in fiscal 2025 and fiscal 2026, were unfavorable to the prior period by approximately $80 million.

Previous wording

Consolidated SG&A expenses decreased $5.1 million, or 0.9%, to $546.2 million and decreased as a percentage of consolidated net sales by 330 bps to 42.1%. The decrease in SG&A rate was driven by fixed cost leverage on higher net sales, costs related to operating model improvements in the first two quarters of fiscal 2025 that did not reoccur in the first two quarters of fiscal 2026, reduced costs resulting from previously implemented restructuring actions, lower leadership transition costs, and lower distribution costs. This was partially offset by incremental marketing investments and inflationary pressure in retail store-related expenses.

Current wording

Consolidated SG&A expenses decreased $18.9 million, or 2.2%, to $850.4 million and decreased as a percentage of consolidated net sales by 260 bps to 41.5%. The decrease in SG&A rate was driven by fixed cost leverage on higher net sales, costs related to organizational restructuring and operating model improvements in the first three quarters of fiscal 2025 that did not reoccur in the first three quarters of fiscal 2026, lower leadership transition costs, and lower distribution costs. These were partially offset by incremental marketing investments and inflationary pressure in retail store-related expenses.

Previous wording

Consolidated operating income increased $135.8 million to $139.8 million and increased as a percentage of net sales by 2,200 bps to 22.7%, primarily due to the factors previously discussed.

Current wording

Consolidated operating income increased $164.8 million to $224.0 million and increased as a percentage of net sales by 790 bps to 10.9%, primarily due to the factors previously discussed.

Previous wording

Consolidated interest expense increased $7.4 million, or 47.2%, to $23.1 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 wording

Consolidated interest expense increased $12.0 million, or 52.7%, to $34.9 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.

Previous wording

Consolidated interest income increased $4.2 million to $8.5 million, primarily driven by approximately $4 million of interest recognized on IEEPA tariff refund recoveries.

Current wording

Consolidated interest income increased $6.5 million, or 65.2%, to $16.5 million, primarily driven by $4 million of interest recognized on IEEPA tariff refund recoveries and higher cash balances and short-term investments during the period.

Previous wording

Consolidated income tax provision increased $30.1 million to $37.2 million, and the effective tax rate decreased 690 bps to 23.8%. The increase in the consolidated income tax provision was driven by higher pre-tax income, while the decrease in the effective tax rate was primarily attributable to discrete tax items recognized in the prior comparable period, including incremental tax expense related to expiring stock-based compensation, which had a disproportionate impact on the effective tax rate given the lower level of pre-tax income in that period.

Current wording

Consolidated income tax provision increased $38.7 million to $49.0 million, and the effective tax rate decreased 330 bps to 23.9%. The increase in the consolidated income tax provision was driven by higher pre-tax income, while the decrease in the effective tax rate was driven by discrete tax items recognized in the prior-year period, including incremental tax expense related to expiration of stock-based compensation awards, which had a disproportionate impact on that period’s rate given its lower level of pre-tax income. This was partially offset by a higher estimated annual effective tax rate, reflecting a larger proportion of income generated in higher tax jurisdictions.

Previous wording

Results by Segment - First Two Quarters of Fiscal 2026 compared to First Two Quarters of Fiscal 2025

Current wording

Results by Segment - First Three Quarters of Fiscal 2026 compared to First Three Quarters of Fiscal 2025

Previous wording

The following table summarizes net sales and segment operating income, by segment, for the first two quarters of fiscal 2026 and fiscal 2025:

Current wording

The following table summarizes net sales and segment operating income, by segment, for the first three quarters of fiscal 2026 and fiscal 2025:

Previous wording

(3)Related to costs associated with the retirement of Michael D. Casey, the Company’s former Chief Executive Officer, in the first quarter of fiscal 2025 and costs related to the departure of Douglas C. Palladini, the Company’s former Chief Executive Officer, in the second quarter of fiscal 2026. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.

Current wording

(3)Related to costs associated with the retirement of Michael D. Casey, the Company’s former CEO, in fiscal 2025 and costs related to the departure of Douglas C. Palladini, the Company’s former CEO, in the second quarter of fiscal 2026. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.

Previous wording

(4)Reflects third-party legal defense costs incurred in connection with a specific intellectual property litigation matter not in the ordinary course of business described in Note 15, Commitments and Contingencies to the condensed consolidated financial statements. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.

Current wording

(4)Reflects third-party legal defense costs incurred in connection with a specific intellectual property litigation matter not in the ordinary course of business, as described in Note 15, Commitments and Contingencies, to the condensed consolidated financial statements. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.

Previous wording

(5)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 wording

(6)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.