The operating income fell 62.2 per cent to $29.1 million, reflecting higher tariffs, increased investment in product quality and store expansion. Adjusted operating income dropped 48.9 per cent to $39.4 million, with an adjusted operating margin of 5.2 per cent versus 10.2 per cent in the previous year.
American apparel company Carter’s, Inc, has reported flat Q3 FY25 sales at $757.8 million, while profit fell sharply due to higher tariffs and restructuring costs.
Net income dropped to $11.6 million from $58.3 million, with adjusted EPS down to $0.74.
The company plans 300 job cuts and 150 store closures to save $35 million annually, while tariffs are expected to impact Q4 earnings by $25–35 million.
Net income plunged to $11.6 million, or $0.32 per diluted share, from $58.3 million, or $1.62 per diluted share, a year earlier. On an adjusted basis, net income was $26.8 million, or $0.74 per diluted share, compared to $59 million, or $1.64 per diluted share, in Q3 FY24, Carter’s said in a press release.
“Our third quarter performance reflected continued improvement in US retail business demand as we achieved positive comparable sales and improved pricing for the second consecutive quarter,” said Douglas C Palladini, chief executive officer (CEO) and president. “However, elevated product costs, in part due to the impact of higher tariffs, as well as additional investment, weighed meaningfully on our profitability.”
For the first nine months (9M) of FY25, Carter’s has reported net sales of $1.97 billion, down 0.6 per cent YoY. Adjusted operating income declined nearly half to $86.5 million, with adjusted earnings per share (EPS) at $1.57, compared with $3.43 a year earlier. Net cash used in operations totalled $136.3 million, compared to net cash inflow of $11.3 million in FY24.
The company has initiated a productivity drive, including the reduction of 300 office-based roles (around 15 per cent of its workforce) and the closure of 150 stores across North America by 2026, measures expected to generate annual savings of about $35 million beginning in 2026, added the release.
Looking ahead, the company warned that new US import tariffs could have a pre-tax earnings impact of $200–250 million annually. Vietnam, Cambodia, Bangladesh, and India now account for about 75 per cent of Carter’s sourcing, with China contributing less than 3 per cent. The company expects a $25–35 million hit to pre-tax income in Q4 FY25 due to tariff pressures.
Carter’s has also secured commitments for a new five-year $750 million asset-based revolving credit facility to strengthen liquidity and is evaluating refinancing options for its $500 million senior notes maturing in 2027.
Fibre2Fashion News Desk (SG)
