Copyright Mechanicsburg Patriot News
It’s challenging times for a certain baby clothing brand. Carter’s has revealed plans to shutter 150 stores across North America by 2028 while dealing with the financial strain of tariffs. There’s also plans to reduce its office-based workforce by 300 — a 15% cut — by the end of this year. This is all due to the tariffs introduced by President Donald Trump’s administration. The baby apparel retailer estimates that the annual gross pre-tax impact of the additional import duties could range between $200m and $250m on an annualized basis. The announcement came along with the company’s fiscal third-quarter earnings report. The brand had a marginal dip in net sales, with a 0.1% decrease to $757.8 million in the third quarter of 2025, down from 758.5 million in the same period of the previous fiscal year. The decline in net sales was attributed to a downturn in US wholesale segment sales, which was offset by gains in retail and international segment sales. But nonetheless, the US wholesale segment experienced a decrease of 5.1%. But the company’s operating income took a huge hit, dropping 62.2% to $29.1 million, with operating margin shrinking to 3.8% from 10.2% a year earlier. Net income for the quarter stood at $11.6 million, or $0.32 per diluted share, which is different to the $58.3 million, or $1.62 per diluted share, that was reported in the third quarter of 2024. “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,” Carter’s CEO and president Douglas Palladini said to Retail Insight Network. “However, elevated product costs, in part due to the impact of higher tariffs, as well as additional investment, weighed meaningfully on our profitability. “In light of the difficult decisions being made to improve our performance, the board of directors and I have also decided to reduce our 2026 compensation.” The planned store closures, now totaling 150, were revised upwards from the initial target of 100. These closures will take place this fiscal year and in 2026, impacting stores that collectively contribute around $110 million in annual net sales. The retailer has been adjusting its sourcing strategy due to the tariffs, with countries such as Vietnam, Cambodia, Bangladesh and India set to account for 75% of its product sourcing spend in fiscal 2025, while China’s share is set to drop to less than 3%. As a result of the ongoing uncertainty surrounding the tariffs and their potential impact on the popular brand, Carter’s has suspended its fiscal 2025 guidance.
