Carter's, Inc. (CRI): what the price assumes

boothcheck covers Carter's, Inc. (CRI) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/CRI

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage (computed at the 7% minimum rate; the CAPM rate 6.5% sits below it).

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 5.1%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Carter's is the largest seller of baby clothes in the United States, holding approximately 21% in the zero to two-year-old baby market and reaching parents three ways at once: its own stores, its own websites, and exclusive lines carried by Amazon, Target and Walmart.
• Tariffs are the live problem, adding roughly 50 million dollars to cost of goods sold in the first quarter of fiscal 2026 alone, a quarter in which the entire company produced 28.4 million dollars of operating profit.
• Sharon Price John became chief executive on June 15, 2026, and the company's own fiscal 2026 plan puts the earnings recovery in the back half of the year, which makes the autumn reports the ones that decide this.

Bull Case

Start with the case against. American families are having fewer children, the quarterly dividend was cut from 80 cents to 25 cents, and import tariffs are chewing through the gross margin. Every one of those is true. None of them describes what the business actually did in its most recent quarter.

Net sales rose 8.1% to 681.1 million dollars in the first quarter of fiscal 2026, with all three segments growing, and the U.S. Retail stores and websites posted a fourth consecutive quarter of positive comparable net sales growth at 10.5%. That is not a business losing its customer. Traffic responded to marketing spend, average unit retail rose alongside volume, and the International arm swung from a small operating loss a year earlier to 4.2 million dollars of segment operating income across 191 stores in Canada and 64 in Mexico.

The reason demand holds up is worth sitting with, because it is unusual for an apparel company. Clothing brands normally live and die on taste, and taste in a two-year-old is exercised by a tired adult buying something that has to survive a washing machine twice a week. Carter's owns that decision. The 10-K puts its position at approximately 21% in the zero to two-year-old baby market and roughly 9% across ages zero to 10, and it reaches that customer through channels that compete with each other: company stores and websites on one side, exclusive brands sold at Amazon, Target and Walmart on the other. A parent who abandons the mall does not necessarily abandon the brand. They just buy it somewhere else, and Carter's still books the sale.

Management describes the strategy in the filing as being Direct-to-consumer first, leaning on a platform that No other children's apparel company combines our scale and capabilities across retail stores, eCommerce. Self-description in a 10-K is worth what it usually is, but the channel arithmetic behind it is real: replenishment basics through mass retail partners, higher-margin full-price selling through owned channels, and a credit card program run by a third party that carries the underwriting risk while Carter's collects royalties on usage.

On capital, the bull has to accept a concession and then look at what it bought. The dividend cut and the pause in buybacks were not gestures of confidence. They were the price of refinancing into a higher coupon while profits were down. What they preserved is a balance sheet with cash covering most of the debt outstanding and guided operating cash flow of 110 to 120 million dollars against 55 million dollars of capital spending for the year. A company that keeps its options open in a bad year gets to see the good one.

And the good one has a specific shape. Management expects the tariff and investment drag to moderate through the year, with earnings weighted to the second half. If that happens, the operating margin recovers toward the level this business sustains across a full cycle, and today's price is anchored to a year that will read as the trough rather than the trend.

Bear Case

Carter's does not make anything. We source all of our products from a global network of third-party suppliers, which means the single biggest variable in its profit line is set by governments rather than by management. In the first quarter of fiscal 2026, incremental tariff-related costs hit cost of goods sold by approximately 50 million dollars, average unit costs climbed by a low-teens percentage, and consolidated gross margin fell 310 basis points to 43.1%. For scale, the entire company produced 28.4 million dollars of operating profit that quarter. The tariff line was larger than the earnings line, and the only reason the margin held at all was that the company raised prices on parents.

That last point is the fragile part. Pricing works until it does not, and this is the value end of a discretionary category. The 10-K's own risk language names the exposure precisely: our ability to recover refunds of incremental tariff amounts or other tariff amounts paid sits on the list of things that could go the other way, and the fiscal 2026 outlook treats any such refunds as a possibility rather than a plan.

Now connect that to what the price is leaning on. Today's price is measured against a full-cycle operating margin near 11% of sales. Fiscal 2025 delivered 5.0%, down 400 basis points on the prior year, on operating income of 143.9 million dollars against 254.7 million a year earlier and 323.4 million the year before that. Three years, one direction. If the through-the-cycle figure is a memory rather than a mean, the methods that make this stock look inexpensive lose the base they stand on, and what is left is a company earning a mid-single-digit margin in a category where BKE earns 21.1% and ANF earns 13.0%.

The customer list adds its own fragility. two largest wholesale customers accounted for 11.0% and 10.3%, respectively, of consolidated net sales in fiscal 2025, and roughly 83% of gross accounts receivable sat with the ten largest wholesale customers, three of them individually above 10% of the total. Those relationships run without long-term commitments. A single large retailer trimming its baby department is a revenue event that arrives all at once, and the same accounts decide whether Carter's exclusive brands get the shelf space or a competitor's private label does.

Then there is the cost of the money. In November 2025 the company redeemed 500 million dollars of 5.625% senior notes due 2027 and issued 575 million of 7.375% senior notes due February 2031, and guides to net interest expense of approximately 40 million dollars in fiscal 2026. More principal, at a higher rate, landing on a smaller operating profit. That is a fixed claim paid before shareholders see anything, and it is why the dividend went from 80 cents a quarter to 25 and the buyback stopped. Management chose the lenders over the owners, which is the correct choice and also a statement about how much room there was.

Valuation

Price the whole company against what it earns in a normal year, not last year, and Carter's changes hands at a bit over seven times mid-cycle operating profit. That is low enough to sit under what a business in steady mid-single-digit annual decline would warrant. Which is a strange thing to say about the leading brand in its category, and it is the fact everything else here circles.

The methods used to triangulate the business disagree, and the pattern of the disagreement carries more information than any single output. Peer multiples applied to the current numbers reach past today's price. The forward cash-flow approaches land essentially on it. The lenses that capitalize the cash being generated right now, crediting no growth whatsoever, sit far under it: the price is more than double where they land. The asset-value lenses, which start from book value and add the return earned on it, put the price about 37% above them. Read together, those four say the same thing in different registers. Today's price is a bet on the cycle, not on the quarter.

What has to be true is unusually easy to state. The full-cycle operating margin the price is measured against runs near 11% of sales. Fiscal 2025 came in at 5.0% and the first quarter of fiscal 2026 at 4.2%, on net sales of 2.898 billion dollars for the fiscal year just closed. Roughly half the profitability the valuation assumes has to come back. Not new stores, not a new category, not a bigger market. Just the margin.

Cohort position sharpens the question rather than answering it. Among peers filing their own numbers, BKE runs a 21.1% operating margin, ANF 13.0%, URBN 9.8%, GAP 8.4% and AEO 6.0%. Carter's fiscal 2025 result puts it at the bottom of that group, and the multiple the market pays reflects exactly that ranking. The argument between the peer-multiple lenses and the cash-flow lenses is really an argument about whether Carter's belongs there permanently.

Solvency is the part that is not in doubt. Cash on hand covers most of the borrowings, leaving net debt of roughly 94.1 million dollars on the funded-debt basis, and the share count has come down about 3% a year over the last four years. Guided operating cash flow of 110 to 120 million dollars comfortably clears 55 million dollars of planned capital spending and roughly 40 million of net interest. The company can wait. Whether waiting is rewarded depends on a margin recovery no line on the balance sheet can produce.

Catalysts

The first quarter of fiscal 2026, reported May 6, 2026, was the clearest read on the tariff question so far. Net sales grew 8.1% to 681.1 million dollars with all three segments up, U.S. Retail comparable sales rose 10.5%, and operating income improved to 28.4 million dollars from 26.1 million, though the prior-year quarter carried leadership transition and restructuring costs that did not repeat. Diluted earnings came to $0.39 a share against $0.43 a year earlier, and the company paid a quarterly dividend of $0.25 totalling 9.2 million dollars with no shares repurchased.

Leadership changed hands in June. Sharon Price John, who ran Build-A-Bear Workshop since 2016 and before that led the Stride Rite children's business, took over as chief executive and president effective June 15, 2026, ending an interim arrangement under the finance chief. The board reaffirmed the fiscal 2026 outlook alongside that announcement, which matters more than the usual reassurance: a chief executive who inherits guidance rather than resetting it has less room to rebase expectations in her first year.

The outlook itself is where the next few quarters get decided. For fiscal 2026 the company projects low-to-mid single-digit percentage growth in net sales against 2.898 billion dollars in fiscal 2025, operating cash flow of 110 to 120 million dollars, capital spending of 55 million, net interest expense of approximately 40 million reflecting the refinanced notes, an effective tax rate near 22%, and average shares outstanding of roughly 36 million. Earnings are weighted to the second half on the expectation that tariff and investment costs ease. The second-quarter report is the first test of that assumption, and a first half that lands as planned would leave the whole recovery riding on the two reports that follow.

Peer Cohorts (Per Segment, With Filing Citations)

U.S. Retail (reported)

• GAP (GAP, INC)
• FY2025 10-K: 320 million, and $ 386 million in fiscal 2024, 2023, and 2022, respectively. Research and development costs described in Accounting Standards Codification ("ASC") No. 730 are expensed as incurred. These costs primarily consist of payroll and related benefits attributable to time spent on research and development…
• FY2025 10-K: …Athleta's versatile performance apparel is designed for women by women, with inclusivity at its core. Since 2018, Athleta has been certified as a benefit corporation ("B Corp"), furthering its commitment to using the business as a force for good to drive social and environmental impact. Athleta apparel is available…
• AEO (American Eagle Outfitters, Inc.)
• FY2025 10-K: Accumulated Other Comprehensive Loss 67 Note 11 Share-Based Payments 67 Note 12 Retirement Plan and Employee Stock Purchase Plan 70 Note 13 Income Taxes 70 Note 14 Segment Reporting 73 Note 15 Impairment, Restructuring and Other Charges 75 Note 16 Subsequent Events 77 53 AMERICAN EAGLE OUTFITTERS, INC. Notes to…
• FY2025 10-K: Revenue Recognition. In accordance with Accounting Standard Codification ("ASC") Topic 606, Revenue from Contracts with Customers, we record revenue for store sales upon the purchase of merchandise by customers. The Company's e-commerce operation records revenue upon the estimated customer receipt date of the…
• ANF (Abercrombie & Fitch Co.)
• FY2025 10-K: …with customer insights. The Company continues to develop and invest its mobile capabilities as mobile engagement continues to grow, with over 87% of the Company's digital traffic generated from mobile devices in Fiscal 2024. In addition, in its efforts to expand its global brand reach, the Company also partners with…
• FY2025 10-K: …to the Company's gift card and loyalty programs, refer to Note 3, " REVENUE RECOGNITION ." The Company also recognizes revenue under wholesale arrangements when control passes to the wholesale partner, which is generally upon shipment. Revenue from the Company's franchise and license arrangements, primarily royalties…
• URBN (Urban Outfitters, Inc.)
• FY2025 10-K: …Retail segment net sales accounted for approximately 1.0% of consolidated net sales for fiscal 2025, compared to less than 1.0% of consolidated net sales for fiscal 2024. Urban Outfitters targets young adults aged 18 to 28 through a unique merchandise mix, compelling store environment, social media and third-party…
• FY2025 10-K: & Venues net sales accounted for less than 1.0% of consolidated net sales for fiscal 2025 and fiscal 2024. Net sales from the Retail segment accounted for approximately 88.2%, 90.8% and 92.1% of total consolidated net sales for fiscal 2025, 2024 and 2023, respectively. Store data for fiscal 2025 was as follows:…
• BKE (BUCKLE, INC)
• FY2025 10-K: $1.218 billion from net sales of $1.261 billion for the 53-week fiscal year ended February 3, 2024. Comparable store net sales for the 52-week fiscal year decreased 2.7% from comparable store net sales for the prior year 52-week period ended February 3, 2024. The reduction in total net sales for the year was the…
• FY2025 10-K: …of The Buckle, Inc. and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. Revenue Recognition - Retail store sales are recorded, net of expected returns, upon the purchase of merchandise by customers. Online sales are recorded, net of expected returns, when…

U.S. Wholesale (reported)

• GIII (G III APPAREL GROUP LTD /DE/)
• FY2025 10-K: …our wholesale business has been dependent on our sales during the third and fourth quarters due to the anticipation of the holiday shopping season for our retail customers. Net sales during the third and fourth quarters accounted for approximately 61% of our net sales in fiscal 2025. We are highly dependent on our…
• FY2025 10-K: …to its wholesale customers based on pre-defined credit criteria. Accounts receivable are net of an allowance for doubtful accounts. In circumstances where the Company is aware of a specific customer's inability to meet its financial obligation (such as in the case of bankruptcy filings, extensive delay in payment or…
• LEVI (LEVI STRAUSS & CO)
• FY2025 10-K: …and upon delivery to the customer with respect to e-commerce transactions. Payment terms for wholesale transactions depend on the country of sale or agreement with the customer, and payment is generally required after shipment or receipt by the wholesale customer. Payment is due at the time of sale for retail store…
• FY2025 10-K: GroupHeldForSaleOrDisposedOfBySaleNotDiscontinuedOperationsMember lvis:DockersMember 2025-07-31 2025-07-31 0000094845 us-gaap:DisposalGroupHeldForSaleOrDisposedOfBySaleNotDiscontinuedOperationsMember lvis:DockersMember 2024-12-02 2025-11-30 0000094845…
• KTB (KONTOOR BRANDS, INC.)
• FY2025 10-K: …through a joint venture arrangement. The majority of the International Wholesale business is located in EMEA and APAC, where we sell our products to outdoor and sporting goods stores, department store and specialty store wholesale customers, online, including digital marketplaces, as well as through our distribution…
• FY2025 10-K: . U.S. Wholesale revenues increased 7%, attributable to the acquisition and growth in our Wrangler wholesale business, with category growth in Western, workwear, non-denim products and female, which was partially offset by a decrease in our Lee U.S. Wholesale business. Net revenues in 2025 included an approximate 2%…
• PVH (PVH Corp.)
• FY2025 10-K: …our licensees' expertise can better serve our brands. Our directly operated businesses in North America during 2024 consisted principally of (i) wholesale sales under our owned and licensed trademarks; and (ii) the operation of retail stores, principally in premium outlet centers, and digital commerce sites under our…
• FY2025 10-K: …accelerated realization of the earnout provided for in the agreement with Basic Resources. Please see Note 3, "Divestitures," for further discussion. 2023 (In millions) Tommy Hilfiger North America (4) Tommy Hilfiger International (4) Calvin Klein North America (4) Calvin Klein International (4) Heritage Brands…
• VFC (V. F. CORPORATION)
• FY2025 10-K: …us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2024-03-31 2025-03-29 0000103379 us-gaap:InterestRateContractMember us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2023-04-02 2024-03-30 0000103379…
• FY2025 10-K: …vfc:AcceleratedDepreciationMember 2023-04-02 2024-03-30 0000103379 us-gaap:CostOfSalesMember vfc:AcceleratedDepreciationMember 2022-04-03 2023-04-01 0000103379 us-gaap:SellingGeneralAndAdministrativeExpensesMember us-gaap:ContractTerminationMember 2024-03-31 2025-03-29 0000103379…
• RL (RALPH LAUREN CORPORATION)
• FY2025 10-K: …our customers and exit less productive doors when deemed appropriate. We sell our wholesale merchandise primarily to major department stores, specialty stores, and third-party digital partners across North America, Europe, Asia, Australia, and New Zealand, and extend credit based on an evaluation of each wholesale…
• FY2025 10-K: …showrooms in London, Madrid, Milan, Munich, Paris, and Stockholm. In addition, we utilize virtual showrooms, allowing our customers to experience and discover our product assortments in a retail setting remotely. 11 Shop-within-Shops. As a critical element of our distribution to department stores, we and our…

Core business (reported)

• GIII (G III APPAREL GROUP LTD /DE/)
• FY2025 10-K: …nature of our industry may result in lower prices for our products and decreased gross profit margins. ​ The apparel business is highly competitive. We have numerous competitors with respect to the sale of apparel, footwear and accessories, including digital websites, distributors that import products from abroad and…
• FY2025 10-K: …of the wholesale operations segment. ​ The Company allocates overhead to its business segments on various bases, which include units shipped, space utilization, inventory levels, and relative sales levels, among other factors. The method of allocation has been applied consistently on a year-to-year basis. ​ The total…
• LEVI (LEVI STRAUSS & CO)
• FY2025 10-K: …supply chain. Logistics . During fiscal year 2024 and as part of Project Fuel, the Company changed its distribution strategy from an owned and operated model to a mix of owned and third-party operated distribution centers used to warehouse and ship products to our wholesale customers, retail stores and e-commerce…
• FY2025 10-K: …or non-compliance can raise reputational challenges with our consumers and other stakeholders for various reasons, including the inability to sufficiently verify the origins for the material used in the products we sell. The global apparel industry is subject to intense competition and cost and pricing pressure. The…
• COLM (COLUMBIA SPORTSWEAR COMPANY)
• FY2025 10-K: …("EMEA"), and Canada. The following tables disaggregate the Company's reportable segment Net sales by product category and channel, which the Company believes provides a meaningful depiction of how the nature, timing and uncertainty of Net sales are affected by economic factors: Year Ended December 31, 2025 (in…
• FY2025 10-K: , especially during periods of heightened economic uncertainty in our key markets. • Highly Competitive Markets. In each of our geographic markets, we face significant competition from global and regional branded apparel, footwear, accessories, and equipment companies. More recently this competition has extended to…
• AS (Amer Sports, Inc.)
• FY2025 20-F: …December 31, 2025, compared to the year ended December 31, 2024. Segment Adjusted Operating Profit in our Technical Apparel segment increased by 34.0% for the year ended December 31, 2025, compared to the year ended December 31, 2024. This increase was primarily driven by higher gross profit, partially offset by an…
• FY2025 20-F: …them exactly where they shop, across digital and physical spaces. We generate revenue from the sale of our products through direct-to-consumer and wholesale channels: • Direct-to-Consumer includes sales of our brands' products through (i) owned e-commerce websites and (ii) owned retail stores, which include elevated…
• UAA (UNDER ARMOUR, INC.)
• FY2025 10-K: …of operations. We operate in highly competitive markets and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenues and gross profit. The market for performance apparel, footwear and…
• FY2025 10-K: …in innovations around sustainability; and greater economies of scale. In addition, some of our competitors have long-term relationships with our key retail customers that are potentially more important to those customers because of the significantly larger volume and product mix that our competitors sell to them. As…
• LULU (lululemon athletica inc.)
• FY2025 10-K: …our technical product innovation. We also believe our ability to introduce new product innovations, combine function and fashion, and connect through in-store, online, and community experiences sets us apart from our competition. In addition, we believe our vertical retail distribution strategy and community-based…
• FY2025 10-K: …athletic apparel, including large, diversified apparel companies with substantial market share, and established companies expanding their production and marketing of technical athletic apparel, as well as against smaller retailers and those specifically focused on women's athletic apparel. We also face competition…
• FIGS (FIGS, Inc.)
• FY2025 10-K: …and results of operations. The market for healthcare apparel is highly competitive. We compete in the healthcare apparel industry, principally on the basis of product quality, innovation, style, price, brand image, distribution model, as well as customer experience and service. The industry is highly competitive and…
• FY2025 10-K: …to applicable import duties and tariffs. Gross Profit and Gross Margin We define gross profit as net revenues less cost of goods sold. Gross margin is gross profit expressed as a percentage of net revenues. Our gross margin has fluctuated historically and may continue to fluctuate from period to period based on a…
• AEO (American Eagle Outfitters, Inc.)
• FY2025 10-K: …of climate change, the availability of import quotas, transportation disruptions and foreign currency exchange rate fluctuations, could adversely affect our business and cause our results of operations to fluctuate. We operate in a highly competitive industry, and we face significant pricing pressures from existing…
• FY2025 10-K: …a sufficient number of qualified senior managers and other key personnel. We must also attract, develop, and retain a sufficient number of qualified field and distribution center personnel. Competition for talent is intense and the turnover rate in the retail industry is generally high, and we cannot be sure that we…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.