Major baby apparel retailer, Carter’s Inc is undertaking significant operational cuts to combat the financial pressures stemming from previously introduced import tariffs. The company announced plans to close 150 stores across North America by 2028, revising its closure target upward from an initial plan of 100. These closures, which impact stores collectively contributing around $110 million in annual net sales, are scheduled to take place this fiscal year and in 2026.
In addition to the store closures, Carter’s is streamlining its corporate structure, intending to reduce its office-based workforce by 300 employees by the end of the current year. The company estimates the annual gross pre-tax impact of the additional import duties could range between $200 million and $250 million.
The strategic announcements coincided with the release of the company’s fiscal third-quarter earnings report. While the brand’s net sales declined by 0.1 per cent to $757.8 million, the company’s operating income took a massive hit, dropping 62.2 per cent to $29.1 million. Consequently, the operating margin shrank from 10.2 per cent a year earlier to just 3.8 per cent. Net income for the quarter plummeted to $11.6 million from $58.3 million, or $1.62 per diluted share, in the prior year.
Douglas Palladini, CEO and President, noted, while US retail business demand improved with positive comparable sales, elevated product costs, in part due to the impact of higher tariffs, as well as additional investment, weighed meaningfully on their profitability.
To mitigate future tariff risks, Carter's has drastically shifted its sourcing strategy, with countries like Vietnam, Cambodia, Bangladesh, and India set to account for 75 per cent of its product sourcing spend in FY25, while China’s share is expected to drop to less than 3 per cent. Due to the ongoing uncertainty surrounding the tariff impact, Carter’s has currently suspended its fiscal 2025 guidance.
