North American apparel retailer Carter’s has reported net sales decrease of 4.8% to $629.83m in the first quarter of fiscal 2025 (Q1 FY25), compared with $661.49m during the same period of the previous year.
The company cited macroeconomic factors as reasons for the sales decline: inflation, heightened interest rates and waning consumer confidence.
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In the quarter ending 29 March 2025, the company saw US wholesale sales fall by 5.3%, US retail by 4.3%, and international segment sales by 4.9%.
Comparable net sales for US retail also saw a reduction of 5.2%, although e-commerce performed better than physical stores.
Carter’s also reported that changes in foreign currency exchange rates negatively impacted consolidated net sales by $6.4m, or 1%.
During the quarter, Carter’s underwent notable leadership changes with Michael Casey stepping down as CEO and chairman on 3 January 2025.
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By GlobalDataOn 26 March, the company appointed Douglas Palladini as its new CEO, president and member of its board, all effective from 3 April.
Palladini stated: “Our teams delivered a good first quarter. Our US tetail business achieved its sales and earnings plans in the quarter. Trends in March, the most significant month of the quarter, improved meaningfully from performance in January and February, driven by the effectiveness of our product and promotional strategies.
“In March, we saw improved traffic, conversion and comparable sales trends while continuing to add new customers and improve customer retention. Sales in our US wholesale business exceeded our forecasts due to higher demand from several customers. Demand outside the United States was also strong in the first quarter, particularly in our Canada and Mexico retail businesses.”
The retailer’s operating income suffered a significant drop of 52.6% to $26.10m, from $55.04m in the first quarter of the previous fiscal year.
The operating margin shrunk to 4.1% from 8.3%, influenced by pricing investments, fixed cost deleverage and expenses associated with leadership changes and operational improvements.
Its adjusted operating income also saw a downturn of 35.7%.
Carter’s recorded net income of $15.54m in Q1 FY25. This translates to $0.43 per diluted share from $38.03m or $1.04 per diluted share in the first quarter of fiscal 2024.
Carter’s has decided to suspend its future financial guidance in response to the transitions and looming uncertainties regarding proposed new tariffs and their potential impact on operations.
Palladini added: “As I get up to speed on the business and assess what is required to return to growth, we are suspending forward-looking guidance at this time. I strongly believe in the tenet that we ‘do what we say’ and I intend to spend the time required to be able to meet that commitment. In addition, the current tariff situation has introduced substantial uncertainty, greatly complicating our ability to accurately predict Carter’s financial outlook.”
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