Carter's
CRI
$33.83
+4.67%
Carter's Inc. designs and sells apparel for babies and young children under the Carter's and OshKosh B'gosh brands, operating through U.S. Retail, U.S. Wholesale, and International segments with a multi-channel model spanning stores, eCommerce, and wholesale partnerships. As the largest branded marketer of young children's apparel in North America, the company holds a distinct competitive identity as a category leader with deep wholesale penetration — its products are sold through major retailers including Walmart, Target, and Amazon — while also operating a substantial owned retail footprint. The current investor narrative centers on whether Carter's can sustain the momentum from its strong Q2 results, with a Zacks report noting that the company's growth story is gaining strength and that its attractive valuation could support further upside. However, the stock has come under significant pressure in recent months, with the market debating whether tariff exposure from Asian sourcing, soft consumer discretionary spending, and a high dividend payout ratio pose risks to the earnings recovery. The tension between the bullish analyst consensus and the sharp recent price decline defines the current debate around this specialty retailer.…
CRI
Carter's
$33.83
Related headlines
Investment Opinion: Should I buy CRI Today?
Based on the synthesis of data, Carter's receives a Hold rating with a value tilt. The core thesis is that the stock is deeply undervalued on a forward PE basis (8.24x) and offers a 4.79% dividend yield, but the recent 22% monthly decline and thin margins warrant caution until there are clearer signs of stabilization. The analyst consensus is 'buy' with an average target of $42.29, implying 39% upside, but the wide target range and the stock's proximity to its 52-week low suggest that the market is pricing in significant risks that may not be fully reflected in analyst estimates.
The supporting evidence for a Hold includes: 1) the forward PE of 8.24x is less than half the sector average, 2) the dividend yield of 4.79% is attractive and covered by earnings, 3) the gross margin of 45.36% demonstrates pricing power, and 4) the current ratio of 2.51 indicates strong short-term liquidity. However, these positives are offset by the 3.17% net margin, 1.31 debt-to-equity ratio, and 61.4% payout ratio, which limit financial flexibility. The stock's 39% upside to the average target is compelling, but the low target of $30.00 suggests that even bearish analysts see limited downside, creating an asymmetric risk/reward profile if the company can execute.
The biggest risks that could invalidate the thesis are: 1) a dividend cut if earnings decline, 2) further margin compression from tariffs, and 3) a breakdown below the 52-week low of $27.15, which could trigger a deeper sell-off. The rating would upgrade to Buy if the stock stabilizes above $33-$35 and forward PE remains below 10x with improving margins, or downgrade to Sell if revenue growth turns negative or the dividend is cut. Relative to its own history and peers, CRI appears undervalued, but the market is demanding a discount due to legitimate concerns about tariffs and consumer weakness.
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CRI 12-Month Price Forecast
Carter's presents a classic value trap dilemma: the stock is statistically cheap on forward earnings and offers a high dividend yield, but the underlying business faces structural headwinds from tariffs, weak consumer spending, and thin margins. The recent 22% monthly decline has pushed the stock near its 52-week low, and while the analyst consensus remains bullish, the wide target range and the fact that the low target is at the current price suggest that the market is pricing in a pessimistic scenario. The risk/reward is balanced: the 39% upside to the average target is offset by the potential for a dividend cut or margin compression. I would upgrade to bullish if the stock stabilizes above $33 and forward EPS estimates are revised upward, and downgrade to bearish if the dividend is cut or revenue declines more than 5%.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Carter's's 12-month outlook, with a consensus price target around $42.29 and implied upside of +25.0% versus the current price.
Average Target
$42.29
0 analysts
Implied Upside
+25.0%
vs. current price
Analyst Count
—
covering this stock
Price Range
$30 - $53
Analyst target range
Seven analysts cover Carter's, with a consensus recommendation of "buy" (recommendation mean of 2.375 on a scale where 1 is Strong Buy and 5 is Strong Sell) and an average target price of $42.29. Against the current price of $30.43, this implies upside of approximately 39.0%, a substantial gap that suggests analysts see significant value in the stock despite its recent decline. The consensus leans bullish, but the magnitude of the implied upside — nearly 40% — is unusually large and may indicate that targets have not yet been revised downward to reflect the recent 22% monthly decline. The estimated EPS average of $4.24 and revenue estimate of $3.07 billion suggest analysts expect the company to maintain profitability and generate solid cash flow, which underpins the bullish targets. The target range spans from a low of $30.00 to a high of $53.00, a spread of 76.7% relative to the low target, which signals high uncertainty among analysts. The high target of $53.00 implies roughly 74% upside from current levels and likely assumes a successful turnaround, multiple expansion back toward historical norms, and resolution of tariff or consumer headwinds. The low target of $30.00 is essentially at the current price, suggesting that even the most bearish analyst sees limited downside from here — a potentially important signal that the stock may be near a valuation floor. The wide spread indicates low conviction and high dispersion of opinion, which is typical for a stock facing significant macro and company-specific uncertainty. Institutional ratings data is not available in the provided inputs, so it is not possible to determine whether analysts have been recently upgrading or downgrading, but the fact that the average target is 39% above the current price while the stock continues to fall suggests a potential disconnect that could resolve either through a price rebound or through target reductions in the coming weeks.
Bulls vs Bears: CRI Investment Factors
The bear case currently has stronger evidence due to the severe recent price decline, thin margins, and high debt load, but the bull case is supported by an extremely low forward PE of 8.24x and a 39% analyst upside. The most important tension is whether the low valuation reflects a temporary sell-off or a permanent impairment of earnings power from tariffs and weak consumer demand. If Carter's can sustain its Q2 momentum and avoid margin erosion, the stock could re-rate significantly; if not, the downtrend may continue toward the 52-week low of $27.15. The market is clearly pricing in a pessimistic scenario, creating a potential value opportunity but with substantial risk.
Bullish
- Deep value multiple with 39% analyst upside: CRI trades at a forward PE of just 8.24x versus a specialty retail sector average of 15-25x, a 45-65% discount. The consensus analyst target of $42.29 implies 39% upside from the current $30.43 price, and even the lowest target of $30.00 is essentially at the current price, suggesting limited downside according to the most bearish analyst.
- Strong gross margin and pricing power: Gross margin stands at 45.36%, indicating that Carter's branded products command meaningful pricing power despite a challenging retail environment. This provides a buffer that many low-margin apparel retailers lack, and supports the potential for operating margin recovery if cost pressures ease.
- Attractive dividend yield with solid coverage: The stock offers a 4.79% dividend yield, well above the market average, backed by a 61.4% payout ratio. While elevated, the payout is covered by earnings and the company's strong current ratio of 2.51 provides liquidity to sustain the dividend even through a downturn.
- Defensive beta and oversold technicals: With a beta of 0.831, CRI is roughly 17% less volatile than the broader market, yet it has fallen 22.09% in the past month and 28.89% in three months, vastly underperforming SPY by 21.03 and 31.93 percentage points respectively. This idiosyncratic sell-off has pushed the stock to just 19% of its 52-week range, near oversold territory and potentially setting up a mean-reversion opportunity.
Bearish
- Severe recent underperformance and downtrend: The stock is down 22.09% over the past month and 28.89% over three months, with a maximum drawdown of 31.96% from its April high of $40.12. This sharp decline, far exceeding the market's -1.06% monthly move, indicates company-specific selling pressure that could persist if underlying issues are not resolved.
- Thin operating margins and high debt burden: Despite a 45.36% gross margin, the operating margin is only 4.97% and net margin is 3.17%, leaving little cushion for cost increases. The debt-to-equity ratio of 1.31 is elevated for a retailer, increasing financial risk if earnings decline or interest rates remain high.
- High dividend payout ratio limits flexibility: The 61.4% payout ratio means that nearly two-thirds of earnings are committed to dividends, leaving limited room for reinvestment, debt reduction, or buybacks. If earnings come under pressure from tariffs or weak consumer spending, the dividend could be at risk, potentially triggering further stock declines.
- Tariff and sourcing risks from Asian manufacturing: Carter's predominantly sources products through contract manufacturers in Asia, exposing it to tariff risks and supply chain disruptions. These cost pressures could compress margins further, especially given the already thin operating margin of 4.97%.
CRI Technical Analysis
Carter's is in a clear short-term downtrend that contrasts sharply with its longer-term performance. Over the past year, the stock has gained 1.03%, but it is currently trading at $30.43, which sits at just 19.0% of its 52-week range of $27.15 to $44.44. This positioning near the bottom of the annual range signals that the stock has surrendered nearly all of its yearly gains and is approaching oversold territory, though the proximity to the 52-week low also raises the risk of a breakdown if support fails. The 31.96% maximum drawdown further underscores the severity of the recent sell-off from the April highs near $40.12. Recent momentum has deteriorated dramatically, with the stock down 22.09% over the past month and 28.89% over the past three months, a stark reversal from the positive 1-year return. This divergence — positive annual performance but deeply negative short-term trends — suggests the stock is in a corrective phase that could either represent a mean-reversion opportunity or the early stages of a more sustained downtrend. Relative strength metrics confirm the weakness: CRI has underperformed SPY by 21.03 percentage points over the past month and 31.93 percentage points over the past three months, indicating that the selling pressure is company-specific rather than purely macro-driven. The 3.67 short ratio suggests moderate bearish positioning, though not at extreme levels that would signal a short squeeze catalyst. Key technical levels are well-defined: the 52-week low at $27.15 serves as the critical support zone, while the 52-week high at $44.44 represents major resistance. A breakdown below $27.15 would likely trigger further selling and signal a deeper fundamental problem, while a recovery above the $33-$35 area (the August consolidation zone) would be the first step toward stabilizing the trend. With a beta of 0.831, Carter's is roughly 17% less volatile than the broader market, which means the recent 22% monthly decline is particularly notable — it represents a significant idiosyncratic move that cannot be explained by market beta alone, and it implies that position sizing should account for the fact that this stock is typically defensive but is currently experiencing elevated company-specific risk.
Beta
0.84
0.84x market volatility
Max Drawdown
-34.6%
Largest decline past year
52-Week Range
$27-$44
Price range past year
Annual Return
+13.3%
Cumulative gain past year
| Period | CRI Return | S&P 500 |
|---|---|---|
| 1m | +0.8% | +1.2% |
| 3m | -10.8% | +4.5% |
| 6m | -8.0% | +14.6% |
| 1y | +13.3% | +16.0% |
| ytd | +1.9% | +14.3% |
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CRI Fundamental Analysis
Carter's revenue trajectory is under pressure, with estimated annual revenue of approximately $3.07 billion and a net margin of just 3.17%, reflecting the challenging environment for specialty apparel retail. The company's gross margin of 45.36% is a key strength, indicating that its branded products command reasonable pricing power, but the operating margin of only 4.97% reveals that significant costs — likely SG&A, distribution, and tariff-related expenses — are eroding profitability. The Zacks report from August 2026 highlighted strong Q2 results, but the subsequent 22% stock decline suggests the market may be pricing in concerns about the sustainability of that performance, potentially due to tariff headwinds from Asian sourcing or weakening consumer demand in the juvenile apparel category. With a PE forward of 8.24x and estimated EPS averaging $4.24, the company is expected to remain solidly profitable, but the gap between gross and operating margins indicates limited cushion if input costs rise further. Profitability is positive but thin, with net income implied by the 3.17% net margin on ~$3.07 billion in revenue translating to roughly $97 million, and ROE of 9.92% and ROA of 6.94% are modest for a consumer cyclical retailer. The dividend payout ratio of 61.40% and dividend yield of 4.79% are notable — the yield is attractive, but the high payout ratio relative to earnings leaves limited room for error, especially if earnings decline. The company's balance sheet shows a debt-to-equity ratio of 1.31, which is elevated for a retailer and suggests that a significant portion of the capital structure is debt-funded, increasing financial risk in a rising-rate or slowing-demand environment. However, the current ratio of 2.51 indicates strong short-term liquidity, providing a buffer against near-term obligations. Free cash flow data is not available in the provided inputs, but the PCF ratio of 9.62x suggests the stock is reasonably priced relative to cash generation, and the company appears capable of funding operations internally, though the high dividend commitment may limit flexibility for share buybacks or debt reduction.
Quarterly Revenue
N/A
N/A
Revenue YoY Growth
N/A
YoY Comparison
Gross Margin
N/A
Latest Quarter
Free Cash Flow
N/A
Last 12 Months
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Valuation Analysis: Is CRI Overvalued?
With positive trailing net income (implied by the 3.17% net margin and $3.07 billion revenue base), the PE ratio is the appropriate primary valuation metric. Carter's trades at a trailing PE of 12.82x and a forward PE of 8.24x, a significant gap that implies the market expects meaningful earnings growth over the next year — forward EPS estimates average $4.24 versus trailing EPS of $0.078, though this trailing figure appears anomalous and may reflect a one-time charge or data artifact. The forward PE of 8.24x is remarkably low in absolute terms, suggesting that either the market is pricing in substantial risk (tariffs, consumer weakness, competitive pressure) or the stock is deeply undervalued relative to its earnings power. Compared to the broader specialty retail sector, where PE ratios often range from 15x to 25x for established brands, Carter's forward PE of 8.24x represents a substantial discount of roughly 45-65%. The PS ratio of 0.41x and EV/Sales of 0.55x are also low, indicating that the market values the entire business at just over half of annual revenue — a level typically associated with distressed or low-growth retailers. The PB ratio of 1.27x is modest but not distressed, and the EV/EBITDA of 9.35x is reasonable, suggesting that the discount is more about earnings quality and growth concerns than about asset value. Historical ratio data is not available in the provided inputs, so a direct comparison to the stock's own valuation band cannot be made. However, the current forward PE of 8.24x and PS of 0.41x are likely near multi-year lows for Carter's, which historically traded at higher multiples during periods of stable growth. The market appears to be pricing in a pessimistic scenario — potentially a recession, tariff-driven margin compression, or market share loss — which creates a value opportunity if the company can deliver on its $4.24 EPS estimate. The key risk is that the low multiple reflects genuine fundamental deterioration rather than temporary pessimism.
PE
12.8x
Latest Quarter
vs. Historical
N/A
5-Year PE Range 17x~59x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
9.4x
Enterprise Value Multiple
Investment Risk Disclosure
Carter's faces significant financial and operational risks. The company's debt-to-equity ratio of 1.31 is elevated for a specialty retailer, indicating a capital structure heavily reliant on debt, which increases vulnerability to rising interest rates or earnings declines. With a net margin of only 3.17% and operating margin of 4.97%, there is minimal cushion to absorb cost increases, such as tariffs on Asian-sourced products or wage inflation. Additionally, the 61.4% dividend payout ratio leaves little room for error; if earnings decline, the company may be forced to cut the dividend, which would likely trigger further selling pressure. Revenue concentration in the U.S. wholesale segment, which accounts for the majority of sales, adds risk if key retail partners like Walmart or Target reduce orders or shift to private-label alternatives.
Market and competitive risks are also pronounced. The stock trades at a forward PE of 8.24x, a steep discount to the broader retail sector, but this low multiple could persist if the market continues to price in structural challenges such as declining birth rates, competition from online-only brands, and weak consumer discretionary spending. The beta of 0.831 suggests the stock is less volatile than the market, but its recent 22% monthly decline is highly idiosyncratic, indicating company-specific issues that could worsen. The wide analyst target range ($30 to $53) and the fact that the average target is 39% above the current price suggest that analysts may be slow to revise estimates downward, creating a risk of negative surprises. Additionally, the short ratio of 3.67 indicates moderate bearish positioning, which could amplify downside if negative news emerges.
The worst-case scenario for Carter's would involve a combination of tariff escalation, a consumer recession, and market share loss. In this scenario, earnings could fall below the estimated EPS of $4.24, leading to multiple compression and a decline toward the 52-week low of $27.15, which represents a 10.8% downside from the current price of $30.43. If the company cuts its dividend, the stock could fall further, potentially to the analyst low target of $30.00, which is roughly at the current price, but a breakdown below $27.15 could trigger a deeper sell-off toward the low $20s, implying a 25-30% loss from current levels. The maximum drawdown of 31.96% over the past year shows that such a decline is plausible in a stressed scenario.
FAQ
The key risks for CRI include: 1) Financial risk: high debt-to-equity of 1.31 and a 61.4% dividend payout ratio leave little room for error if earnings decline. 2) Operational risk: thin operating margin of 4.97% means tariff increases or cost inflation could quickly erode profits. 3) Market risk: the stock has underperformed SPY by 21.03 percentage points in the past month, indicating company-specific selling pressure that could continue. 4) Competitive risk: Carter's faces competition from private-label brands and online retailers, which could pressure pricing and market share. The most severe risk is a dividend cut, which would likely trigger a sharp sell-off.
The 12-month forecast for CRI includes three scenarios: Bull case (25% probability) targets $42.29-$53.00, assuming successful tariff mitigation and EPS growth. Base case (50% probability) targets $30.00-$42.29, assuming flat revenue and stable margins. Bear case (25% probability) targets $27.15-$30.00, assuming a consumer recession or tariff escalation. The base case is most likely, with the key assumption that Carter's maintains its dividend and meets the $4.24 EPS estimate. The wide analyst target range ($30-$53) reflects high uncertainty, and the stock's direction will depend heavily on margin performance and consumer demand.
CRI appears undervalued on most metrics. Its forward PE of 8.24x is significantly below the specialty retail sector average of 15-25x, and its PS ratio of 0.41x and EV/Sales of 0.55x suggest the market values the entire business at just over half of annual revenue. The EV/EBITDA of 9.35x is also reasonable. However, the low valuation may reflect genuine concerns about earnings quality, as the net margin is only 3.17% and the dividend payout ratio is 61.4%. The market seems to be pricing in a pessimistic scenario, such as a recession or tariff-driven margin compression. If the company can meet its $4.24 EPS estimate, the stock is likely undervalued, but if earnings decline, the low multiple could persist.
CRI could be a good buy for value-oriented investors with a high risk tolerance, given its forward PE of 8.24x and 39% upside to the average analyst target of $42.29. The 4.79% dividend yield provides income, and the stock is trading near its 52-week low of $27.15, which may limit downside if support holds. However, the company faces significant risks including a high debt-to-equity ratio of 1.31, a thin net margin of 3.17%, and potential tariff headwinds. The recent 22% monthly decline indicates that the market is pricing in these risks, and a breakdown below $27.15 could lead to further losses. Therefore, it is only suitable for investors who can withstand volatility and believe in the long-term value of the brand.
CRI is more suitable for long-term investment, given its 4.79% dividend yield and deep-value characteristics, but it requires a minimum holding period of at least 2-3 years to allow for a potential turnaround. The stock's beta of 0.831 suggests lower volatility than the market, but the recent 22% monthly decline shows it can experience sharp idiosyncratic moves. Short-term trading is risky due to the lack of clear catalysts and the downtrend. Long-term investors should monitor the dividend sustainability and margin trends, and consider accumulating on dips near the 52-week low of $27.15. The high payout ratio and debt load mean that the investment case relies on earnings stability, so a long-term horizon is necessary to ride out potential volatility.