cri-20260704

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 4, 2026

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-31829

CARTER’S, INC.

(Exact name of registrant as specified in its charter)


Delaware						13-3912933
(State or other jurisdiction of						(I.R.S. Employer Identification No.)
incorporation or organization)

Phipps Tower,

3438 Peachtree Road NE, Suite 1800

Atlanta, Georgia 30326

(Address of principal executive offices, including zip code)

(678) 791-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	CRI	New York Stock Exchange
Series A Preferred Stock Purchase Rights	-	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of July 24, 2026, there were 36,711,185 shares of the registrant’s common stock outstanding.

CARTER’S, INC.

INDEX



Part I. Financial Information			Page

	Item 1	Financial Statements
		Unaudited Condensed Consolidated Balance Sheets as of July 4, 2026, January 3, 2026 and June 28, 2025	1
		Unaudited Condensed Consolidated Statements of Operations for the fiscal quarter and two fiscal quarters ended July 4, 2026 and June 28, 2025	2
		Unaudited Condensed Consolidated Statements of Comprehensive Income for the fiscal quarter and two fiscal quarters ended July 4, 2026 and June 28, 2025	3
		Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the fiscal quarters ended July 4, 2026, April 4, 2026, June 28, 2025, and March 29, 2025	4
		Unaudited Condensed Consolidated Statements of Cash Flows for the two fiscal quarters ended July 4, 2026 and June 28, 2025	5
		Notes to the Unaudited Condensed Consolidated Financial Statements	6
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3	Quantitative and Qualitative Disclosures about Market Risk	35
	Item 4	Controls and Procedures	36

Part II. Other Information

	Item 1	Legal Proceedings	37
	Item 1A	Risk Factors	37
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	38
	Item 3	Defaults upon Senior Securities	38
	Item 4	Mine Safety Disclosures	38
	Item 5	Other Information	38
	Item 6	Exhibits	39

Signatures			40

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CARTER’S, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(unaudited)


	July 4, 2026		January 3, 2026		June 28, 2025
ASSETS
Current assets:
Cash and cash equivalents	$	653,571	$	487,075	$	338,183
Accounts receivable, net of allowance for credit losses of $7,898, $7,587, and $6,340, respectively	167,852		178,566		140,352
Finished goods inventories, net of inventory reserves of $11,613, $8,897, and $10,284, respectively	577,737		544,624		619,074
Prepaid expenses and other current assets	73,357		60,508		60,612
Total current assets	1,472,517		1,270,773		1,158,221
Property, plant, and equipment, net of accumulated depreciation of $585,801, $609,059, and $598,575, respectively	178,651		186,307		188,177
Operating lease assets	568,288		591,806		571,303
Tradenames, net	268,541		268,659		268,777
Goodwill	207,795		208,994		209,016
Customer relationships, net	18,377		20,128		21,854
Other assets	18,191		18,803		38,204
Total assets	$	2,732,360	$	2,565,470	$	2,455,552

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	323,644	$	235,700	$	306,399
Current operating lease liabilities	132,717		136,488		124,002
Other current liabilities	139,862		133,809		95,270
Total current liabilities	596,223		505,997		525,671
Long-term debt, net	567,808		567,173		498,531
Deferred income taxes	42,620		39,380		42,290
Long-term operating lease liabilities	484,235		508,461		501,804
Other long-term liabilities	14,151		19,411		33,354
Total liabilities	$	1,705,037	$	1,640,422	$	1,601,650

Commitments and contingencies - Note 15

Shareholders’ equity:
Preferred stock; par value $0.01 per share; 100,000 shares authorized; none issued or outstanding	$	—	$	—	$	—
Common stock, voting; par value $0.01 per share; 150,000,000 shares authorized; 36,711,901, 36,425,877, and 36,467,071 shares issued and outstanding, respectively	367		364		365
Additional paid-in capital	23,910		19,584		14,460
Accumulated other comprehensive loss	(27,349)		(24,361)		(32,817)
Retained earnings	1,030,395		929,461		871,894
Total shareholders’ equity	1,027,323		925,048		853,902
Total liabilities and shareholders’ equity	$	2,732,360	$	2,565,470	$	2,455,552

See accompanying notes to the unaudited condensed consolidated financial statements.

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share data)

(unaudited)


	Fiscal quarter ended				Two fiscal quarters ended
	July 4, 2026		June 28, 2025		July 4, 2026		June 28, 2025
Net sales	$	615,490	$	585,313	$	1,296,603	$	1,215,139
Cost of goods sold	202,891		303,553		590,131		642,289

Gross profit	412,599		281,760		706,472		572,850
Royalty income, net	3,362		3,249		7,981		8,580
Selling, general, and administrative expenses	276,135		280,965		546,184		551,284


Operating income	139,826		4,044		168,269		30,146
Interest expense	11,312		7,857		23,069		15,676
Interest income	(8,483)		(4,292)		(11,739)		(7,434)
Other expense (income), net	352		(1,224)		438		(1,148)

Income before income taxes	136,645		1,703		156,501		23,052
Income tax provision	31,687		1,257		37,207		7,067
Net income	$	104,958	$	446	$	119,294	$	15,985

Basic net income per common share	$	2.87	$	0.01	$	3.26	$	0.43
Diluted net income per common share	$	2.87	$	0.01	$	3.26	$	0.43
Dividend declared and paid per common share	$	0.25	$	0.25	$	0.50	$	1.05

See accompanying notes to the unaudited condensed consolidated financial statements.

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)

(unaudited)


	Fiscal quarter ended				Two fiscal quarters ended
	July 4, 2026		June 28, 2025		July 4, 2026		June 28, 2025
Net income	$	104,958	$	446	$	119,294	$	15,985
Other comprehensive (loss) income:
Reclassification related to settlement of Carter’s post-retirement life insurance arrangement, net of tax of $(135) for two fiscal quarters ended July 4, 2026	—		—		(435)		—
Foreign currency translation adjustments	(609)		10,249		(2,552)		10,861
Total other comprehensive (loss) income	$	(609)	$	10,249	$	(2,987)	$	10,861
Comprehensive income	$	104,349	$	10,695	$	116,307	$	26,846

See accompanying notes to the unaudited condensed consolidated financial statements.

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(amounts in thousands, except share amounts)

(unaudited)


	Common stock - shares	Common stock - $		Additional paid-in capital		Accumulated other comprehensive loss		Retained earnings		Total shareholders’ equity
Balance at January 3, 2026	36,425,877	$	364	$	19,584	$	(24,361)	$	929,461	$	925,048

Withholdings from vesting of restricted stock	(79,985)	—		(3,012)		—		—		(3,012)
Restricted stock activity	504,225	5		(5)		—		—		—
Stock-based compensation expense	—	—		3,684		—		—		3,684


Dividends declared of $0.25 per common share	—	—		—		—		(9,220)		(9,220)
Comprehensive income	—	—		—		(2,379)		14,336		11,957

Balance at April 4, 2026	36,850,117	$	369	$	20,251	$	(26,740)	$	934,577	$	928,457

Withholdings from vesting of restricted stock	(1,913)	—		(67)		—		—		(67)
Restricted stock activity	(136,303)	(2)		2		—		—		—
Stock-based compensation expense	—	—		3,689		—		—		3,689

Dividends declared of $0.25 per common share	—	—		—		—		(9,140)		(9,140)
Comprehensive income	—	—		—		(609)		104,958		104,349
Other	—	—		35		—		—		35
Balance at July 4, 2026	36,711,901	$	367	$	23,910	$	(27,349)	$	1,030,395	$	1,027,323


	Common stock - shares	Common stock - $		Additional paid-in capital		Accumulated other comprehensive loss		Retained earnings		Total shareholders’ equity
Balance at December 28, 2024	36,041,995	$	360	$	3,856	$	(43,678)	$	894,024	$	854,562

Withholdings from vesting of restricted stock	(93,538)	(1)		(4,221)		—		—		(4,222)
Restricted stock activity	288,657	3		(3)		—		—		—
Stock-based compensation expense	—	—		9,753		—		—		9,753

Dividends declared of $0.80 per common share	—	—		—		—		(28,999)		(28,999)
Comprehensive income	—	—		—		612		15,539		16,151

Balance at March 29, 2025	36,237,114	$	362	$	9,385	$	(43,066)	$	880,564	$	847,245

Withholdings from vesting of restricted stock	(3,233)	—		(110)		—		—		(110)
Restricted stock activity	233,190	3		(3)		—		—		—
Stock-based compensation expense	—	—		5,188		—		—		5,188

Dividends declared of $0.25 per common share	—	—		—		—		(9,116)		(9,116)
Comprehensive income	—	—		—		10,249		446		10,695

Balance at June 28, 2025	36,467,071	$	365	$	14,460	$	(32,817)	$	871,894	$	853,902

See accompanying notes to the unaudited condensed consolidated financial statements.

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)


	Two fiscal quarters ended
	July 4, 2026		June 28, 2025
Cash flows from operating activities:
Net income	$	119,294	$	15,985
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation of property, plant, and equipment	24,765		24,967
Amortization of intangible assets	1,883		1,846
Provision for excess and obsolete inventory, net	2,730		1,853




Amortization of debt issuance costs	1,142		832
Stock-based compensation expense	7,373		14,941
Unrealized foreign currency exchange loss (gain), net	159		(799)
Provision for doubtful accounts receivable from customers	318		1,182
Unrealized gain on investments	(1,223)		(474)

Deferred income taxes expense	3,813		3,549
Other operating items, net	(530)		(4)
Effect of changes in operating assets and liabilities:
Accounts receivable	10,533		54,068
Finished goods inventories	(37,313)		(114,014)
Prepaid expenses and other assets	(12,057)		(30,218)
Accounts payable and other liabilities	81,408		17,948
Net cash provided by (used in) operating activities	$	202,295	$	(8,338)

Cash flows from investing activities:
Capital expenditures	$	(12,795)	$	(26,546)


Net cash used in investing activities	$	(12,795)	$	(26,546)

Cash flows from financing activities:






Dividends paid	$	(18,345)	$	(38,115)


Withholdings from vesting of restricted stock	(3,079)		(4,332)

Other	—		(370)
Net cash used in financing activities	$	(21,424)	$	(42,817)

Net effect of exchange rate changes on cash and cash equivalents	(1,580)		2,958
Net increase (decrease) in cash and cash equivalents	$	166,496	$	(74,743)
Cash and cash equivalents, beginning of period	487,075		412,926
Cash and cash equivalents, end of period	$	653,571	$	338,183

See accompanying notes to the unaudited condensed consolidated financial statements.

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 – THE COMPANY

Carter’s, Inc. and its wholly owned subsidiaries (collectively, the “Company”) design, source, and market branded childrenswear under the Carter’s, OshKosh B’gosh (or “OshKosh”), Skip Hop, Child of Mine, Just One You, Simple Joys, Little Planet, Otter Avenue, and other brands. The Company’s products are sourced through contractual arrangements with manufacturers worldwide for sale in the Company’s retail stores, eCommerce sites, and mobile app, which offer the Company’s brand name merchandise and other licensed products manufactured by other companies. The Company also distributes its products to wholesale customers, which include leading department stores, national chains, and specialty retailers domestically and internationally.

Our trademarks that are referred to in this Quarterly Report on Form 10-Q, including Carter’s, OshKosh B’gosh, OshKosh, Skip Hop, Child of Mine, Just One You, Simple Joys, Little Planet, Otter Avenue, PurelySoft, and Carter’s Rewards, many of which are registered in the United States and in over 100 other countries and territories, are each the property of one or more subsidiaries of Carter’s, Inc.

NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). All intercompany transactions and balances have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the consolidated financial condition, results of operations, comprehensive income, statement of shareholders’ equity, and cash flows of the Company for the interim periods presented. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the fiscal quarter ended July 4, 2026 are not necessarily indicative of the results that may be expected for the current fiscal year ending January 2, 2027.

The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

The accompanying condensed consolidated balance sheet as of January 3, 2026 was derived from the Company’s audited consolidated financial statements included in its most recently filed Annual Report on Form 10-K. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC and the instructions to Form 10-Q.

The Company operates on a 52 or 53 week fiscal calendar. Fiscal 2026 will end on January 2, 2027 and includes 52 weeks. Fiscal 2025 ended on January 3, 2026 and included 53 weeks. The fiscal quarters ended July 4, 2026 and June 28, 2025 each included 13 weeks.

Accounting Policies

The accounting policies the Company follows are set forth in its most recently filed Annual Report on Form 10-K. There have been no material changes to these accounting policies. During the first quarter of fiscal 2026, the Company began accounting for potential refunds of tariffs previously paid under the International Emergency Economic Powers Act (“IEEPA”) as gain contingencies, as described below.

IEEPA Tariff Recovery

During the first quarter of fiscal 2026, the U.S. Supreme Court ruled that tariffs imposed under the IEEPA were unlawful. Following the April 20, 2026 launch of U.S. Customs and Border Protection’s Consolidated Administration and Processing of Entries (“CAPE”) process, the Company submitted claims seeking approximately $130 million of refunds of previously paid IEEPA tariffs through the CAPE system.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company has elected to apply a gain contingency model in accordance with ASC 450-30, “Gain Contingencies” to account for recoveries of previously paid IEEPA tariffs. Under this model, a gain contingency is not recognized in the financial statements until the gain is realized or realizable. Any recovery, when recognized, is reflected as a reduction of Cost of goods sold for amounts related to goods already sold, or as a reduction of inventory to the extent the related goods remain on hand.

During the second quarter of fiscal 2026, the Company received refund payments from U.S. Customs and Border Protection totaling approximately $132 million, including interest, in connection with various adjudicated claims, and the related recovery has been recognized. The Company recorded approximately $128 million of the recovery as a reduction of Cost of goods sold and $4 million in Interest income within our condensed consolidated statement of operations. As of July 4, 2026, the Company’s remaining unadjudicated IEEPA refund claims, which continue to be accounted for as gain contingencies, were approximately $2 million. Uncertainty remains regarding the timing, amount, and ultimate receipt of any further refunds, and accordingly no additional amounts have been recognized in the condensed consolidated financial statements for these remaining claims.

Goodwill and Tradename Assets

During the second quarter of fiscal 2025, the Company identified a triggering event related to the new tariffs enacted by the Trump Administration and the resulting unfavorable impact on the Company’s financial forecasts, as well as a sustained decrease in the Company’s stock price at that time. As a result, the Company performed a quantitative impairment test on the goodwill ascribed to each of the Company’s reporting units and on the value of its indefinite-lived intangible tradename assets in the second quarter of fiscal 2025, which resulted in no impairment. The Company did not identify any triggering events during the second quarter or first two quarters of fiscal 2026 that would require an interim quantitative impairment test.

Recent Accounting Pronouncements

Disaggregation of Income Statement Expenses (ASU 2024-03)

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses. The ASU is intended to increase transparency and comparability of financial statements by requiring public business entities to disclose in the notes to the financial statements additional information about specified expense components included in certain expense captions presented on the face of the consolidated statement of operations. The ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company expects to adopt the ASU for its fiscal 2027 annual reporting period using a prospective transition method. The Company does not expect adoption of ASU to have a material impact on amounts reported in its consolidated financial statements; however, adoption will require additional disclosures in the notes to the consolidated financial statements.

Internal-Use Software (ASU 2025-06)

In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software: Targeted Improvements to the Accounting for Internal-Use Software. The ASU modernizes the accounting for internal-use software by removing the existing “software development stages” model and instead requiring capitalization of internal-use software costs when (1) management has authorized and committed to funding the project and (2) it is probable the project will be completed and the software will be used as intended. The ASU is effective for fiscal years beginning after December 15, 2027 and interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact of adopting the ASU on its consolidated financial statements.

NOTE 3 – REVENUE RECOGNITION

The Company generates revenue primarily from the sale of products to retail and wholesale customers and from royalties earned under licensing arrangements. Contracts with customers include written agreements as well as arrangements that are implied by customary business practices or law.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Disaggregation of Revenue

The Company sells its products directly to consumers (“direct-to-consumer”) through its retail stores, eCommerce websites, and mobile app, and to other retailers and partners that in turn sell the products to their own customers (“wholesale channel”). The Company also earns royalties from certain of its licensees that sell products under the Company’s brands.

Disaggregated revenues from these sources were as follows:


	Fiscal quarter ended July 4, 2026
(dollars in thousands)	U.S. Retail		U.S. Wholesale		International		Total
Direct-to-consumer	$	304,677	$	—	$	63,288	$	367,965
Wholesale channel	—		215,552		31,973		247,525

	$	304,677	$	215,552	$	95,261	$	615,490

Royalty income, net	$	753	$	1,793	$	816	$	3,362


	Two fiscal quarters ended July 4, 2026
(dollars in thousands)	U.S. Retail		U.S. Wholesale		International		Total
Direct-to-consumer	$	636,925	$	—	$	127,165	$	764,090
Wholesale channel	—		466,959		65,554		532,513

	$	636,925	$	466,959	$	192,719	$	1,296,603

Royalty income, net	$	2,194	$	4,682	$	1,105	$	7,981


	Fiscal quarter ended June 28, 2025
(dollars in thousands)	U.S. Retail		U.S. Wholesale		International		Total
Direct-to-consumer	$	299,549	$	—	$	60,619	$	360,168
Wholesale channel	—		192,998		32,147		225,145

	$	299,549	$	192,998	$	92,766	$	585,313

Royalty income, net	$	407	$	2,119	$	723	$	3,249


	Two fiscal quarters ended June 28, 2025
(dollars in thousands)	U.S. Retail		U.S. Wholesale		International		Total
Direct-to-consumer	$	593,980	$	—	$	114,442	$	708,422
Wholesale channel	—		443,094		63,623		506,717

	$	593,980	$	443,094	$	178,065	$	1,215,139

Royalty income, net	$	1,926	$	5,441	$	1,213	$	8,580

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accounts Receivable from Customers and Licensees

The components of Accounts receivable, net were as follows:


(dollars in thousands)	July 4, 2026		January 3, 2026		June 28, 2025
Trade receivables from wholesale customers, net	$	167,728	$	174,566	$	138,164
Royalties receivable	2,918		4,011		3,802
Other receivables(1)	9,010		11,705		7,479
Total gross receivables	$	179,656	$	190,282	$	149,445
Less: Wholesale accounts receivable reserves(2)(3)	(11,804)		(11,716)		(9,093)
Accounts receivable, net	$	167,852	$	178,566	$	140,352

(1)Includes receivables related to shipping volume rebates, healthcare-related rebates, amounts due from third-party gift card program partners, recoveries related to provisional anti-dumping duties in Mexico, and tax recoveries.

(2)Includes allowance for chargebacks of $3.9 million, $4.1 million, and $2.8 million for the periods ended July 4, 2026, January 3, 2026, and June 28, 2025, respectively.

(3)Includes allowance for credit losses of $7.9 million, $7.6 million, and $6.3 million for the periods ended July 4, 2026, January 3, 2026, and June 28, 2025, respectively.

Contract Assets and Liabilities

The Company’s contract assets are not material to the Company’s condensed consolidated financial statements.

The Company recognizes a contract liability when it has received consideration before transferring the related goods to the customer. The Company’s contract liabilities primarily consist of (1) obligations related to unredeemed gift cards, (2) unredeemed customer loyalty rewards, and (3) the unamortized upfront bonus received from a third-party financial institution under the Company’s private label credit card program. Contract liabilities are classified as current and are included in Other current liabilities on the Company’s consolidated balance sheets.

Contract Liabilities

Total contract liabilities were as follows:


(dollars in thousands)	July 4, 2026		January 3, 2026		June 28, 2025
Contract liabilities - current:
Unredeemed gift cards	$	25,795	$	25,994	$	24,998
Unredeemed customer loyalty rewards	1,851		2,372		1,587
Carter’s credit card - upfront bonus	—		—		357
Total contract liabilities - current	$	27,646	$	28,366	$	26,942

Composition of Contract Liabilities

Unredeemed gift cards - represent obligations to transfer goods in the future to customers that have purchased gift cards. Gift card contract liabilities change due to the issuance and redemption of gift cards and the recognition of breakage on balances that are not expected to be redeemed. Although gift cards do not expire, all outstanding gift card balances are classified as current liabilities, as they are redeemable on demand by the cardholder. The majority of gift cards are redeemed within one year of issuance. During the second quarters of fiscal 2026 and fiscal 2025, the Company recognized revenue of $1.8 million and $1.9 million related to the gift card liability balance that existed at April 4, 2026 and March 29, 2025, respectively. Additionally, during the first two quarters of fiscal 2026 and fiscal 2025, the Company recognized revenue of $6.0 million and $5.5 million related to the gift card liability balance that existed at January 3, 2026 and December 28, 2024, respectively.

Unredeemed loyalty rewards - represent obligations under the Company’s loyalty program to transfer goods in the future to customers when the reward certificates are redeemed. Changes in the loyalty program contract liability result from new rewards earned, and reward certificate redemptions and expirations. The earning and redemption cycles are under one year in duration.

Carter’s credit card - upfront bonus - represents the unamortized portion of the upfront signing bonus received from a third-party financial institution under the Company’s private label credit card program. This bonus was recognized as revenue over the term of the agreement.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4 – OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following:


(dollars in thousands)	July 4, 2026		January 3, 2026		June 28, 2025
Income taxes payable(1)	$	27,030	$	635	$	4,759
Accrued interest(2)	26,761		5,736		8,269
Unredeemed gift cards	25,795		25,994		24,998
Accrued employee benefits(3)	13,380		28,021		15,130
Accrued bonuses and incentive compensation	4,582		19,861		7,435
Accrued taxes	4,367		10,334		5,538
Accrued salaries and wages	4,281		4,236		12,333

Other(4)	33,666		38,992		16,808
Other current liabilities	$	139,862	$	133,809	$	95,270

(1)Increase as of July 4, 2026 reflects incremental income taxes on the IEEPA tariff refunds received during the second quarter of fiscal 2026.

(2)Increase as of July 4, 2026 reflects the timing of interest payments on long-term debt.

(3)Includes accruals for severance and other termination benefits. See Note 13, Organizational Restructuring, for additional information.

(4)Amount as of July 4, 2026 and January 3, 2026 includes liabilities under the deferred compensation plan. See Note 10, Fair Value Measurements, for additional information.

NOTE 5 – SUPPLY CHAIN FINANCE PROGRAM

The Company has established a voluntary supply chain finance (“SCF”) program through participating financial institutions. This SCF program enables participating suppliers to accelerate payments for receivables due from the Company by selling receivables directly to the participating financial institutions at their discretion. As of July 4, 2026, the SCF program has a $70.0 million revolving capacity. The Company is not a party to the agreements between the participating financial institutions and the suppliers in connection with the SCF program and has no economic interest in the supplier’s decision to sell a receivable. Payment terms for most of our suppliers are 60 days, regardless of participation in the SCF program. The Company settles obligations with the participating financial institutions in accordance with the original invoice due dates, and participation in the SCF program does not extend the Company’s payment terms. The Company does not provide any guarantees in connection with the SCF program and does not pledge collateral under the program.

The Company’s liability related to amounts payable to participating financial institutions for suppliers who voluntarily participate in the SCF program is included in Accounts payable on our condensed consolidated balance sheets. As of July 4, 2026, January 3, 2026, and June 28, 2025, amounts under the SCF program included in Accounts payable were $24.7 million, $13.5 million, and $27.6 million, respectively. Payments made in connection with the SCF program, like payments of other accounts payable, are reflected as a reduction to our operating cash flow.

NOTE 6 – LONG-TERM DEBT

Long-term debt consisted of the following:


(dollars in thousands)	July 4, 2026		January 3, 2026		June 28, 2025
$575 million 7.375% Senior Notes due 2031	$	575,000	$	575,000	$	—
$500 million 5.625% Senior Notes due 2027	—		—		500,000
Less unamortized debt issuance-related costs	(7,192)		(7,827)		(1,469)
Senior notes, net	$	567,808	$	567,173	$	498,531
Secured revolving credit facility	—		—		—
Total long-term debt, net	$	567,808	$	567,173	$	498,531

Secured Revolving Credit Facility

As of July 4, 2026 and January 3, 2026, the Company had no outstanding borrowings under its secured asset-based revolving credit facility (“ABL facility”), exclusive of $5.8 million and $6.3 million of outstanding letters of credit, respectively. As of June 28, 2025, the Company had no outstanding borrowings under its secured cash-flow-based revolving credit facility, exclusive of $6.9 million of outstanding letters of credit. As of July 4, 2026, January 3, 2026, and June 28, 2025, there was approximately $568.6 million, $743.7 million, and $843.1 million available for future borrowing, respectively. Any outstanding

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

borrowings under the Company’s ABL facility and secured cash-flow-based revolving credit facility are classified as non-current liabilities on the Company’s condensed consolidated balance sheets due to contractual repayment terms under the credit facility. However, these repayment terms also allow us to repay some or all of the outstanding borrowings at any time.

ABL Facility

On November 17, 2025, the Company, through its wholly owned subsidiary, The William Carter Company (“TWCC”), entered into a new five-year ABL facility of up to $750.0 million. The ABL facility replaced the Company’s existing $850.0 million secured cash-flow-based revolving credit facility due April 2027. Borrowings under the ABL facility will mature, and lending commitments thereunder will terminate, in November 2030.

The ABL facility contains various covenants, including those that restrict the Company’s ability and the ability of its restricted subsidiaries to incur certain indebtedness, pay dividends or make distributions or other restricted payments, or to grant certain liens on their respective property or assets, among other things. The ABL facility also includes a springing financial covenant, consisting of, if the excess availability falls below certain thresholds, a fixed charge coverage ratio not to be less than 1.00 to 1.00.

The availability under the ABL facility was $568.6 million and $743.7 million as of July 4, 2026 and January 3, 2026, respectively. Availability is determined using borrowing base calculations of eligible inventory, accounts receivable, and intellectual property balances, less availability reserves, current outstanding borrowings under the ABL facility, and outstanding letters of credit. Availability may fluctuate throughout the year principally based on changes in eligible inventory and accounts receivable balances. As of July 4, 2026, the borrowing rate for a term Secured Overnight Financing Rate (“SOFR”) loan would have been 4.92%, which includes an excess availability-based adjustment of 1.25%.

As of July 4, 2026, the Company was in compliance with its covenants and requirements under the ABL facility.

Senior Notes

On November 13, 2025, TWCC issued $575.0 million principal amount of senior notes at par, bearing interest at a rate of 7.375% per annum, and maturing on February 15, 2031. TWCC received net proceeds from the offering of the senior notes of approximately $567.0 million, after deducting underwriting fees and other expenses, which TWCC used to redeem the senior notes discussed below and for other general corporate purposes. Approximately $8.0 million, including both bank fees and other third-party expenses, was capitalized in connection with the issuance and is being amortized over the term of the senior notes.

On November 27, 2025, TWCC redeemed $500.0 million principal amount of senior notes, bearing interest at a rate of 5.625% per annum, and originally maturing on March 15, 2027. Pursuant to the optional redemption provisions described in the indenture dated as of March 14, 2019, TWCC paid the outstanding principal plus accrued and unpaid interest.

NOTE 7 – COMMON STOCK

Open Market Share Repurchases

The Company’s Board of Directors (the “Board”) has authorized share repurchase programs providing for the repurchase of up to an aggregate of $1.00 billion of the Company’s common stock. As of July 4, 2026, the total remaining capacity under outstanding repurchase authorizations, based on settled repurchase transactions, was $599.0 million. The share repurchase authorizations have no expiration dates.

The Company did not repurchase and retire any shares of its common stock through open market transactions during the first two quarters of fiscal 2026 and 2025.

Future repurchases may occur from time to time in the open market, in privately negotiated transactions, or otherwise. The timing and amount of any repurchases will be at the discretion of the Company subject to restrictions under the Company’s secured asset-based revolving credit facility and considerations given to market conditions, stock price, other investment priorities, excise taxes, and other factors.

Dividends

In each of the first two quarters of fiscal 2026, the Company’s Board declared, and the Company paid, a cash dividend per common share of $0.25 (for an aggregate of $0.50 per common share for the first two quarters of fiscal 2026). In the first and

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

second quarters of fiscal 2025, the Board declared, and the Company paid, a cash dividend per common share of $0.80 and $0.25, respectively (for an aggregate of $1.05 per common share for the first two quarters of fiscal 2025).

The Board will evaluate future dividend declarations based on a number of factors, including restrictions under the Company’s secured asset-based revolving credit facility, business conditions, the Company’s financial performance, and other considerations.

Provisions in the Company’s ABL facility could have the effect of restricting the Company’s ability to pay cash dividends on, or make future repurchases of, its common stock, as further described in Note 6, Long-term Debt, to the condensed consolidated financial statements.

NOTE 8 – STOCK-BASED COMPENSATION

The Company recorded stock-based compensation expense as follows:


	Fiscal quarter ended				Two fiscal quarters ended
(dollars in thousands)	July 4, 2026		June 28, 2025		July 4, 2026		June 28, 2025

Restricted stock:
Time-based awards(1)(2)	$	2,537	$	3,268	$	5,845	$	12,341
Performance-based awards(2)	153		149		296		431
Market-based awards(2)	(153)		171		80		569
Stock awards	1,152		1,600		1,152		1,600
Total	$	3,689	$	5,188	$	7,373	$	14,941

(1)First two quarters of fiscal 2025 include accelerated vesting of outstanding time-based restricted stock awards related to the retirement of Michael D. Casey, the Company’s former Chief Executive Officer, in the first quarter of fiscal 2025.

(2)Second quarter and first two quarters of fiscal 2026 include forfeitures of outstanding time-based, performance-based, and market-based restricted stock awards related to the departure of Douglas C. Palladini, the Company’s former Chief Executive Officer, in the second quarter of fiscal 2026.

The Company recognizes compensation cost ratably over the applicable performance periods based on the estimated probability of achievement of its performance targets at the end of each period.

On April 28, 2026, Douglas C. Palladini departed the Company as Chief Executive Officer (“CEO”) and President and resigned as a member of the Board. In connection with his departure, his outstanding restricted stock awards were forfeited, resulting in a reversal of previously recognized stock-based compensation expense of approximately $0.5 million, which is reflected in the table above for the second quarter and first two quarters of fiscal 2026.

On May 1, 2026, the Company announced the appointment of Sharon Price John as CEO and President of the Company and a member of the Board, effective June 15, 2026. On June 15, 2026, in connection with Ms. John’s appointment and the terms of her employment agreement, the Company granted Ms. John 62,204 shares of time-based restricted stock awards, 46,651 shares of performance-based restricted stock awards, and 46,651 shares of market-based restricted stock awards. The number of shares granted was based on the closing price of the Company’s stock on the grant date, which was $41.80, with the time-based and performance-based restricted stock awards having a grant-date fair value of $41.80 per share and the market-based restricted stock awards having a grant-date fair value of $69.05 per share.

The market-based restricted stock awards cliff vest at the end of the three-year performance period ending December 30, 2028, subject to the performance of the Company’s total shareholder return (“TSR”) relative to a defined peer group over the three-year period. A Monte-Carlo simulation was utilized to determine the grant-date fair value of the market-based restricted stock awards in fiscal 2026, using the following assumptions: beginning TSR price of $32.14, grant-date share price of $41.80, simulation term of 2.5 years, expected volatility of 48.7%, and risk-free interest rate of 4.1%.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of Accumulated other comprehensive loss consisted of the following:


(dollars in thousands)	July 4, 2026		January 3, 2026		June 28, 2025
Cumulative foreign currency translation adjustments	$	(27,981)	$	(25,428)	$	(28,861)
Pension and post-retirement obligations(1)(2)(3)	632		1,066		(3,956)
Total accumulated other comprehensive loss	$	(27,349)	$	(24,361)	$	(32,817)

(1)Net of income taxes of $0.2 million, $0.3 million, and $1.2 million for the periods ended July 4, 2026, January 3, 2026, and June 28, 2025, respectively.

(2)In fiscal 2025, the Company substantially completed the process of settling its pension obligations under the frozen OshKosh B’Gosh, Inc. Pension Plan. In the first quarter of fiscal 2026, the Company distributed the surplus plan assets, net of final plan expenses and adjustments, in accordance with the terms of the plan and regulatory requirements.

(3)In the first quarter of fiscal 2026, the Company settled its post-retirement life insurance liabilities.

During the first quarter of fiscal 2026, the Company made a lump-sum payment to a third-party insurance provider to assume all remaining premium obligations related to its post-retirement life insurance arrangement. In connection with this settlement, $0.4 million of deferred gains on post-retirement life obligations (net of income taxes of $0.1 million) were reclassified from Accumulated other comprehensive loss to Other expense (income), net within the condensed consolidated statement of operations. During the first two quarters of fiscal 2025, no amounts were reclassified from Accumulated other comprehensive loss to the condensed consolidated statement of operations.

NOTE 10 – FAIR VALUE MEASUREMENTS

Investments

In support of The William Carter Company Deferred Compensation Plan (the “Deferred Compensation Plan”), the Company invests comparable amounts in marketable securities, principally equity-based mutual funds, to approximate the participants’ investment return on employee deferrals of compensation. These investments are held in an irrevocable Rabbi Trust established to fund the Company’s obligations under the Deferred Compensation Plan. The Rabbi Trust investments are restricted in their use to meet funding obligations to Plan participants.

In fiscal 2025, the Board approved the termination of the Deferred Compensation Plan, effective as of September 20, 2025. In connection with the Deferred Compensation Plan’s termination, the Company expects to liquidate the Rabbi Trust investments to fund the settlement of the related Deferred Compensation Plan obligations, with final settlement expected to occur in the fourth quarter of fiscal 2026.

All of the marketable securities are included in Prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets as of July 4, 2026 and January 3, 2026, and their aggregate fair values were $23.0 million and $21.7 million, respectively. As of June 28, 2025, the aggregate fair value of the Rabbi Trust investments was $20.0 million and was included in Other assets. The change in classification reflects the Company’s expectation to liquidate the Rabbi Trust investments to fund the settlement of Deferred Compensation Plan obligations in the fourth quarter of fiscal 2026.

These investments are classified as Level 1 within the fair value hierarchy. The change in the aggregate fair values of marketable securities is due to the net activity of gains and losses and any contributions and distributions during the period. Gains on the investments in marketable securities were $0.8 million and $1.2 million for the second quarter and the first two quarters of fiscal 2026, respectively. Gains on the investments in marketable securities were $0.1 million and $0.5 million for the second quarter and the first two quarters of fiscal 2025, respectively. These amounts are included in Other expense (income), net on the Company’s condensed consolidated statement of operations.

Borrowings

As of July 4, 2026, the Company had no outstanding borrowings under its ABL facility.

The fair value of the Company’s senior notes was $594.2 million, $592.9 million, and $497.4 million at July 4, 2026, January 3, 2026, and June 28, 2025, respectively. The fair value of these senior notes was estimated using observable market inputs, which incorporate quoted market prices of comparable borrowings, the Company’s credit risk, and current market conditions, and is therefore within Level 2 of the fair value hierarchy. The senior notes had a notional value and carrying value (gross of debt issuance costs) of $575.0 million, $575.0 million, and $500.0 million as of July 4, 2026, January 3, 2026, and June 28, 2025, respectively.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Goodwill, Intangible, and Long-Lived Tangible Assets

Some assets are not measured at fair value on a recurring basis but are subject to fair value adjustments only in certain circumstances. These assets can include goodwill, indefinite-lived intangible assets, and other long-lived assets that have been reduced to fair value when impaired. Assets that are written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment occurs.

NOTE 11 – INCOME TAXES

The Company’s income tax provision and effective tax rates for the fiscal periods indicated were as follows:


	Fiscal quarter ended						Two fiscal quarters ended
(dollars in thousands)	July 4, 2026			June 28, 2025			July 4, 2026			June 28, 2025
Income tax provision	$	31,687		$	1,257		$	37,207		$	7,067
Effective income tax rate	23.2		%	73.8		%	23.8		%	30.7		%

The Company’s effective income tax rate was 23.2% for the second fiscal quarter ended July 4, 2026, compared to 73.8% for the second fiscal quarter ended June 28, 2025. The Company’s effective income tax rate was 23.8% for the first two fiscal quarters ended July 4, 2026, compared to 30.7% for the first two fiscal quarters ended June 28, 2025. The decrease in the effective tax rate for each period was driven by discrete tax items recognized in the prior-year periods, including incremental tax expense related to expiring stock-based compensation, which had a disproportionate impact on those rates given the lower level of pre-tax income in the prior year.

As of July 4, 2026, the Company had gross unrecognized income tax benefits of $6.0 million, of which $5.0 million, if ultimately recognized, may affect the Company’s effective income tax rate in the periods settled. The Company has recorded tax positions for which the ultimate deductibility is more likely than not, but for which there is uncertainty about the timing of such deductions.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 12 – EARNINGS PER SHARE

The following is a reconciliation of basic common shares outstanding to diluted common and common equivalent shares outstanding:


	Fiscal quarter ended				Two fiscal quarters ended
	July 4, 2026		June 28, 2025		July 4, 2026		June 28, 2025
Weighted-average number of common and common equivalent shares outstanding:
Basic number of common shares outstanding	35,591,295		35,409,988		35,542,362		35,361,039
Dilutive effect of equity awards	8,865		—		5,093		605
Diluted number of common and common equivalent shares outstanding	35,600,160		35,409,988		35,547,455		35,361,644

Earnings per share:
(dollars in thousands, except per share data)
Basic net income per common share:
Net income	$	104,958	$	446	$	119,294	$	15,985
Income allocated to participating securities	(2,846)		(231)		(3,332)		(866)
Net income available to common shareholders	$	102,112	$	215	$	115,962	$	15,119
Basic net income per common share	$	2.87	$	0.01	$	3.26	$	0.43

Diluted net income per common share:
Net income	$	104,958	$	446	$	119,294	$	15,985
Income allocated to participating securities	(2,845)		(231)		(3,332)		(866)
Net income available to common shareholders	$	102,113	$	215	$	115,962	$	15,119

Diluted net income per common share	$	2.87	$	0.01	$	3.26	$	0.43

Anti-dilutive awards excluded from diluted earnings per share computation(*)	124,246		269,133		134,419		316,202

(*)The anti-dilutive shares excluded from diluted net income per common share primarily relate to out-of-the-money stock options.

The Company grants shares of its common stock in the form of restricted stock awards to certain key employees under the Company’s Amended and Restated Equity Incentive Plan. Prior to vesting of the restricted stock awards, the grant recipients are entitled to receive non-forfeitable cash dividends if the Company declares and pays dividends on the Company’s common stock. Accordingly, unvested shares of the Company’s restricted stock awards are deemed to be participating securities for purposes of computing earnings per share (“EPS”).

Beginning with restricted stock awards granted on or after May 13, 2026, grant recipients are entitled to receive forfeitable cash dividends if the Company declares and pays dividends on its common stock. Any such dividends accrue and are paid to the grant recipient only upon vesting of the underlying shares and are forfeited if the underlying award is forfeited. As a result, unvested restricted stock awards granted on or after May 13, 2026 are not deemed to be participating securities for purposes of computing EPS. Restricted stock awards granted prior to May 13, 2026 continue to be treated as participating securities.

NOTE 13 – ORGANIZATIONAL RESTRUCTURING

In fiscal 2025, the Company initiated an organizational restructuring of its offices-based workforce to right-size its cost structure and improve future profitability. In connection with this restructuring, the Company recorded charges of $9.8 million in Selling, general, and administrative expenses in fiscal 2025, primarily related to severance and other termination benefits.

As of January 3, 2026, the Company had an accrual of $8.8 million related to these actions recorded in Other current liabilities on the condensed consolidated balance sheets. During the first two quarters of fiscal 2026, the Company paid substantially all of the remaining severance and other termination benefits and completed the restructuring. The Company recorded no charges related to this restructuring during the second quarter or the first two quarters of fiscal 2026.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 14 – SEGMENT INFORMATION

The Company reports segment information based upon a “management approach.” The management approach refers to the internal reporting that is used by management for making operating decisions and assessing the performance of the Company’s reportable segments.

The Company has three operating and reportable segments: U.S. Retail, U.S. Wholesale, and International. The U.S. Retail segment consists of revenue primarily from sales of products in the United States through our retail stores, eCommerce websites, and mobile app. Similarly, the U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale partners. The International segment consists of revenue primarily from sales of products outside the United States, largely through our retail stores and eCommerce websites in Canada and Mexico, and sales to our international wholesale customers and licensees. The Company sells similar products in each of its three segments.

The Company’s chief operating decision maker is the Chief Executive Officer. The chief operating decision maker evaluates the operating performance of the segments based upon each segment’s net sales and segment operating income. Segment operating income includes net sales, royalty income, and related cost of goods sold and selling, general, and administrative expenses attributable to each segment. Segment operating income excludes unallocated corporate expenses and the impact of tariff refund recoveries, as well as specific charges that are not directly attributable to segment operations, including operating model improvement costs, restructuring costs, leadership transition costs, specific intellectual property litigation costs, and impairment charges related to goodwill and indefinite-lived intangible assets. The Company does not evaluate performance or allocate resources based on segment asset data, and therefore total segment assets are not presented.

Certain costs, including incentive compensation for certain employees, and various other general corporate costs that are not specifically allocable to segments, are included in unallocated corporate expenses below.

Segment Performance

The table below presents certain segment information for the Company’s reportable segments for the periods indicated:


	Fiscal quarter ended July 4, 2026
(dollars in thousands)	U.S. Retail		U.S. Wholesale		International		Total
Net sales	$	304,677	$	215,552	$	95,261	$	615,490
Cost of goods sold(1)	123,769		158,647		48,143		330,559
Selling expenses(2)	124,464		2,431		28,052		154,947
Distribution expenses(3)	17,020		14,512		5,397		36,929
Other segment items(4)	35,171		10,221		8,259		53,651
Segment operating income	$	4,253	$	29,741	$	5,410	$	39,404

(1)Tariff refund recoveries are excluded from segment operating income.

(2)Selling expenses include the costs of operating our retail stores and eCommerce channels, as well as wholesale sales management costs.

(3)Distribution expenses include payments to third-party shippers and handling costs to process product through our distribution facilities, including eCommerce fulfillment costs, and delivery to our wholesale customers and to our retail stores.

(4)Other segment items include royalty income and overhead costs that are attributable to our reportable segments and include allocated accounting, finance, human resources, and information technology expenses, occupancy costs, and other benefit and compensation programs, including performance-based compensation.


	Two fiscal quarters ended July 4, 2026
(dollars in thousands)	U.S. Retail		U.S. Wholesale		International		Total
Net sales	$	636,925	$	466,959	$	192,719	$	1,296,603
Cost of goods sold	268,302		350,382		99,116		717,800
Selling expenses	250,618		4,839		56,200		311,657
Distribution expenses	37,322		28,916		11,585		77,823
Other segment items	67,393		16,296		16,249		99,938
Segment operating income	$	13,290	$	66,526	$	9,569	$	89,385

Note: See footnotes above.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


	Fiscal quarter ended June 28, 2025
(dollars in thousands)	U.S. Retail		U.S. Wholesale		International		Total
Net sales	$	299,549	$	192,998	$	92,766	$	585,313
Cost of goods sold	116,495		138,068		48,990		303,553
Selling expenses	127,246		2,420		26,227		155,893
Distribution expenses	18,210		15,184		5,022		38,416
Other segment items	33,830		10,264		8,920		53,014
Segment operating income	$	3,768	$	27,062	$	3,607	$	34,437

Note: See footnotes above.


	Two fiscal quarters ended June 28, 2025
(dollars in thousands)	U.S. Retail		U.S. Wholesale		International		Total
Net sales	$	593,980	$	443,094	$	178,065	$	1,215,139
Cost of goods sold	237,144		308,676		96,469		642,289
Selling expenses	248,768		4,810		50,481		304,059
Distribution expenses	37,460		30,411		11,138		79,009
Other segment items	64,532		16,825		16,586		97,943
Segment operating income	$	6,076	$	82,372	$	3,391	$	91,839

Note: See footnotes above.

The table below presents a reconciliation of reportable segment operating income to Income before income taxes:


	Fiscal quarter ended				Two fiscal quarters ended
	July 4, 2026		June 28, 2025		July 4, 2026		June 28, 2025
Total segment operating income	$	39,404	$	34,437	$	89,385	$	91,839
Items not included in segment operating income:
Tariff refund recovery(1)	127,669		—		127,669		—
Unallocated corporate expenses(2)	(21,304)		(22,687)		(42,842)		(44,699)
Leadership transition costs(3)	(4,726)		(1,068)		(4,726)		(7,194)
IP litigation costs(4)	(1,217)		—		(1,217)		—
Operating model improvement costs(5)	—		(6,638)		—		(9,800)
Consolidated operating income	$	139,826	$	4,044	$	168,269	$	30,146
Interest expense	11,312		7,857		23,069		15,676
Interest income	(8,483)		(4,292)		(11,739)		(7,434)
Other expense (income), net	352		(1,224)		438		(1,148)
Income before income taxes	$	136,645	$	1,703	$	156,501	$	23,052

(1)Related to $128 million of IEEPA tariff recoveries, excluding interest received, which are reflected as a reduction of Cost of goods sold in our condensed consolidated statement of operations.

(2)Unallocated corporate expenses include corporate overhead expenses that are not directly attributable to one of our business segments and include unallocated accounting, finance, legal, human resources, and information technology expenses, occupancy costs for our corporate headquarters, and other benefit and compensation programs, including performance-based compensation.

(3)Related to costs associated with the retirement of Michael D. Casey, the Company’s former Chief Executive Officer, in the first quarter of fiscal 2025 and costs related to the departure of Douglas C. Palladini, the Company’s former Chief Executive Officer, in the second quarter of fiscal 2026. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.

(4)Reflects third-party legal defense costs incurred in connection with a specific intellectual property litigation matter not in the ordinary course of business described in Note 15, Commitments and Contingencies to the condensed consolidated financial statements. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.

(5)Primarily related to third-party consulting costs to support operating model improvements. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Additional Data by Segment

The table below presents additional information for our reportable segments for the periods presented:

Depreciation and amortization expense


	Fiscal quarter ended				Two fiscal quarters ended
	July 4, 2026		June 28, 2025		July 4, 2026		June 28, 2025
U.S. Wholesale	$	1,865	$	2,182	$	3,823	$	4,359
U.S. Retail	8,006		8,459		16,476		16,759
International	2,689		2,472		5,406		4,794
Unallocated corporate	463		446		943		901
Total	$	13,023	$	13,559	$	26,648	$	26,813

NOTE 15 – COMMITMENTS AND CONTINGENCIES

The Company is subject to various claims and pending or threatened lawsuits in the normal course of business. The Company is a defendant in a legal matter related to allegations of intellectual property infringement. Given the inherent uncertainty of litigation, it is reasonably possible that we may incur a loss; however, the Company is unable to estimate the likelihood of a loss or the range of possible loss at this time. The ultimate outcome of this matter, including our estimate that it is reasonably possible a loss could be incurred, is inherently uncertain and the ultimate outcome of the litigation could be materially different from our current estimates.

The Company’s contractual obligations and commitments include obligations associated with leases, the secured revolving credit agreement, senior notes, and employee benefit plans.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Statements in this Quarterly Report on Form 10-Q that are not historical fact and use predictive words such as “estimates”, “outlook”, “guidance”, “expect”, “believe”, “intend”, “designed”, “target”, “plans”, “may”, “will”, “are confident” and similar words are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements and related assumptions involve risks and uncertainties that could cause actual results and outcomes to differ materially from any forward-looking statements or views expressed in this Form 10-Q. These risks and uncertainties include, but are not limited to, those disclosed in Part II, Item 1A. “Risk Factors” of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 2026 and Part I, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2026, and otherwise in our reports and filings with the Securities and Exchange Commission, as well as the following factors: changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits; risks related to public health crises; risks related to the organizational restructuring plan, including, but not limited to, our ability to achieve the expected savings from the plan and to fully implement the plan; risks related to consumer tastes and preferences, as well as fashion trends; the failure to protect our intellectual property; the diminished value of our brands, potentially as a result of negative publicity or unsuccessful branding and marketing efforts; delays, product recalls, or loss of revenue due to a failure to meet our quality standards; risks related to uncertainty regarding the future of international trade agreements and the United States’ position on international trade, as well as significant political, trade, and regulatory developments and other circumstances beyond our control; the roll-back of incremental tariffs imposed under the International Emergency Economic Powers Act (the “incremental tariffs”) and any additional actions taken in response to their roll-back, including, but not limited to, tariffs imposed pursuant to Section 122 of the Trade Act of 1974 and tariffs imposed under Section 301 of the Trade Act of 1974; our ability to recover refunds of incremental tariff amounts or other tariff amounts paid; increased competition in the marketplace; financial difficulties for one or more of our major customers; identification of locations and negotiation of appropriate lease terms for our retail stores; distinct risks facing our eCommerce business; failure to forecast demand for our products and our failure to manage our inventory; increased margin pressures, including increased cost of materials and labor and our inability to successfully increase prices to offset these increased costs; continued inflationary pressures with respect to labor and raw materials and global supply chain constraints that have, and could continue, to affect freight, transit, and other costs; fluctuations in foreign currency exchange rates; unseasonable or extreme weather conditions; risks associated with corporate responsibility issues; our foreign sourcing arrangements; a relatively small number of vendors supply a significant

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

amount of our products; disruptions in our supply chain, including increased transportation and freight costs; our ability to effectively source and manage inventory; problems with our Braselton, Georgia distribution facility; pending and threatened lawsuits; a breach of our information technology systems and the loss of personal data or a failure to implement new information technology systems successfully; unsuccessful expansion into international markets; failure to comply with various laws and regulations; failure to properly manage strategic initiatives; retention of key individuals; acquisition and integration of other brands and businesses; failure to achieve sales growth plans and profitability objectives to support the carrying value of our intangible assets; our continued ability to meet obligations related to our debt; changes in our tax obligations, including additional customs, duties or tariffs; our continued ability to declare and pay a dividend; volatility in the market price of our common stock; and the cost or effort required for our shareholders to bring certain claims or actions against us, as a result of our designation of the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings. Except for any ongoing obligations to disclose material information as required by federal securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The inclusion of any statement in this Quarterly Report on Form 10-Q does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

OVERVIEW

We are North America’s largest and most enduring apparel company exclusively for babies and young children. Our core brands are Carter’s and OshKosh B’gosh (or “OshKosh”), iconic and among the sector’s most trusted names. Our exclusive Carter’s brands, which consist of Child of Mine, Just One You, and Simple Joys, are developed for Walmart, Target, and Amazon. Our emerging brands include Little Planet, crafted with organic fabrics and sustainable materials, Otter Avenue, a toddler-focused apparel brand, and Skip Hop, baby essentials from tubs to toys.

Established in 1865, our Carter’s brand is recognized and trusted by consumers for high-quality apparel and accessories for children in sizes newborn to 14.

Established in 1895, OshKosh is a well-known brand, trusted by consumers for high-quality apparel and accessories for children in sizes newborn to 14, with a focus on playclothes for toddlers and young children. We acquired OshKosh in 2005.

Established in 2003, the Skip Hop brand rethinks, reenergizes, and reimagines durable necessities to create higher value, superior quality, and award-winning products for parents, babies, and toddlers. We acquired Skip Hop in 2017.

Launched in 2021, the Little Planet brand focuses on sustainable clothing through the sourcing of mostly organic cotton as certified under the Global Organic Textile Standard (“GOTS”), a global textile processing standard for organic fibers. This brand includes a wide assortment of baby and toddler apparel, accessories, and sleepwear.

Launched in 2025, Otter Avenue is a toddler brand that focuses on functionality designed to encourage independence, while combining fun, sophistication, and fashion-forward styles. This brand includes a curated assortment of toddler apparel and accessories.

Additionally, Child of Mine, an exclusive Carter’s brand, is sold at Walmart, Just One You, an exclusive Carter’s brand, is sold at Target, and Simple Joys, an exclusive Carter’s brand, is available on Amazon.

Our purpose is to embrace the wonder of childhood and uplift those shaping the future. We believe our brands are complementary to one another in product offering and aesthetic. Each brand is uniquely positioned in the marketplace and offers great value to families with young children. Our multichannel, global business model, which includes retail stores, eCommerce, mobile app, and wholesale distribution channels, as well as omni-channel capabilities in the United States and Canada, enables us to reach a broad range of consumers around the world.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

As of July 4, 2026, our channels included 1,042 company-operated retail stores in North America, eCommerce websites, approximately 19,500 wholesale locations in North America, as well as our international wholesale accounts and licensees who operate in over 1,100 locations outside of North America in over 90 countries.

The following is a discussion of our results of operations and current financial condition. This should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this Form 10-Q and audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the 2025 fiscal year ended January 3, 2026.

Fiscal Periods

Segments

We have three operating and reportable segments: U.S. Retail, U.S. Wholesale, and International. Our U.S. Retail segment consists of revenue primarily from sales of products in the United States through our retail stores, eCommerce websites, and mobile app. Our U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale customers. Our International segment consists of revenue primarily from sales of products outside the United States, largely through our retail stores and eCommerce websites in Canada and Mexico, and sales to our international wholesale customers and licensees. The Company sells similar products in each of its three segments.

Gross Profit and Gross Margin

Gross profit represents consolidated net sales less cost of goods sold. Gross margin is calculated as gross profit divided by consolidated net sales. Cost of goods sold includes the cost of products, as well as changes in inventory reserves and expenses related to the merchandising, design, and procurement of product, including inbound freight costs, purchasing and receiving costs, and inspection costs. Cost of goods sold also includes the costs of shipping eCommerce orders directly to end consumers. For omni-channel transactions, Cost of goods sold includes the costs of shipping product to end consumers or to retail stores. Our gross profit and gross margin may not be comparable to those of other entities that define their metrics differently.

Retail store occupancy costs, distribution expenses, and generally all other expenses other than interest and income taxes are included in Selling, general, and administrative (“SG&A”) expenses. Distribution expenses included in SG&A primarily consist of payments to third-party shippers and handling costs to process product through the Company’s distribution facilities, including eCommerce fulfillment costs, and delivery of product to wholesale customers and to our retail stores.

Comparable Sales Metrics

We present comparable sales metrics because we consider them an important supplemental measure of our U.S. Retail and International performance, and the Company uses such information to assess the performance of the U.S. Retail and International segments. Additionally, we believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of our business.

Our comparable sales metrics include sales for all stores and eCommerce sites that were open and operated by us during the comparable fiscal period, including stand-alone format stores that converted to multi-branded format stores and certain remodeled or relocated stores. A store or site becomes comparable following 13 consecutive full fiscal months of operations. If a store relocates within the same center with no business interruption or material change in square footage, the sales of such store will continue to be included in the comparable store metrics. If a store relocates to another center more than five miles away, or there is a material change in square footage, such store is treated as a new store. Stores that are closed during the relevant fiscal period are included in the comparable store sales metrics up to the last full fiscal month of operations. In fiscal

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

years that include a 53rd week, we adjust the prior year comparable period to include a 53rd week so comparable sales reflect an equivalent number of weeks in each period.

The method of calculating sales metrics varies across the retail industry. As a result, our comparable sales metrics may not be comparable to those of other retailers.

Recent Developments

Executive Leadership Transition

On May 1, 2026, the Company announced that the Board of Directors (the “Board”) appointed Sharon Price John as Chief Executive Officer & President of the Company and a member of the Board effective June 15, 2026. In connection with the appointment of Ms. John, Douglas C. Palladini departed the Company as Chief Executive Officer & President and resigned as a member of the Board effective April 28, 2026. Additional information regarding these management changes and related arrangements is included in the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2026.

Trade Policy

During the first quarter of fiscal 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unlawful. During the second quarter of fiscal 2026, following the April 20, 2026 launch of U.S. Customs and Border Protection’s Consolidated Administration and Processing of Entries (“CAPE”) process, the Company submitted claims seeking approximately $130 million of refunds of previously paid IEEPA tariffs through the CAPE system.

During the second quarter of fiscal 2026, the Company received refund payments from U.S. Customs and Border Protection totaling approximately $132 million, including interest, in connection with various adjudicated claims, and the related recovery has been recognized. The Company recorded approximately $128 million of the recovery as a reduction of Cost of goods sold and $4 million in Interest income. As of July 4, 2026, the Company’s remaining unadjudicated IEEPA refund claims, which continue to be accounted for as gain contingencies, were approximately $2 million. Uncertainty remains regarding the timing, amount, and ultimate receipt of any further refunds, and accordingly no additional amounts have been recognized in the condensed consolidated financial statements for these remaining claims.

In response to the ruling on IEEPA tariffs, the U.S. Administration imposed a new 10% global tariff under Section 122 of the Trade Act of 1974 (“Section 122”), effective February 24, 2026. In May 2026, the U.S. Court of International Trade issued a ruling finding the Section 122 tariffs unlawful, although this ruling is currently stayed pending appeal. During the first two quarters of fiscal 2026, the Company paid approximately $26 million of incremental Section 122 tariffs related to imports from Vietnam, India, Bangladesh, Cambodia, and other countries. As of July 4, 2026, approximately $18 million of these tariffs remained capitalized within the Company’s inventory balances.

The Section 122 tariffs imposed effective February 24, 2026 expired on July 24, 2026. Effective July 24, 2026, the U.S. Administration imposed additional tariffs under Section 301(b) of the Trade Act of 1974 (“Section 301”) as a result of the Administration’s investigations into forced labor practices of various foreign countries. These tariffs range from 10% to 12.5% and apply to imports from approximately 60 countries and territories. In addition, the U.S. Administration is continuing its separate investigation, under Section 301(b), into excess capacity and production in manufacturing sectors in foreign countries, signaling its intent to maintain tariff levels comparable to those previously in effect under the IEEPA tariffs. As of the date of this filing, no proposed tariffs have been imposed as a result of the excess capacity investigation. Because the Company sources substantially all of its apparel and other products from a global network of third-party suppliers, primarily located in Asia, any new or increased tariffs, quotas, embargoes, or other trade barriers have the potential to adversely affect its supply chain, cost structure, margins, and competitiveness. Retaliatory actions taken by impacted countries could further disrupt global trade and create additional inflationary pressures in raw materials and logistics.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Second Fiscal Quarter 2026 Financial Highlights

Unless otherwise stated, comparisons below are to the second quarter of fiscal 2025. References below to adjusted operating income, adjusted net income, and adjusted diluted net income per common share are non-GAAP financial measures; see “Reconciliation of Non-GAAP Financial Measures to GAAP Measures.”

•Consolidated net sales increased $30.2 million, or 5.2%, to $615.5 million.

◦U.S. Retail sales increased $5.1 million driven by higher unit volume. Comparable net sales, including retail stores and eCommerce, increased 5.1% for the period, reflecting a fifth consecutive quarter of positive comparable net sales growth.

◦U.S. Wholesale sales increased $22.6 million, driven by growth in our core and exclusive Carter’s brands, as well as in Skip Hop, and strong demand for Fall product, which was partially offset by lower sales to our off-price wholesale channel customers.

◦International sales increased $2.5 million, driven by growth in Mexico and Canada, partially offset by unfavorable timing of shipments to our international partners.

•Consolidated gross profit increased $130.8 million, or 46.4%, to $412.6 million, and consolidated gross margin increased 1,890 bps to 67.0%, primarily due to $128 million of IEEPA tariff refund recoveries and higher average unit retail (“AUR”), partially offset by higher average unit cost (“AUC”) driven by incremental tariff-related costs, investment in product make, and channel mix.

•Consolidated SG&A expenses decreased $4.8 million, or 1.7%, to $276.1 million. SG&A as a percentage of consolidated net sales (“SG&A rate”) decreased 310 bps to 44.9%, driven by fixed cost leverage on higher net sales, costs related to operating model improvements in the second quarter of fiscal 2025 that did not reoccur in the second quarter of fiscal 2026, reduced costs resulting from previously implemented restructuring actions, lower performance-based compensation, and lower distribution costs, partially offset by higher leadership transition costs, incremental marketing investments, and inflationary pressure in retail store-related expenses.

•Consolidated operating income increased $135.8 million to $139.8 million and adjusted operating income increased $6.4 million, or 54.1%, to $18.1 million. Operating margin increased 2,200 bps to 22.7%, primarily due to the factors discussed in detail below, including $128 million of IEEPA tariff refund recoveries.

•Consolidated net income increased $104.5 million to $105.0 million, primarily due to the factors discussed in detail below. Adjusted net income increased $3.1 million, or 49.3%, to $9.4 million.

•Diluted net income per common share increased $2.86 to $2.87 and adjusted diluted net income per common share increased $0.09, or 52.9%, to $0.26.

•During the first two quarters of fiscal 2026, we opened 4 stores and closed 29 stores in the United States.

•As a result of our strong financial position and available liquidity, we returned $9.1 million in cash dividends to our shareholders in the second quarter of fiscal 2026.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

RESULTS OF OPERATIONS

SECOND FISCAL QUARTER ENDED JULY 4, 2026 COMPARED TO SECOND FISCAL QUARTER ENDED JUNE 28, 2025

The following table summarizes our results of operations.


	Fiscal quarter ended
(dollars in thousands, except per share data)	July 4, 2026			June 28, 2025			$ Change		% / bps Change
Consolidated net sales	$	615,490		$	585,313		$	30,177	5.2	%
Cost of goods sold	202,891			303,553			(100,662)		(33.2)	%

Gross profit	412,599			281,760			130,839		46.4	%
Gross profit as % of consolidated net sales	67.0		%	48.1		%			1,890 bps
Royalty income, net	3,362			3,249			113		3.5	%
Royalty income as % of consolidated net sales	0.5		%	0.6		%			(10) bps
Selling, general, and administrative expenses	276,135			280,965			(4,830)		(1.7)	%
SG&A expenses as % of consolidated net sales	44.9		%	48.0		%			(310) bps


Operating income	139,826			4,044			135,782		>100%
Operating income as % of consolidated net sales	22.7		%	0.7		%			2,200 bps
Interest expense	11,312			7,857			3,455		44.0	%
Interest income	(8,483)			(4,292)			(4,191)		97.6	%
Other expense (income), net	352			(1,224)			1,576		nm

Income before income taxes	136,645			1,703			134,942		>100%
Income tax provision	31,687			1,257			30,430		>100%
Effective tax rate(*)	23.2		%	73.8		%			nm
Net income	$	104,958		$	446		$	104,512	>100%

Basic net income per common share	$	2.87		$	0.01		$	2.86	>100%
Diluted net income per common share	$	2.87		$	0.01		$	2.86	>100%
Dividend declared and paid per common share	$	0.25		$	0.25		$	—	—	%

(*)Effective tax rate is calculated by dividing the provision for income taxes by income before income taxes.

Note: Results may not be additive due to rounding. If applicable, percentage changes that are not considered meaningful are denoted with “nm”.

Consolidated Net Sales

Consolidated net sales increased $30.2 million, or 5.2%, to $615.5 million. The increase in net sales was driven by increased net sales in each of our U.S. Wholesale, U.S. Retail, and International segments. AUR increased by a mid-single digit percentage, primarily reflecting higher realized pricing and sales leverage in U.S. Wholesale, as well as the favorable impact of changes in foreign currency exchange rates used for translation. Unit volume increased by a low-single digit percentage driven by growth in U.S. Wholesale and U.S. Retail, partially offset by unit volume decline in our International segment. Changes in foreign currency exchange rates used for translation had a favorable effect on our consolidated net sales of $2.4 million.

Gross Profit and Gross Margin

Consolidated gross profit increased $130.8 million, or 46.4%, to $412.6 million and consolidated gross margin increased 1,890 bps to 67.0%. The increase in consolidated gross profit and gross margin was driven by approximately $128 million of IEEPA tariff refund recoveries and higher AUR, partially offset by higher AUC and channel mix. AUC, which excludes the impact of tariff refund recoveries, increased by a low-double digit percentage, driven by incremental domestic and international tariff-related costs and investments in product make. Incremental tariff-related costs, which represent tariff costs in excess of the duty rates in effect prior to the tariff actions initiated in fiscal 2025, unfavorably impacted Cost of goods sold by approximately $28 million.

Selling, General, and Administrative Expenses

Consolidated SG&A expenses decreased $4.8 million, or 1.7%, to $276.1 million and decreased as a percentage of consolidated net sales by 310 bps to 44.9%. This decrease in SG&A rate was driven by fixed cost leverage on higher net sales, costs related to operating model improvements in the second quarter of fiscal 2025 that did not reoccur in the second quarter of fiscal 2026, reduced costs resulting from previously implemented restructuring actions, lower performance-based compensation, and lower

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

distribution costs. This was partially offset by increased leadership transition costs, incremental marketing investments, and inflationary pressure in retail store-related expenses.

Operating Income

Consolidated operating income increased $135.8 million to $139.8 million and increased as a percentage of net sales by 2,200 bps to 22.7%, primarily due to the factors previously discussed.

Interest Expense

Consolidated interest expense increased $3.5 million, or 44.0%, to $11.3 million, reflecting the impact of the Company’s fourth quarter of fiscal 2025 issuance of $575.0 million principal amount of 7.375% senior notes due 2031 and redemption of $500.0 million principal amount of 5.625% senior notes due 2027.

Interest Income

Consolidated interest income increased $4.2 million to $8.5 million, primarily driven by approximately $4 million of interest recognized on IEEPA tariff refund recoveries.

Other Expense (Income), Net

Consolidated other expense was $0.4 million in the second quarter of fiscal 2026 compared to consolidated other income of $1.2 million in the second quarter of fiscal 2025, which was primarily driven by changes in foreign currency exchange rates during the period.

Income Taxes

Consolidated income tax provision increased $30.4 million to $31.7 million and the effective tax rate decreased to 23.2% from 73.8% in the prior period. The increase in the consolidated income tax provision was driven by higher pre-tax income, while the decrease in the effective tax rate was primarily attributable to discrete tax items recognized in the prior comparable period, including incremental tax expense related to expiring stock-based compensation, which had a disproportionate impact on the effective tax rate given the lower level of pre-tax income in that period.

Net Income

Consolidated net income increased $104.5 million to $105.0 million, driven by the factors previously discussed.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results by Segment - Second Quarter of Fiscal 2026 compared to Second Quarter of Fiscal 2025

The following table summarizes net sales by segment and segment operating income for the second quarter of fiscal 2026 and the second quarter of fiscal 2025:


	Fiscal quarter ended
(dollars in thousands)	July 4, 2026		% of consolidated net sales		June 28, 2025		% of consolidated net sales		$ Change		% Change
Net sales:
U.S. Retail	$	304,677	49.5	%	$	299,549	51.2	%	$	5,128	1.7	%
U.S. Wholesale	215,552		35.0	%	192,998		33.0	%	22,554		11.7	%
International	95,261		15.5	%	92,766		15.8	%	2,495		2.7	%
Consolidated net sales	$	615,490	100.0	%	$	585,313	100.0	%	$	30,177	5.2	%

Segment operating income:			Segment operating margin				Segment operating margin
U.S. Retail	$	4,253	1.4	%	$	3,768	1.3	%	$	485	12.9	%
U.S. Wholesale	29,741		13.8	%	27,062		14.0	%	2,679		9.9	%
International	5,410		5.7	%	3,607		3.9	%	1,803		50.0	%

Total segment operating income	$	39,404	6.4	%	$	34,437	5.9	%	$	4,967	14.4	%

Items not included in segment operating income:			Consolidated operating margin				Consolidated operating margin
Tariff refund recovery(1)	$	127,669	n/a		$	—	n/a		n/a		n/a
Unallocated corporate expenses(2)	(21,304)		n/a		(22,687)		n/a		(1,383)		(6.1)	%
Leadership transition costs(3)	(4,726)		n/a		(1,068)		n/a		n/a		n/a
IP litigation costs(4)	(1,217)		n/a		—		n/a		n/a		n/a
Operating model improvement costs(5)	—		n/a		(6,638)		n/a		n/a		n/a

Consolidated operating income	139,826		22.7	%	4,044		0.7	%	$	135,782	>100%

(1)Related to $128 million of IEEPA tariff recoveries, excluding interest received, which are reflected as a reduction of Cost of goods sold in our condensed consolidated statement of operations.

U.S. Retail

U.S. Retail segment net sales increased $5.1 million, or 1.7%, to $304.7 million, driven by higher unit volume. Unit volume increased by a low-single digit percentage driven by improved traffic and transactions in eCommerce, partially offset by the sales impact of net store closures and the timing of the Easter holiday. AUR was consistent with the prior comparable period.

Comparable net sales, including retail stores and eCommerce, increased 5.1%, reflecting a fifth consecutive quarter of positive comparable net sales growth. Comparable net sales grew in both retail stores and eCommerce, driven by higher average transaction size. As of July 4, 2026, we operated 779 retail stores in the U.S. compared to 804 as of January 3, 2026, and 809 as of June 28, 2025.

U.S. Retail segment operating income increased $0.5 million, or 12.9%, to $4.3 million, primarily driven by a decrease in SG&A expenses of $2.3 million, partially offset by a decrease in gross profit of $2.1 million. Segment operating margin

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

increased 10 bps to 1.4%, primarily driven by a 180 bps decrease in SG&A rate, partially offset by a 170 bps decrease in gross margin. The decrease in gross margin was driven by a high-single digit percentage increase in AUC, reflecting incremental tariff-related costs. The decrease in SG&A rate reflected fixed cost leverage on higher net sales, reduced costs resulting from previously implemented restructuring actions and lower store count, and lower distribution and performance-based compensation costs, partially offset by incremental marketing investments and inflationary pressure in store-related expenses.

U.S. Wholesale

U.S. Wholesale segment net sales increased $22.6 million, or 11.7%, to $215.6 million, driven by growth in our core and exclusive Carter’s brands, as well as in Skip Hop, and the earlier demand for Fall product as compared to the prior comparable period, which was partially offset by lower sales to our off-price wholesale channel customers. AUR increased by a low-double digit percentage, primarily reflecting higher realized pricing and sales leverage. Unit volume increased by a low-single digit percentage primarily driven by our exclusive Carter’s brands, partially offset by off-price wholesale channel customers.

U.S. Wholesale segment operating income increased $2.7 million, or 9.9%, to $29.7 million, primarily due to an increase in gross profit of $2.0 million and a decrease in SG&A expenses of $1.0 million. Segment operating margin decreased 20 bps to 13.8%, primarily driven by a 210 bps decrease in gross margin and a 20 bps decrease in royalty income as a percentage of net sales, partially offset by a 210 bps decrease in SG&A rate. The decrease in gross margin was driven by higher AUC, partially offset by higher AUR and decreased sales to low-margin off-price wholesale channel customers. AUC increased by a mid-teens percentage primarily driven by incremental tariff-related costs and investments in product make. The decrease in the SG&A rate reflected fixed cost leverage on higher net sales and lower distribution and performance-based compensation costs, partially offset by incremental marketing investments.

International

International segment net sales increased $2.5 million, or 2.7%, to $95.3 million, driven by growth in Mexico and Canada, partially offset by unfavorable timing of shipments to our international partners. In Mexico, net sales growth reflected higher AUR and the contribution from new retail stores, partially offset by the timing of the Easter holiday. Canada net sales growth reflected higher comparable net sales, which increased 1.3%, driven by increased AUR.

AUR increased by a mid-single digit percentage, driven by the favorable impact of foreign currency exchange rates and pricing. International segment unit volume decreased by a low-single digit percentage driven by lower shipments to our international partners. Changes in foreign currency exchange rates used for translation had a $2.4 million favorable effect on International segment net sales.

As of July 4, 2026, we operated 190 stores and 73 stores in Canada and Mexico, respectively. As of January 3, 2026, we operated 192 and 72 stores in Canada and Mexico, respectively. As of June 28, 2025, we operated 192 and 64 stores in Canada and Mexico, respectively.

International segment operating income increased $1.8 million, or 50.0%, to $5.4 million, primarily due to an increase in gross profit of $3.3 million, partially offset by an increase in SG&A expenses of $1.6 million. Segment operating margin increased 180 bps to 5.7%, driven by a 230 bps increase in gross margin, partially offset by a 50 bps increase in the SG&A rate. The increase in gross margin was driven by higher AUR and channel mix, partially offset by a low-single digit percentage increase in AUC driven by incremental tariff-related costs and channel mix. The increase in the SG&A rate was driven by higher retail store rent and retail store employee costs, partially offset by fixed cost leverage on increased net sales and lower performance-based compensation.

Unallocated Corporate Expenses

Unallocated corporate expenses include corporate overhead expenses that are not directly attributable to one of our business segments and include unallocated accounting, finance, legal, human resources, and information technology expenses, occupancy costs for our corporate headquarters, and other benefit and compensation programs, including performance-based compensation.

Unallocated corporate expenses decreased $1.4 million, or 6.1%, to $21.3 million. Unallocated corporate expenses, as a percentage of consolidated net sales, decreased 40 bps to 3.5%, driven by lower performance-based compensation and reduced costs resulting from previously implemented restructuring actions.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

TWO FISCAL QUARTERS ENDED JULY 4, 2026 COMPARED TO TWO FISCAL QUARTERS ENDED JUNE 28, 2025

The following table summarizes our results of operations.


	Two fiscal quarters ended
(dollars in thousands, except per share data)	July 4, 2026			June 28, 2025			$ Change		% / bps Change
Consolidated net sales	$	1,296,603		$	1,215,139		$	81,464	6.7	%
Cost of goods sold	590,131			642,289			(52,158)		(8.1)	%

Gross profit	706,472			572,850			133,622		23.3	%
Gross profit as % of consolidated net sales	54.5		%	47.1		%			740 bps
Royalty income, net	7,981			8,580			(599)		(7.0)	%
Royalty income, net as % of consolidated net sales	0.6		%	0.7		%			(10) bps
Selling, general, and administrative expenses	546,184			551,284			(5,100)		(0.9)	%
SG&A expenses as % of consolidated net sales	42.1		%	45.4		%			(330) bps


Operating income	168,269			30,146			138,123		>100%
Operating income as % of consolidated net sales	13.0		%	2.5		%			1,050 bps
Interest expense	23,069			15,676			7,393		47.2	%
Interest income	(11,739)			(7,434)			(4,305)		57.9	%
Other expense (income), net	438			(1,148)			1,586		nm

Income before income taxes	156,501			23,052			133,449		>100%
Income tax provision	37,207			7,067			30,140		>100%
Effective tax rate(*)	23.8		%	30.7		%			(690) bps
Net income	$	119,294		$	15,985		$	103,309	>100%

Basic net income per common share	$	3.26		$	0.43		$	2.83	>100%
Diluted net income per common share	$	3.26		$	0.43		$	2.83	>100%
Dividend declared and paid per common share	$	0.50		$	1.05		$	(0.55)	(52.4)	%

(*)Effective tax rate is calculated by dividing the provision for income taxes by income before income taxes.

Note: Results may not be additive due to rounding. Percentage changes that are not considered meaningful are denoted with “nm”.

Consolidated Net Sales

Consolidated net sales increased $81.5 million, or 6.7%, to $1.30 billion. The increase in net sales was driven by increased net sales in each of our U.S. Retail, U.S. Wholesale, and International segments. AUR increased by a mid-single digit percentage, primarily reflecting higher realized pricing and sales leverage in U.S. Wholesale, as well as the favorable impact of changes in foreign currency exchange rates used for translation. Unit volume increased by a low-single digit percentage driven by growth in our U.S. Retail and International segments, partially offset by unit volume decline in our U.S. Wholesale segment. Changes in foreign currency exchange rates used for translation had a favorable effect on our consolidated net sales of $8.0 million.

Gross Profit and Gross Margin

Consolidated gross profit increased $133.6 million, or 23.3%, to $706.5 million and consolidated gross margin increased 740 bps to 54.5%. The increase in consolidated gross profit and gross margin was driven by $128 million of IEEPA tariff refund recoveries, higher AUR, and channel mix, partially offset by higher AUC. AUC, which excludes the impact of tariff refund recoveries, increased by a low-teens percentage, driven by incremental domestic and international tariff-related costs and investments in product make. Incremental tariff-related costs unfavorably impacted Cost of goods sold by approximately $78 million.

Selling, General, and Administrative Expenses

Consolidated SG&A expenses decreased $5.1 million, or 0.9%, to $546.2 million and decreased as a percentage of consolidated net sales by 330 bps to 42.1%. The decrease in SG&A rate was driven by fixed cost leverage on higher net sales, costs related to operating model improvements in the first two quarters of fiscal 2025 that did not reoccur in the first two quarters of fiscal 2026, reduced costs resulting from previously implemented restructuring actions, lower leadership transition costs, and lower distribution costs. This was partially offset by incremental marketing investments and inflationary pressure in retail store-related expenses.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Income

Consolidated operating income increased $138.1 million to $168.3 million and increased as a percentage of net sales by 1,050 bps to 13.0%, primarily due to the factors previously discussed.

Interest Expense

Consolidated interest expense increased $7.4 million, or 47.2%, to $23.1 million, reflecting the impact of the Company’s fourth quarter of fiscal 2025 issuance of $575.0 million principal amount of 7.375% senior notes due 2031 and redemption of $500.0 million principal amount of 5.625% senior notes due 2027.

Interest Income

Consolidated interest income increased $4.3 million to $11.7 million, primarily driven by $4 million interest recognized on IEEPA tariff refund recoveries.

Other Expense (Income), Net

Consolidated other expense was $0.4 million in the first two quarters of fiscal 2026 compared to consolidated other income of $1.1 million in the first two quarters of fiscal 2025, which was primarily driven by changes in foreign currency exchange rates during the period.

Income Taxes

Consolidated income tax provision increased $30.1 million to $37.2 million, and the effective tax rate decreased 690 bps to 23.8%. The increase in the consolidated income tax provision was driven by higher pre-tax income, while the decrease in the effective tax rate was primarily attributable to discrete tax items recognized in the prior comparable period, including incremental tax expense related to expiring stock-based compensation, which had a disproportionate impact on the effective tax rate given the lower level of pre-tax income in that period.

Net Income

Consolidated net income increased $103.3 million to $119.3 million, primarily due to the factors previously discussed.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results by Segment - First Two Quarters of Fiscal 2026 compared to First Two Quarters of Fiscal 2025

The following table summarizes net sales and segment operating income, by segment, for the first two quarters of fiscal 2026 and fiscal 2025:


	Two fiscal quarters ended
(dollars in thousands)	July 4, 2026		% of consolidated net sales		June 28, 2025		% of consolidated net sales		$ Change		% Change
Net sales:
U.S. Retail	$	636,925	49.1	%	$	593,980	48.9	%	$	42,945	7.2	%
U.S. Wholesale	466,959		36.0	%	443,094		36.5	%	23,865		5.4	%
International	192,719		14.9	%	178,065		14.6	%	14,654		8.2	%
Consolidated net sales	$	1,296,603	100.0	%	$	1,215,139	100.0	%	$	81,464	6.7	%

Segment operating income:			Segment operating margin				Segment operating margin
U.S. Retail	$	13,290	2.1	%	$	6,076	1.0	%	$	7,214	118.7	%
U.S. Wholesale	66,526		14.2	%	82,372		18.6	%	(15,846)		(19.2)	%
International	9,569		5.0	%	3,391		1.9	%	6,178		182.2	%

Total segment operating income	$	89,385	6.9	%	$	91,839	7.6	%	$	(2,454)	(2.7)	%

Items not included in segment operating income:			Consolidated operating margin				Consolidated operating margin
Tariff refund recovery(1)	$	127,669	n/a		$	—	n/a		n/a		n/a
Unallocated corporate expenses(2)	(42,842)		n/a		(44,699)		n/a		(1,857)		(4.2)	%
Leadership transition costs(3)	(4,726)		n/a		(7,194)		n/a		n/a		n/a
IP litigation costs(4)	(1,217)		n/a		—		n/a		n/a		n/a
Operating model improvement costs(5)	—		n/a		(9,800)		n/a		n/a		n/a
Consolidated operating income	$	168,269	13.0	%	$	30,146	2.5	%	$	138,123	458.2	%

(1)Related to $128 million of IEEPA tariff recoveries, excluding interest received, which are reflected as a reduction of Cost of goods sold in our condensed consolidated statement of operations.

U.S. Retail

U.S. Retail segment net sales increased $42.9 million, or 7.2%, to $636.9 million. The increase in net sales was driven by higher unit volume. Unit volume increased by a mid-single digit percentage driven by higher traffic, transactions, and units per transaction in both stores and eCommerce, partially offset by the sales impact of net store closures. AUR increased by a low-single digit percentage, reflecting higher pricing, partially offset by product mix, which reflects a higher proportion of opening price point product, and increased promotional activity. Comparable net sales, including retail stores and eCommerce, increased 7.8% driven by the factors mentioned above, as well as improved average transaction size in both stores and eCommerce.

U.S. Retail segment operating income increased $7.2 million, or 118.7%, to $13.3 million, primarily due to an increase in gross profit of $11.8 million, partially offset by an increase in SG&A expenses of $4.8 million. Segment operating margin increased 110 bps to 2.1%, driven by a 330 bps decrease in the SG&A rate, partially offset by a 220 bps decrease in gross margin. The decrease in gross margin was driven by a high-single digit percentage increase in AUC as a result of incremental

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

tariff-related costs. The decrease in the SG&A rate was driven by fixed cost leverage on higher net sales, reduced costs resulting from previously implemented restructuring actions, and lower distribution costs, partially offset by incremental marketing investments and inflationary pressure in retail store-related expenses.

U.S. Wholesale

U.S. Wholesale segment net sales increased $23.9 million, or 5.4%, to $467.0 million, driven by growth in our exclusive Carter’s brands and the earlier demand for Fall product as compared to the prior comparable period, partially offset by decreased demand with certain customers and lower sales to our off-price wholesale channel customers. AUR increased by a high-single digit percentage, primarily reflecting higher realized pricing and sales leverage. Units sold decreased by a low-single digit percentage, primarily driven by lower unit volume with certain customers and with our off-price wholesale channel customers.

U.S. Wholesale segment operating income decreased $15.8 million, or 19.2%, to $66.5 million, primarily due to a decrease in gross profit of $17.8 million, partially offset by a decrease in SG&A expenses of $2.8 million. Segment operating margin decreased 440 bps to 14.2%. The drivers of the decrease in operating margin were a 530 bps decrease in gross margin, partially offset by a 130 bps decrease in SG&A rate. The decrease in gross margin was driven by a high-teens percentage increase in AUC as a result of incremental tariff-related costs and investments in product make, partially offset by increased AUR and decreased sales to low-margin off-price wholesale customers. The decrease in the SG&A rate was driven by fixed cost leverage on increased net sales, lower distribution costs, and lower bad debt expense, partially offset by incremental marketing investments.

International

International segment net sales increased $14.7 million, or 8.2%, to $192.7 million, driven by growth in Mexico and Canada, partially offset by lower sales to international partners. In Mexico, net sales growth reflected higher AUR and the contribution from new retail stores. Canadian comparable net sales, including retail stores and eCommerce, increased 2.7% driven by higher unit volume and the favorable impact of foreign currency exchange rates. International segment AUR increased by a mid-single digit percentage driven by pricing and the favorable impact of foreign currency exchange rates. International segment units sold increased by a low-single digit percentage. Changes in foreign currency exchange rates used for translation had an $8.0 million favorable effect on International segment net sales.

International segment operating income increased $6.2 million, or 182.2%, to $9.6 million, primarily due to an increase in gross profit of $12.0 million, partially offset by an increase in SG&A expenses of $5.7 million. Segment operating margin increased 310 bps to 5.0%, driven by a 280 bps increase in gross margin and a 40 bps decrease in the SG&A rate. The increase in gross margin was driven by higher AUR and channel mix, partially offset by increased AUC. AUC increased by a low-single digit percentage due to incremental tariff-related costs. The decrease in the SG&A rate was driven by fixed cost leverage on increased net sales and reduced costs resulting from previously implemented restructuring actions, partially offset by increased retail store rent and retail store employee costs.

Unallocated Corporate Expenses

Unallocated corporate expenses decreased $1.9 million, or 4.2%, to $42.8 million. Unallocated corporate expenses, as a percentage of consolidated net sales, decreased 40 bps to 3.3% driven by reduced costs resulting from previously implemented restructuring actions and lower consulting costs.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

We have provided non-GAAP adjusted cost of goods sold, gross profit, SG&A expenses, operating income, interest income, income tax provision, net income, and diluted net income per common share measures, which exclude certain items presented below. We believe that this information provides a meaningful comparison of our results and affords investors a view of what management considers to be our core performance, and we also, from time to time, use some of these non-GAAP measures, such as adjusted operating income, as performance metrics in awards under our annual and long-term incentive compensation plans. These measures are not in accordance with, or an alternative to, generally accepted accounting principles in the U.S. (GAAP). The most comparable GAAP measures are cost of goods sold, gross profit, SG&A expenses, operating income, interest income, income tax provision, net income, and diluted net income per common share, respectively. Adjusted cost of goods sold, gross profit, SG&A expenses, operating income, interest income, income tax provision, net income, and diluted net income per common share should not be considered in isolation or as a substitute for analysis of our results as reported in accordance with GAAP. Other companies may calculate adjusted cost of goods sold, gross profit, SG&A expenses, operating income, interest income, income tax provision, net income, and diluted net income per common share differently than we do, limiting the usefulness of the measure for comparisons with other companies.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


	Fiscal quarter ended July 4, 2026
(dollars in millions, except earnings per share)	Cost of Goods Sold		Gross Profit		SG&A expenses		Operating Income		% Net Sales		Interest Income		Income Taxes		Net Income		Diluted Net Income per Common Share
As reported (GAAP)	$	202.9	$	412.6	$	276.1	$	139.8	22.7	%	$	8.5	$	31.7	$	105.0	$	2.87
Tariff refund recovery(1)	127.7		(127.7)		—		(127.7)				(4.0)		(31.6)		(100.1)		(2.73)
Leadership transition costs(2)	—		—		(4.7)		4.7				—		1.1		3.6		0.10
IP litigation costs(3)	—		—		(1.2)		1.2				—		0.3		0.9		0.03
As adjusted	$	330.6	$	284.9	$	270.2	$	18.1	2.9	%	$	4.5	$	1.5	$	9.4	$	0.26


	Two fiscal quarters ended July 4, 2026
(dollars in millions, except earnings per share)	Cost of Goods Sold		Gross Profit		SG&A expenses		Operating Income		% Net Sales		Interest Income		Income Taxes		Net Income		Diluted Net Income per Common Share
As reported (GAAP)	$	590.1	$	706.5	$	546.2	$	168.3	13.0	%	$	11.7	$	37.2	$	119.3	$	3.26
Tariff refund recovery(1)	127.7		(127.7)		—		(127.7)				(4.0)		(31.6)		(100.1)		(2.73)
Leadership transition costs(2)	—		—		(4.7)		4.7				—		1.1		3.6		0.10
IP litigation costs(3)	—		—		(1.2)		1.2				—		0.3		0.9		0.03
As adjusted	$	717.8	$	578.8	$	540.2	$	46.5	3.6	%	$	7.7	$	7.0	$	23.7	$	0.65

(1)Related to $132 million of IEEPA tariff recoveries, including $4 million of interest received.

(2)Related to the departure of Douglas C. Palladini, the Company’s former Chief Executive Officer, in the second quarter of fiscal 2026.

(3)Reflects third-party legal defense costs incurred in connection with a specific intellectual property litigation matter not in the ordinary course of business described in Note 15, Commitments and Contingencies to the condensed consolidated financial statements.


	Fiscal quarter ended June 28, 2025
(dollars in millions, except earnings per share)	Cost of Goods Sold		Gross Profit		SG&A expenses		Operating Income		% Net Sales		Interest Income		Income Taxes		Net Income		Diluted Net Income per Common Share
As reported (GAAP)	$	303.6	$	281.8	$	281.0	$	4.0	0.7	%	$	4.3	$	1.3	$	0.4	$	0.01
Operating model improvement costs(1)	—		—		(6.6)		6.6				—		1.6		5.0		0.14
Leadership transition costs(2)	—		—		(1.1)		1.1				—		0.3		0.8		0.02
As adjusted	$	303.6	$	281.8	$	273.3	$	11.8	2.0	%	$	4.3	$	3.1	$	6.3	$	0.17


	Two fiscal quarters ended June 28, 2025
(dollars in millions, except earnings per share)	Cost of Goods Sold		Gross Profit		SG&A expenses		Operating Income		% Net Sales		Interest Income		Income Taxes		Net Income		Diluted Net Income per Common Share
As reported (GAAP)	$	642.3	$	572.9	$	551.3	$	30.1	2.5	%	$	7.4	$	7.1	$	16.0	$	0.43
Operating model improvement costs(1)	—		—		(9.8)		9.8				—		2.4		7.4		0.21
Leadership transition costs(2)	—		—		(7.2)		7.2				—		0.6		6.6		0.18
As adjusted	$	642.3	$	572.9	$	534.3	$	47.1	3.9	%	$	7.4	$	10.0	$	30.1	$	0.83

(1)Primarily related to third-party consulting costs to support operating model improvements.

(2)Related to costs associated with the retirement of Michael D. Casey, the Company’s former Chief Executive Officer, in the first quarter of fiscal 2025.

Note: Results may not be additive due to rounding.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

LIQUIDITY AND CAPITAL RESOURCES

Our ongoing cash needs are primarily for working capital (consisting primarily of inventory), capital expenditures, employee compensation, interest on debt, the return of capital to our shareholders, and other general corporate purposes. We expect that our primary sources of liquidity will be cash and cash equivalents on hand, cash flow from operations, and available borrowing capacity under our secured asset-based revolving credit facility. We believe that our sources of liquidity are sufficient to meet our cash requirements for at least the next twelve months. However, these sources of liquidity may be affected by events described in the “Forward-Looking Statements” section of this Form 10-Q, including, but not limited to, our risk factors discussed under the heading “Risk Factors” in Part II, Item 1A. of this Quarterly Report on Form 10-Q, the risk factors discussed under the heading “Risk Factors” in our most recently filed Annual Report on Form 10-K, and in other reports filed with the Securities and Exchange Commission from time to time.

As discussed under the heading “Known or Anticipated Trends” in our most recently filed Annual Report on Form 10-K, the impacts of new tariffs and other trade measures have had and may continue to have an adverse impact on our cost structure and supply chain, which may impact our working capital needs in the near term. While recent developments, including a decision by the U.S. Supreme Court that invalidated certain incremental tariffs, may affect our future exposure to these tariffs, the trade policy environment remains dynamic and the ultimate impacts are uncertain. We continue to evaluate and mitigate these impacts and may experience volatility in cash flows in the near term. However, we believe our sources of liquidity, including cash and available borrowing capacity under our secured asset-based revolving credit facility, will be sufficient to manage these developments.

As of July 4, 2026, we had $653.6 million of cash and cash equivalents held at major financial institutions, including $67.9 million held at financial institutions located outside of the United States. We do not expect any material restrictions on our ability to access or use cash held outside of the United States. We maintain cash deposits with major financial institutions that exceed the insurance coverage limits provided by the Federal Deposit Insurance Corporation in the United States and by similar insurers for deposits located outside the United States. To mitigate this risk, we utilize a policy of allocating cash deposits among major financial institutions that have been evaluated by us and third-party rating agencies as having acceptable risk profiles.

Balance Sheet

Net accounts receivable at July 4, 2026 were $167.9 million compared to $140.4 million at June 28, 2025 and $178.6 million at January 3, 2026. The increase of $27.5 million, or 19.6%, at July 4, 2026 compared to June 28, 2025 primarily reflects the timing of wholesale customer shipments. Due to the seasonal nature of our operations, the net accounts receivable balance at July 4, 2026 is not comparable to the net accounts receivable balance at January 3, 2026.

Inventories at July 4, 2026 were $577.7 million compared to $619.1 million at June 28, 2025 and $544.6 million at January 3, 2026. The decrease of $41.3 million, or 6.7%, at July 4, 2026 compared to June 28, 2025 was driven by lower days of supply and the timing of inbound inventory receipts, partially offset by increased product costs. Due to the seasonal nature of our operations, the inventory balance at July 4, 2026 is not comparable to the inventory balance at January 3, 2026.

Prepaid expenses and other current assets at July 4, 2026 were $73.4 million compared to $60.6 million at June 28, 2025 and $60.5 million at January 3, 2026. The increase of $12.7 million, or 21.0%, at July 4, 2026 compared to June 28, 2025 was driven by the reclassification of Rabbi Trust assets from long-term to current to align with the anticipated settlement of associated deferred compensation liabilities in fiscal 2026.

Accounts payable at July 4, 2026 were $323.6 million compared to $306.4 million at June 28, 2025 and $235.7 million at January 3, 2026. The increase of $17.2 million, or 5.6%, at July 4, 2026 compared to June 28, 2025 was driven by the timing of vendor payments. Due to the seasonal nature of our operations, the accounts payable balance at July 4, 2026 is not comparable to the accounts payable balance at January 3, 2026.

Other current liabilities at July 4, 2026 were $139.9 million compared to $95.3 million at June 28, 2025 and $133.8 million at January 3, 2026. The increase of $44.6 million, or 46.8%, at July 4, 2026 compared to June 28, 2025 was primarily driven by additional income taxes accrued for the receipt of IEEPA tariff refunds, the timing of interest payments on long-term debt, and the reclassification of deferred compensation liabilities from long-term to current to reflect the anticipated settlement of plan participant balances.

Other long-term liabilities at July 4, 2026 were $14.2 million compared to $33.4 million at June 28, 2025 and $19.4 million at January 3, 2026. The decrease of $19.2 million, or 57.6%, at July 4, 2026 compared to June 28, 2025 was primarily driven by

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

the reclassification of deferred compensation liabilities from long-term to current to reflect the anticipated settlement of plan participant balances.

Cash Flow

Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities was $202.3 million for the first two quarters of fiscal 2026 compared to net cash used in operating activities of $8.3 million in the first two quarters of fiscal 2025. Our cash flow provided by operating activities is driven by net income and changes in our working capital. The increase in operating cash flow was primarily driven by $132 million in IEEPA tariff refund recoveries, including interest, lower days of supply and the timing of inbound inventory receipts, and favorable timing of interest payments on our senior notes as compared to the prior period. The income taxes associated with the tariff refund recoveries are expected to be paid in the third quarter of fiscal 2026.

Net Cash Used in Investing Activities

Net cash used in investing activities was $12.8 million for the first two quarters of fiscal 2026 compared to $26.5 million in the first two quarters of fiscal 2025. The decrease in net cash used in investing activities was driven by decreased capital expenditures. Capital expenditures in the first two quarters of fiscal 2026 were driven by U.S. and international retail store openings and remodels and investments in our distribution facilities. We plan to invest approximately $50 million in capital expenditures in fiscal 2026, primarily for our distribution facilities and strategic information technology initiatives.

Net Cash Used in Financing Activities

Net cash used in financing activities was $21.4 million in the first two quarters of fiscal 2026 compared to $42.8 million in the first two quarters of fiscal 2025. This change in cash flow from financing activities was primarily driven by lower cash dividends distributed to shareholders during the period.

Share Repurchases

The Company did not repurchase and retire any shares of its common stock through open market transactions during the first two quarters of fiscal 2026 and 2025. The total remaining capacity under outstanding repurchase authorizations as of July 4, 2026 was approximately $599.0 million, based on settled repurchase transactions. The share repurchase authorizations have no expiration dates.

Dividends

In each of the first two quarters of fiscal 2026, the Company’s Board declared, and the Company paid, a cash dividend per common share of $0.25 (for an aggregate cash dividend per common share of $0.50 for the first two quarters of fiscal 2026). Additionally, in the first and second quarters of fiscal 2025, the Board declared, and the Company paid, a cash dividend per common share of $0.80 and $0.25, respectively (for an aggregate cash dividend per common share of $1.05 for the first two quarters of fiscal 2025). Our Board will evaluate future dividend declarations based on a number of factors, including restrictions under our secured asset-based revolving credit facility (“ABL facility”), business conditions, our financial performance, and other considerations.

Provisions in our ABL facility could have the effect of restricting our ability to pay cash dividends on, or make future repurchases of, our common stock, as further described in Note 6, Long-term Debt, to the condensed consolidated financial statements.

Financing Activities

Secured Revolving Credit Facility

As of July 4, 2026 and January 3, 2026, we had no outstanding borrowings under our ABL facility, exclusive of $5.8 million and $6.3 million of outstanding letters of credit, respectively. As of June 28, 2025, we had no outstanding borrowings under our secured cash-flow-based revolving credit facility, exclusive of $6.9 million of outstanding letters of credit. As of July 4, 2026, January 3, 2026, and June 28, 2025, there was approximately $568.6 million, $743.7 million, and $843.1 million available for future borrowing, respectively. Any outstanding borrowings under our ABL facility and secured cash-flow-based revolving

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

credit facility are classified as non-current liabilities on our condensed consolidated balance sheets due to contractual repayment terms under the credit facility. However, these repayment terms also allow us to repay some or all of the outstanding borrowings at any time.

ABL Facility

As of July 4, 2026, the Company was in compliance with its covenants and requirements under the ABL facility.

Senior Notes

As of July 4, 2026, the Company had $575.0 million principal amount of senior notes outstanding, bearing interest at a rate of 7.375% per annum, and maturing on February 15, 2031. On our condensed consolidated balance sheets, the $575.0 million of outstanding senior notes as of July 4, 2026 is reported net of $7.2 million of unamortized debt issuance-related costs.

On November 13, 2025, TWCC issued the $575.0 million principal amount of senior notes due 2031. TWCC received net proceeds from the offering of the senior notes of approximately $567.0 million, after deducting underwriting fees and other expenses, which TWCC used to redeem the senior notes discussed below and for other general corporate purposes. Approximately $8.0 million, including both bank fees and other third-party expenses, was capitalized in connection with the issuance and is being amortized over the term of the senior notes.

Seasonality

We experience seasonal fluctuations in our sales and profitability due to the timing of certain holidays and key retail shopping periods, which generally has resulted in lower sales and gross profit in the first half of our fiscal year versus the second half of the fiscal year. Accordingly, our results of operations during the first half of the year may not be indicative of the results we expect for the full year.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies and estimates are described under the heading “Critical Accounting Policies and Estimates” in Item 7 of our most recent Annual Report on Form 10-K for the 2025 fiscal year ended January 3, 2026. Our critical accounting

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

policies and estimates are those policies that require management’s most difficult and subjective judgments and may result in the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies and estimates include: revenue recognition and accounts receivable allowance, inventory, goodwill and other indefinite-lived intangible assets, accrued expenses, loss contingencies, accounting for income taxes, foreign currency, employee benefit plans, and stock-based compensation arrangements. There have been no material changes in these critical accounting policies and estimates from those described in our most recent Annual Report on Form 10-K.

Goodwill and Indefinite-lived Intangible Assets

In the fourth quarter of fiscal 2025, the Company performed an annual quantitative impairment test on the goodwill ascribed to each of the Company’s reporting units and on the value of its indefinite-lived intangible tradename assets as of January 3, 2026. The assumptions used in the quantitative impairment test of the goodwill of our reporting units include projected revenue growth and profitability, terminal growth rates, discount rates, market multiples, and applicable control premiums. The assumptions used in the quantitative impairment test of our indefinite-lived intangible tradename assets include projected revenue growth and profitability, terminal growth rates, discount rates, and royalty rates.

Based upon this assessment, there were no impairments on the value of goodwill or indefinite-lived intangible tradename assets. The annual assessment indicated that the fair value of assets for the U.S. Wholesale, U.S. Retail, and Other International reporting units exceeded its carrying values by at least 25%. The fair value of assets for the Canada reporting unit exceeded its carrying value by approximately 8%. The assessment indicated that the fair value of our indefinite-lived tradename assets exceeded the carrying values by at least 35%.

Sensitivity tests on the Canada reporting unit showed that a 100 bps increase in the discount rate, a 50 bps decrease in the long-term revenue growth rate, a 250 bps decrease in revenue growth rates, or a 50 bps decrease in operating margins would not change the conclusion and would not result in an impairment charge.

The Company believes that the assumptions used in the impairment tests are reasonable and supportable as of July 4, 2026, and therefore, there were no impairment charges recorded in the second or first two quarters of fiscal 2026. As of July 4, 2026, the carrying value of the goodwill ascribed to the Canada reporting unit was $37.3 million.

The degree of uncertainty associated with the assumptions used in our impairment tests is elevated in the current macroeconomic environment due to evolving trade policies. The Company continues to monitor these macroeconomic conditions, including the potential impacts from new tariffs or trade restrictions, which could adversely affect the financial performance of our reporting units and indefinite-lived intangible tradename assets. Should these conditions lead to a significant decline in projected financial results, there could be impairment charges to these assets mentioned above, to the goodwill ascribed to our other reporting units, or to our other indefinite-lived intangible tradename assets.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Currency and Interest Rate Risks

In the operation of our business, we have market risk exposures including those related to foreign currency risk and interest rates. These risks, and our strategies to manage our exposure to them, are discussed below.

Currency Risk

We contract to purchase product from third parties, primarily in Asia. While these contracts are stated in U.S. dollars, there can be no assurance that the cost for the future production of our products will not be affected by exchange rate fluctuations between the U.S. dollar and the local currencies of these contracted manufacturers. Due to the number of currencies involved, we cannot quantify the potential impact that future currency fluctuations may have on our results of operations in future periods.

The financial statements of our foreign subsidiaries that are denominated in functional currencies other than the U.S. dollar are translated into U.S. dollars using period-end exchange rates for assets and liabilities and weighted-average exchange rates for revenues and expenses. The resulting translation adjustments are recorded as a component of Accumulated other comprehensive loss.

Our foreign subsidiaries typically record sales denominated in currencies other than the U.S. dollar, which are then translated into U.S. dollars using weighted-average exchange rates. The changes in foreign currency exchange rates used for translation in the second quarter of fiscal 2026, compared to the second quarter of fiscal 2025, had a $2.4 million favorable effect on our

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)

consolidated net sales. Changes in foreign currency exchange rates used for translation in the first two quarters of fiscal 2026, compared to the first two quarters of fiscal 2025, had an $8.0 million favorable effect on our consolidated net sales.

Fluctuations in exchange rates between the U.S. dollar and other currencies may affect our results of operations, financial position, and cash flows. Transactions by our foreign subsidiaries may be denominated in a currency other than the entity’s functional currency. Foreign currency transaction gains and losses also include the impact of intercompany loans with foreign subsidiaries that are marked to market. In our condensed consolidated statement of operations, these gains and losses are recorded within Other expense (income), net. Foreign currency transaction gains and losses related to intercompany loans with foreign subsidiaries that are of a long-term nature are accounted for as translation adjustments and are included in Accumulated other comprehensive loss.

Interest Rate Risk

Our operating results are subject to risk from interest rate fluctuations on our ABL facility, which carries variable interest rates. As of July 4, 2026, there were no variable rate borrowings outstanding under the ABL facility. As a result, the impact of a hypothetical 100 bps increase in the effective interest rate would not result in a material amount of additional interest expense over a 12-month period.

Other Risks

We enter into various purchase order commitments with our suppliers. We can cancel these arrangements, although in some instances we may be subject to a termination charge reflecting a percentage of work performed prior to cancellation.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective as of July 4, 2026.

Changes in Internal Control over Financial Reporting

The principal executive officer and principal financial officer also conducted an evaluation of the Company’s internal control over financial reporting (“Internal Control”) to determine whether any changes in Internal Control occurred during the fiscal quarter ended July 4, 2026 that have materially affected, or which are reasonably likely to materially affect, Internal Control.

There were no changes in the Company’s Internal Control that materially affected, or were reasonably likely to materially affect, such control over financial reporting during the fiscal quarter ended July 4, 2026.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is subject to various claims and pending or threatened lawsuits in the normal course of our business. The Company is not currently a party to any legal proceedings that it believes would have a material adverse effect on its financial position, results of operations, or cash flows.

ITEM 1A. RISK FACTORS

Except as set forth below, there have been no material changes to the risk factors described in our Form 10-K for the 2025 fiscal year ended January 3, 2026.

Our business could be negatively impacted by political and economic risks, including from the conflict between the United States, Israel, and Iran and related geopolitical instability, that we are exposed to as a result of our global operations.

We are subject to general political and economic risks in connection with our global operations, including political instability (both in the United States and globally, including the ongoing conflict between Russia and Ukraine and the related economic and retaliatory measures), frequent hostilities between Israel and Hamas, persistent conflict in the Red Sea region, terrorist attacks, and changes in diplomatic and trade relationships, any of which may have a significant adverse effect on our business, financial condition, and results of operations. Economic uncertainty in the United States and abroad has led to growing concerns about the systemic impact of rising energy costs, geopolitical issues, or the availability and cost of credit and higher interest rates, which could further lead to increased market volatility, decreased consumer confidence, and diminished growth expectations in the U.S. economy and abroad. As our customers react to global economic conditions, we have seen and may see customers reduce spending on our products and take additional precautionary measures to limit or delay expenditures and preserve capital and liquidity, thereby adversely affecting our customers’ ability or willingness to purchase our products.

In addition, in late February 2026, the United States and Israel launched coordinated military strikes against Iran, which retaliated with missile attacks across the region. Although we do not have material operations in the Middle East, the ongoing conflict and any further escalation, including additional military actions, retaliatory measures, sanctions, disruptions to trade or transportation routes, cyberattacks, or other governmental or market responses, has caused, and could continue to cause, significant disruptions of global energy supplies and increases in global energy prices, heightened inflationary pressures on our input costs and supply chain, negative effects on global supply chains, energy markets, commodity prices, currency exchange rates, financial markets and overall macroeconomic conditions, and adversely impact customer spending patterns in markets in which we operate. While we expect the impacts of conflict between the United States, Israel, and Iran to continue to have an effect on our business, financial condition, and results of operations, we are unable to predict the extent or nature of these impacts at this time.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Repurchases

The following table provides information about share repurchases during the second quarter of fiscal 2026:


Period	Total number of shares purchased(1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs(2)	Approximate dollar value of shares that may yet be purchased under the plans or programs(3)
April 5, 2026 through May 2, 2026	—	$	—	—	$	598,966,271

May 3, 2026 through May 30, 2026	1,913	$	34.88	—	$	598,966,271

May 31, 2026 through July 4, 2026	—	$	—	—	$	598,966,271

Total	1,913			—

(1)All the shares purchased represent shares of our common stock surrendered by our employees to satisfy required tax withholding upon the vesting of restricted stock awards between May 3, 2026 and May 30, 2026.

(2)The Company did not repurchase shares in open market transactions during the second quarter of fiscal 2026. Refer to the open market repurchases as disclosed in Note 7, Common Stock, to our accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

(3)Under share repurchase authorizations approved by our Board of Directors. The share repurchase authorizations have no expiration dates.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

N/A

ITEM 4. MINE SAFETY DISCLOSURES

N/A

ITEM 5. OTHER INFORMATION

Securities Trading Plans of Directors and Executive Officers

During the fiscal quarter ended July 4, 2026, none of the Company’s directors or officers, as defined in Section 16 of the Exchange Act, adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as defined under Item 408(a) of Regulation S-K.

ITEM 6. EXHIBITS

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

Exhibit Number

Filing Date

Filed Herewith

3.1

Amended and Restated Certificate of Incorporation of Carter’s, Inc.

8-K

3.1

May 23, 2017

3.2

Amended and Restated By-Laws of Carter’s, Inc.

8-K

3.1

November 13, 2025

10.1 *

Offer Letter, dated April 27, 2026.

8-K

10.1

May 1, 2026

10.2 *

Amended and Restated Equity Incentive Plan of Carter’s, Inc.

S-8

99.1

May 14, 2026

31.1

Rule 13a-15(e)/15d-15(e) and 13a-15(f)/15d-15(f) Certification.

31.2

Rule 13a-15(e)/15d-15(e) and 13a-15(f)/15d-15(f) Certification.

Section 1350 Certification.

101.INS

XBRL Instance Document - the instant document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

The cover page from this Quarterly Report on Form 10-Q formatted as Inline XBRL

* Indicates a management contract or compensatory plan.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CARTER’S, INC.


July 31, 2026			/s/ SHARON PRICE JOHN
			Sharon Price John
			Chief Executive Officer & President
			(Principal Executive Officer)


July 31, 2026			/s/ RICHARD F. WESTENBERGER
			Richard F. Westenberger
			Chief Financial Officer & Chief Operating Officer
			(Principal Financial & Accounting Officer)