Carter's Growth Story Gains Strength: Is More Upside Ahead?

Carter’s Inc. CRI delivered a strong second-quarter fiscal 2026, marking another step forward in its recovery journey. The company reported a 5% year-over-year increase in net sales, marking the third consecutive quarter of sales growth, while adjusted operating profit jumped 54%. Management highlighted that results exceeded expectations, supported by continued momentum in U.S. Retail and improved execution across the business.

The company’s U.S. Retail business remained a key growth driver, with comparable sales rising 5% in the quarter, extending its streak of comps growth to five consecutive quarters. Growth was supported by strong demand across core age categories, particularly baby products, while e-commerce sales accelerated with double-digit growth. Investments in digital capabilities, including improved website features, AI-powered product reviews and enhanced customer engagement tools, helped strengthen the online shopping experience and attract younger consumers, including Gen Z families.

Carter’s also benefited from broad-based segment improvements, with U.S. Wholesale sales increasing 12% year over year, driven by the demand for fall products and growth across key brands. International operations delivered higher profitability, with operating income rising 50% as productivity savings and favorable currency movements supported margins.

Looking ahead, Carter’s is focusing on leveraging its strong brand portfolio, market leadership and omnichannel capabilities to drive sustainable growth. Management emphasized a consumer-centric, data-driven approach aimed at strengthening brand equity and expanding market opportunities.

However, challenges remain, including tariff uncertainty, cautious consumer spending and pricing sensitivity. The company has moderated its full-year sales outlook while maintaining its operating profit expectations, reflecting confidence in productivity initiatives and improved execution. With strategic investments gaining traction and core businesses showing resilience, Carter’s growth trajectory appears to be strengthening.

CRI’s Price Performance, Valuation & Estimates

Carter’s shares have jumped 21.2% in the past year against the industry’s 45% decline.

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From a valuation standpoint, CRI trades at a forward price-to-earnings ratio of 10.13X compared with the industry’s average of 18.41X.

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The Zacks Consensus Estimate for CRI’s 2026 earnings per share (EPS) indicates a year-over-year decline of 5.5%, while that for 2027 suggests growth of 5%. The company’s EPS estimates for 2026 and 2027 have moved up 5.1% and 3.6%, respectively, in the past seven days.

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Carter’s currently sports a Zacks Rank #1 (Strong Buy).

Other Key Picks in the Consumer Discretionary Space

Wolverine World Wide Inc. WWW, which designs, manufactures and distributes a wide variety of casual and active footwear and apparel, currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

The Zacks Consensus Estimate for Wolverine’s current financial-year sales and earnings indicates growth of 6.5% and 20.9%, respectively, from the year-ago reported numbers. WWW delivered a trailing four-quarter earnings surprise of 7.6%, on average. 

Kontoor Brands Inc. KTB, which is a lifestyle apparel company, designs, manufactures, procures, sells, and licenses apparel, footwear, and accessories, currently carries a Zacks Rank of 2. 

The Zacks Consensus Estimate for Kontoor Brands’ current financial-year sales and EPS indicates declines of 14.3% and 6.1%, respectively, from the year-ago reported numbers. KTB delivered a trailing four-quarter earnings surprise of 21.4%, on average.

Superior Group of Companies Inc. SGC, which produces, manufactures, and sells promotional products and branded uniforms, and healthcare apparel and accessories in the United States and internationally, currently has a Zacks Rank of 2.

The Zacks Consensus Estimate for Superior Group’s current financial-year sales and EPS indicates growth of 3.1% and 39.1%, respectively, from the year-ago reported numbers. SGC delivered a negative trailing four-quarter earnings surprise of 90.2%, on average. 

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This article originally published on Zacks Investment Research (zacks.com).

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