Carter’s posted higher first-quarter sales but warned that tariffs continue to weigh on margins, with the childrenswear retailer seeking roughly $130 million in government refunds tied to import duties.
Net sales rose more than 8% year over year to $681 million in the quarter, while net income fell 7.7% to $14.3 million.
Interim president and CEO Richard Westenberger said the company has filed claims for tariff-related refunds connected to IEEPA duties and is awaiting repayment from the government.
“We’re in line for our refund, and we’re monitoring it closely,” Westenberger told analysts on the company’s earnings call.
The retailer said tariffs remain a major source of uncertainty despite the sales growth. Westenberger noted that Carter’s has historically paid just over $100 million annually in import duties, equating to an effective tariff rate of around 13%. However, additional duties have pushed the effective rate above 35%, adding more than $200 million in incremental costs.
Carter’s expects those pressures to continue into the second quarter, forecasting a lower gross margin rate as higher tariff expenses offset gains from pricing actions, supply chain mitigation efforts and productivity improvements.
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The company expects low-single-digit sales growth in Q2 and adjusted operating income between $11 million and $13 million.
“We’re cautious that we’re out of the woods when it comes to tariffs,” Westenberger said, warning that the government could introduce new measures that reinstate or increase IEEPA-level tariffs across sourcing markets.
A number of major retailers have also pursued tariff-related refund claims, including Lululemon, Dollar General and Kohl’s.
The earnings report comes as Carter’s continues broader restructuring efforts. Last fall, the retailer said it would cut around 300 corporate roles — roughly 15% of that workforce — and close about 150 stores across North America over the next three years.
The company is also undergoing another leadership transition. Earlier this month, Carter’s named Sharon Price John as its next CEO and president, effective June 15. She succeeds Douglas Palladini, who exited the role after about a year.
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