What changed
Q3 net sales $752.5M, down 0.7%; adjusted operating income $56.9M, up 45%; full-year sales outlook cut to $2.91B to $2.93B from 2% to 3% growth on $2.898B; exclusive brands down mid single digits
When
Quarter ended October 3, 2026; results and call October 30, 2026; $132M IEEPA refund received in Q2 2026
Who it affects
Carter's Inc, owner of Carter's, OshKosh B'gosh, Skip Hop, Child of Mine (Walmart), Just One You (Target) and Simple Joys (Amazon); 1,035 stores and about 19,500 wholesale doors
What to do
Plan Q4 for heavier promotions and lower units, and test price increases SKU by SKU before November

Key takeaways

  • Carter's received $132 million in IEEPA tariff refunds, about 70% of its full-year adjusted operating income, yet cut 2026 sales guidance to $2.91 billion to $2.93 billion.
  • Exclusive brands for Walmart, Target and Amazon fell mid single digits in Q3, with prices up and units down across the company.
  • Management expects a more promotional November and December with quarter-to-date comps already down, so test price rises per SKU and cap coupon budgets now.

Carter's 2026, $ millions

  • Tariff refund132$M
  • FY adj. operating income, midpoint182.5$M
  • Q3 operating income55.8$M
  • Sales outlook cut, midpoint50$M
Source: Carter's 8-K and 10-Q filings, October 30, 2026

The quarter: profit up, sales down, outlook cut

For the 13 weeks to October 3, 2026 Carter's reported net sales of $752.5 million, down 0.7% from $757.8 million. US Retail was flat at $362.6 million with comparable sales up 0.4%; US Wholesale fell 3.8% to $273.1 million; International rose 4.5% to $116.7 million. Operating income almost doubled to $55.8 million from $29.1 million, adjusted operating income rose 45% to $56.9 million, and adjusted earnings per share were $1.03 against $0.74. Gross margin widened to 47.1% from 45.1%.

The company then trimmed the year. In July it had guided to net sales growth of 2% to 3% over fiscal 2025's $2.898 billion, which implied roughly $2.96 billion to $2.99 billion. The new range is $2.91 billion to $2.93 billion, about $50 million lower at the midpoint, blamed on continued pressure on consumers from economic and geopolitical uncertainty. Adjusted operating income guidance of $178 million to $187 million was held, and adjusted EPS is now $3.05 to $3.23 against $3.47 last year because of higher interest costs after a debt refinancing.

Where the $132 million went

The refund covers import duties Carter's paid under the International Emergency Economic Powers Act tariffs that the Supreme Court struck down in February 2026. The company received about $132 million including $4 million of interest in the second quarter, booked $128 million as a reduction of cost of goods sold, and excludes it from adjusted results. About $2 million of claims were still unadjudicated at quarter end. Set against full-year adjusted operating income of $178 million to $187 million, the refund equals roughly 70% of a whole year's underlying operating profit.

Management does not treat it as safe money. Chief financial officer Richard Westenberger said: "I don't think we're out of the woods as it relates to tariffs." The company flags the risk that replacement duties under other trade statutes follow the IEEPA rollback, and it expects only $10 million to $11 million of lower gross tariff cost in the fourth quarter, because last year's holiday goods carried the higher rates.

Carter's 2026 so far

  1. Supreme Court strikes down IEEPA tariffs

  2. $132M refund received, $128M to cost of goods

  3. Outlook: sales up 2% to 3%

  4. Q3 ends: sales down 0.7%, exclusive brands down

  5. Sales outlook cut to $2.91B to $2.93B

The exclusive brands for Amazon, Walmart and Target slipped

Carter's runs three store-exclusive labels: Child of Mine at Walmart, Just One You at Target and Simple Joys on Amazon. On the call, management said exclusive brand sales fell mid single digits in the quarter, though they remain up high single digits year to date, and the wholesale decline was mainly fall shipments that moved into the second quarter. The company did not break out any single retailer.

For an Amazon brand in baby or kids, that matters because Simple Joys is the house label it competes against in search results. The owner of that label is raising prices and watching units fall mid single digits, and it told analysts it expects the promotional environment to intensify in November and December. A brand on Vendor Central faces the same price negotiations; the Amazon Vendor Central management guide covers how those terms work.

So what: price up, units down, promotions up

Consolidated average unit retail rose mid single digits while units sold fell mid single digits, and US Retail average prices rose low single digits with units down low single digits. Half of the two-point gross margin gain came from mix toward retail and most of the rest from pricing. Carter's plans more low-single-digit price increases in US Retail in the fourth quarter, while comparable sales were already down quarter to date and September's double-digit comps followed a soft July and August.

The fourth-quarter outlook is $860 million to $880 million against $925 million a year earlier, when the quarter had 14 weeks and about $37 million of extra sales, with adjusted operating income of $74 million to $83 million against $89 million. Inventory ended 11% lower at $587 million, partly because of port delays, and the company closed more than 30 stores net in the quarter, heading for about 40 for the year. Our Amazon Q4 strategy guide sets out how to plan for a season a large competitor expects to be more promotional.

Worked example with illustrative numbers

These figures are invented to show the method. A baby apparel brand sells a $30 three-pack on Amazon at 10,000 units a quarter, or $300,000, with a 55% gross margin before ad spend. It follows Carter's playbook and lifts price 5% to $31.50. If units fall 5% to 9,500, revenue is $299,250, almost unchanged, but gross profit rises because the extra $1.50 a unit is nearly all margin: about $179,000 against $165,000, a gain of roughly $14,000.

Now add the promotional season Carter's predicts. If a 15% coupon is needed on 40% of units to hold rank in December, the blended price falls to about $29.60 and gross profit drops to roughly $156,000 on the same 9,500 units, below where the brand started. The price increase only works if it is tested per SKU in October and the coupon budget is capped in advance.

Test a price rise before Q4

  1. 1Pick

    Top 10 ASINs by revenue

  2. 2Lift

    5% for two weeks in Seller Central

  3. 3Measure

    Units versus the prior two weeks

  4. 4Cap

    Coupon budget as a share of sales

What Amazon baby and kids brands should do before Black Friday

  • Brand manager: in Seller Central, run a 5% price test on the top 10 ASINs for two weeks and compare unit velocity with the prior two weeks. Metric: revenue per ASIN flat or up with units down less than 5%.
  • PPC manager: in the ad console, set a separate Black Friday to Cyber Monday budget and a target ACoS from product margin so a heavier coupon season does not push campaigns past break-even. Metric: TACoS by week against the October baseline.
  • Finance lead: cap the total coupon and deal budget for November and December as a share of expected revenue, following the Amazon coupons and promotions guide. Metric: promotional spend as a share of sales stays within the cap.
  • Supply chain lead: review inventory against a flat-units Q4, since Carter's cut stock 11% and expects shopping compressed into the last weeks of the year. Metric: weeks of cover between 8 and 12 on hero ASINs entering December.
  • Owner: if any products were imported under IEEPA tariffs, confirm refund claims with your broker before the window closes; Carter's recovered $132 million. Metric: refund claims filed for every eligible entry.

When this does not apply

Carter's is a 1,035-store retailer and a wholesaler to about 19,500 doors, so its sales mix and bargaining power differ from a marketplace-only brand. Its exclusive-brand figure is for Walmart, Target and Amazon combined, not Amazon alone, and the company gave no retailer split. The tariff refund applies only to companies that paid IEEPA duties as importer of record; brands that bought landed goods from a distributor have no claim. Pricing power in licensed character apparel or premium organic basics may be stronger than the mid-single-digit unit decline Carter's reported.

Where PPC Spider helps

We set a target ACoS from margin after fees and build the Q4 coupon budget before the season, so a promotional December does not erase a price increase. Follow the ecommerce marketplace news channel for the next retailer earnings, or request a free Amazon audit to check your Q4 pricing and ad plan.

Sources

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