Executive Summary

Q4 2024 was modest on sales but stronger than internal plans: net sales grew 0.2% to $859.7M, adjusted operating margin was 13.4%, and adjusted EPS was $2.39, while GAAP EPS was $1.71 due to a $30M OshKosh tradename impairment .
Versus company guidance, CRI delivered above the high end on revenue, adjusted operating income, and adjusted EPS (guided Q4 revenue $800–$840M; adj OI $70–$90M; adj EPS $1.32–$1.72) driven by better holiday promotional execution and wholesale strength .
2025 outlook is notably lower: FY2025 adjusted EPS of $3.20–$3.80 and adjusted operating income of $180–$210M reflect 150–200 bps gross margin compression from residual retail price investments, wholesale mix, FX, and higher product/freight costs plus ~$30–$35M higher variable comp; tax rate ~23.5% .
Key drivers: U.S. Wholesale grew 7.3% YoY with exclusive brands; U.S. Retail comps fell 3.4% (improved trend vs 1H), International declined 2.0% (constant currency +2.6%); year-end inventories -6% YoY, operating cash flow ~$299M; liquidity $1.3B .
Stock narrative catalysts: clear beat vs company guidance, but a downbeat FY2025 guidance path and CEO transition (interim CEO appointed; external CEO search ongoing); dividend maintained at $0.80 per share .

What Went Well and What Went Wrong

What Went Well
- U.S. Wholesale strength with exclusive brands drove 7.3% YoY segment sales growth; wholesale margin >20% in Q4 .
- Holiday promotional strategy and targeted pricing investments lifted traffic/conversion and delivered a positive 5% comp over Black Friday period; management: “we achieved a 13.4% adjusted operating margin in the fourth quarter” .
- International retail delivered positive comps in Canada (+6%) and Mexico (+8%), with continued momentum in Mexico; year-end inventories -6% and operating cash flow ~$299M underpin robust liquidity ($1.3B) .
What Went Wrong
- U.S. Retail remained under pressure (comps -3.4% in Q4; full-year demand weighed by inflation/higher rates); targeted pricing reduced gross margin YoY despite lower product costs .
- International reported net sales -2% YoY in Q4 and FX remains a headwind (constant currency +2.6%); stronger USD expected to pressure 2025 profitability outside the U.S. .
- OshKosh tradename impairment ($30M pre-tax) reflected lower projected sales/earnings for the brand; 2025 guide implies gross margin down ~150–200 bps and SG&A up low single digits (variable comp restoration) .

Financial Results

Overall financials (chronological columns: Q2 2024 → Q3 2024 → Q4 2024)

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue ($USD Millions)	$564.4	$758.5	$859.7
GAAP Diluted EPS ($)	$0.76	$1.62	$1.71
Adjusted Diluted EPS ($)	$0.76	$1.64	$2.39
GAAP Operating Margin %	7.0%	10.2%	9.7%
Adjusted Operating Margin %	7.0%	10.2%	13.4%
Gross Margin %	—	46.9%	47.8%

Q4 2024 vs company guidance (company provided Q4 guidance on Oct 25)

Metric	Prior Guidance (Q4 2024)	Actual Q4 2024	Result
Revenue ($USD Millions)	$800–$840	$859.7	Beat
Adjusted Operating Income ($USD Millions)	$70–$90	$115.0	Beat
Adjusted Diluted EPS ($)	$1.32–$1.72	$2.39	Beat

Segment breakdown – Q4 2024

Segment	Net Sales ($USD Millions)	YoY Change	Segment Op Margin %
U.S. Retail	$466.2	-2.8%	15.7%
U.S. Wholesale	$265.4	+7.3%	20.5%
International	$128.1	-2.0% (CC +2.6%)	16.4%

KPIs and operating metrics

KPI	Q4 2024 / FY 2024 Value
U.S. Retail comparable sales YoY	-3.4%
U.S. Wholesale YoY growth	+7.3%
International net sales YoY	-2.0% (constant currency +2.6%)
Gross margin rate	47.8% (down ~90 bps YoY)
Year-end inventory YoY	-6%
Operating cash flow (FY)	$298.8M
Total liquidity at year-end	$1.3B (Cash $413M; $845M revolver availability)
Dividend	Declared $0.80 per share on Feb 21, 2025 (payable Mar 28, 2025)

Non-GAAP note: Q4 adjusted results exclude $30.0M OshKosh tradename impairment and $1.8M restructuring; Q4 GAAP EPS includes $0.63 impact from the impairment .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales ($B)	FY 2025 (53 wks)	—	$2.780–$2.855	New
Adjusted Operating Income ($M)	FY 2025	—	$180–$210	New
Adjusted Diluted EPS ($)	FY 2025	—	$3.20–$3.80	New
Operating Cash Flow ($M)	FY 2025	—	~$200	New
Capital Expenditures ($M)	FY 2025	—	~$65	New
Gross Margin vs FY’24	FY 2025	—	Down ~150–200 bps (pricing residuals, wholesale mix, FX, product/freight/tariffs)	New
SG&A	FY 2025	—	Up low single-digits; +$30–$35M variable comp normalization	New
Effective Tax Rate	FY 2025	—	~23.5%	New
Adjusted EPS exclusions	FY 2025	—	CEO retirement $8–$9M; operating model initiatives $9–$10M; pension termination up to $10M pre-tax	New
Net Sales ($M)	Q1 2025	—	$615–$625 ($661 Q1’24)	New
Adjusted Operating Income ($M)	Q1 2025	—	$30–$35 ($55 Q1’24)	New
Adjusted Diluted EPS ($)	Q1 2025	—	$0.45–$0.55 ($1.04 Q1’24)	New
Dividend	Ongoing	—	Board declared $0.80 per share for Mar 28, 2025 payment	Maintained

Context for Q1 2025 guide: later Easter, residual pricing investments, higher inbound freight, higher net interest and tax; retail comps planned down mid-to-high single digits; wholesale down high-single digits; international down mid-single digits .

Earnings Call Themes & Trends

Topic	Q2 2024 (Prior-2)	Q3 2024 (Prior-1)	Q4 2024 (Current)	Trend
Pricing/promotions	Record gross margin; begin planning price/marketing investments; macro weaker than expected	Implemented ~$40M price + $10M marketing plan; 3Q comps improved; barbell mix; price investments ~170 bps GM impact	~$30M price investments in Q4; holiday promotions (5% BF comp) lifted metrics; residual lower pricing to weigh 1H’25	Improving engagement; lingering 1H’25 margin headwind
U.S. Retail traffic/comps	Retail sales lower on fewer visits/conversion; plan to increase marketing	3Q comps -7% but improved vs 1H; e-comm comps improved into Oct	Q4 comps -3.4%; traffic remains key issue; conversion improved; plan assortment/marketing upgrades	Trend improving but still negative
Wholesale exclusive brands	Mass channel one-stop shift benefitting CRI	Exclusive brands record sales; off-price down ~50%	4Q wholesale +7% YoY; exclusive brands growth; dept stores down; off-price normalizing	Positive structural driver
Gross margin drivers	Lower inbound freight/product costs aided margins	GM 46.9% (-60 bps) on price investments, freight, mix	GM 47.8% (-90 bps) on pricing investments; freight and mix headwinds	Near-term pressure
Inventory/working capital	Liquidity >$1B; inventory mgmt progress	Sold through pack-and-hold; inventory quality improved	YE inventories -6%; operating cash flow ~$299M; liquidity $1.3B	Strong balance sheet
International & FX	Canada softer; International down	International down 9% reported; Mexico comps +9%	International -2% reported; CC +2.6%; Canada comps +6%, Mexico +8%; FX headwind likely in 2025	Stabilizing ex-FX
Product strategy	Strength in baby/toddler; elevate style/value	Barbell: opening price and best performing; Little Planet/PurelySoft strong	Modernizing assortment; expanding House of Brands; invest in Kids (4–14) in 2H25	Mix shift to value + premium
AI/technology	—	New inventory allocation and personalization tools referenced	AI-enabled allocation and demand forecast; AI personalization driving retention	Capability build
Sourcing/tariffs	—	—	China sourcing <5% of finished goods; fabric still China-heavy; diversify to India/Bangladesh/Vietnam; tariff risk monitored	Reduced China exposure

Management Commentary

“Our fourth quarter performance was stronger than we had forecasted with sales and earnings above the high end of the guidance … while Q4 was stronger than expected, our outlook for 2025 profitability is expected to be more challenging” — Richard F. Westenberger, Interim CEO/CFO/COO .
“We achieved a 13.4% adjusted operating margin in the fourth quarter… profitability reflected planned investments in pricing, marketing and stores” .
“On approximately 20% of our assortment … we lowered prices by $1 to $2 … we saw an increase in unit velocity … customer counts were up in Q4” .
“Wholesale continues to be a very profitable part of our business with an operating margin over 20% in the fourth quarter” .
“We’re planning 2025 operating income in the range of $180 million to $210 million … gross margin will be down approximately 150 to 200 basis points … SG&A up due to restoring variable compensation ($30–$35M)” .
“We have reduced our exposure to China pretty considerably … sub-5% of apparel sourced in China” .

Q&A Highlights

Pricing trajectory and stabilization: Management expects pricing to normalize by 2H25; residual lower pricing weighs in 1H25; wholesale pricing down modestly in plans .
Retail traffic: Primary challenge remains traffic; conversion improved; plan to lean more into brand marketing as assortment/store experience upgrades take hold .
Wholesale shelf space and outlook: Opportunity to add toddler shelf space at Walmart/Target; growth engine remains exclusive brands; department stores planned down; off-price normalizing after -50% in 2024 .
2025 bridge: Gross margin down ~150–200 bps on residual price actions, wholesale mix, FX, product/freight/tariffs; SG&A up L-SD with $30–$35M variable comp normalization; ETR ~23.5% .
Sourcing/tariffs: China finished goods <5%; fabric still China-centric but diversifying; tariff risk monitored .

Estimates Context

Wall Street consensus (S&P Global) for Q4 2024 revenue and EPS was unavailable due to data access limits at time of request; therefore, we benchmarked results against company guidance and prior periods [Values from S&P Global were unavailable at time of analysis].
Implication: CRI materially beat its own Q4 guidance on revenue, adjusted operating income, and adjusted EPS; Street estimate comparisons could further inform the magnitude of beat/miss when accessible .

Key Takeaways for Investors

Beat vs company guidance, but FY2025 guide is reset lower, with explicit drivers (GM down 150–200 bps, SG&A up on variable comp) — expect near-term estimate cuts and focus on 2H25 recovery cadence .
Structural positives: exclusive brands in mass channel, >20% wholesale margins, and liquidity ($1.3B) provide cushion to invest and navigate a softer 1H25 .
Retail turnaround hinges on traffic: early signs (holiday comp lift, improved conversion), but sustained progress depends on refreshed assortments, Kids re-invest, and marketing intensity .
Inventory discipline and cash generation continue to support dividend ($0.80) and optionality on buybacks once visibility improves; share repurchases paused in 2H24 but capacity remains large .
Watch macro/FX/tariffs/freight as key swing factors, along with CEO appointment timing and strategy update — potential catalysts for sentiment re-rating .

CARTERS INC (CRI)·Q4 2024 Earnings Summary