What Happened?
Shares of children’s apparel manufacturer Carter’s (NYSE: CRI) fell 18.1% in the morning session after the company reported disappointing Q4 2024 results. Its full-year EPS guidance missed significantly and its EPS guidance for next quarter also fell short of Wall Street's estimates. Revenue was flat, as growth in U.S. Wholesale was offset by declines in U.S. Retail and International segments. Adjusted EBITDA took a hit, with margins shrinking due to higher freight costs and increased promotional spending, which hurt profitability. Management pointed to macroeconomic pressures, high interest rates, and planned pricing investments as ongoing challenges.
On the bright side, the company beat analysts' same-store sales expectations, which helped deliver an EPS beat. Still, the weak guidance is weighing on the stock.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Carter's? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Carter’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. Moves this big are rare for Carter's and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 7 months ago when the stock dropped 11.3% on the news that the company reported second quarter earnings results. Its full-year revenue guidance was lowered, and it now sits below expectations. Also its full-year earnings guidance fell short of Wall Street's estimates, so the outlook is worrisome for the retailer. Management highlighted a host of challenges. Firstly, CRI called out weaker market conditions due to declining consumer confidence and inflation, which hasn't moderated to expected levels. In addition, the company noted that, "The quarter got off to a slow start in April with the earlier Easter holiday and late arrival of warmer weather." Overall, this was a bad quarter.
Carter's is down 19% since the beginning of the year, and at $43.61 per share, it is trading 50.4% below its 52-week high of $87.92 from March 2024. Investors who bought $1,000 worth of Carter’s shares 5 years ago would now be looking at an investment worth $475.41.
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