Carter’s closes 29 US stores as tariff refund masks underlying costs
The 161-year-old children’s clothing giant reported a surge in operating income driven by a one-time government refund, even as it continues to shed underperforming retail locations.
Carter’s, the 161-year-old children’s apparel maker, has closed 29 stores in the United States during the first two quarters of fiscal 2026, according to its filing with the Securities and Exchange Commission. The closures are part of a broader strategy to reduce costly real estate holdings, with the company operating 1,042 company-operated retail stores in North America as of 4 July 2026.
The retailer reported a 5.1% increase in comparable US sales for the second quarter of 2026, marking its fifth consecutive quarter of positive growth. However, the headline financial results were heavily influenced by a one-time $128 million government refund of previously paid tariffs.
Operating income surged to $139.8 million in the second quarter of 2026, up from $4.0 million in the same period of 2025. Stripped of the tariff refund, adjusted operating income rose to $18.1 million from $11.8 million in the prior year, indicating that underlying profitability remains under pressure despite the sales growth.
Investors reacted to the one-time nature of the refund, with Carter’s stock falling more than 8% following the announcement. The company also narrowed its full-year outlook, citing ongoing tariff costs that partially offset the benefit of the refund.
Despite the shrinking store footprint, Carter’s maintains broad customer reach through exclusive product lines sold at mass-market partners. The retailer offers specific lines for Target, Walmart, and Amazon, allowing it to capture sales from consumers who have shifted their spending habits toward big-box and online shopping.
Industry data suggests this shift is structural, with mass merchants now capturing 80% of planned spending in the back-to-school category. Carter’s returned $18 million to shareholders through dividends in the first half of fiscal 2026, while continuing a cost-cutting program that includes plans to close approximately 150 lower-margin stores in North America through 2028.
