Carter's, Inc. CRI hit a new 52-week low of $49.65 yesterday before closing at $52.21. The current price reflects a 68% discount from its 52-week high of $88.03, highlighting a challenging year for the children's apparel giant. Overall, the CRI stock has trended downward in the past year, led by shifting consumer trends and competitive pressures.

The company is also facing strong resistance levels, raising concerns among investors from a technical perspective. The stock has been trading below both the 200-day and 50-day simple moving averages (SMAs) for an extended period, reinforcing a bearish outlook.

Currently, at $52.21, CRI remains below its 200-day and 50-day SMAs of $60.16 and $54.15, respectively, indicating a possible sustained downward trend.

CRI Trades Below 50 & 200-Day SMA

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CRI has struggled for quite some time now, facing company-specific challenges that led it to underperform in the Zacks Shoes and Retail Apparel industry. In the past six months, CRI shares have lost 15.9% compared with the industry's decline of 4.4%, highlighting company-specific challenges. CRI has lagged the broader Consumer Discretionary and S&P 500 growth of 25% and 14.3%, respectively.

CRI Stock's Past 6 Months' Performance

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Factors Behind CRI’s Stock Decline

Carter's, like many in the industry, continues to face challenges from inflation and high interest rates, which have pressured consumer spending and impacted its overall performance. The suspension of pandemic-related stimulus payments to child-care centers has further strained families with young children, leading to softer demand for the company’s brands.

The company has reported declining sales in the last few quarters, following a similar trend in the previous period. Macroeconomic headwinds, including inflation and currency fluctuations, have contributed to the downturn. Across its segments, U.S. Retail saw a notable decline, with comparable sales also weakening. The U.S. Wholesale business experienced a slight dip, while the International segment faced even steeper declines, reflecting broader market challenges.

CRI is grappling with higher selling, general and administrative (SG&A) expenses as a percentage of net sales, reflecting ongoing challenges. The increase was driven by fixed-cost deleverage from lower sales, investments in brand marketing and retail stores, rising distribution expenses, and higher transportation costs. Looking ahead, Carter’s anticipates SG&A expenses to rise for fiscal 2024 due to growth-related investments and inflation, though cost-reduction initiatives are expected to help mitigate some of the impact.

CRI’s Bleak Outlook

Looking at these challenges, CRI has provided a bleak outlook for the fourth quarter of 2024, expecting a decline in net sales and profitability compared to the previous year. The company anticipates lower sales in its U.S. Retail and International businesses, with total sales in U.S. Retail projected to decline in the high single to low double digits, while International sales are expected to fall in the mid to high single digits. Comparable sales in U.S. Retail are also forecasted to drop significantly.

For 2024, Carter’s expects a decline in net sales, adjusted operating income, and earnings per share compared to 2023. The company attributes this weaker outlook to ongoing macroeconomic pressures, softer consumer demand and persistent challenges in its key markets.

Factors Contributing to CRI’s Growth

Carter's has made significant efforts in pricing to address market conditions and enhance profitability. Customers have been responding favorably to the strength in its product offerings, backed by new pricing and marketing strategies launched in the reported quarter. The company is strategically focused on essential core products, especially in the inflationary markets.

Carter’s is effectively utilizing its omnichannel capabilities to drive growth and enhance profitability. In the third quarter, nearly 38% of digital orders were fulfilled through stores, up from 35% last year, reducing shipping costs and improving margins. The company has also optimized its retail footprint by opening 40 high-margin outlets and closing about 30 low-margin stores in low-traffic areas.

Investments in AI-driven marketing personalization have further strengthened e-commerce performance, improving conversion rates and boosting key sales metrics. Looking ahead, Carter’s remains committed to enhancing its brand experience across digital and in-store platforms, working closely with wholesale partners to drive long-term growth.

Final Words on CRI Stock

Given Carter’s ongoing macroeconomic challenges, stock performance trends and weak near-term outlook, a cautious approach is warranted. However, the company’s strategic initiatives, pricing adjustments and omni-channel investments provide the potential for stabilization. Investors should monitor further developments in consumer demand trends and cost-reduction efforts. For existing shareholders, retaining the stock appears prudent, given the company’s long-term growth potential. CRI presently carries a Zacks Rank #3 (Hold).

Three Picks You Can’t Miss

We have highlighted three better-ranked stocks, namely, Wolverine World Wide WWW, Gildan Activewear GIL and lululemon athletica LULU.

Wolverine designs, manufactures and distributes a wide variety of casual and active apparel and footwear. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for WWW’s current financial-year sales indicates a decline of 22% from the year-ago reported figure. The consensus mark for EPS reflects significant growth to 90 cents from the 5 cents reported in the prior year. WWW has a trailing four-quarter earnings surprise of 17.03%, on average.

Gildan Activewear, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank #2 (Buy) at present. GIL has a trailing four-quarter earnings surprise of 5.4%, on average.

The consensus estimate for Gildan Activewear’s current financial-year EPS indicates growth of 15.6% from the year-ago figure.

lululemon is a yoga-inspired athletic apparel company. LULU has a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS indicates growth of 9.7% and 12.5%, respectively, from the year-ago corresponding figures. LULU has a trailing four-quarter earnings surprise of 6.7%, on average.

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Carter's, Inc. (CRI) : Free Stock Analysis Report

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