Carter’s, the North American children’s clothing retailer with roots stretching back 160 years, confronts a severe financial crisis triggered by soaring tariffs. The company anticipates $200–$250 million in annual costs from these duties, prompting plans to shutter 150 stores by 2026 and eliminate 300 corporate positions.
Financial Strain Intensifies
Carter’s adjusted operating income plummeted nearly 50% in the third quarter of fiscal 2025, falling to $39 million from $77 million the previous year. Over the first nine months of 2025, the decline exceeded 60%. Tariff expenses, which tripled after rising from 13% to as high as 30% under the Trump administration, drove much of this erosion. The company has withheld sales and earnings guidance amid ongoing uncertainty, highlighting the depth of its challenges.
Tariff Surge Reshapes Operations
The duties on imported goods are forcing Carter’s to reduce its product lineup by 20–30%, aiming for a unified global assortment to offset up to $35 million in costs. This will limit options for parents seeking affordable baby clothes, including staples from brands like OshKosh B’gosh. Price increases are also planned, with executives monitoring consumer reactions closely. Leadership, including CEO Douglas Palladini and CFO Richard Westenberger, has expressed frustration over the unpredictable landscape, shifting focus from U.S. store expansion to cost-cutting and productivity gains.
Store Closures Ripple Across Continent
By 2026, one in eight Carter’s locations—150 in total—will close, mainly due to expiring leases and tariff pressures. Around 100 closures are set for the U.S. and Canada by that year, with multiple Bay Area locations among those affected. Communities dependent on these stores for convenient baby product access face disruptions, as the retailer shrinks its physical presence significantly.
Workforce Reductions Add Pressure
Corporate staff will bear the brunt of belt-tightening, with 300 jobs cut and notifications completed by the end of 2025. These layoffs coincide with the holiday season, compounding difficulties for affected workers and families. Carter’s emphasizes cost elimination to stabilize operations, but the moves underscore broader retail vulnerabilities.
Industry-Wide Challenges and Legal Hopes
Carter’s is not isolated; over 100 firms grapple with elevated tariff costs, prompting price adjustments and lawsuits. Costco and others have sued at the U.S. Court of International Trade to secure refund rights as liquidation deadlines loom. Carter’s plans to pursue refunds if the Supreme Court invalidates the tariffs imposed via the International Emergency Economic Powers Act, potentially recovering millions. Globally, retailers face elevated import costs, accelerating a wave of closures tied to duties and evolving shopping habits.
As Carter’s navigates store rationalization, product streamlining, and potential legal relief, its century-and-a-half legacy hangs in balance. A favorable court ruling could ease the burden, but persistent tariffs risk eroding customer loyalty and market position, signaling wider pressures on U.S. retail amid policy shifts.
Sources:
“Carter’s Inc. Reports Third Quarter Fiscal 2025 Results.” Market Wire, 26 Oct 2025.
“Blaming Tariffs, Children’s Apparel Chain Carter’s to Close 150 Stores.” CoStar Group, 26 Oct 2025.
“Costco Sues Trump Administration for ‘Full Refund’ of Tariffs.” BBC News, 1 Dec 2025.