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☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Exact name of registrant as specified in its charter)

(Address of principal executive offices, including zip code)

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No x

As of October 22, 2025, there were 36,447,868 shares of the registrant’s common stock outstanding.

(unaudited)

(unaudited)

(*)Pension plan settlement charges for the fiscal quarter and three fiscal quarters ended September 28, 2024 have been reclassified to the Pension plan settlement line item. These charges were previously included in Other expense (income), net.

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Carter’s, Inc. and its wholly owned subsidiaries (collectively, the “Company”) design, source, and market branded childrenswear under the Carter’s, OshKosh B’gosh (or “OshKosh”), Skip Hop, Child of Mine, Just One You, Simple Joys, Little Planet, Otter Avenue, and other brands. The Company’s products are sourced through contractual arrangements with manufacturers worldwide for sale in the Company’s retail stores, eCommerce sites, and mobile app, which offer the Company’s brand name merchandise and other licensed products manufactured by other companies. The Company also distributes its products to wholesale customers, which include leading department stores, national chains, and specialty retailers domestically and internationally.

Our trademarks that are referred to in this Quarterly Report on Form 10-Q, including Carter’s, OshKosh B’gosh, OshKosh, Skip Hop, Child of Mine, Just One You, Simple Joys, Little Planet, Otter Avenue, PurelySoft, and Carter’s Rewards, many of which are registered in the United States and in over 100 other countries and territories, are each the property of one or more subsidiaries of Carter’s, Inc.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). All intercompany transactions and balances have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the condensed consolidated financial condition, results of operations, comprehensive income, statement of shareholders’ equity, and cash flows of the Company for the interim periods presented. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the fiscal quarter ended September 27, 2025 are not necessarily indicative of the results that may be expected for the current fiscal year ending January 3, 2026.

The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

The accompanying condensed consolidated balance sheet as of December 28, 2024 was derived from the Company’s audited consolidated financial statements included in its most recently filed Annual Report on Form 10-K. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC and the instructions to Form 10-Q.

The accounting policies the Company follows are set forth in its most recently filed Annual Report on Form 10-K. There have been no material changes to these accounting policies.

The goodwill impairment assessments for each reporting unit were performed in accordance with ASC 350, “Intangibles--Goodwill and Other” (“ASC 350”) and compares the carrying value of each reporting unit to its fair value. Consistent with prior practice, the Company uses a 50% weighting of the income approach and a 50% weighting of the market approach to determine the fair value of a reporting unit. The assumptions used in these approaches include revenue growth and profitability, terminal growth rates, discount rates, market multiples, and a control premium. Discount rates are dependent upon interest rates and the cost of capital at a point in time. These assumptions are consistent with those we believe hypothetical marketplace participants would use. An impairment is recorded for any excess carrying value above the fair value of the reporting unit, not to exceed the carrying value of goodwill.

In August 2025, the Company appointed Emily D. Evert to its executive leadership team as Chief Strategy Officer. Prior to joining the Company, Emily was a managing director and partner at The Boston Consulting Group, Inc. (“BCG”).

The Company engaged BCG to provide general consulting services in fiscal 2024 and to support operating model improvement initiatives in fiscal 2025. The aggregate fees paid to BCG were approximately $13.6 million in the first three quarters of fiscal 2025 and $1.7 million in the first three quarters of fiscal 2024. As of September 27, 2025, December 28, 2024, and September 28, 2024, outstanding payables to BCG under these engagements were $0.5 million, $0.1 million, and $0.1 million, respectively.

These arrangements were entered into with BCG prior to Ms. Evert’s joining the Company and the engagements with BCG were entered into on terms Management believes to be consistent with those negotiated in an arm’s-length transaction with an unrelated third party.

On September 22, 2025, the Board of Directors (the “Board”) of the Company adopted a limited duration shareholder rights agreement (the “Rights Agreement”) in response to the rapid accumulation of a significant amount of the common stock of the Company by a third party. The agreement is intended to reduce the likelihood that any entity, person or group is able to gain control of the Company through open market accumulation without paying all stockholders an appropriate control premium or providing the Board sufficient opportunity to make informed judgments and take actions that are in the best interests of all shareholders. Pursuant to the agreement, the Company issued, by means of a “dividend”, one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock to shareholders of record on the close of business on October 3, 2025. Initially, these Rights are not exercisable and trade with, and are represented by, the shares of the Company’s common stock. The Rights Agreement will expire on September 21, 2026, or earlier, as provided in the Right’s Agreement.

Under the Rights Agreement, if a person or group (each, an “acquiring person”) acquires beneficial ownership of 15% (or 20% in the case of investors eligible to file Schedule 13Gs) or more of the outstanding shares of the Company’s common stock in a transaction not approved by the Board, the Board, at its option, may exchange each Right (other than Rights owned by the acquiring person that will become void and will not be exercisable) in whole or in part, at an exchange ratio of one share of the Company’s common stock, or one ten-thousandth of a share of Series A Junior Participating Preferred Stock (the “Preferred Stock”) (or of a share of a class or series of the Company’s preferred stock having equivalent rights, preferences and privileges), per outstanding right, subject to adjustment.

Adoption of the Rights Plan did not have an impact on the Company’s condensed consolidated financial statements, including basic and diluted earnings per share. Additional information is included in the Company’s current report on Form 8-K filed September 24, 2025, which is not incorporated herein by reference.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes - Improvements to Income Tax Disclosures. This new guidance requires consistent categories and greater disaggregation of information in the rate reconciliation and greater disaggregation of income taxes paid by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated financial statements but does not expect the effect of the adoption of ASU 2023-09 to be material.

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses. This new guidance is intended to increase transparency and comparability of financial statements by requiring disclosure of significant expense components for certain expenses on the face of the consolidated statement of operations. The ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that this standard will on its consolidated financial statements but does not expect the effect of the adoption of ASU 2024-03 to be material.

The Company’s revenues are earned from contracts or arrangements with retail and wholesale customers and licensees. Contracts include written agreements, as well as arrangements that are implied by customary practices or law.

The Company sells its products directly to consumers (“direct-to-consumer”) and to other retail companies and partners that subsequently sell the products directly to their own retail customers (“wholesale channel”). The Company also earns royalties from certain of its licensees. Disaggregated revenues from these sources for the fiscal periods indicated were as follows:

The components of Accounts receivable, net were as follows:

(1)Includes receivables related to tax recoveries, shipping volume rebates, healthcare-related rebates, amounts due from third-party gift card program partners, and recoveries related to provisional anti-dumping duties in Mexico.

(2)Includes allowance for chargebacks of $3.4 million, $4.4 million, and $5.0 million for the periods ended September 27, 2025, December 28, 2024, and September 28, 2024, respectively.

(3)Includes allowance for credit losses of $12.0 million, $5.7 million, and $8.3 million for the periods ended September 27, 2025, December 28, 2024, and September 28, 2024, respectively.

The Company’s contract assets are not material.

The Company recognizes a contract liability when it has received consideration from a customer and has a future obligation to transfer goods to the customer. Total contract liabilities consisted of the following amounts:    

(1)During the third quarters of fiscal 2025 and fiscal 2024, the Company recognized revenue of $1.3 million and $1.4 million related to the gift card liability balance that existed at June 28, 2025 and June 29, 2024, respectively. Additionally, during the first three quarters of fiscal 2025 and fiscal 2024, the Company recognized revenue of $6.8 million and $7.1 million related to the gift card liability balance that existed at December 28, 2024 and December 30, 2023, respectively.

(2)The Company received an upfront signing bonus from a third-party financial institution, which will be recognized as revenue on a straight-line basis over the term of the agreement. The amount as of September 27, 2025 reflects the current portion of this bonus and will be recognized as revenue through the end of fiscal 2025. The amounts as of December 28, 2024 and September 28, 2024 reflected the current portion of this bonus and were recognized as revenue over the subsequent twelve months.

(3)Included with Other current liabilities on the Company’s condensed consolidated balance sheets.

(4)This amount reflects the non-current portion of the Carter’s credit card signing bonus and is included within Other long-term liabilities on the Company’s condensed consolidated balance sheets.

Other current liabilities at the end of any comparable period were as follows:

(dollars in thousands)			September 27, 2025						December 28, 2024						September 28, 2024
Unredeemed gift cards			$	25,318					$	25,043					$	24,638
Accrued employee benefits			17,180						20,824						14,995
Accrued bonuses and incentive compensation(1)			13,851						2,757						2,866
Accrued taxes			10,671						14,455						10,512
Income taxes payable			7,286						13,820						1,099
Accrued salaries and wages			6,203						12,345						5,999
Other(2)			30,398						40,808						19,950
Other current liabilities			$	110,907					$	130,052					$	80,059

(1)Increase as of September 27, 2025 relates to a higher projected attainment of annual incentive objectives relative to the prior periods.

(2)Includes accruals for severance and other termination benefits, freight, and interest on long-term debt.

We have established a voluntary supply chain finance (“SCF”) program through participating financial institutions. This SCF program enables participating suppliers to accelerate payments for receivables due from the Company by selling them directly to the participating financial institutions at their discretion. As of September 27, 2025, the SCF program has a $70.0 million revolving capacity. We are not a party to the agreements between the participating financial institutions and the suppliers in connection with the SCF program. Payment terms for most of our suppliers are 60 days, regardless of participation in the SCF program. The Company does not provide any guarantees under the SCF program.

The Company’s liability related to amounts payable to the participating financial institution for suppliers who voluntarily participate in the SCF program are included in Accounts payable on our condensed consolidated balance sheets. As of September 27, 2025, December 28, 2024, and September 28, 2024, amounts under the SCF program included in Accounts payable were $24.5 million, $19.0 million, and $14.3 million, respectively. Payments made in connection with the SCF program, like payments of other accounts payable, are reflected as a reduction to our operating cash flow.

Long-term debt consisted of the following:

As of September 27, 2025, December 28, 2024, and September 28, 2024, the Company had no outstanding borrowings under its secured revolving credit facility, exclusive of $6.9 million, $4.7 million, and $5.7 million of outstanding letters of credit, respectively.

As of September 27, 2025, December 28, 2024, and September 28, 2024, there was $843.1 million, $845.3 million, and $844.3 million available for future borrowing. Any outstanding borrowings under the Company’s secured revolving credit facility are classified as non-current liabilities on the Company’s condensed consolidated balance sheets due to the contractual repayment terms under the credit facility. However, these repayment terms also allow us to repay some or all of the outstanding borrowings at any time.

The Company’s secured revolving credit facility provides for an aggregate credit line of $850 million which includes a $750 million U.S. dollar facility and a $100 million multicurrency facility. The credit facility matures in April 2027. The facility contains covenants that restrict the Company’s ability to, among other things: (i) create or incur liens, debt, guarantees or other investments, (ii) engage in mergers and consolidations, (iii) pay dividends or other distributions to, and redemptions and repurchases from, equity holders, (iv) prepay, redeem or repurchase subordinated or junior debt, (v) amend organizational documents, and (vi) engage in certain transactions with affiliates.

The Company’s secured revolving credit facility provides for a leverage-based pricing grid which determines an interest rate for borrowings, calculated as the applicable floating benchmark rate plus a credit spread adjustment, if any, plus an amount ranging from 1.125% to 1.625%, based on leverage. As of September 27, 2025, the borrowing rate for an adjusted term Secured Overnight Financing Rate (“SOFR”) loan would have been 5.39%, which includes a leverage-based adjustment of 1.125%.

In October 2025, the Company’s wholly-owned subsidiaries, The William Carter Company and The Genuine Canadian Corp., obtained commitments for a new five-year asset-based revolving credit facility with initial borrowing commitments of no less than $750 million, subject to the borrowing base under the new facility. Additionally, the Company is evaluating opportunities to refinance our $500.0 million principal amount of senior notes outstanding that mature on March 15, 2027.

The Company repurchased and retired shares in open market transactions in the following amounts for the fiscal periods indicated:

(1)Share repurchases were made in compliance with all applicable rules and regulations and in accordance with the share repurchase authorizations.

(2)The aggregate cost of share repurchases and average price paid per share exclude excise tax on share repurchases.

The total aggregate remaining capacity under outstanding repurchase authorizations as of September 27, 2025 was $599.0 million, based on settled repurchase transactions. The share repurchase authorizations have no expiration date.

Future repurchases may occur from time to time in the open market, in privately negotiated transactions, or otherwise. The timing and amount of any repurchases will be at the discretion of the Company subject to restrictions under the Company’s secured revolving credit facility, market conditions, stock price, other investment priorities, and other factors.

In the first, second, and third quarters of fiscal 2025, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.80, $0.25, and $0.25, respectively (for an aggregate cash dividend per common share of $1.30 for the first three quarters of fiscal 2025). Additionally, in each of the first three quarters of fiscal 2024, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.80 (for an aggregate cash dividend per common share of $2.40 for the first three quarters of fiscal 2024). The Board of Directors will evaluate future dividend declarations based on a number of factors, including restrictions under the Company’s secured revolving credit facility, business conditions, the Company’s financial performance, and other considerations.

Provisions in the Company’s secured revolving credit facility could have the effect of restricting the Company’s ability to pay cash dividends on, or make future repurchases of, its common stock, as further described in Note 6, Long-term Debt, to the condensed consolidated financial statements.

The Company recorded stock-based compensation expense as follows:

(1)Increase in the first three quarters of fiscal 2025 was primarily due to the accelerated vesting of outstanding time-based restricted stock awards related to the retirement of our former CEO in the first quarter of fiscal 2025.

(2)During the first three quarters of fiscal 2024, the achievement of performance target estimates related to certain performance-based grants were revised resulting in a reversal of previously recognized stock-based compensation expense.

The Company recognizes compensation cost ratably over the applicable performance periods based on the estimated probability of achievement of its performance targets at the end of each period.

On April 3, 2025, the Company granted the following awards to Douglas C. Palladini in connection with his appointment as CEO and President of the Company and a member of the Board of Directors: 98,400 shares of time-based restricted stock awards and 98,400 shares of market-based restricted stock awards. The number of shares granted was based on the closing price of the Company’s stock on the grant date, which was $35.57, with the time-based restricted stock awards having a grant-date fair value of $35.57 per share and the market-based restricted stock awards having a grant-date fair value of $10.67 per share. A Monte-Carlo simulation was utilized to determine the grant-date fair value of the market-based restricted stock awards.

The market-based restricted stock awards issued to Mr. Palladini are eligible to be earned upon achieving share price hurdles for 20 consecutive trading days over a three-year period, starting on the award grant date. The share price hurdles were set based on growth rates of 30%, 60%, and 90% above the closing stock price on grant date, which was $35.57. One-third of the award will be earned upon achievement of each of the applicable share price hurdles, but no earned shares will vest until the end of the three-year period, subject to Mr. Palladini’s continued employment through the end of the three-year period.

The components of Accumulated other comprehensive loss consisted of the following:

(*)Net of income taxes of $0.3 million, $1.2 million, and $1.1 million for the periods ended September 27, 2025, December 28, 2024, and September 28, 2024, respectively.

During the third quarter of fiscal 2025, the Company substantially completed the process of settling its pension obligations under the frozen OshKosh B’Gosh, Inc. Pension Plan (the “pension plan”). In August 2025, the pension plan used existing pension plan assets to purchase non-participating annuity contracts from an insurance company and to make single-sum payments to certain plan participants, thereby settling its existing pension benefit obligations. The Company expects to distribute surplus plan assets to plan participants in fiscal 2026 in accordance with the terms of the plan and regulatory requirements.

As a result of the settlement, the Company remeasured the funded status of the pension plan as of August 31, 2025. In the third quarter and first three quarters of fiscal 2025, a gain on pension obligations of $0.9 million (net of income taxes of $0.3 million) was recognized in Accumulated other comprehensive (loss) income related to this remeasurement. Additionally, in the third quarter and first three quarters of fiscal 2025, $4.1 million of deferred losses on pension obligations (net of income taxes of $1.3 million) were reclassified from Accumulated other comprehensive loss to Pension plan settlement within the condensed consolidated statement of operations in connection with the settlement of the pension plan. Refer to Note 13, Employee Benefit Plans, to the condensed consolidated financial statements.

In the third quarter of fiscal 2024 the Company made single-sum payments to certain participants in the pension plan, thereby reducing its pension benefit obligations. As a result of the single-sum payout, the Company remeasured the funded status of the pension plan as of August 31, 2024. In the third quarter and first three quarters of fiscal 2024, a gain on pension obligations of $1.5 million (net of income taxes of $0.5 million) was recognized in Accumulated other comprehensive (loss) income related to this remeasurement. Additionally, in the third quarter and first three quarters of fiscal 2024, $0.7 million of deferred losses on pension obligations (net of income taxes of $0.2 million) were reclassified from Accumulated other comprehensive loss to Pension plan settlement within the condensed consolidated statement of operations related to the partial settlement of the pension plan.

In support of The William Carter Company Deferred Compensation Plan (the “Plan”), the Company invests comparable amounts in marketable securities, principally equity-based mutual funds, to approximate the participant’s investment return on employee deferrals of compensation. All of the marketable securities are included in Other assets on the Company’s condensed consolidated balance sheets, and their aggregate fair values were $21.0 million, $19.5 million, and $19.0 million at September 27, 2025, December 28, 2024, and September 28, 2024, respectively. These investments are classified as Level 1 within the fair value hierarchy. The change in the aggregate fair values of marketable securities is due to the net activity of gains and losses and any contributions and distributions during the period. Gains on the investments in marketable securities were $1.0 million and $1.5 million for the third quarter and the first three quarters of fiscal 2025, respectively. Gains on the investments in marketable securities were $0.6 million and $1.7 million for the third quarter and the first three quarters of fiscal 2024, respectively. These amounts are included in Other (income) expense, net on the Company’s condensed consolidated statement of operations.

During the third quarter of fiscal 2025, the Board of Directors approved the termination of the Plan, effective as of September 30, 2025 (the “Termination Date”). In connection with the termination, all participants will receive a single lump-sum distribution of their account balances on a final payment date, expected to occur in the third quarter of fiscal 2026. Until the final payment date, the Plan will continue to operate in the ordinary course. This includes maintaining investment allocations and processing scheduled distributions; however, all employee contributions ceased as of the Termination Date. See Note 13, Employee Benefit Plans for additional information.

As of September 27, 2025, the Company had no outstanding borrowings under its secured revolving credit facility.

The fair value of the Company’s senior notes was $500.2 million, $494.4 million, and $498.1 million at September 27, 2025, December 28, 2024, and September 28, 2024, respectively. The fair value of these senior notes with a notional value and carrying value (gross of debt issuance costs) of $500.0 million was estimated using a quoted price as provided in the secondary market, which considers the Company’s credit risk and market related conditions, and is therefore within Level 2 of the fair value hierarchy.

Some assets are not measured at fair value on a recurring basis but are subject to fair value adjustments only in certain circumstances. These assets can include goodwill, indefinite-lived intangible assets, and long-lived tangible assets that have been reduced to fair value when impaired. Assets that are written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment occurs.

In the fourth quarter of fiscal 2024, the Company recorded a non-cash pre-tax impairment charge of $30.0 million to reduce the carrying value of the indefinite-lived OshKosh tradename asset to $40.0 million. The impairment charge was driven by decreased actual and projected sales and profitability for our OshKosh brand.

The goodwill impairment assessments for each reporting unit was performed in accordance with ASC 350 and compares the carrying value of each reporting unit to its fair value. Consistent with prior practice, the Company uses a 50% weighting of the income approach and a 50% weighting of the market approach to determine the fair value of a reporting unit. The assumptions used in these approaches include revenue growth and profitability, terminal growth rates, discount rates, market multiples, and a control premium. Discount rates are dependent upon interest rates and the cost of capital at a point in time. These assumptions are consistent with those we believe hypothetical marketplace participants would use. An impairment is recorded for any excess carrying value above the fair value of the reporting unit, not to exceed the carrying value of goodwill.

The Company’s income tax provision and effective tax rates for the fiscal periods indicated were as follows:

The Company’s effective income tax rate was 21.8% for the third fiscal quarter ended September 27, 2025, compared to 17.5% for the third fiscal quarter ended September 28, 2024. The Company’s effective income tax rate was 27.2% for the first three fiscal quarters ended September 27, 2025, compared to 20.0% for the first three fiscal quarters ended September 28, 2024. The increase in the effective tax rate was driven by lower income before income taxes in period, incremental nondeductible officers’ compensation, and Hong Kong’s implementation of the Pillar Two global minimum tax legislation. This was partially offset by a lower proportion of income generated in the United States, where the tax rate is higher relative to some of our international jurisdictions.

As of September 27, 2025, the Company had gross unrecognized income tax benefits of $7.9 million, of which $5.6 million, if ultimately recognized, may affect the Company’s effective income tax rate in the periods settled. The Company has recorded tax positions for which the ultimate deductibility is more likely than not, but for which there is uncertainty about the timing of such deductions.

On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act of 2025 (“OBBB”), which includes, among other provisions, changes to the U.S. corporate income tax system such as the immediate expensing of qualifying research and development costs and the permanent extension of certain provisions of the Tax Cuts and Jobs Act. Based on the Company’s current evaluation of the legislation, the Company does not expect these tax law changes to have a material impact on the Company’s consolidated financial statements. The Company will continue to assess the potential impacts of OBBB as additional regulatory guidance becomes available.

The following is a reconciliation of basic common shares outstanding to diluted common and common equivalent shares outstanding:

(*)The volume of anti-dilutive awards is, in part, due to the related unamortized compensation costs.

In fiscal 2024, the Board of Directors authorized the termination of the pension plan, with an effective date of November 30, 2024, through lump sum distributions and the purchase of annuity contracts. During the third quarter of fiscal 2025, the Company substantially completed the process of settling its pension obligations under the pension plan. In August 2025, the pension plan used existing pension plan assets to purchase non-participating annuity contracts from an insurance company and to make single-sum payments to certain plan participants, thereby settling its existing pension benefit obligations. The Company expects to distribute surplus plan assets to plan participants in fiscal 2026 in accordance with the terms of the plan and regulatory requirements.

These settlement transactions had no cash impact on the Company but did result in a non-cash pre-tax pension settlement charge of $8.8 million in the third quarter of fiscal 2025, recorded within Pension plan settlement on the Company’s condensed consolidated statement of operations. The charge reflects the recognition of $5.4 million of deferred losses associated with its pension obligations, which were released from Accumulated other comprehensive income, and a $3.4 million charge related to the recognition of prior service cost for the surplus plan assets to be distributed to plan participants in fiscal 2026.

During the third quarter of fiscal 2024, the pension plan made lump sum payments to certain participants, thereby reducing its pension benefit obligations. The transaction had no cash impact on the Company but did result in a non-cash pre-tax partial pension settlement charge of $0.9 million, which is included in Pension plan settlement on the Company’s condensed consolidated statement of operations.

As a result of the pension plan settlements, the Company remeasured the funded status of its pension plan as of August 31, 2025 and August 31, 2024. Presented below is the reconciliation of changes in the projected benefit obligation and plan assets as a result of this remeasurement and pension plan settlements:

The accumulated benefit obligation was equal to the projected benefit obligation as of August 31, 2025 and August 31, 2024 because the plan was frozen. The funded status asset is included in Other assets in the Company’s condensed consolidated balance sheets.

Net periodic pension cost of $0.3 million was recognized in the first three quarters of fiscal 2025, exclusive of the $8.8 million non-cash pre-tax pension settlement charge described above.

The discount rate for determining the benefit obligation as of August 31, 2025 and August 31, 2024 was 0.00% and 5.00%, respectively. The assumption for net periodic pension cost in the first three quarters of fiscal 2025 includes a discount rate of 5.50% through August 31, 2025 and 0.00% thereafter. The assumption for net periodic pension cost in the first three quarters of fiscal 2024 includes a discount rate of 4.75% through August 31, 2024 and 5.00% thereafter. The expected rate of return on plan assets in the first three quarters of fiscal 2025 was 5.50% through August 31, 2025 and 0.00% thereafter. The expected rate of return on plan assets in the first three quarters of fiscal 2024 was 4.75% through August 31, 2024 and 5.00% thereafter.

The fair value of plan assets was $3.4 million and $48.2 million as of August 31, 2025 and August 31, 2024, respectively. Plan assets as of August 31, 2024 were invested in fixed income securities, which include funds holding corporate bonds of companies from diverse industries and U.S. Treasuries.

During the third quarter of fiscal 2025, the Board of Directors approved the termination of The William Carter Company Deferred Compensation Plan (the “Plan”), effective as of September 30, 2025 (the “Termination Date”). In connection with the termination, all participants will receive a single lump-sum distribution of their account balances on a final payment date, expected to occur in the third quarter of fiscal 2026. Until the final payment date, the Plan will continue to operate in the ordinary course. This includes maintaining investment allocations and processing scheduled distributions; however, all employee contributions ceased as of the Termination Date.

The Plan permitted eligible employees to defer salary and incentive compensation in accordance with the Internal Revenue Code. Participant deferrals earn investment returns based on a select number of investment options, including equity, debt, and real estate mutual funds. Deferred compensation plan liabilities are recognized in Other long term liabilities on the Company’s condensed consolidated balance sheets. Changes in the balance, excluding those related to contributions or payments, are included in Other expense (income), net on the Company’s condensed consolidated statement of operations. The Company invests comparable amounts in marketable securities to approximate the participants’ return on selected investment options.

In the third quarter of fiscal 2025, the Company initiated an organizational restructuring of our offices-based workforce to right-size its cost structure and improve future profitability. The Company currently estimates it will incur approximately $10.0 million to $11.0 million in organizational restructuring charges through the end of fiscal 2025 in connection with this initiative.

Substantially all of these charges are related to severance and other termination benefits and are recorded within Selling, general and administrative expenses. Severance and other termination benefits are expected to be paid out primarily in the first two quarters of fiscal 2026, and therefore the accrual is included in Other current liabilities in the Company’s condensed consolidated balance sheets. The activity in the organizational restructuring accrual was as follows:

The Company has three operating and reportable segments: U.S. Retail, U.S. Wholesale, and International. The U.S. Retail segment consists of revenue primarily from sales of products in the United States through our retail stores, eCommerce websites, and mobile app. Similarly, the U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale partners. The International segment consists of revenue primarily from sales of products outside the United States, largely through our retail stores and eCommerce websites in Canada and Mexico, and sales to our international wholesale customers and licensees. The Company sells similar products in each of its three segments.

The Company’s chief operating decision maker is the Chief Executive Officer. The chief operating decision maker evaluates the operating performance of the segments based upon each segment’s net sales and segment operating income. Segment operating income includes net sales, royalty income, and related cost of goods sold and selling, general, and administrative expenses attributable to each segment. Segment operating income excludes unallocated corporate expenses as well as specific charges that are not directly attributable to segment operations, including restructuring costs, operating model improvement costs, leadership transition costs, and impairment charges related to goodwill and indefinite-lived intangible assets.

In fiscal 2024, the Company changed its measure of segment profitability to segment operating income, which excludes the charges mentioned above, and which were included in our previous measure of segment profitability, to better align with management’s assessment of segment performance and to provide better insights into segment performance. Prior period segment operating income for the third quarter and three fiscal quarters ended September 28, 2024 have been recast to conform to the current presentation. The Company does not evaluate performance or allocate resources based on segment asset data, and therefore total segments assets are not presented.

Certain costs, including incentive compensation for certain employees, and various other general corporate costs that are not specifically allocable to segments, are included in unallocated corporate expenses below.

The table below presents certain segment information for our reportable segments for the periods indicated:

(1)Selling expenses include the costs of operating our retail stores and eCommerce channels, as well as wholesale sales management costs.

(2)Distribution expenses include payments to third-party shippers and handling costs to process product through our distribution facilities, including eCommerce fulfillment costs, and delivery to our wholesale customers and to our retail stores.

(3)Other segment items include royalty income and overhead costs that are attributable to our reportable segments and include allocated accounting, finance, human resources, and information technology expenses, occupancy costs, and other benefit and compensation programs, including performance-based compensation.

(1)Unallocated corporate expenses include corporate overhead expenses that are not directly attributable to one of our reportable segments and include unallocated accounting, finance, legal, human resources, and information technology expenses, occupancy costs for our corporate headquarters, and other benefit and compensation programs, including performance-based compensation.

(2)Primarily related to third-party consulting costs to support operating model improvement costs.

(3)Related to costs associated with the transition of our former CEO, including accelerated vesting of outstanding time-based restricted stock awards pursuant to a retirement agreement approved by the Board of Directors, executive recruiting costs, and other related costs.

(4)Related to charges for severance and other termination benefits as a result of organizational restructuring. Refer to Note 14, Organizational Restructuring for more information.

(5)Pension plan settlement charges for the fiscal quarter and three fiscal quarters ended September 28, 2024 have been reclassified to the Pension plan settlement line item. These charges were previously included in Other expense (income), net.

The tables below present additional information for our reportable segments for the periods presented:

The Company is subject to various claims and pending or threatened lawsuits in the normal course of business. The Company is not currently a party to any legal proceedings that it believes would have a material adverse impact on its financial position, results of operations, or cash flows.

The Company’s contractual obligations and commitments include obligations associated with leases, the secured revolving credit agreement, senior notes, and employee benefit plans.

Statements in this Quarterly Report on Form 10-Q that are not historical fact and use predictive words such as “estimates”, “outlook”, “guidance”, “expect”, “believe”, “intend”, “designed”, “target”, “plans”, “may”, “will”, “are confident” and similar words are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements and related assumptions involve risks and uncertainties that could cause actual results and outcomes to differ materially from any forward-looking statements or views expressed in this Form 10-Q.

These risks and uncertainties include, but are not limited to, those disclosed in Part II, Item 1A. “Risk Factors” of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 2025 and Part I, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2024, and otherwise in our reports and filings with the Securities and Exchange Commission, as well as the following factors: changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits; risks related to public health crises; risks related to the organizational restructuring plan, including, but not limited to, our ability to achieve the expected savings from the plan and to fully implement the plan; risks related to consumer tastes and preferences, as well as fashion trends; the failure to protect our intellectual property; the diminished value of our brands, potentially as a result of negative publicity or unsuccessful branding and marketing efforts; delays, product recalls, or loss of revenue due to a failure to meet our quality standards; risks related to uncertainty regarding the future of international trade agreements and the United States’ position on international trade, as well as significant political, trade, and regulatory developments and other circumstances beyond our control; increased competition in the marketplace; financial difficulties for one or more of our major customers; identification of locations and negotiation of appropriate lease terms for our retail stores; distinct risks facing our eCommerce business; failure to forecast demand for our products and our failure to manage our inventory; increased margin pressures, including increased cost of materials and labor and our inability to successfully increase prices to offset these increased costs; continued inflationary pressures with respect to labor and raw materials and global supply chain constraints that have, and could continue, to affect freight, transit, and other costs; fluctuations in foreign currency exchange rates; unseasonable or extreme weather conditions; risks associated with corporate responsibility issues; our foreign sourcing arrangements; a relatively small number of vendors supply a significant amount of our products; disruptions in our supply chain, including increased transportation and freight costs; our ability to effectively source and manage inventory; problems with our Braselton, Georgia distribution facility; pending and threatened lawsuits; a breach of our information technology systems and the loss of personal data or a failure to implement new information technology systems successfully; unsuccessful expansion into international markets; failure to comply with various laws and regulations; failure to properly manage strategic initiatives; retention of key individuals; acquisition and integration of other brands and businesses; failure to achieve sales growth plans and profitability objectives to support the carrying value of our intangible assets; our continued ability to meet obligations related to our debt; our ability to close our new asset based lending facility within the timeframe we previously disclosed; changes in our tax obligations, including additional customs, duties or tariffs; our continued ability to declare and pay a dividend; volatility in the market price of our common stock; and the cost or effort required for our shareholders to bring certain claims or actions against us, as a result of our designation of the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings. Except for any ongoing obligations to disclose material information as required by federal securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The inclusion of any statement in this Quarterly Report on Form 10-Q does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

We are North America’s largest and most-enduring apparel company exclusively for babies and young children. Our core brands are Carter’s and OshKosh B’gosh (or “OshKosh”), iconic and among the sector’s most trusted names. Our exclusive Carter’s brands are developed for Walmart, Target, and Amazon. Our emerging brands include Little Planet, crafted with organic fabrics and sustainable materials, Otter Avenue, a toddler-focused apparel brand, and Skip Hop, baby essentials from tubs to toys.

Established in 1865, our Carter’s brand is recognized and trusted by consumers for high-quality apparel and accessories for children in sizes newborn to 14.

Established in 1895, OshKosh is a well-known brand, trusted by consumers for high-quality apparel and accessories for children in sizes newborn to 14, with a focus on playclothes for toddlers and young children. We acquired OshKosh in 2005.

Established in 2003, the Skip Hop brand rethinks, reenergizes, and reimagines durable necessities to create higher value, superior quality, and award-winning products for parents, babies, and toddlers. We acquired Skip Hop in 2017.

Launched in 2021, the Little Planet brand focuses on sustainable clothing through the sourcing of mostly organic cotton as certified under the Global Organic Textile Standard (“GOTS”), a global textile processing standard for organic fibers. This brand includes a wide assortment of baby and toddler apparel, accessories, and sleepwear.

Launched in July 2025, Otter Avenue is a toddler brand that focuses on functionality designed to encourage independence, while combining fun, sophistication, and fashion-forward styles. This brand includes a curated assortment of toddler apparel and accessories.

Additionally, Child of Mine, an exclusive Carter’s brand, is sold at Walmart, Just One You, an exclusive Carter’s brand, is sold at Target, and Simple Joys, an exclusive Carter’s brand, is available on Amazon.

Our purpose is to embrace the wonder of childhood and uplift those shaping the future. We believe our brands are complementary to one another in product offering and aesthetic. Each brand is uniquely positioned in the marketplace and offers great value to families with young children. Our multichannel, global business model, which includes retail stores, eCommerce, mobile app, and wholesale distribution channels, as well as omni-channel capabilities in the United States and Canada, enables us to reach a broad range of consumers around the world. As of September 27, 2025, our channels included 1,065 company-operated retail stores in North America, eCommerce websites, approximately 19,500 wholesale locations in North America, as well as our international wholesale accounts and licensees who operate in over 1,100 locations outside of North America in over 90 countries.

The following is a discussion of our results of operations and current financial condition. This should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this Form 10-Q and audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the 2024 fiscal year ended December 28, 2024.

We have three operating and reportable segments: U.S. Retail, U.S. Wholesale, and International. Our U.S. Retail segment consists of revenue primarily from sales of products in the United States through our retail stores, eCommerce websites, and mobile app. Similarly, our U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale customers. Our International segment consists of revenue primarily from sales of products outside the United States, largely through our retail stores and eCommerce websites in Canada and Mexico, and sales to our international wholesale customers and licensees. The Company sells similar products in each of its three segments.

In fiscal 2024, the Company changed its measure of segment profitability to segment operating income. Segment operating income includes net sales, royalty income, and related cost of goods sold and selling, general, and administrative (“SG&A”) expenses attributable to each segment. Segment operating income excludes unallocated corporate expenses as well as specific charges that are not directly attributable to segment operations, including restructuring costs, operating model improvement costs, leadership transition costs, and impairment charges related to goodwill and indefinite-lived intangible assets, which were included in our previous measure of segment profitability. This change has no impact on our consolidated operating income. Management believes this updated presentation more accurately reflects how the business is managed and provides better insight into segment performance. Prior period segment operating income for the fiscal quarter and three fiscal quarters ended September 28, 2024 have been recast to conform to the current presentation.

Gross profit is calculated as consolidated net sales less cost of goods sold. Gross margin is calculated as gross profit divided by consolidated net sales. Cost of goods sold includes expenses related to the merchandising, design, and procurement of product, including inbound freight, purchasing, receiving, and inspection costs. Also included in costs of goods sold are the costs of shipping eCommerce product to end consumers. Retail store occupancy costs, distribution expenses, and generally all other expenses other than interest and income taxes are included in SG&A expenses. Distribution expenses that are included in SG&A primarily consist of payments to third-party shippers and handling costs to process product through our distribution facilities, including eCommerce fulfillment costs, and delivery to our wholesale customers and to our retail stores. Our gross profit and gross margin may not be comparable to other entities that define their metrics differently.

We present comparable sales metrics because we consider them an important supplemental measure of our U.S. Retail and International performance, and the Company uses such information to assess the performance of the U.S. Retail and International segments.

Additionally, we believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of our business.

Our comparable sales metrics include sales for all stores and eCommerce sites, including the mobile app, that were open and operated by us during the comparable fiscal period, including stand-alone format stores that converted to multi-branded format stores and certain remodeled or relocated stores. A store or site becomes comparable following 13 consecutive full fiscal months of operations. If a store relocates within the same center with no business interruption or material change in square footage, the sales of such store will continue to be included in the comparable store metrics. If a store relocates to another center more than five miles away, or there is a material change in square footage, such store is treated as a new store. Stores that are closed during the relevant fiscal period are included in the comparable store sales metrics up to the last full fiscal month of operations.

The method of calculating sales metrics varies across the retail industry. As a result, our comparable sales metrics may not be comparable to those of other retailers.

In the third quarter of fiscal 2025, we initiated an organizational restructuring of our offices-based workforce to right-size our cost structure and improve future profitability. The plan is expected to reduce offices-based roles by approximately 15% and to generate approximately $35 million in annual savings beginning in fiscal 2026 primarily related to reduced compensation and employee benefit costs.

As a result, we recorded $6.1 million in severance and other termination benefits during the third quarter of fiscal 2025. We expect to record an additional $4.0 million to $5.0 million in severance and other termination benefits in the fourth quarter of fiscal 2025. We expect to pay substantially all of these costs in the first two quarters of fiscal 2026. Refer to Note 14, Organizational Restructuring in the condensed consolidated financial statements for additional information.

Throughout the second half of fiscal 2024 and continuing into fiscal 2025, with the assistance of external industry experts, we conducted a comprehensive assessment of our business with the goal of identifying long-term growth opportunities and to scope the strategies and investments needed to realize them in the coming years.

This review highlighted many strengths, including our brand assets, significant awareness and equity with consumers, and the unique reach of our multi-channel business model. It also identified several opportunities to improve the focus and appeal of our product offerings, enabling us to capture new customer segments and market share going forward.

Based on learnings from the review, we are pursuing enhancements to our operating model, which include improving our product and brand development processes to be faster, nimbler, and more responsive to changing consumer preferences. We believe this operating model work is very foundational to improving our capabilities and will better position us for future growth.

Operating model improvement costs, primarily related to third-party consulting fees, were $3.7 million and $13.5 million for the fiscal quarter and three fiscal quarters ended September 27, 2025, respectively. These costs were included in SG&A expenses in our condensed consolidated statement of operations. We anticipate incurring additional costs of approximately $1 million to $2 million for the remainder of fiscal 2025.

In each of the second and third quarters of fiscal 2025, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.25, which represented a 69% reduction when compared to the cash dividend per common share paid of $0.80 in the first quarter of fiscal 2025. The action was taken to realign our dividend with our current level of profitability, especially against the backdrop of a challenging market environment and the significantly higher product costs the Company will incur as the result of the incremental tariffs on products imported into the United States.

On March 26, 2025, the Company announced the appointment of Douglas C. Palladini as Chief Executive Officer and President and a member of the Board of Directors, effective April 3, 2025. Mr. Palladini brings extensive leadership and brand-building experience to the role and succeeded Richard F. Westenberger, then serving as Interim Chief Executive Officer. Mr. Westenberger continues to serve as our Chief Financial Officer & Chief Operating Officer.

Following its inauguration in January 2025, the second Trump Administration has made numerous announcements and taken action to increase tariffs assessed on products imported into the United States, which introduced heightened uncertainty across the global economy. Given that we source all of our apparel and other products from a global network of third-party suppliers—primarily located in Asia—any new or increased tariffs, quotas, embargoes, or other trade barriers have the potential to adversely affect our supply chain, cost structure, margins, and competitiveness. Additionally, retaliatory actions taken by impacted countries could further disrupt global trade and create additional inflationary pressures in raw materials and logistics. We estimate that Vietnam, Cambodia, Bangladesh, and India will collectively represent approximately 75%, and China less than 3%, of our product sourcing spend in fiscal 2025. In fiscal 2024, 60% of the fabric used in the manufacture of our products was sourced from China; however, the fibers used to produce that fabric were sourced from outside of China.

While these recently announced tariffs did not have a material impact on the Company’s financial results during the first three quarters of fiscal 2025, we expect incremental tariffs related to imports from Vietnam, Cambodia, Bangladesh, India, and other countries to have a net unfavorable impact to our pre-tax income of approximately $25 million to $35 million in the fourth quarter of fiscal 2025. On an annualized basis, the Company estimates gross incremental costs of approximately $200 million to $250 million related to these incremental tariffs. While the Company expects pressure on gross margin in fiscal 2026, the Company is pursuing actions to mitigate the impact, which include, but are not limited to, changes to our product assortments, cost sharing with our vendor partners, changes to the mix of production by country, and raising prices to end consumers and our wholesale customers. These actions that we take may not fully offset the impact of tariffs and, as a result, our revenues, gross margins, and overall financial performance may be materially harmed.

Refer to the risk factor under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and the risk factors disclosed under the heading, “Risk Factors” in our most recently filed Annual Report on Form 10-K for further information on risks related to the uncertainty of future global trade relations.

Notwithstanding the factors described above, we remain focused on returning to consistent, profitable growth, recapturing market share, and creating long‑term shareholder value through initiatives designed to (i) stabilize business performance, (ii) increase near‑term productivity, and (iii) invest to enable long‑term growth.

We have prioritized stabilizing business performance in response to recent market challenges, including declining birth rates, inflationary pressures, evolving consumer preferences and the imposition of incremental tariffs. Initiatives to stabilize our business performance include revisions to our product assortments, investing in marketing to drive demand, implementing pricing strategies to reinforce our value proposition for consumers, and pursuing actions to mitigate the impact of incremental tariffs, which include, but are not limited to, changes to our product assortments, cost sharing with our vendor partners, changes to the mix of production by country, and raising prices to end consumers and our wholesale customers. We are already seeing improved trends in U.S. Retail as a result of these initiatives, achieving two consecutive quarters of positive comparable net sales, a second consecutive quarter of year-over-year growth in customer count, and continued strength in our core baby assortment.

In order to position the Company for consistent profitable growth, we have implemented a comprehensive productivity agenda that includes the following:

•Store portfolio optimization - We have identified opportunities to rationalize our store portfolio by closing approximately 150 low-margin stores primarily at lease expiration in North America during fiscal years 2025 through 2028. We currently expect to close approximately 100 stores across fiscal 2025 and fiscal 2026. The 150 stores collectively represent approximately $110 million in annual net sales. We expect these actions, assuming anticipated sales transfer to nearby company-operated stores and our eCommerce channel and the elimination of fixed store expenses, to favorably impact our profitability. Additionally, we are suspending new store openings in the U.S. under our current store model. These actions allow us to focus on improving the productivity of our existing retail store fleet and to advance our fleet segmentation strategy to create more differentiated consumer experiences.

•Organizational restructuring - In the third quarter of fiscal 2025, we initiated an organizational restructuring of our offices-based workforce to right-size our cost structure and improve future profitability. The plan is expected to reduce offices-based roles by approximately 15% by the end of the second quarter of fiscal 2026 and to generate approximately $35 million in annual savings beginning in fiscal 2026.

•Reduction in discretionary spending - We are targeting approximately $10 million of reductions in discretionary spending, deferring non-critical expenditures where possible.

•Process efficiency - Our operating model improvement initiative has shortened our product development calendar by approximately three months, improved responsiveness to changing consumer and market trends, and reduced assortment over-development. In addition, we are rationalizing our product choices by approximately 20-30% to create a more unified, global product assortment across all of our brands.

We are investing in foundational investments to drive long-term growth:

•Marketing and demand creation - We are increasing marketing spend to drive traffic and strengthen consumer loyalty, while continuously measuring our return on these investments.

•Store format testing - Although we are pausing further expansion of our current U.S. store model, we plan to invest in new store-type testing, in-store experiences, and real estate strategy development as we seek greater productivity from our retail store fleet.

•Infrastructure and Technology - We continue to invest in modernizing our distribution network and enhancing technology capabilities. These initiatives include upgrading equipment and systems, digitizing aspects of our product design and development process, migrating certain applications to cloud-based platforms, and consolidating systems and platforms.

Unless otherwise stated, comparisons are to the third quarter of fiscal 2024:

•Consolidated net sales decreased $0.6 million, or 0.1%, to $757.8 million.

◦U.S. Retail sales increased $9.3 million, driven by higher average selling prices per unit. U.S. Retail comparable net sales increased 2.0%, a second consecutive quarter of positive comparable net sales.

◦U.S. Wholesale sales decreased $15.2 million, driven largely by lower sales of our Simple Joys brand.

◦International sales increased $5.2 million, primarily driven by growth in Mexico and higher average selling prices per unit.

•Consolidated gross profit decreased $14.4 million, or 4.0%, to $341.6 million, and consolidated gross margin decreased 180 basis points (“bps”) to 45.1%, primarily due to higher average cost per unit sold driven by incremental tariffs and investments in product make.

•Consolidated SG&A expenses increased $33.2 million, or 11.7%, to $318.0 million. SG&A as a percentage of consolidated net sales (“SG&A rate”) increased 450 bps to 42.0%, driven by factors that include costs related to organizational restructuring, operating model improvements and leadership transition, investments in new and remodeled retail stores, and increased performance-based compensation.

•Consolidated operating income decreased $47.9 million, or 62.2%, to $29.1 million and adjusted consolidated operating income, a non-GAAP financial measure, decreased $37.7 million, or 48.9%, to $39.4 million. Operating margin decreased 640 bps to 3.8%, and adjusted operating margin decreased 500 bps to 5.2%, driven by the factors discussed in detail below.

•Consolidated net income decreased $46.7 million, or 80.1%, to $11.6 million, driven by the factors discussed in detail below, including a pre-tax, non-cash pension settlement charge of $8.8 million.

•Diluted net income per common share decreased $1.30, or 80.2%, to $0.32, and adjusted diluted net income per common share decreased $0.90, or 54.9%, to $0.74.

•During the first three quarters of fiscal 2025, we opened 19 stores and closed 15 stores in the United States.

•As a result of our strong financial position and available liquidity, we returned $9.1 million in cash dividends to our shareholders in the third quarter of fiscal 2025.