Carter’s to cut 150 stores and 15% of office jobs amid tariff challenges

US apparel retailer Carter’s has disclosed plans to shutter 150 stores across North America by 2028 as it grapples with the financial strain of tariffs.

The retailer also plans to reduce its office-based workforce by 300 – a 15% cut – by the end of 2025.

The adverse effects of the tariffs introduced by President Donald Trump’s administration have significantly dented its profitability.

Carter’s estimates that the annual gross pre-tax impact of the additional import duties could range between $200m and $250m on an annualised basis.

The announcement came alongside the company’s fiscal third-quarter earnings report. Carter’s experienced a marginal dip in net sales, with a 0.1% decrease to $757.8m in the third quarter of 2025, down from $758.5m in the same period of the previous fiscal year.

This decline in net sales was attributed to a downturn in US wholesale segment sales, somewhat offset by gains in US retail and international segment sales. But despite these, the US wholesale segment saw a decrease of 5.1%.

The company’s operating income took a significant hit, plummeting 62.2% to $29.1m, with operating margin shrinking to 3.8% from 10.2% a year earlier.

Net income for the quarter stood at $11.6m, or $0.32 per diluted share, in stark contrast to the $58.3m, or $1.62 per diluted share, reported in the third quarter of 2024.

Carter’s CEO and president Douglas Palladini stated: “Our third quarter performance reflected continued improvement in US retail business demand as we achieved positive comparable sales and improved pricing for the second consecutive quarter,”

“However, elevated product costs, in part due to the impact of higher tariffs, as well as additional investment, weighed meaningfully on our profitability.

“In light of the difficult decisions being made to improve our performance, the board of directors and I have also decided to reduce our 2026 compensation.”

Carter’s anticipates incurring additional charges in the fourth quarter related to severance and outplacement services, estimated between $4m to $5m. These measures are expected to generate annualised savings of $35m from 2026.

The planned store closures, now totalling 150, have been revised upwards from the initial target of 100.

These closures will take place during the fiscal years 2025 and 2026, impacting stores that collectively contribute around $110m in annual net sales.

The retailer has been adjusting its sourcing strategy in response to the tariffs, with countries such as Vietnam, Cambodia, Bangladesh and India set to account for 75% of its product sourcing spend in fiscal 2025, while China’s share will drop to less than 3%.

For the fourth quarter of fiscal 2025, the company anticipates a negative pre-tax income impact of between $25m and $35m due to the tariffs.

In light of the ongoing uncertainty surrounding the tariffs and their potential impact on the business, Carter’s has suspended its fiscal 2025 guidance.

“Carter’s to cut 150 stores and 15% of office jobs amid tariff challenges” was originally created and published by Retail Insight Network, a GlobalData owned brand.

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