Popular children's clothing brand Carter's plans to close around 150 stores across North America and lay off nearly 15% of its employees, following tariffs levied under President Donald Trump's trade policies that have significantly reduced profits.
As per a report by The Independent, Carter's, in its most recent earnings report issued Monday, stated that its third-quarter net income declined more than 80% to $11.6 million from $58.3 million for the same quarter last year. The Atlanta-based store is aiming to save approximately $35 million annually by closing stores and reorganising.
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Tariffs blamed for soaring costs and shrinking profits
Carter's stated that high product costs, mainly resulting from increased tariffs on imports, have weighed on profitability even as U.S. retail demand has remained consistent. "Our third quarter performance reflected continued improvement in U.S. Retail business demand," CEO Doug Palladini stated. "However, elevated product costs, in part due to the impact of higher tariffs, as well as additional investment, weighed meaningfully on our profitability," he further added.
Palladini further revealed that the company would "act decisively", such as shutting low-margin stores, right-sizing operations, and optimising its product mix. He also asserted that the leadership team of the company, including the board, would accept lower financial pay in 2026 as part of cost-saving measures.
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Rising tariffs to add up to $250 million in extra costs
In its Monday earnings reports, the company also stated that tariffs would contribute $200 million to $250 million to its import costs during 2025 on top of the $110 million duties already incurred. It said, "These additional tariffs have begun to add substantially to the approximately $110 million in duties on imported products paid by the company."
It said, "Over time, the company intends to partially offset these additional costs through a combination of changes to its product assortments, cost sharing with its vendor partners, changes to the mix of its production by country, and raising prices to end consumers and its wholesale customers," The Independent reported.
According to a report by the Atlanta Business Chronicle, Palladini, on a conference call, told investors that customers, especially Generation Zs, are very enthusiastic about Carter's new products.
Yet, he also added, "there remains meaningful work to be done to eliminate costs, enhance productivity, add complexity and exhibit consistent growth in revenue and profitability."
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Carter's is the latest in a list of American businesses, including toy maker and Barbie creator Mattel and retailers Home Depot, that have cited financial hardship tied to the ongoing trade tariffs.
