Can Higher Traffic Offset Carter's Consumer Spending Pressures?

Carter's, Inc. CRI is demonstrating that stronger customer engagement can help offset a challenging consumer backdrop. While inflation, higher gas prices and uneven consumer confidence continue to pressure discretionary spending, the company is seeing improving retail momentum driven by increased s…

Carter's, Inc. CRI is demonstrating that stronger customer engagement can help offset a challenging consumer backdrop. While inflation, higher gas prices and uneven consumer confidence continue to pressure discretionary spending, the company is seeing improving retail momentum driven by increased store and online traffic rather than relying solely on higher prices. Management emphasized that investments in demand creation, digital marketing and brand-building initiatives are attracting more shoppers and strengthening customer relationships, suggesting Carter's is gaining relevance even as consumers remain cautious.

The strategy is already producing measurable results. U.S. Retail net sales rose nearly 13% in the first quarter, while comparable sales increased more than 10%, marking the fourth consecutive quarter of positive comps. Traffic improved across both stores and e-commerce, supported by stronger marketing execution and a growing active customer base. Although management acknowledged that shoppers have become increasingly value-conscious, Carter's still achieved low-single-digit growth in average unit retail prices (AURs) while increasing unit sales by double digits. The company also added more Gen Z parents to its customer file, with these consumers gravitating toward higher-priced merchandise. Marketing investments across social media, connected TV and influencer partnerships helped drive these gains by increasing brand awareness and consumer engagement.

Beyond marketing, Carter's is creating additional reasons for consumers to engage with its brands. Collaborations such as the OshKosh x Disney Winnie the Pooh collection successfully attracted new shoppers, particularly Gen Z parents, while generating average selling prices that were more than double the U.S. retail average. The company is also enhancing its digital experience and investing in more compelling brand storytelling to encourage repeat visits and improve customer loyalty. These initiatives complement broader productivity efforts that are helping fund growth investments without significantly increasing the overall cost structure.

Management remains cautious, noting that consumers are still prioritizing value and that competitive pricing could intensify if industry conditions weaken further. Even so, Carter's believes sustained traffic growth provides a stronger foundation than relying solely on price increases. If marketing initiatives continue expanding the customer base and driving repeat purchases, higher traffic could remain an important lever for supporting sales growth despite ongoing pressure on consumer spending.

CRI’s Price Performance & Valuation

Carter’s shares have gained 24.9% in the past three months against the industry’s 13.8% decline.

From a valuation standpoint, CRI trades at a forward price-to-earnings ratio of 13.69X compared with the industry’s average of 19.19X.

Carter’s currently carries a Zacks Rank #2 (Buy).

Other Key Picks in the Consumer Discretionary Space

Columbia Sportswear Company COLM, which engages in the sourcing, marketing and distribution of outdoor and active lifestyle apparel, footwear, accessories and equipment, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

COLM delivered a trailing four-quarter earnings surprise of 44.1%, on average. The Zacks Consensus Estimate for Columbia Sportswear’s current financial-year sales indicates growth of 2.6% from the year-ago number.

Ralph Lauren Corporation RL, which is a designer, marketer and distributor of premium lifestyle products, currently carries a Zacks Rank #2.

RL delivered a trailing four-quarter earnings surprise of 9.1%, on average. The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales indicates growth of 6.7% from the year-ago number.

Superior Group of Companies, Inc. SGC produces, manufactures and sells promotional products and branded uniforms, and healthcare apparel and accessories in the United States and internationally. At present, SGC carries a Zacks Rank #2.

The Zacks Consensus Estimate for SGC’s current fiscal-year sales and earnings implies growth of 2% and 28.3%, respectively, from the year-ago figures. SGC delivered a trailing four-quarter negative earnings surprise of 81.9%, on average.

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