What Happened?
Shares of children’s apparel manufacturer Carter’s (NYSE: CRI) fell 15.7% in the afternoon session after President Trump announced "reciprocal tariffs" on all US imports, set at a minimum rate of 10%.
From clothing brands and electronics makers to the e-commerce sites that move their goods, companies built on global supply chains took the biggest hit. Stocks with heavy exposure to Asia were especially hard-hit, as the new tariffs threatened the growth and profits of firms with factories in the region. Vietnam, central to many companies' production plans, faced a 46% tariff. Cambodia and Indonesia were also in the crosshairs, with tariff rates of 49% and 32%. These measures could significantly erode the competitiveness of goods produced in those regions. For example, reduced production volumes would negatively affect the sales growth of all companies benefiting from these manufacturing hubs.
The shares closed the day at $35.55, down 15.5% from previous close.
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What The Market Is Telling Us
Carter’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. Moves this big are rare for Carter's and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was about 1 month ago when the stock dropped 18.1% on the news that the company reported disappointing Q4 2024 results. Its full-year EPS guidance missed significantly and its EPS guidance for next quarter also fell short of Wall Street's estimates. Revenue was flat, as growth in U.S. Wholesale was offset by declines in U.S. Retail and International segments. Adjusted EBITDA took a hit, with margins shrinking due to higher freight costs and increased promotional spending, which hurt profitability. Management pointed to macroeconomic pressures, high interest rates, and planned pricing investments as ongoing challenges.
On the bright side, the company beat analysts' same-store sales expectations, which helped deliver an EPS beat. Still, the weak guidance is weighing on the stock.
Carter's is down 33.9% since the beginning of the year, and at $35.57 per share, it is trading 55.6% below its 52-week high of $80.16 from April 2024. Investors who bought $1,000 worth of Carter’s shares 5 years ago would now be looking at an investment worth $542.56.
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