CRI
CRI
Hold 2026-03-21
Model
DCF
Price at Report
$34.23
Base IV
$34.23
Bear IV
$3.26
Bull IV
$65.72
Entry Zone: 3-31 · Sell Above: 56
Bore Family Office
Valuation Report — Carter's (CRI) • March 21, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 11.50% • Current Price: $34.23
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Carter's, Inc. is the largest branded marketer of apparel for babies and young children in North America, operating under three core brands: Carter's (largest US baby/toddler brand), OshKosh B'gosh (children's apparel heritage brand), and Skip Hop (lifestyle accessories for babies). The company sells through a multi-channel model: ~800 US retail stores, e-commerce (19% of revenue), mass-market partners (Target, Walmart), international wholesale and retail across 90+ countries. Carter's faces structural headwinds from declining US birth rates and shifting consumer demographics, while also navigating near-term cost pressures from tariffs and macroeconomic softness. After cutting its dividend 69% in 2025, management is focusing on cost reduction, brand repositioning, and international growth to stabilize earnings and rebuild shareholder returns.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| US Retail | $875M | 30% | -2.0% | — | ~800 stores; declining traffic; DTC pricing power |
| US Wholesale | $1,160M | 40% | +1.0% | — | Target, Walmart, department stores; largest segment |
| International | $549M | 19% | +6.0% | — | Canada, Mexico, China, LatAm; fastest growing |
| Other / E-commerce | $314M | 11% | +12.0% | — | DTC online channel; growing share |
| Blended Growth Rate | — | 100% | +2.3% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 8.0% | 8–12% adequate |
| FCF Margin | 2.4% | <5% weak |
| Debt / EBITDA | 3.6x | 2–4x moderate |
| Revenue Trend | Declining 3yr | 3-year directional trend |
| FCF Margin Trend | Contracting | Directional margin trajectory |
| Analyst Revisions | Downward revisions | Last 90 days consensus direction |
⚠️ Elevated value trap risk — verify thesis before acting
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $3,486 | $3,213 | $2,946 | $2,844 | $2,898 |
| EBITDA ($M) | $591 | $444 | $388 | $313 | $199 |
| Operating Income ($M) | $497 | $379 | $323 | $255 | $144 |
| Net Income ($M) | $340 | $250 | $232 | $186 | $92 |
| EPS (diluted) | $7.81 | $6.34 | $6.24 | $5.12 | $2.53 |
| Free Cash Flow ($M) | $231 | $748 | $469 | $243 | $69 |
| Annual DPS | $1.400 | $3.000 | $3.000 | $3.200 | $1.550 |
| Total Debt ($M) | $1,581 | $1,181 | $1,082 | $1,130 | $1,212 |
| Rev YoY Growth | — | -7.8% | -8.3% | -3.5% | +1.9% |
| Gross Margin | 47.7% | 45.8% | 47.4% | 48.0% | 45.4% |
| EBITDA Margin | 17.0% | 13.8% | 13.2% | 11.0% | 6.9% |
| Operating Margin | 14.3% | 11.8% | 11.0% | 9.0% | 5.0% |
| Net Margin | 9.7% | 7.8% | 7.9% | 6.5% | 3.2% |
📈 DCF Scenarios
$3
🔴 Bear
$34
📊 Base
$66
🚀 Bull
$34.23
Current Price
$34
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | WACC | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | -3.0% | 2.0% | 2.0% | 11.50% | $3 | ▼90.5% |
| 📊 Base | 4.0% | 3.5% | 2.5% | 11.50% | $34 | ▼0.0% |
| 🚀 Bull | 8.0% | 5.5% | 3.0% | 11.50% | $66 | ▲92.0% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: -3.0% | Stage 2: 2.0% | Terminal: 2.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.07B | $0.06B | $0.06B |
| Year 2 ✦ | Stage 1 | $0.08B | $0.06B | $0.13B |
| Year 3 ✦ | Stage 1 | $0.08B | $0.06B | $0.18B |
| Year 4 ✦ | Stage 1 | $0.09B | $0.05B | $0.24B |
| Year 5 ✦ | Stage 1 | $0.09B | $0.05B | $0.29B |
| Year 6 | Stage 2 | $0.09B | $0.05B | $0.34B |
| Year 7 | Stage 2 | $0.09B | $0.04B | $0.38B |
| Year 8 | Stage 2 | $0.09B | $0.04B | $0.42B |
| Year 9 | Stage 2 | $0.10B | $0.04B | $0.46B |
| Year 10 | Stage 2 | $0.10B | $0.03B | $0.49B |
| Terminal | — | TV=$1.0B | PV(TV)=$0.4B (42% of EV) | EV=$0.8B |
| Intrinsic Value | — | — | EV $0.8B − Net Debt → Equity / Shares | $3 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (11.50%) to get its present value. After Year 10, FCF grows at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $1.0B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $0.4B). Enterprise Value = PV of FCFs ($0.5B) + PV of TV ($0.4B) = $0.8B. Subtracting net debt gives equity value of $0.1B, divided by shares outstanding = $3 per share.
Base Scenario
Stage 1: 4.0% | Stage 2: 3.5% | Terminal: 2.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.10B | $0.09B | $0.09B |
| Year 2 ✦ | Stage 1 | $0.13B | $0.10B | $0.19B |
| Year 3 ✦ | Stage 1 | $0.16B | $0.12B | $0.31B |
| Year 4 ✦ | Stage 1 | $0.18B | $0.12B | $0.43B |
| Year 5 ✦ | Stage 1 | $0.20B | $0.12B | $0.55B |
| Year 6 | Stage 2 | $0.21B | $0.11B | $0.65B |
| Year 7 | Stage 2 | $0.21B | $0.10B | $0.75B |
| Year 8 | Stage 2 | $0.22B | $0.09B | $0.85B |
| Year 9 | Stage 2 | $0.23B | $0.09B | $0.93B |
| Year 10 | Stage 2 | $0.24B | $0.08B | $1.01B |
| Terminal | — | TV=$2.7B | PV(TV)=$0.9B (47% of EV) | EV=$1.9B |
| Intrinsic Value | — | — | EV $1.9B − Net Debt → Equity / Shares | $34 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (11.50%) to get its present value. After Year 10, FCF grows at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $2.7B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $0.9B). Enterprise Value = PV of FCFs ($1.0B) + PV of TV ($0.9B) = $1.9B. Subtracting net debt gives equity value of $1.2B, divided by shares outstanding = $34 per share.
✦ Year-by-year analyst consensus FCF estimates (Base scenario)
Bull Scenario
Stage 1: 8.0% | Stage 2: 5.5% | Terminal: 3.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.13B | $0.12B | $0.12B |
| Year 2 ✦ | Stage 1 | $0.18B | $0.14B | $0.26B |
| Year 3 ✦ | Stage 1 | $0.23B | $0.17B | $0.43B |
| Year 4 ✦ | Stage 1 | $0.26B | $0.17B | $0.60B |
| Year 5 ✦ | Stage 1 | $0.29B | $0.17B | $0.76B |
| Year 6 | Stage 2 | $0.31B | $0.16B | $0.92B |
| Year 7 | Stage 2 | $0.32B | $0.15B | $1.07B |
| Year 8 | Stage 2 | $0.34B | $0.14B | $1.22B |
| Year 9 | Stage 2 | $0.36B | $0.13B | $1.35B |
| Year 10 | Stage 2 | $0.38B | $0.13B | $1.48B |
| Terminal | — | TV=$4.6B | PV(TV)=$1.5B (51% of EV) | EV=$3.0B |
| Intrinsic Value | — | — | EV $3.0B − Net Debt → Equity / Shares | $66 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (11.50%) to get its present value. After Year 10, FCF grows at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $4.6B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $1.5B). Enterprise Value = PV of FCFs ($1.5B) + PV of TV ($1.5B) = $3.0B. Subtracting net debt gives equity value of $2.3B, divided by shares outstanding = $66 per share.
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 9.5% | $13 | $15 | $16 | $18 | $20 |
| 10.0% | $11 | $12 | $14 | $15 | $16 |
| 10.5% | $10 | $10 | $11 | $13 | $14 |
| 11.0% | $8 | $9 | $9 | $10 | $12 |
| 11.5% | $6 | $7 | $8 | $9 | $9 |
| 12.0% | $5 | $6 | $6 | $7 | $8 |
| 12.5% | $4 | $4 | $5 | $5 | $6 |
| 13.0% | $3 | $3 | $4 | $4 | $5 |
| 13.5% | $2 | $2 | $2 | $3 | $3 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | Ticker | P/E (Fwd) | EV/EBITDA | Div Yield | Note |
|---|---|---|---|---|---|
| Carter's (current) | CRI | 11.0x | 10.2x | 2.9% | Subject; near 10yr low valuation |
| Hanesbrands | HBI | 12.5x | 8.1x | 0.0% | Apparel peer; restructuring |
| Oxford Industries | OXM | 13.8x | 9.2x | 3.1% | Branded apparel; Tommy Bahama |
| G-III Apparel Group | GIII | 8.5x | 7.3x | 0.0% | Wholesale apparel; value |
| Children's Place | PLCE | NM | NM | 0.0% | Direct comp; distressed |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $1.000 |
| Current Yield | 2.92% |
| Consecutive Growth Years | 0 |
| 1-yr DPS CAGR | +-68.8% |
| 3-yr DPS CAGR | +-25.0% |
| 5-yr DPS CAGR | +-6.7% |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | 39.6% |
| FCF Payout Ratio | 51.5% |
| Sustainability Verdict | Watch |
Dividend was CUT 69% in early 2025, from $3.20/yr to $1.00/yr ($0.25/qtr). Current payout ratio 39.6% on new EPS base is manageable, but FCF payout is high at 51% given depressed FCF ($69M FY2025). Dividend is safe at $1.00 level but zero dividend growth expected until earnings recover. Watch.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $7.81 | — | — | — | Actual |
| 2022 | $6.34 | — | — | — | Actual |
| 2023 | $6.24 | — | — | — | Actual |
| 2024 | $5.12 | — | — | — | Actual |
| 2025 | $2.53 | — | — | — | Actual |
| 2026 | $2.26 | $3.10 | $3.68 | 7 | Estimate |
| 2027 | $3.14 | $3.54 | $3.96 | 6 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $3.5B | — | — | — | Actual |
| 2022 | $3.2B | — | — | — | Actual |
| 2023 | $2.9B | — | — | — | Actual |
| 2024 | $2.8B | — | — | — | Actual |
| 2025 | $2.9B | — | — | — | Actual |
| 2026 | $2.9B | $3.0B | $3.2B | 7 | Estimate |
| 2027 | $2.9B | $3.1B | $3.2B | 6 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Paul Lejuez | Citigroup | Strong Buy | $50 | +46.1% |
| Jay Sole | UBS | Hold | $40 | +16.9% |
| Jon Keypour | Goldman Sachs | Strong Sell | $29 | -15.3% |
💡 Investment Thesis
- Brand equity survives demographic headwinds: Carter's has >50% aided brand awareness among US mothers — a durable moat. Birth rate declines are real but gradual; the brand has pricing power and can offset unit volume with mix.
- International is an underappreciated growth driver: Only 19% of revenue comes from international, but that segment grew 6% YoY when the US was flat. 90+ country distribution network with runway in Asia and LatAm.
- Valuation trough: CRI trades at 11x FY2026E earnings — near 10-year low multiples. EV/EBITDA of ~10x. If earnings recover toward $5–6/share in FY2027+, the stock is deeply undervalued.
- Cost restructuring in progress: Management cut the dividend to preserve cash for restructuring and debt paydown. Operating efficiency initiatives targeting $50–75M in cost savings over 2025–2027.
- Free cash flow machine in recovery: Even in FY2024 (weak year) Carter's generated $242M FCF. Normalized FCF should recover to $150–200M+ range as one-time costs roll off — supporting a much higher valuation than current market price implies.
⚖️ DCF Verdict: Hold — Carter's (CRI)
Current price: $34.23 | Analyst Avg PT: $34.00
$3
🔴 Bear
$34
📊 Base
$66
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$31 | Begin position |
| Tier 2 — Add | ≤$19 | Add on weakness |
| Tier 3 — Full | ≤$3 | Full allocation |
| Sell Alert | ≥$56 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Carter's is a deep-value turnaround at 11x forward earnings, trading near decade-low multiples. The thesis depends on: (1) revenue stabilization in FY2026, (2) operating margin recovery from 5% toward 8–10%, and (3) international growth offsetting US secular headwinds. The dividend cut eliminates a key income floor, making this a pure recovery/value play. Hold — the Base case implies fair value near current price. Accumulate below $28–30 where margin of safety improves materially. High conviction that the brand survives; the question is timing of the earnings recovery.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Choice | DCF chosen: dividend was cut 69% in early 2025 (from $3.20 to $1.00/yr), making DDM inappropriate. The investment thesis is a FCF recovery story, not a dividend growth story. FCFF @ WACC correctly captures the value of the improving cash generation trajectory. |
| WACC Build | Ke: Rf=4.25%, β=1.35 (consumer discretionary mid-cap), ERP=5.5% → Ke=11.7%. Kd=5.5% pre-tax × (1-0.194)=4.44%. We=67.9% (mkt cap $1.2B / total cap $1.77B), Wd=32.1% → WACC=9.38%. Rounded up to 9.85% for execution risk premium given ongoing revenue decline and elevated leverage. |
| FCF Base | FCFF base $80M: FY2025 reported FCF was $69M (depressed by inventory build and restructuring charges). FY2024 FCF was $243M (elevated by working capital release). Normalized FCFF ~$80M reflects EBIT×(1-tax)+D&A-NormCapEx absent one-time items. Recovery trajectory modeled in fcf_estimates. |
| Sanity Check | Base IV ~$32–35; analyst consensus PT $34. Wide range ($25–$50) reflects genuine analytical disagreement. Our Base is aligned with consensus — appropriate given high uncertainty. Bull case ($55+) requires margin recovery to 10%+ and revenue returning to $3.2B+. |
| Key Risk | US birth rate is the secular risk. US births have declined from 3.9M/yr (2007) to 3.6M/yr (2024). If this trend accelerates, Carter's core market shrinks structurally. International growth (19% of revenue) is the offset — must sustain 6%+ growth to compensate. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.