Carter's operating margin fell to 5 percent last year from 9 percent in 2024, and new CEO Sharon Price John is responding with segmented wholesale assortments, an accelerated product pipeline and a brand refresh rolling out next year.

Net sales for the brand's parent, Carter's Inc. — which also operates OshKosh B'gosh — reached $2.9 billion last year, up slightly from $2.84 billion, while diluted earnings per share dropped to $2.53 from $5.12. Second-quarter net sales improved to $615 million from $585 million a year earlier.

"We're looking at 26 years here since we've touched this iconic brand," John, who joined in mid-June, told WWD. "As generations change, tastes change, technologies and consumers evolve, and the way moms think evolve. We needed to make some choices."

How will the wholesale accounts be differentiated?

Carter's plans to further differentiate its offering across its three biggest wholesale accounts — Walmart, Target and Amazon. Its Child of Mine, Just One You and Simple Joys labels are sold at those retailers respectively, and the company wants each line to pull its own weight.

"The objective is to create a segmentation that's non-cannibalistic and creates incrementality," John said.

For sourcing and merchandising teams, that means distinct product and packaging changes across three separate private-label-style programs, most of which roll out next year. Carter's sells through about 20,000 retail doors in total and operates roughly 1,000 stores across North America.

What changes are coming to product?

The assortment will shift toward kid-directed design: more licensed product, different silhouettes incorporating tulle and tutus, "toyetic" elements and new fabrications. Carter's just launched its Stellar Sleep program, built on five fabric types that accommodate seasonal variation and whether a child sleeps hot or cool.

"You're going to see a lot more whimsy and playfulness, some expansion of the licensing business, different silhouettes that incorporate tulle-ing and tutus — things that girls might gravitate towards, and things with toyetic elements and different fabrications," John said.

Core price points remain intact. Perennial bestsellers include five-packs of short-sleeve bodysuits at $14, a four-pack in long sleeves, 2-Way Zip Sleep & Play pajamas at $18 and Little Character sets at $26.

How fast can Carter's move?

The company says it will act faster on consumer insights and data and accelerate its product and innovation pipeline to match the speed at which licenses, trends and styles come and go — a structural challenge for a supply chain historically built around replenishment basics. "I've done this at other companies," John said.

The rebranding sits within a comprehensive turnaround strategy begun in 2025 that includes cost-cutting, increased full-price selling and store closings, though John said some new stores are opening and others are being refreshed.

Late last month the company launched a "Watch Them Glow" campaign with a refreshed star logo intended to signal the changes. "We're not trying to cut off our past because our past is really meaningful, and consumers love our brand, so you have to be careful with brand changes," John said. "But we want to bring [Carter's] more into the now… We want to evolve to have both a 'mom first' and a 'kid first' type of sensibility."

Who is leading the turnaround?

John succeeded Douglas Palladini, who held the CEO role for just a year. She was recruited from Build-A-Bear Workshop, where a 13-year tenure as CEO and president included a transformational period of improved profitability and growth. Earlier roles include president of Stride Rite's children's group, general manager and senior vice president of Hasbro's global Playskool business, and Mattel's vice president of international marketing for the Disney business unit.

"The lessons learned are always the same," John said. "You have to keep the consumer in the center of the choices that you make, and the best brands transcend utility and functionality to feelings, emotions and meaning."

The strategy rests on a demographic insight: mothers remain the primary clothing selectors for young children, but influence shifts to kids around kindergarten age, driven by peers, brands and licensing. "They might have a favorite cartoon character or sports team, and won't leave that store until they get the T-shirt or pajamas with that cartoon character or sports team," John said, noting kids can insist on choosing as young as age 3 or 4.

Most product and packaging changes will reach retail next year, with licensing expansion and the accelerated pipeline determining whether the 160-year-old brand — founded in 1865 by William Carter in Needham, Mass. — can rebuild its operating margin while holding its core price architecture.