CARTERS INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 –THE COMPANY

Carter’s, Inc. and its wholly owned subsidiaries (collectively, the “Company”) design, source, and market branded childrenswear under the Carter’s, OshKosh B’gosh (or “OshKosh”), Skip Hop, Child of Mine, Just One You, Simple Joys, Little Planet, Otter Avenue, and other brands. The Company’s products are sourced through contractual arrangements with manufacturers worldwide for sale in the Company’s retail stores, eCommerce sites, and mobile app, which offer the Company’s brand name merchandise and other licensed products manufactured by other companies. The Company also distributes its products to wholesale customers, which include leading department stores, national chains, and specialty retailers domestically and internationally.

Our trademarks that are referred to in this Quarterly Report on Form 10-Q, including Carter’s, OshKosh B’gosh, OshKosh, Skip Hop, Child of Mine, Just One You, Simple Joys, Little Planet, Otter Avenue, PurelySoft, and Carter’s Rewards, many of which are registered in the United States and in over 100 other countries and territories, are each the property of one or more subsidiaries of Carter’s, Inc.

NOTE 2 –BASIS OF PRESENTATION, RECENT ACCOUNTING PRONOUNCEMENTS, AND OTHER

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). All intercompany transactions and balances have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the condensed consolidated financial condition, results of operations, comprehensive income, statement of shareholders’ equity, and cash flows of the Company for the interim periods presented. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the fiscal quarter ended September 27, 2025 are not necessarily indicative of the results that may be expected for the current fiscal year ending January 3, 2026.

The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

The accompanying condensed consolidated balance sheet as of December 28, 2024 was derived from the Company’s audited consolidated financial statements included in its most recently filed Annual Report on Form 10-K. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC and the instructions to Form 10-Q.

The Company operates on a 52 or 53 week fiscal calendar. Fiscal 2025 will end on January 3, 2026 and includes 53 weeks. Fiscal 2024 ended on December 28, 2024 and included 52 weeks. The fiscal quarters ended September 27, 2025 and September 28, 2024 each included 13 weeks.

Accounting Policies

The accounting policies the Company follows are set forth in its most recently filed Annual Report on Form 10-K. There have been no material changes to these accounting policies.

Goodwill and Tradename Assets

During the second quarter of fiscal 2025, the Company identified a triggering event related to the new tariffs enacted by the Trump Administration and the resulting unfavorable impact on the Company’s financial forecasts, as well as a sustained decrease in the Company’s stock price since the last impairment test conducted in the fourth quarter of fiscal 2024. As a result, the Company performed a quantitative impairment test on the goodwill ascribed to each of the Company’s reporting units and on the value of its indefinite-lived intangible tradename assets.

Additionally, during the third quarter of fiscal 2025, the Company identified a triggering event related to the sustained decrease in the Company’s stock price since the last impairment test conducted in the second quarter of fiscal 2025. As a result, the Company performed a quantitative impairment test on the goodwill ascribed to each of the Company’s reporting units and on the value of its indefinite-lived intangible tradename assets.

Goodwill

The goodwill impairment assessments for each reporting unit were performed in accordance with ASC 350, “Intangibles--Goodwill and Other” (“ASC 350”) and compares the carrying value of each reporting unit to its fair value. Consistent with prior practice, the Company uses a 50% weighting of the income approach and a 50% weighting of the market approach to determine the fair value of a reporting unit. The assumptions used in these approaches include revenue growth and profitability, terminal growth rates, discount rates, market multiples, and a control premium. Discount rates are dependent upon interest rates and the cost of capital at a point in time. These assumptions are consistent with those we believe hypothetical marketplace participants would use. An impairment is recorded for any excess carrying value above the fair value of the reporting unit, not to exceed the carrying value of goodwill.

Based on these assessments, there wereno impairments to the value of goodwill in the second quarter or third quarter of fiscal 2025. The assessment performed in the third quarter of fiscal 2025 indicated that the fair value of assets exceeded its carrying value for the U.S. Wholesale reporting unit by over 100%. The assessment indicated that the fair value of assets for the U.S. Retail, Canada, and Other International reporting units exceeded its carrying values by approximately 4%,7%, and 4%, respectively.

Tradename Assets

The indefinite-lived tradename asset assessments were performed in accordance with ASC 350 and were determined using the relief-from-royalty valuation method, which examines the hypothetical cost savings that accrue as a result of not having to license the tradename from another owner. The relief-from-royalty valuation method involves two steps: (1) estimation of reasonable royalty rates for the tradename assets and (2) the application of these royalty rates to a forecasted net revenue stream and discounting the resulting cash flows to determine a fair value. If the carrying amount exceeds the fair value of the tradename, an impairment charge is recognized in the amount of the excess.

Based on these assessments, there wereno impairments to the value of our indefinite-lived tradename assets in the second quarter or third quarter of fiscal 2025.

Related Party Transaction

In August 2025, the Company appointed Emily D. Evert to its executive leadership team as Chief Strategy Officer. Prior to joining the Company, Emily was a managing director and partner at The Boston Consulting Group, Inc. (“BCG”).

The Company engaged BCG to provide general consulting services in fiscal 2024 and to support operating model improvement initiatives in fiscal 2025. The aggregate fees paid to BCG were approximately $13.6 million in the first three quarters of fiscal 2025 and $1.7 million in the first three quarters of fiscal 2024. As of September 27, 2025, December 28, 2024, and September 28, 2024, outstanding payables to BCG under these engagements were $0.5 million, $0.1 million, and $0.1 million, respectively.

These arrangements were entered into with BCG prior to Ms. Evert’s joining the Company and the engagements with BCG were entered into on terms Management believes to be consistent with those negotiated in an arm’s-length transaction with an unrelated third party.

Shareholder Right’s Plan

On September 22, 2025, the Board of Directors (the “Board”) of the Company adopted a limited duration shareholder rights agreement (the “Rights Agreement”) in response to the rapid accumulation of a significant amount of the common stock of the Company by a third party. The agreement is intended to reduce the likelihood that any entity, person or group is able to gain control of the Company through open market accumulation without paying all stockholders an appropriate control premium or providing the Board sufficient opportunity to make informed judgments and take actions that are in the best interests of all shareholders. Pursuant to the agreement, the Company issued, by means of a “dividend”, one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock to shareholders of record on the close of business on October 3, 2025. Initially, these Rights are not exercisable and trade with, and are represented by, the shares of the Company’s common stock. The Rights Agreement will expire on September 21, 2026, or earlier, as provided in the Right’s Agreement.

Under the Rights Agreement, if a person or group (each, an “acquiring person”) acquires beneficial ownership of 15% (or 20% in the case of investors eligible to file Schedule 13Gs) or more of the outstanding shares of the Company’s common stock in a transaction not approved by the Board, the Board, at its option, may exchange each Right (other than Rights owned by the acquiring person that will become void and will not be exercisable) in whole or in part, at an exchange ratio ofone share of the Company’s common stock, or one ten-thousandth of a share of Series A Junior Participating Preferred Stock (the “Preferred Stock”) (or of a share of a class or series of the Company’s preferred stock having equivalent rights, preferences and privileges), per outstanding right, subject to adjustment.

Adoption of the Rights Plan did not have an impact on the Company’s condensed consolidated financial statements, including basic and diluted earnings per share. Additional information is included in the Company’s current report on Form 8-K filed September 24, 2025, which is not incorporated herein by reference.

Recent Accounting Pronouncements

Income Taxes - Improvements to Income Tax Disclosures (ASU 2023-09)

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes - Improvements to Income Tax Disclosures. This new guidance requires consistent categories and greater disaggregation of information in the rate reconciliation and greater disaggregation of income taxes paid by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated financial statements but does not expect the effect of the adoption of ASU 2023-09 to be material.

Disaggregation of Income Statement Expenses (ASU 2024-03)

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses. This new guidance is intended to increase transparency and comparability of financial statements by requiring disclosure of significant expense components for certain expenses on the face of the consolidated statement of operations. The ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that this standard will on its consolidated financial statements but does not expect the effect of the adoption of ASU 2024-03 to be material.

NOTE 3 -REVENUE RECOGNITION

The Company’s revenues are earned from contracts or arrangements with retail and wholesale customers and licensees. Contracts include written agreements, as well as arrangements that are implied by customary practices or law.

Disaggregation of Revenue

The Company sells its products directly to consumers (“direct-to-consumer”) and to other retail companies and partners that subsequently sell the products directly to their own retail customers (“wholesale channel”). The Company also earns royalties from certain of its licensees. Disaggregated revenues from these sources for the fiscal periods indicated were as follows:

Accounts Receivable from Customers and Licensees

The components of Accounts receivable, net were as follows:

(1)Includes receivables related to tax recoveries, shipping volume rebates, healthcare-related rebates, amounts due from third-party gift card program partners, and recoveries related to provisional anti-dumping duties in Mexico.

(2)Includes allowance for chargebacks of $3.4 million, $4.4 million, and $5.0 million for the periods ended September 27, 2025, December 28, 2024, and September 28, 2024, respectively.

(3)Includes allowance for credit losses of $12.0 million, $5.7 million, and $8.3 million for the periods ended September 27, 2025, December 28, 2024, and September 28, 2024, respectively.

Contract Assets and Liabilities

The Company’s contract assets are not material.

Contract Liabilities

The Company recognizes a contract liability when it has received consideration from a customer and has a future obligation to transfer goods to the customer. Total contract liabilities consisted of the following amounts:

(1)During the third quarters of fiscal 2025 and fiscal 2024, the Company recognized revenue of $1.3 million and $1.4 million related to the gift card liability balance that existed at June 28, 2025 and June 29, 2024, respectively. Additionally, during the first three quarters of fiscal 2025 and fiscal 2024, the Company recognized revenue of $6.8 million and $7.1 million related to the gift card liability balance that existed at December 28, 2024 and December 30, 2023, respectively.

(2)The Company received an upfront signing bonus from a third-party financial institution, which will be recognized as revenue on a straight-line basis over the term of the agreement. The amount as of September 27, 2025 reflects the current portion of this bonus and will be recognized as revenue through the end of fiscal 2025. The amounts as of December 28, 2024 and September 28, 2024 reflected the current portion of this bonus and were recognized as revenue over the subsequent twelve months.

(3)Included with Other current liabilities on the Company’s condensed consolidated balance sheets.

(4)This amount reflects the non-current portion of the Carter’s credit card signing bonus and is included within Other long-term liabilities on the Company’s condensed consolidated balance sheets.

NOTE 4 –OTHER CURRENT LIABILITIES

Other current liabilities at the end of any comparable period were as follows:

(1)Increase as of September 27, 2025 relates to a higher projected attainment of annual incentive objectives relative to the prior periods.

(2)Includes accruals for severance and other termination benefits, freight, and interest on long-term debt.

NOTE 5 –SUPPLY CHAIN FINANCE PROGRAM

We have established a voluntary supply chain finance (“SCF”) program through participating financial institutions. This SCF program enables participating suppliers to accelerate payments for receivables due from the Company by selling them directly to the participating financial institutions at their discretion. As of September 27, 2025, the SCF program has a $70.0 million revolving capacity. We are not a party to the agreements between the participating financial institutions and the suppliers in connection with the SCF program. Payment terms for most of our suppliers are 60 days, regardless of participation in the SCF program. The Company does not provide any guarantees under the SCF program.

The Company’s liability related to amounts payable to the participating financial institution for suppliers who voluntarily participate in the SCF program are included in Accounts payable on our condensed consolidated balance sheets. As of September 27, 2025, December 28, 2024, and September 28, 2024, amounts under the SCF program included in Accounts payable were $24.5 million, $19.0 million, and $14.3 million, respectively. Payments made in connection with the SCF program, like payments of other accounts payable, are reflected as a reduction to our operating cash flow.

NOTE 6 –LONG-TERM DEBT

Long-term debt consisted of the following:

Secured Revolving Credit Facility

As of September 27, 2025, December 28, 2024, and September 28, 2024, the Company hadno outstanding borrowings under its secured revolving credit facility, exclusive of $6.9 million, $4.7 million, and $5.7 million of outstanding letters of credit, respectively.

As of September 27, 2025, December 28, 2024, and September 28, 2024, there was $843.1 million, $845.3 million, and $844.3 million available for future borrowing. Any outstanding borrowings under the Company’s secured revolving credit facility are classified as non-current liabilities on the Company’s condensed consolidated balance sheets due to the contractual repayment terms under the credit facility. However, these repayment terms also allow us to repay some or all of the outstanding borrowings at any time.

Terms of the Secured Revolving Credit Facility

The Company’s secured revolving credit facility provides for an aggregate credit line of $850 million which includes a $750 million U.S. dollar facility and a $100 million multicurrency facility. The credit facility matures in April 2027. The facility contains covenants that restrict the Company’s ability to, among other things: (i) create or incur liens, debt, guarantees or other investments, (ii) engage in mergers and consolidations, (iii) pay dividends or other distributions to, and redemptions and repurchases from, equity holders, (iv) prepay, redeem or repurchase subordinated or junior debt, (v) amend organizational documents, and (vi) engage in certain transactions with affiliates.

The Company’s secured revolving credit facility provides for a leverage-based pricing grid which determines an interest rate for borrowings, calculated as the applicable floating benchmark rate plus a credit spread adjustment, if any, plus an amount ranging from 1.125% to 1.625%, based on leverage. As of September 27, 2025, the borrowing rate for an adjusted term Secured Overnight Financing Rate (“SOFR”) loan would have been 5.39%, which includes a leverage-based adjustment of 1.125%.

As of September 27, 2025, the Company was in compliance with its financial and other covenants under the secured revolving credit facility.

In October 2025, the Company’s wholly-owned subsidiaries, The William Carter Company and The Genuine Canadian Corp., obtained commitments for a new five-year asset-based revolving credit facility with initial borrowing commitments of no less than $750 million, subject to the borrowing base under the new facility. Additionally, the Company is evaluating opportunities to refinance our $500.0 million principal amount of senior notes outstanding that mature on March 15, 2027.

NOTE 7 –COMMON STOCK

Open Market Share Repurchases

The Company repurchased and retired shares in open market transactions in the following amounts for the fiscal periods indicated:

(1)Share repurchases were made in compliance with all applicable rules and regulations and in accordance with the share repurchase authorizations.

(2)The aggregate cost of share repurchases and average price paid per share exclude excise tax on share repurchases.

The total aggregate remaining capacity under outstanding repurchase authorizations as of September 27, 2025 was $599.0 million, based on settled repurchase transactions. The share repurchase authorizations have no expiration date.

Future repurchases may occur from time to time in the open market, in privately negotiated transactions, or otherwise. The timing and amount of any repurchases will be at the discretion of the Company subject to restrictions under the Company’s secured revolving credit facility, market conditions, stock price, other investment priorities, and other factors.

Dividends

In the first, second, and third quarters of fiscal 2025, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.80, $0.25, and $0.25, respectively (for an aggregate cash dividend per common share of $1.30 for the first three quarters of fiscal 2025). Additionally, in each of the first three quarters of fiscal 2024, the Board of Directors declared, and the Company paid, a cash dividend per common share of $0.80 (for an aggregate cash dividend per common share of $2.40 for the first three quarters of fiscal 2024). The Board of Directors will evaluate future dividend declarations based on a number of factors, including restrictions under the Company’s secured revolving credit facility, business conditions, the Company’s financial performance, and other considerations.

Provisions in the Company’s secured revolving credit facility could have the effect of restricting the Company’s ability to pay cash dividends on, or make future repurchases of, its common stock, as further described in Note 6, Long-term Debt, to the condensed consolidated financial statements.

NOTE 8 –STOCK-BASED COMPENSATION

The Company recorded stock-based compensation expense as follows:

(1)Increase in the first three quarters of fiscal 2025 was primarily due to the accelerated vesting of outstanding time-based restricted stock awards related to the retirement of our former CEO in the first quarter of fiscal 2025.

(2)During the first three quarters of fiscal 2024, the achievement of performance target estimates related to certain performance-based grants were revised resulting in a reversal of previously recognized stock-based compensation expense.

The Company recognizes compensation cost ratably over the applicable performance periods based on the estimated probability of achievement of its performance targets at the end of each period.

On April 3, 2025, the Company granted the following awards to Douglas C. Palladini in connection with his appointment as CEO and President of the Company and a member of the Board of Directors:98,400 shares of time-based restricted stock awards and 98,400 shares of market-based restricted stock awards. The number of shares granted was based on the closing price of the Company’s stock on the grant date, which was $35.57, with the time-based restricted stock awards having a grant-date fair value of $35.57 per share and the market-based restricted stock awards having a grant-date fair value of $10.67 per share. A Monte-Carlo simulation was utilized to determine the grant-date fair value of the market-based restricted stock awards.

The market-based restricted stock awards issued to Mr. Palladini are eligible to be earned upon achieving share price hurdles for 20 consecutive trading days over athree-year period, starting on the award grant date. The share price hurdles were set based on growth rates of 30%,60%, and 90% above the closing stock price on grant date, which was $35.57. One-third of the award will be earned upon achievement of each of the applicable share price hurdles, but no earned shares will vest until the end of thethree-year period, subject to Mr. Palladini’s continued employment through the end of thethree-year period.

NOTE 9 –ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of Accumulated other comprehensive loss consisted of the following:

(*)Net of income taxes of $0.3 million, $1.2 million, and $1.1 million for the periods ended September 27, 2025, December 28, 2024, and September 28, 2024, respectively.

Pension Plan Settlements

During the third quarter of fiscal 2025, the Company substantially completed the process of settling its pension obligations under the frozen OshKosh B’Gosh, Inc. Pension Plan (the “pension plan”). In August 2025, the pension plan used existing pension plan assets to purchase non-participating annuity contracts from an insurance company and to make single-sum payments to certain plan participants, thereby settling its existing pension benefit obligations. The Company expects to distribute surplus plan assets to plan participants in fiscal 2026 in accordance with the terms of the plan and regulatory requirements.

As a result of the settlement, the Company remeasured the funded status of the pension plan as of August 31, 2025. In the third quarter and first three quarters of fiscal 2025, a gain on pension obligations of $0.9 million (net of income taxes of $0.3 million) was recognized in Accumulated other comprehensive (loss) income related to this remeasurement. Additionally, in the third quarter and first three quarters of fiscal 2025, $4.1 million of deferred losses on pension obligations (net of income taxes of $1.3 million) were reclassified from Accumulated other comprehensive loss to Pension plan settlement within the condensed consolidated statement of operations in connection with the settlement of the pension plan. Refer to Note 13, Employee Benefit Plans, to the condensed consolidated financial statements.

In the third quarter of fiscal 2024 the Company made single-sum payments to certain participants in the pension plan, thereby reducing its pension benefit obligations. As a result of the single-sum payout, the Company remeasured the funded status of the pension plan as of August 31, 2024. In the third quarter and first three quarters of fiscal 2024, a gain on pension obligations of $1.5 million (net of income taxes of $0.5 million) was recognized in Accumulated other comprehensive (loss) income related to this remeasurement. Additionally, in the third quarter and first three quarters of fiscal 2024, $0.7 million of deferred losses on pension obligations (net of income taxes of $0.2 million) were reclassified from Accumulated other comprehensive loss to Pension plan settlement within the condensed consolidated statement of operations related to the partial settlement of the pension plan.

NOTE 10 –FAIR VALUE MEASUREMENTS

Investments

In support of The William Carter Company Deferred Compensation Plan (the “Plan”), the Company invests comparable amounts in marketable securities, principally equity-based mutual funds, to approximate the participant’s investment return on employee deferrals of compensation. All of the marketable securities are included in Other assets on the Company’s condensed consolidated balance sheets, and their aggregate fair values were $21.0 million, $19.5 million, and $19.0 million at September 27, 2025, December 28, 2024, and September 28, 2024, respectively. These investments are classified as Level 1 within the fair value hierarchy. The change in the aggregate fair values of marketable securities is due to the net activity of gains and losses and any contributions and distributions during the period. Gains on the investments in marketable securities were $1.0 million and $1.5 million for the third quarter and the first three quarters of fiscal 2025, respectively. Gains on the investments in marketable securities were $0.6 million and $1.7 million for the third quarter and the first three quarters of fiscal 2024, respectively. These amounts are included in Other (income) expense, net on the Company’s condensed consolidated statement of operations.

During the third quarter of fiscal 2025, the Board of Directors approved the termination of the Plan, effective as of September 30, 2025 (the “Termination Date”). In connection with the termination, all participants will receive a single lump-sum distribution of their account balances on a final payment date, expected to occur in the third quarter of fiscal 2026. Until the final payment date, the Plan will continue to operate in the ordinary course. This includes maintaining investment allocations and processing scheduled distributions; however, all employee contributions ceased as of the Termination Date. See Note 13, Employee Benefit Plans for additional information.

Borrowings

As of September 27, 2025, the Company hadno outstanding borrowings under its secured revolving credit facility.

The fair value of the Company’s senior notes was $500.2 million, $494.4 million, and $498.1 million at September 27, 2025, December 28, 2024, and September 28, 2024, respectively. The fair value of these senior notes with a notional value and carrying value (gross of debt issuance costs) of $500.0 million was estimated using a quoted price as provided in the secondary market, which considers the Company’s credit risk and market related conditions, and is therefore within Level 2 of the fair value hierarchy.

Goodwill, Intangible Assets, and Long-Lived Tangible Assets

Some assets are not measured at fair value on a recurring basis but are subject to fair value adjustments only in certain circumstances. These assets can include goodwill, indefinite-lived intangible assets, and long-lived tangible assets that have been reduced to fair value when impaired. Assets that are written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment occurs.

In the fourth quarter of fiscal 2024, the Company recorded a non-cash pre-tax impairment charge of $30.0 million to reduce the carrying value of the indefinite-lived OshKosh tradename asset to $40.0 million. The impairment charge was driven by decreased actual and projected sales and profitability for our OshKosh brand.

During the second quarter of fiscal 2025, the Company identified a triggering event related to the new tariffs enacted by the Trump Administration and the resulting unfavorable impact on the Company’s financial forecasts, as well as a sustained decrease in the Company’s stock price since the last impairment test conducted in the fourth quarter of fiscal 2024. As a result, the Company performed a quantitative impairment test on the goodwill ascribed to each of the Company’s reporting units and on the value of its indefinite-lived intangible tradename assets.

Additionally, during the third quarter of fiscal 2025, the Company identified a triggering event related to the sustained decrease in the Company’s stock price since the last impairment test conducted in the second quarter of fiscal 2025. As a result, the Company performed a quantitative impairment test on the goodwill ascribed to each of the Company’s reporting units and on the value of its indefinite-lived intangible tradename assets.

The goodwill impairment assessments for each reporting unit was performed in accordance with ASC 350 and compares the carrying value of each reporting unit to its fair value. Consistent with prior practice, the Company uses a 50% weighting of the income approach and a 50% weighting of the market approach to determine the fair value of a reporting unit. The assumptions used in these approaches include revenue growth and profitability, terminal growth rates, discount rates, market multiples, and a control premium. Discount rates are dependent upon interest rates and the cost of capital at a point in time. These assumptions are consistent with those we believe hypothetical marketplace participants would use. An impairment is recorded for any excess carrying value above the fair value of the reporting unit, not to exceed the carrying value of goodwill.

Based on these assessments, there wereno impairments to the value of goodwill in the second quarter or third quarter of fiscal 2025. The assessment performed in the third quarter of fiscal 2025 indicated that the fair value of assets exceeded its carrying value for the U.S. Wholesale reporting unit by over 100%. The assessment indicated that the fair value of assets for the U.S. Retail, Canada, and Other International reporting units exceeded its carrying values by approximately 4%,7%, and 4%, respectively.

The indefinite-lived tradename asset assessments were performed in accordance with ASC 350 and were determined using the relief-from-royalty valuation method, which examines the hypothetical cost savings that accrue as a result of not having to license the tradename from another owner. The relief-from-royalty valuation method involves two steps: (1) estimation of reasonable royalty rates for the tradename assets and (2) the application of these royalty rates to a forecasted net revenue stream and discounting the resulting cash flows to determine a fair value. If the carrying amount exceeds the fair value of the tradename, an impairment charge is recognized in the amount of the excess.

Based on these assessments, there were no impairments to the value of our indefinite-lived tradename assets in the second quarter or third quarter of fiscal 2025.

NOTE 11 –INCOME TAXES

The Company’s income tax provision and effective tax rates for the fiscal periods indicated were as follows:

The Company’s effective income tax rate was 21.8% for the third fiscal quarter ended September 27, 2025, compared to 17.5% for the third fiscal quarter ended September 28, 2024. The Company’s effective income tax rate was 27.2% for the first three fiscal quarters ended September 27, 2025, compared to 20.0% for the first three fiscal quarters ended September 28, 2024. The increase in the effective tax rate was driven by lower income before income taxes in period, incremental nondeductible officers’ compensation, and Hong Kong’s implementation of the Pillar Two global minimum tax legislation. This was partially offset by a lower proportion of income generated in the United States, where the tax rate is higher relative to some of our international jurisdictions.

As of September 27, 2025, the Company had gross unrecognized income tax benefits of $7.9 million, of which $5.6 million, if ultimately recognized, may affect the Company’s effective income tax rate in the periods settled. The Company has recorded tax positions for which the ultimate deductibility is more likely than not, but for which there is uncertainty about the timing of such deductions.

On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act of 2025 (“OBBB”), which includes, among other provisions, changes to the U.S. corporate income tax system such as the immediate expensing of qualifying research and development costs and the permanent extension of certain provisions of the Tax Cuts and Jobs Act. Based on the Company’s current evaluation of the legislation, the Company does not expect these tax law changes to have a material impact on the Company’s consolidated financial statements. The Company will continue to assess the potential impacts of OBBB as additional regulatory guidance becomes available.

NOTE 12 –EARNINGS PER SHARE

The following is a reconciliation of basic common shares outstanding to diluted common and common equivalent shares outstanding:

(*)The volume of anti-dilutive awards is, in part, due to the related unamortized compensation costs.

NOTE 13 –EMPLOYEE BENEFIT PLANS

OshKosh B’Gosh Pension Plan

In fiscal 2024, the Board of Directors authorized the termination of the pension plan, with an effective date of November 30, 2024, through lump sum distributions and the purchase of annuity contracts. During the third quarter of fiscal 2025, the Company substantially completed the process of settling its pension obligations under the pension plan. In August 2025, the pension plan used existing pension plan assets to purchase non-participating annuity contracts from an insurance company and to make single-sum payments to certain plan participants, thereby settling its existing pension benefit obligations. The Company expects to distribute surplus plan assets to plan participants in fiscal 2026 in accordance with the terms of the plan and regulatory requirements.

These settlement transactions had no cash impact on the Company but did result in a non-cash pre-tax pension settlement charge of $8.8 million in the third quarter of fiscal 2025, recorded within Pension plan settlement on the Company’s condensed consolidated statement of operations. The charge reflects the recognition of $5.4 million of deferred losses associated with its pension obligations, which were released from Accumulated other comprehensive income, and a $3.4 million charge related to the recognition of prior service cost for the surplus plan assets to be distributed to plan participants in fiscal 2026.

During the third quarter of fiscal 2024, the pension plan made lump sum payments to certain participants, thereby reducing its pension benefit obligations. The transaction had no cash impact on the Company but did result in a non-cash pre-tax partial pension settlement charge of $0.9 million, which is included in Pension plan settlement on the Company’s condensed consolidated statement of operations.

Funded Status

As a result of the pension plan settlements, the Company remeasured the funded status of its pension plan as of August 31, 2025 and August 31, 2024. Presented below is the reconciliation of changes in the projected benefit obligation and plan assets as a result of this remeasurement and pension plan settlements:

The accumulated benefit obligation was equal to the projected benefit obligation as of August 31, 2025 and August 31, 2024 because the plan was frozen. The funded status asset is included in Other assets in the Company’s condensed consolidated balance sheets.

Net periodic pension cost of $0.3 million was recognized in the first three quarters of fiscal 2025, exclusive of the $8.8 million non-cash pre-tax pension settlement charge described above.

Assumptions

The discount rate for determining the benefit obligation as of August 31, 2025 and August 31, 2024 was 0.00% and 5.00%, respectively. The assumption for net periodic pension cost in the first three quarters of fiscal 2025 includes a discount rate of 5.50% through August 31, 2025 and 0.00% thereafter. The assumption for net periodic pension cost in the first three quarters of fiscal 2024 includes a discount rate of 4.75% through August 31, 2024 and 5.00% thereafter. The expected rate of return on plan assets in the first three quarters of fiscal 2025 was 5.50% through August 31, 2025 and 0.00% thereafter. The expected rate of return on plan assets in the first three quarters of fiscal 2024 was 4.75% through August 31, 2024 and 5.00% thereafter.

The fair value of plan assets was $3.4 million and $48.2 million as of August 31, 2025 and August 31, 2024, respectively. Plan assets as of August 31, 2024 were invested in fixed income securities, which include funds holding corporate bonds of companies from diverse industries and U.S. Treasuries.

Deferred Compensation Plan

During the third quarter of fiscal 2025, the Board of Directors approved the termination of The William Carter Company Deferred Compensation Plan (the “Plan”), effective as of September 30, 2025 (the “Termination Date”). In connection with the termination, all participants will receive a single lump-sum distribution of their account balances on a final payment date, expected to occur in the third quarter of fiscal 2026. Until the final payment date, the Plan will continue to operate in the ordinary course. This includes maintaining investment allocations and processing scheduled distributions; however, all employee contributions ceased as of the Termination Date.

The Plan permitted eligible employees to defer salary and incentive compensation in accordance with the Internal Revenue Code. Participant deferrals earn investment returns based on a select number of investment options, including equity, debt, and real estate mutual funds. Deferred compensation plan liabilities are recognized in Other long term liabilities on the Company’s condensed consolidated balance sheets. Changes in the balance, excluding those related to contributions or payments, are included in Other expense (income), net on the Company’s condensed consolidated statement of operations. The Company invests comparable amounts in marketable securities to approximate the participants’ return on selected investment options.

NOTE 14 –ORGANIZATIONAL RESTRUCTURING

In the third quarter of fiscal 2025, the Company initiated an organizational restructuring of our offices-based workforce to right-size its cost structure and improve future profitability. The Company currently estimates it will incur approximately $10.0 million to $11.0 million in organizational restructuring charges through the end of fiscal 2025 in connection with this initiative.

Substantially all of these charges are related to severance and other termination benefits and are recorded within Selling, general and administrative expenses. Severance and other termination benefits are expected to be paid out primarily in the first two quarters of fiscal 2026, and therefore the accrual is included in Other current liabilities in the Company’s condensed consolidated balance sheets. The activity in the organizational restructuring accrual was as follows:

NOTE 15 –SEGMENT INFORMATION

The Company hasthree operating and reportable segments: U.S. Retail, U.S. Wholesale, and International. The U.S. Retail segment consists of revenue primarily from sales of products in the United States through our retail stores, eCommerce websites, and mobile app. Similarly, the U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale partners. The International segment consists of revenue primarily from sales of products outside the United States, largely through our retail stores and eCommerce websites in Canada and Mexico, and sales to our international wholesale customers and licensees. The Company sells similar products in each of itsthree segments.

The Company’s chief operating decision maker is the Chief Executive Officer. The chief operating decision maker evaluates the operating performance of the segments based upon each segment’s net sales and segment operating income. Segment operating income includes net sales, royalty income, and related cost of goods sold and selling, general, and administrative expenses attributable to each segment. Segment operating income excludes unallocated corporate expenses as well as specific charges that are not directly attributable to segment operations, including restructuring costs, operating model improvement costs, leadership transition costs, and impairment charges related to goodwill and indefinite-lived intangible assets.

In fiscal 2024, the Company changed its measure of segment profitability to segment operating income, which excludes the charges mentioned above, and which were included in our previous measure of segment profitability, to better align with management’s assessment of segment performance and to provide better insights into segment performance. Prior period segment operating income for the third quarter and three fiscal quarters ended September 28, 2024 have been recast to conform to the current presentation. The Company does not evaluate performance or allocate resources based on segment asset data, and therefore total segments assets are not presented.

Certain costs, including incentive compensation for certain employees, and various other general corporate costs that are not specifically allocable to segments, are included in unallocated corporate expenses below.

Segment Performance

The table below presents certain segment information for our reportable segments for the periods indicated:

(1)Selling expenses include the costs of operating our retail stores and eCommerce channels, as well as wholesale sales management costs.

(2)Distribution expenses include payments to third-party shippers and handling costs to process product through our distribution facilities, including eCommerce fulfillment costs, and delivery to our wholesale customers and to our retail stores.

(3)Other segment items include royalty income and overhead costs that are attributable to our reportable segments and include allocated accounting, finance, human resources, and information technology expenses, occupancy costs, and other benefit and compensation programs, including performance-based compensation.

(1)Unallocated corporate expenses include corporate overhead expenses that are not directly attributable to one of our reportable segments and include unallocated accounting, finance, legal, human resources, and information technology expenses, occupancy costs for our corporate headquarters, and other benefit and compensation programs, including performance-based compensation.

(2)Primarily related to third-party consulting costs to support operating model improvement costs.

(3)Related to costs associated with the transition of our former CEO, including accelerated vesting of outstanding time-based restricted stock awards pursuant to a retirement agreement approved by the Board of Directors, executive recruiting costs, and other related costs.

(4)Related to charges for severance and other termination benefits as a result of organizational restructuring. Refer to Note 14, Organizational Restructuring for more information.

(5)Pension plan settlement charges for the fiscal quarter and three fiscal quarters ended September 28, 2024 have been reclassified to the Pension plan settlement line item. These charges were previously included in Other expense (income), net.

Additional Data by Segment

The tables below present additional information for our reportable segments for the periods presented:

Depreciation and amortization expense

NOTE 16 –COMMITMENTS AND CONTINGENCIES

The Company is subject to various claims and pending or threatened lawsuits in the normal course of business. The Company is not currently a party to any legal proceedings that it believes would have a material adverse impact on its financial position, results of operations, or cash flows.

The Company’s contractual obligations and commitments include obligations associated with leases, the secured revolving credit agreement, senior notes, and employee benefit plans.