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 AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 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 October 3, 2026 are not necessarily indicative of the results that may be expected for the current fiscal year ending January 2, 2027.

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 January 3, 2026 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 2026 will end on January 2, 2027 and includes 52 weeks. Fiscal 2025 ended on January 3, 2026 and included 53 weeks. The fiscal quarters ended October 3, 2026 and September 27, 2025 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. During the first quarter of fiscal 2026, the Company began accounting for potential refunds of tariffs previously paid under the International Emergency Economic Powers Act (“IEEPA”) as gain contingencies, as described below. During the third quarter of fiscal 2026, the Company began investing a portion of its cash in certificates of deposit, as described below.

IEEPA Tariff Recovery

During the first quarter of fiscal 2026, the U.S. Supreme Court ruled that tariffs imposed under the IEEPA were unlawful. Following the April 20, 2026 launch of U.S. Customs and Border Protection’s Consolidated Administration and Processing of Entries (“CAPE”) process, the Company submitted claims seeking approximately $130 million of refunds of previously paid IEEPA tariffs through the CAPE system.

The Company has elected to apply a gain contingency model in accordance with ASC 450-30,“Gain Contingencies” to account for recoveries of previously paid IEEPA tariffs. Under this model, a gain contingency is not recognized in the financial statements until the gain is realized or realizable. Any recovery, when recognized, is reflected as a reduction of Cost of goods sold for amounts related to goods already sold, or as a reduction of inventory to the extent the related goods remain on hand.

During the second quarter of fiscal 2026, the Company received refund payments from U.S. Customs and Border Protection totaling approximately $132 million, including interest, in connection with various adjudicated claims, and the related recovery has been recognized. The Company recorded approximately $128 million of the recovery as a reduction of Cost of goods sold and $4 million in Interest income within the condensed consolidated statement of operations. As of October 3, 2026, the Company’s remaining unadjudicated IEEPA refund claims, which continue to be accounted for as gain contingencies, were approximately $2 million. Uncertainty remains regarding the timing, amount, and ultimate receipt of any further refunds, and accordingly no additional amounts have been recognized in the condensed consolidated financial statements for these remaining claims.

Cash and Cash Equivalents and Short-Term Investments

The Company considers all highly liquid investments that have original maturities of three months or less to be cash equivalents. Cash and cash equivalents include deposit accounts, cash management funds invested in U.S. government instruments, and certificates of deposit with original maturities of three months or less. These investments are stated at cost, which approximates fair value. Cash equivalents also include amounts due from third-party financial institutions for credit and debit card transactions; these amounts typically settle in less than five days.

Investments with original maturities greater than three months at the date of purchase are excluded from Cash and cash equivalents. Such investments are classified as Short-term investments when their remaining maturities as of the balance sheet date are twelve months or less, and within Other assets when their remaining maturities as of the balance sheet date exceed twelve months. The Company’s Short-term investments consist of fixed-rate certificates of deposit held with a major financial institution, with interest payable at maturity. These investments are carried at cost, which approximates fair value due to their short-term maturities. Accrued interest is recorded within Prepaid expenses and other current assets in the condensed consolidated balance sheets, and interest earned is recognized in Interest income in the condensed consolidated statement of operations. Purchases of these investments are presented within investing activities in the condensed consolidated statement of cash flows, and amounts received at maturity are presented within investing activities to the extent of the original principal and within operating activities to the extent of interest received.

As of October 3, 2026, the Company held $25.0 million of certificates of deposit classified as Cash and cash equivalents and $75.0 million of certificates of deposit classified as Short-term investments in the condensed consolidated balance sheets. No certificates of deposit were held as of January 3, 2026 or September 27, 2025.

Goodwill and Tradename Assets

During the second and third quarters of fiscal 2025, the Company identified a triggering event related to the new tariffs enacted by the U.S. Administration and the resulting unfavorable impact on the Company’s financial forecasts, as well as a sustained decrease in the Company’s stock price at that time. 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 in the second and third quarters of fiscal 2025, which resulted in no impairment. The Company did not identify any triggering events during the third quarter or first three quarters of fiscal 2026 that would require an interim quantitative impairment test.

Expiration of Shareholder Rights Plan

On September 22, 2025, the Board of Directors 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. Pursuant to the Rights 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 as of the close of business on October 3, 2025.

The Rights Agreement expired in accordance with its terms on September 21, 2026, and all Rights issued thereunder expired unexercised. Neither the adoption nor the expiration of the Rights Agreement had 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 21, 2026, which is not incorporated herein by reference, as well as in Part II, Item 5. “Other Information”.

Recent Accounting Pronouncements

Disaggregation of Income Statement Expenses (ASU 2024-03)

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses. The ASU is intended to increase transparency and comparability of financial statements by requiring public business entities to disclose in the notes to the financial statements additional information about specified expense components included in certain expense captions presented 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 expects to adopt the ASU for its fiscal 2027 annual reporting period using a prospective transition method. The Company does not expect adoption of the ASU to have a material impact on amounts reported in its consolidated financial statements; however, adoption will require additional disclosures in the notes to the consolidated financial statements.

Internal-Use Software (ASU 2025-06)

In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software: Targeted Improvements to the Accounting for Internal-Use Software. The ASU modernizes the accounting for internal-use software by removing the existing “software development stages” model and instead requiring capitalization of internal-use software costs when (1) management has authorized and committed to funding the project and (2) it is probable the project will be completed and the software will be used as intended. The ASU is effective for fiscal years beginning after December 15, 2027 and interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact of adopting the ASU on its consolidated financial statements.

NOTE 3 –REVENUE RECOGNITION

The Company generates revenue primarily from the sale of products to retail and wholesale customers and from royalties earned under licensing arrangements. Contracts with customers include written agreements as well as arrangements that are implied by customary business practices or law.

Disaggregation of Revenue

The Company sells its products directly to consumers (“direct-to-consumer”) through its retail stores, eCommerce websites, and mobile app, and to other retailers and partners that in turn sell the products to their own consumers (“wholesale”). The Company also earns royalties from certain of its licensees that sell products under the Company’s brands.

Revenues disaggregated by segment and channel were as follows:

Accounts Receivable from Customers and Licensees

The components of Accounts receivable, net were as follows:

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

(2)Includes allowance for chargebacks of $3.7 million, $4.1 million, and $3.4 million for the periods ended October 3, 2026, January 3, 2026, and September 27, 2025, respectively.

(3)Includes allowance for credit losses of $11.2 million, $7.6 million, and $12.0 million for the periods ended October 3, 2026, January 3, 2026, and September 27, 2025, respectively.

Contract Assets and Liabilities

The Company’s contract assets are not material to the Company’s condensed consolidated financial statements.

The Company recognizes a contract liability when it has received consideration before transferring the related goods to the customer. The Company’s contract liabilities primarily consist of (1) obligations related to unredeemed gift cards, (2) unredeemed customer loyalty rewards, and (3) the unamortized upfront bonus received from a third-party financial institution under the Company’s private label credit card program. Contract liabilities are classified as current and are included in Other current liabilities on the Company’s condensed consolidated balance sheets.

Contract Liabilities

Total contract liabilities were as follows:

Composition of Contract Liabilities

Unredeemed gift cards - represent obligations to transfer goods in the future to customers that have purchased gift cards. Gift card contract liabilities change due to the issuance and redemption of gift cards and the recognition of breakage on balances that are not expected to be redeemed. Although gift cards do not expire, all outstanding gift card balances are classified as current liabilities, as they are redeemable on demand by the cardholder. The majority of gift cards are redeemed within one year of issuance. During the third quarters of fiscal 2026 and fiscal 2025, the Company recognized revenue of $1.3 million and $1.3 million related to the gift card liability balance that existed at July 4, 2026 and June 28, 2025, respectively. Additionally, during the first three quarters of fiscal 2026 and fiscal 2025, the Company recognized revenue of $7.3 million and $6.8 million related to the gift card liability balance that existed at January 3, 2026 and December 28, 2024, respectively.

Unredeemed loyalty rewards - represent obligations under the Company’s loyalty program to transfer goods in the future to customers when the reward certificates are redeemed. Changes in the loyalty program contract liability result from new rewards earned, and reward certificate redemptions and expirations. The earning and redemption cycles are under one year in duration.

Carter’s credit card upfront bonus - represents the unamortized portion of the upfront signing bonus received from a third-party financial institution under the Company’s private label credit card program. This bonus was recognized as revenue over the term of the agreement.

NOTE 4 –OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following:

(1)The increase as of October 3, 2026 primarily reflects the timing of estimated income tax payments, which are based on annualized income.

(2)Includes accruals for severance and other termination benefits. See Note 13, Organizational Restructuring, for additional information.

(3)Amounts as of October 3, 2026 and January 3, 2026 include liabilities under the deferred compensation plan. See Note 10, Fair Value Measurements, for additional information.

NOTE 5 –SUPPLY CHAIN FINANCE PROGRAM

The Company has 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 receivables directly to the participating financial institutions at their discretion. As of October 3, 2026, the SCF program has a $70.0 million revolving capacity. The Company is not a party to the agreements between the participating financial institutions and the suppliers in connection with the SCF program and has no economic interest in the suppliers’ decision to sell a receivable. Payment terms for most of the Company’s suppliers are 60 days, regardless of participation in the SCF program. The Company settles obligations with the participating financial institutions in accordance with the original invoice due dates, and participation in the SCF program does not extend the Company’s payment terms. The Company does not provide any guarantees in connection with the SCF program and does not pledge collateral under the program.

The Company’s liability related to amounts payable to participating financial institutions for suppliers who voluntarily participate in the SCF program is included in Accounts payable on the condensed consolidated balance sheets. As of October 3, 2026, January 3, 2026, and September 27, 2025, amounts under the SCF program included in Accounts payable were $23.7 million, $13.5 million, and $24.5 million, respectively. Payments made in connection with the SCF program, like payments of other accounts payable, are reflected as a reduction to operating cash flow.

NOTE 6 –LONG-TERM DEBT

Long-term debt consisted of the following:

Secured Revolving Credit Facility

As of October 3, 2026 and January 3, 2026, the Company hadno outstanding borrowings under its secured asset-based revolving credit facility (“ABL facility”), exclusive of $5.8 million and $6.3 million of outstanding letters of credit, respectively. As of September 27, 2025, the Company hadno outstanding borrowings under its secured cash-flow-based revolving credit facility, exclusive of $6.9 million of outstanding letters of credit. As of October 3, 2026, January 3, 2026, and September 27, 2025, there was approximately $540.5 million, $743.7 million, and $843.1 million available for future borrowing, respectively. Any outstanding borrowings under the Company’s ABL facility and secured cash-flow-based revolving credit facility are classified as non-current liabilities on the Company’s condensed consolidated balance sheets due to contractual repayment terms under the credit facility. However, these repayment terms also allow the Company to repay some or all of the outstanding borrowings at any time.

ABL Facility

On November 17, 2025, the Company, through its wholly owned subsidiary, The William Carter Company (“TWCC”), entered into a newfive-year ABL facility of up to $750.0 million. The ABL facility replaced the Company’s existing $850.0 million secured cash-flow-based revolving credit facility due April 2027. Borrowings under the ABL facility will mature, and lending commitments thereunder will terminate, in November 2030.

The ABL facility contains various covenants, including those that restrict the Company’s ability and the ability of its restricted subsidiaries to incur certain indebtedness, pay dividends or make distributions or other restricted payments, or to grant certain liens on their respective property or assets, among other things. The ABL facility also includes a springing financial covenant, consisting of, if the excess availability falls below certain thresholds, a fixed charge coverage ratio not to be less than 1.00 to 1.00.

The availability under the ABL facility was $540.5 million and $743.7 million as of October 3, 2026 and January 3, 2026, respectively. Availability is determined using borrowing base calculations of eligible inventory, accounts receivable, and intellectual property balances, less availability reserves, current outstanding borrowings under the ABL facility, and outstanding letters of credit. Availability may fluctuate throughout the year principally based on changes in eligible inventory and accounts receivable balances. As of October 3, 2026, the borrowing rate for a term Secured Overnight Financing Rate (“SOFR”) loan would have been 5.16%, which includes an excess availability-based adjustment of 1.25%.

As of October 3, 2026, the Company was in compliance with its covenants and requirements under the ABL facility.

Senior Notes

On November 13, 2025, TWCC issued $575.0 million principal amount of senior notes at par, bearing interest at a rate of 7.375% per annum, and maturing on February 15, 2031. TWCC received net proceeds from the offering of the senior notes of approximately $567.0 million, after deducting underwriting fees and other expenses, which TWCC used to redeem the senior notes discussed below and for other general corporate purposes. Approximately $8.0 million, including both bank fees and other third-party expenses, was capitalized in connection with the issuance and is being amortized over the term of the senior notes.

On November 27, 2025, TWCC redeemed $500.0 million principal amount of senior notes, bearing interest at a rate of 5.625% per annum, and originally maturing on March 15, 2027. Pursuant to the optional redemption provisions described in the indenture dated as of March 14, 2019, TWCC paid the outstanding principal plus accrued and unpaid interest.

NOTE 7 –COMMON STOCK

Open Market Share Repurchases

The Company’s Board of Directors (the “Board”) has authorized share repurchase programs providing for the repurchase of up to an aggregate of $1.00 billion of the Company’s common stock. As of October 3, 2026, the total remaining capacity under outstanding repurchase authorizations, based on settled repurchase transactions, was $599.0 million. The share repurchase authorizations have no expiration dates.

The Company did not repurchase and retire any shares of its common stock through open market transactions during the first three quarters of fiscal 2026 and 2025.

Dividends

In each of the first three quarters of fiscal 2026, the Company’s Board declared, and the Company paid, a cash dividend per common share of $0.25 (for an aggregate of $0.75 per common share for the first three quarters of fiscal 2026). In the first, second, and third quarters of fiscal 2025, the Board declared, and the Company paid, a cash dividend per common share of $0.80, $0.25, and $0.25, respectively (for an aggregate of $1.30 per common share for the first three quarters of fiscal 2025).

The Board will evaluate future dividend declarations based on a number of factors, including restrictions under the Company’s secured asset-based revolving credit facility, business conditions, the Company’s financial performance, and other considerations.

Provisions in the Company’s ABL 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)First three quarters of fiscal 2025 include accelerated vesting of outstanding time-based restricted stock awards related to the retirement of Michael D. Casey, the Company’s former Chief Executive Officer, in the first quarter of fiscal 2025.

(2)First three quarters of fiscal 2026 include forfeitures of outstanding time-based, performance-based, and market-based restricted stock awards related to the departure of Douglas C. Palladini, the Company’s former Chief Executive Officer, in the second quarter of fiscal 2026.

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 28, 2026, Douglas C. Palladini departed the Company as Chief Executive Officer (“CEO”) and President and resigned as a member of the Board. In connection with his departure, his outstanding restricted stock awards were forfeited, resulting in a reversal of previously recognized stock-based compensation expense of approximately $0.5 million, which is reflected in the table above for the first three quarters of fiscal 2026.

On May 1, 2026, the Company announced the appointment of Sharon Price John as CEO and President of the Company and a member of the Board, effective June 15, 2026. On June 15, 2026, in connection with Ms. John’s appointment pursuant to the terms of her employment agreement, the Company granted Ms. John 62,204 shares of time-based restricted stock awards,46,651 shares of performance-based restricted stock awards, and 46,651 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 $41.80, with the time-based and performance-based restricted stock awards having a grant-date fair value of $41.80 per share and the market-based restricted stock awards having a grant-date fair value of $69.05 per share.

The market-based restricted stock awards cliff vest at the end of the three-year performance period ending December 30, 2028, subject to the performance of the Company’s total shareholder return (“TSR”) relative to a defined peer group over the three-year period. A Monte-Carlo simulation was utilized to determine the grant-date fair value of the market-based restricted stock awards in fiscal 2026, using the following assumptions: beginning TSR price of $32.14, grant-date share price of $41.80, simulation term of 2.5 years, expected volatility of 48.7%, and risk-free interest rate of 4.1%.

NOTE 9 –ACCUMULATED OTHER COMPREHENSIVE LOSS

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

(1)Net of income taxes of $0.2 million, $0.3 million, and $0.3 million for the periods ended October 3, 2026, January 3, 2026, and September 27, 2025, respectively.

(2)In fiscal 2025, the Company substantially completed the process of settling its pension obligations under the frozen OshKosh B’Gosh, Inc. Pension Plan. In the first quarter of fiscal 2026, the Company distributed the surplus plan assets, net of final plan expenses and adjustments, in accordance with the terms of the plan and regulatory requirements.

(3)In the first quarter of fiscal 2026, the Company settled its post-retirement life insurance liabilities.

During the first quarter of fiscal 2026, the Company made a lump-sum payment to a third-party insurance provider to assume all remaining premium obligations related to its post-retirement life insurance arrangement. In connection with this settlement, $0.4 million of deferred gains on post-retirement life obligations (net of income taxes of $0.1 million) were reclassified from Accumulated other comprehensive loss to Other expense (income), net within the condensed consolidated statement of operations. During the third quarter of fiscal 2026, no amounts were reclassified from Accumulated other comprehensive loss to the condensed consolidated statement of operations.

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”). As a result, 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 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. In the first quarter of fiscal 2026, the Company distributed the surplus plan assets, net of final plan expenses and adjustments, in accordance with the terms of the plan and regulatory requirements.

NOTE 10 –FAIR VALUE MEASUREMENTS

Deferred Compensation Plan Investments

In support of The William Carter Company Deferred Compensation Plan (the “Deferred Compensation Plan”), the Company invested comparable amounts in marketable securities, principally equity-based mutual funds, to approximate the participants’ investment return on employee deferrals of compensation. These investments were held in an irrevocable Rabbi Trust established to fund the Company’s obligations under the Deferred Compensation Plan and their use was restricted to meeting those obligations.

In fiscal 2025, the Board approved the termination of the Deferred Compensation Plan, effective as of September 20, 2025. In October 2026, subsequent to the end of the third quarter of fiscal 2026, the Company liquidated the Rabbi Trust investments and settled the Deferred Compensation Plan obligations.

The Rabbi Trust investments were included in Prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets as of October 3, 2026 and January 3, 2026, and their aggregate fair values were $23.3 million and $21.7 million, respectively. As of September 27, 2025, the aggregate fair value of the Rabbi Trust investments was $21.0 million and was included in Other assets. The change in classification reflects the Company’s intent, following the termination of the Deferred Compensation Plan, to liquidate the Rabbi Trust investments to fund the settlement of Deferred Compensation Plan obligations.

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 $0.4 million and $1.6 million for the third quarter and the first three quarters of fiscal 2026, respectively. 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. These amounts are included in Other expense (income), net on the Company’s condensed consolidated statement of operations.

Borrowings

As of October 3, 2026, the Company hadno outstanding borrowings under its ABL facility.

The fair value of the Company’s senior notes was $579.3 million, $592.9 million, and $500.2 million at October 3, 2026, January 3, 2026, and September 27, 2025, respectively. The fair value of these senior notes was estimated using observable market inputs, which incorporate quoted market prices of comparable borrowings, the Company’s credit risk, and current market conditions, and is therefore within Level 2 of the fair value hierarchy. The senior notes had a notional value and carrying value (gross of debt issuance costs) of $575.0 million, $575.0 million, and $500.0 million as of October 3, 2026, January 3, 2026, and September 27, 2025, respectively.

Goodwill, Intangible, 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 other long-lived 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.

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 24.4% for the third fiscal quarter ended October 3, 2026, compared to 21.8% for the third fiscal quarter ended September 27, 2025. The increase in the effective tax rate for the period was driven by a higher estimated annual effective tax rate, reflecting a larger proportion of income generated in higher tax jurisdictions, including income from IEEPA tariff refunds in the U.S., and net unfavorable discrete tax items compared to the prior-year period.

The Company’s effective income tax rate was 23.9% for the first three fiscal quarters ended October 3, 2026, compared to 27.2% for the first three fiscal quarters ended September 27, 2025. The decrease in the effective tax rate was driven by discrete tax items recognized in the prior-year period, including incremental tax expense related to expiring stock-based compensation, which had a disproportionate impact on that period’s rate given its lower level of pre-tax income. This was partially offset by a higher estimated annual effective tax rate, reflecting a larger proportion of income generated in higher tax jurisdictions.

As of October 3, 2026, the Company had gross unrecognized income tax benefits of $6.2 million, of which $5.2 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.

NOTE 12 –EARNINGS PER SHARE

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

(*)The anti-dilutive shares excluded from diluted net income per common share primarily relate to out-of-the-money stock options and certain unvested restricted stock awards that were anti-dilutive in part due to unrecognized compensation costs.

The Company grants shares of its common stock in the form of restricted stock awards to certain key employees under the Company’s Amended and Restated Equity Incentive Plan. Prior to vesting of the restricted stock awards, the grant recipients are entitled to receive non-forfeitable cash dividends if the Company declares and pays dividends on the Company’s common stock. Accordingly, unvested shares of the Company’s restricted stock awards are deemed to be participating securities for purposes of computing earnings per share (“EPS”).

Beginning with restricted stock awards granted on or after May 13, 2026, grant recipients are entitled to receive forfeitable cash dividends if the Company declares and pays dividends on its common stock. Any such dividends accrue and are paid to the grant recipient only upon vesting of the underlying shares and are forfeited if the underlying award is forfeited. As a result, unvested restricted stock awards granted on or after May 13, 2026 are not deemed to be participating securities for purposes of computing EPS. Restricted stock awards granted prior to May 13, 2026 continue to be treated as participating securities.

NOTE 13 –ORGANIZATIONAL RESTRUCTURING

In fiscal 2025, the Company initiated an organizational restructuring of its offices-based workforce to right-size its cost structure and improve future profitability. In connection with this restructuring, the Company recorded charges of $9.8 million in Selling, general, and administrative expenses in fiscal 2025, primarily related to severance and other termination benefits.

As of January 3, 2026, the Company had an accrual of $8.8 million related to these actions recorded in Other current liabilities on the condensed consolidated balance sheets. During the first two quarters of fiscal 2026, the Company paid substantially all of the remaining severance and other termination benefits and completed the restructuring. The Company recorded no charges related to this restructuring during the third quarter or the first three quarters of fiscal 2026.

NOTE 14 –SEGMENT INFORMATION

The Company reports segment information based upon a “management approach.” The management approach refers to the internal reporting that is used by management for making operating decisions and assessing the performance of the Company’s reportable segments.

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 and the impact of IEEPA tariff refund recoveries, as well as specific charges that are not directly attributable to segment operations, including operating model improvement costs, restructuring costs, leadership transition costs, specific intellectual property litigation costs, and impairment charges related to goodwill and indefinite-lived intangible assets. The Company does not evaluate performance or allocate resources based on segment asset data, and therefore total segment 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 the Company’s reportable segments for the periods indicated:

(1)IEEPA tariff refund recoveries are excluded from segment operating income.

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

(3)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.

(4)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.

The table below presents a reconciliation of reportable segment operating income to Income before income taxes:

(1)Related to $128 million of IEEPA tariff refund recoveries, excluding interest received, which are reflected as a reduction of Cost of goods sold in our condensed consolidated statement of operations.

(2)Unallocated corporate expenses include corporate overhead expenses that are not directly attributable to one of our business 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.

(3)Related to costs associated with the retirement of Michael D. Casey, the Company’s former Chief Executive Officer, in the first quarter of fiscal 2025 and costs related to the departure of Douglas C. Palladini, the Company’s former Chief Executive Officer, in the second quarter of fiscal 2026. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.

(4)Reflects third-party legal defense costs incurred in connection with a specific intellectual property litigation matter not in the ordinary course of business described in Note 15, Commitments and Contingencies, to the condensed consolidated financial statements. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.

(5)Related to charges for severance and other termination benefits as a result of organizational restructuring.

(6)Primarily related to third-party consulting costs to support operating model improvements. Amounts are reflected within Selling, general, and administrative expenses in our condensed consolidated statement of operations.

(7)Related to non-cash charges as a result of pension plan settlements.

Additional Data by Segment

The table below presents additional information for our reportable segments for the periods presented:

Depreciation and amortization expense

NOTE 15 –COMMITMENTS AND CONTINGENCIES

The Company is subject to various claims and pending or threatened lawsuits in the normal course of business. The Company is a defendant in a legal matter related to allegations of intellectual property infringement. Given the inherent uncertainty of litigation, it is reasonably possible that the Company may incur a loss; however, the range of reasonably possible loss is not material to the Company’s financial position, results of operations, or cash flows. The ultimate outcome of this matter, including the Company’s estimate of the range of reasonably possible loss, is inherently uncertain, and the ultimate outcome of the litigation could be materially different from the Company’s current estimates.

The Company’s contractual obligations and commitments include obligations associated with leases, the ABL facility, senior notes, and employee benefit plans.