FORWARD-LOOKING STATEMENTS Statements in this Quarterly Report on Form 10-Q that are not historical fact and use predictive words such as “estimates”, “outlook”, “guidance”, “expect”, “believe”, “intend”, “designed”, “target”, “plans”, “may”, “will”, “are confident” and similar words are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements and related assumptions involve risks and uncertainties that could cause actual results and outcomes to differ materially from any forward-looking statements or views expressed in this Form 10-Q. These risks and uncertainties include, but are not limited to, those disclosed in Part II, Item 1A. “Risk Factors” of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 2026 and Part I, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2026, and otherwise in our reports and filings with the Securities and Exchange Commission, as well as the following factors: changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits; risks related to public health crises; risks related to the organizational restructuring plan, including, but not limited to, our ability to achieve the expected savings from the plan and to fully implement the plan; risks related to consumer tastes and preferences, as well as fashion trends; the failure to protect our intellectual property; the diminished value of our brands, potentially as a result of negative publicity or unsuccessful branding and marketing efforts; delays, product recalls, or loss of revenue due to a failure to meet our quality standards; risks related to uncertainty regarding the future of international trade agreements and the United States’ position on international trade, as well as significant political, trade, and regulatory developments and other circumstances beyond our control; the roll-back of incremental tariffs imposed under the International Emergency Economic Powers Act (the “incremental tariffs”) and any additional actions taken in response to their roll-back, including, but not limited to, tariffs imposed pursuant to Section 122 of the Trade Act of 1974 and tariffs imposed under Section 301 of the Trade Act of 1974; our ability to recover refunds of incremental tariff amounts or other tariff amounts paid; increased competition in the marketplace; financial difficulties for one or more of our major customers; identification of locations and negotiation of appropriate lease terms for our retail stores; distinct risks facing our eCommerce business; failure to forecast demand for our products and our failure to manage our inventory; increased margin pressures, including increased cost of materials and labor and our inability to successfully increase prices to offset these increased costs; continued inflationary pressures with respect to labor and raw materials and global supply chain constraints that have, and could continue, to affect freight, transit, and other costs; fluctuations in foreign currency exchange rates; unseasonable or extreme weather conditions; risks associated with corporate responsibility issues; our foreign sourcing arrangements; a relatively small number of vendors supply a significant 18 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) amount of our products; disruptions in our supply chain, including increased transportation and freight costs; our ability to effectively source and manage inventory; problems with our Braselton, Georgia distribution facility; pending and threatened lawsuits; a breach of our information technology systems and the loss of personal data or a failure to implement new information technology systems successfully; unsuccessful expansion into international markets; failure to comply with various laws and regulations; failure to properly manage strategic initiatives; retention of key individuals; acquisition and integration of other brands and businesses; failure to achieve sales growth plans and profitability objectives to support the carrying value of our intangible assets; our continued ability to meet obligations related to our debt; changes in our tax obligations, including additional customs, duties or tariffs; our continued ability to declare and pay a dividend; volatility in the market price of our common stock; and the cost or effort required for our shareholders to bring certain claims or actions against us, as a result of our designation of the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings. Except for any ongoing obligations to disclose material information as required by federal securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The inclusion of any statement in this Quarterly Report on Form 10-Q does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material. OVERVIEW We are North America’s largest and most enduring apparel company exclusively for babies and young children. Our core brands are Carter’s and OshKosh B’gosh (or “OshKosh”), iconic and among the sector’s most trusted names. Our exclusive Carter’s brands, which consist of Child of Mine, Just One You, and Simple Joys, are developed for Walmart, Target, and Amazon. Our emerging brands include Little Planet, crafted with organic fabrics and sustainable materials, Otter Avenue, a toddler-focused apparel brand, and Skip Hop, baby essentials from tubs to toys. Established in 1865, our Carter’s brand is recognized and trusted by consumers for high-quality apparel and accessories for children in sizes newborn to 14. Established in 1895, OshKosh is a well-known brand, trusted by consumers for high-quality apparel and accessories for children in sizes newborn to 14, with a focus on playclothes for toddlers and young children. We acquired OshKosh in 2005. Established in 2003, the Skip Hop brand rethinks, reenergizes, and reimagines durable necessities to create higher value, superior quality, and award-winning products for parents, babies, and toddlers. We acquired Skip Hop in 2017. Launched in 2021, the Little Planet brand focuses on sustainable clothing through the sourcing of mostly organic cotton as certified under the Global Organic Textile Standard (“GOTS”), a global textile processing standard for organic fibers. This brand includes a wide assortment of baby and toddler apparel, accessories, and sleepwear. Launched in 2025, Otter Avenue is a toddler brand that focuses on functionality designed to encourage independence, while combining fun, sophistication, and fashion-forward styles. This brand includes a curated assortment of toddler apparel and accessories. Additionally, Child of Mine, an exclusive Carter’s brand, is sold at Walmart, Just One You, an exclusive Carter’s brand, is sold at Target, and Simple Joys, an exclusive Carter’s brand, is available on Amazon. Our purpose is to embrace the wonder of childhood and uplift those shaping the future. We believe our brands are complementary to one another in product offering and aesthetic. Each brand is uniquely positioned in the marketplace and offers great value to families with young children. Our multichannel, global business model, which includes retail stores, eCommerce, mobile app, and wholesale distribution channels, as well as omni-channel capabilities in the United States and Canada, enables us to reach a broad range of consumers around the world. 19 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) As of July 4, 2026, our channels included 1,042 company-operated retail stores in North America, eCommerce websites, approximately 19,500 wholesale locations in North America, as well as our international wholesale accounts and licensees who operate in over 1,100 locations outside of North America in over 90 countries. The following is a discussion of our results of operations and current financial condition. This should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this Form 10-Q and audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the 2025 fiscal year ended January 3, 2026. Fiscal Periods 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 July 4, 2026 and June 28, 2025 each included 13 weeks. Segments We have three operating and reportable segments: U.S. Retail, U.S. Wholesale, and International. Our 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. Our U.S. Wholesale segment consists of revenue primarily from sales in the United States of products to our wholesale customers. Our 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 its three 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 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. Gross Profit and Gross Margin Gross profit represents consolidated net sales less cost of goods sold. Gross margin is calculated as gross profit divided by consolidated net sales. Cost of goods sold includes the cost of products, as well as changes in inventory reserves and expenses related to the merchandising, design, and procurement of product, including inbound freight costs, purchasing and receiving costs, and inspection costs. Cost of goods sold also includes the costs of shipping eCommerce orders directly to end consumers. For omni-channel transactions, Cost of goods sold includes the costs of shipping product to end consumers or to retail stores. Our gross profit and gross margin may not be comparable to those of other entities that define their metrics differently. Retail store occupancy costs, distribution expenses, and generally all other expenses other than interest and income taxes are included in Selling, general, and administrative (“SG&A”) expenses. Distribution expenses included in SG&A primarily consist of payments to third-party shippers and handling costs to process product through the Company’s distribution facilities, including eCommerce fulfillment costs, and delivery of product to wholesale customers and to our retail stores. Comparable Sales Metrics We present comparable sales metrics because we consider them an important supplemental measure of our U.S. Retail and International performance, and the Company uses such information to assess the performance of the U.S. Retail and International segments. Additionally, we believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of our business. Our comparable sales metrics include sales for all stores and eCommerce sites that were open and operated by us during the comparable fiscal period, including stand-alone format stores that converted to multi-branded format stores and certain remodeled or relocated stores. A store or site becomes comparable following 13 consecutive full fiscal months of operations. If a store relocates within the same center with no business interruption or material change in square footage, the sales of such store will continue to be included in the comparable store metrics. If a store relocates to another center more than five miles away, or there is a material change in square footage, such store is treated as a new store. Stores that are closed during the relevant fiscal period are included in the comparable store sales metrics up to the last full fiscal month of operations. In fiscal 20 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) years that include a 53rd week, we adjust the prior year comparable period to include a 53rd week so comparable sales reflect an equivalent number of weeks in each period. The method of calculating sales metrics varies across the retail industry. As a result, our comparable sales metrics may not be comparable to those of other retailers. Recent Developments Executive Leadership Transition On May 1, 2026, the Company announced that the Board of Directors (the “Board”) appointed Sharon Price John as Chief Executive Officer & President of the Company and a member of the Board effective June 15, 2026. In connection with the appointment of Ms. John, Douglas C. Palladini departed the Company as Chief Executive Officer & President and resigned as a member of the Board effective April 28, 2026. Additional information regarding these management changes and related arrangements is included in the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2026. Trade Policy During the first quarter of fiscal 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unlawful. During the second quarter of fiscal 2026, 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. As of July 4, 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. In response to the ruling on IEEPA tariffs, the U.S. Administration imposed a new 10% global tariff under Section 122 of the Trade Act of 1974 (“Section 122”), effective February 24, 2026. In May 2026, the U.S. Court of International Trade issued a ruling finding the Section 122 tariffs unlawful, although this ruling is currently stayed pending appeal. During the first two quarters of fiscal 2026, the Company paid approximately $26 million of incremental Section 122 tariffs related to imports from Vietnam, India, Bangladesh, Cambodia, and other countries. As of July 4, 2026, approximately $18 million of these tariffs remained capitalized within the Company’s inventory balances. The Section 122 tariffs imposed effective February 24, 2026 expired on July 24, 2026. Effective July 24, 2026, the U.S. Administration imposed additional tariffs under Section 301(b) of the Trade Act of 1974 (“Section 301”) as a result of the Administration’s investigations into forced labor practices of various foreign countries. These tariffs range from 10% to 12.5% and apply to imports from approximately 60 countries and territories. In addition, the U.S. Administration is continuing its separate investigation, under Section 301(b), into excess capacity and production in manufacturing sectors in foreign countries, signaling its intent to maintain tariff levels comparable to those previously in effect under the IEEPA tariffs. As of the date of this filing, no proposed tariffs have been imposed as a result of the excess capacity investigation. Because the Company sources substantially all of its apparel and other products from a global network of third-party suppliers, primarily located in Asia, any new or increased tariffs, quotas, embargoes, or other trade barriers have the potential to adversely affect its supply chain, cost structure, margins, and competitiveness. Retaliatory actions taken by impacted countries could further disrupt global trade and create additional inflationary pressures in raw materials and logistics. 21 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Second Fiscal Quarter 2026 Financial Highlights Unless otherwise stated, comparisons below are to the second quarter of fiscal 2025. References below to adjusted operating income, adjusted net income, and adjusted diluted net income per common share are non-GAAP financial measures; see “Reconciliation of Non-GAAP Financial Measures to GAAP Measures.” •Consolidated net sales increased $30.2 million, or 5.2%, to $615.5 million. ◦U.S. Retail sales increased $5.1 million driven by higher unit volume. Comparable net sales, including retail stores and eCommerce, increased 5.1% for the period, reflecting a fifth consecutive quarter of positive comparable net sales growth. ◦U.S. Wholesale sales increased $22.6 million, driven by growth in our core and exclusive Carter’s brands, as well as in Skip Hop, and strong demand for Fall product, which was partially offset by lower sales to our off-price wholesale channel customers. ◦International sales increased $2.5 million, driven by growth in Mexico and Canada, partially offset by unfavorable timing of shipments to our international partners. •Consolidated gross profit increased $130.8 million, or 46.4%, to $412.6 million, and consolidated gross margin increased 1,890 bps to 67.0%, primarily due to $128 million of IEEPA tariff refund recoveries and higher average unit retail (“AUR”), partially offset by higher average unit cost (“AUC”) driven by incremental tariff-related costs, investment in product make, and channel mix. •Consolidated SG&A expenses decreased $4.8 million, or 1.7%, to $276.1 million. SG&A as a percentage of consolidated net sales (“SG&A rate”) decreased 310 bps to 44.9%, driven by fixed cost leverage on higher net sales, costs related to operating model improvements in the second quarter of fiscal 2025 that did not reoccur in the second quarter of fiscal 2026, reduced costs resulting from previously implemented restructuring actions, lower performance-based compensation, and lower distribution costs, partially offset by higher leadership transition costs, incremental marketing investments, and inflationary pressure in retail store-related expenses. •Consolidated operating income increased $135.8 million to $139.8 million and adjusted operating income increased $6.4 million, or 54.1%, to $18.1 million. Operating margin increased 2,200 bps to 22.7%, primarily due to the factors discussed in detail below, including $128 million of IEEPA tariff refund recoveries. •Consolidated net income increased $104.5 million to $105.0 million, primarily due to the factors discussed in detail below. Adjusted net income increased $3.1 million, or 49.3%, to $9.4 million. •Diluted net income per common share increased $2.86 to $2.87 and adjusted diluted net income per common share increased $0.09, or 52.9%, to $0.26. •During the first two quarters of fiscal 2026, we opened 4 stores and closed 29 stores in the United States. •As a result of our strong financial position and available liquidity, we returned $9.1 million in cash dividends to our shareholders in the second quarter of fiscal 2026. 22 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS SECOND FISCAL QUARTER ENDED JULY 4, 2026 COMPARED TO SECOND FISCAL QUARTER ENDED JUNE 28, 2025 The following table summarizes our results of operations. Fiscal quarter ended (dollars in thousands, except per share data) July 4, 2026 June 28, 2025 $ Change % / bps Change Consolidated net sales $ 615,490 $ 585,313 $ 30,177 5.2 % Cost of goods sold 202,891 303,553 (100,662) (33.2) % Gross profit 412,599 281,760 130,839 46.4 % Gross profit as % of consolidated net sales 67.0 % 48.1 % 1,890 bps Royalty income, net 3,362 3,249 113 3.5 % Royalty income as % of consolidated net sales 0.5 % 0.6 % (10) bps Selling, general, and administrative expenses 276,135 280,965 (4,830) (1.7) % SG&A expenses as % of consolidated net sales 44.9 % 48.0 % (310) bps Operating income 139,826 4,044 135,782 >100% Operating income as % of consolidated net sales 22.7 % 0.7 % 2,200 bps Interest expense 11,312 7,857 3,455 44.0 % Interest income (8,483) (4,292) (4,191) 97.6 % Other expense (income), net 352 (1,224) 1,576 nm Income before income taxes 136,645 1,703 134,942 >100% Income tax provision 31,687 1,257 30,430 >100% Effective tax rate(*) 23.2 % 73.8 % nm Net income $ 104,958 $ 446 $ 104,512 >100% Basic net income per common share $ 2.87 $ 0.01 $ 2.86 >100% Diluted net income per common share $ 2.87 $ 0.01 $ 2.86 >100% Dividend declared and paid per common share $ 0.25 $ 0.25 $ — — % (*)Effective tax rate is calculated by dividing the provision for income taxes by income before income taxes. Note: Results may not be additive due to rounding. If applicable, percentage changes that are not considered meaningful are denoted with “nm”. Consolidated Net Sales Consolidated net sales increased $30.2 million, or 5.2%, to $615.5 million. The increase in net sales was driven by increased net sales in each of our U.S. Wholesale, U.S. Retail, and International segments. AUR increased by a mid-single digit percentage, primarily reflecting higher realized pricing and sales leverage in U.S. Wholesale, as well as the favorable impact of changes in foreign currency exchange rates used for translation. Unit volume increased by a low-single digit percentage driven by growth in U.S. Wholesale and U.S. Retail, partially offset by unit volume decline in our International segment. Changes in foreign currency exchange rates used for translation had a favorable effect on our consolidated net sales of $2.4 million. Gross Profit and Gross Margin Consolidated gross profit increased $130.8 million, or 46.4%, to $412.6 million and consolidated gross margin increased 1,890 bps to 67.0%. The increase in consolidated gross profit and gross margin was driven by approximately $128 million of IEEPA tariff refund recoveries and higher AUR, partially offset by higher AUC and channel mix. AUC, which excludes the impact of tariff refund recoveries, increased by a low-double digit percentage, driven by incremental domestic and international tariff-related costs and investments in product make. Incremental tariff-related costs, which represent tariff costs in excess of the duty rates in effect prior to the tariff actions initiated in fiscal 2025, unfavorably impacted Cost of goods sold by approximately $28 million. Selling, General, and Administrative Expenses Consolidated SG&A expenses decreased $4.8 million, or 1.7%, to $276.1 million and decreased as a percentage of consolidated net sales by 310 bps to 44.9%. This decrease in SG&A rate was driven by fixed cost leverage on higher net sales, costs related to operating model improvements in the second quarter of fiscal 2025 that did not reoccur in the second quarter of fiscal 2026, reduced costs resulting from previously implemented restructuring actions, lower performance-based compensation, and lower 23 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) distribution costs. This was partially offset by increased leadership transition costs, incremental marketing investments, and inflationary pressure in retail store-related expenses. Operating Income Consolidated operating income increased $135.8 million to $139.8 million and increased as a percentage of net sales by 2,200 bps to 22.7%, primarily due to the factors previously discussed. Interest Expense Consolidated interest expense increased $3.5 million, or 44.0%, to $11.3 million, reflecting the impact of the Company’s fourth quarter of fiscal 2025 issuance of $575.0 million principal amount of 7.375% senior notes due 2031 and redemption of $500.0 million principal amount of 5.625% senior notes due 2027. Interest Income Consolidated interest income increased $4.2 million to $8.5 million, primarily driven by approximately $4 million of interest recognized on IEEPA tariff refund recoveries. Other Expense (Income), Net Consolidated other expense was $0.4 million in the second quarter of fiscal 2026 compared to consolidated other income of $1.2 million in the second quarter of fiscal 2025, which was primarily driven by changes in foreign currency exchange rates during the period. Income Taxes Consolidated income tax provision increased $30.4 million to $31.7 million and the effective tax rate decreased to 23.2% from 73.8% in the prior period. The increase in the consolidated income tax provision was driven by higher pre-tax income, while the decrease in the effective tax rate was primarily attributable to discrete tax items recognized in the prior comparable period, including incremental tax expense related to expiring stock-based compensation, which had a disproportionate impact on the effective tax rate given the lower level of pre-tax income in that period. Net Income Consolidated net income increased $104.5 million to $105.0 million, driven by the factors previously discussed. 24 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Results by Segment - Second Quarter of Fiscal 2026 compared to Second Quarter of Fiscal 2025 The following table summarizes net sales by segment and segment operating income for the second quarter of fiscal 2026 and the second quarter of fiscal 2025: Fiscal quarter ended (dollars in thousands) July 4, 2026 % of consolidated net sales June 28, 2025 % of consolidated net sales $ Change % Change Net sales: U.S. Retail $ 304,677 49.5 % $ 299,549 51.2 % $ 5,128 1.7 % U.S. Wholesale 215,552 35.0 % 192,998 33.0 % 22,554 11.7 % International 95,261 15.5 % 92,766 15.8 % 2,495 2.7 % Consolidated net sales $ 615,490 100.0 % $ 585,313 100.0 % $ 30,177 5.2 % Segment operating income: Segment operating margin Segment operating margin U.S. Retail $ 4,253 1.4 % $ 3,768 1.3 % $ 485 12.9 % U.S. Wholesale 29,741 13.8 % 27,062 14.0 % 2,679 9.9 % International 5,410 5.7 % 3,607 3.9 % 1,803 50.0 % Total segment operating income $ 39,404 6.4 % $ 34,437 5.9 % $ 4,967 14.4 % Items not included in segment operating income: Consolidated operating margin Consolidated operating margin Tariff refund recovery(1) $ 127,669 n/a $ — n/a n/a n/a Unallocated corporate expenses(2) (21,304) n/a (22,687) n/a (1,383) (6.1) % Leadership transition costs(3) (4,726) n/a (1,068) n/a n/a n/a IP litigation costs(4) (1,217) n/a — n/a n/a n/a Operating model improvement costs(5) — n/a (6,638) n/a n/a n/a Consolidated operating income 139,826 22.7 % 4,044 0.7 % $ 135,782 >100% (1)Related to $128 million of IEEPA tariff 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)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. U.S. Retail U.S. Retail segment net sales increased $5.1 million, or 1.7%, to $304.7 million, driven by higher unit volume. Unit volume increased by a low-single digit percentage driven by improved traffic and transactions in eCommerce, partially offset by the sales impact of net store closures and the timing of the Easter holiday. AUR was consistent with the prior comparable period. Comparable net sales, including retail stores and eCommerce, increased 5.1%, reflecting a fifth consecutive quarter of positive comparable net sales growth. Comparable net sales grew in both retail stores and eCommerce, driven by higher average transaction size. As of July 4, 2026, we operated 779 retail stores in the U.S. compared to 804 as of January 3, 2026, and 809 as of June 28, 2025. U.S. Retail segment operating income increased $0.5 million, or 12.9%, to $4.3 million, primarily driven by a decrease in SG&A expenses of $2.3 million, partially offset by a decrease in gross profit of $2.1 million. Segment operating margin 25 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) increased 10 bps to 1.4%, primarily driven by a 180 bps decrease in SG&A rate, partially offset by a 170 bps decrease in gross margin. The decrease in gross margin was driven by a high-single digit percentage increase in AUC, reflecting incremental tariff-related costs. The decrease in SG&A rate reflected fixed cost leverage on higher net sales, reduced costs resulting from previously implemented restructuring actions and lower store count, and lower distribution and performance-based compensation costs, partially offset by incremental marketing investments and inflationary pressure in store-related expenses. U.S. Wholesale U.S. Wholesale segment net sales increased $22.6 million, or 11.7%, to $215.6 million, driven by growth in our core and exclusive Carter’s brands, as well as in Skip Hop, and the earlier demand for Fall product as compared to the prior comparable period, which was partially offset by lower sales to our off-price wholesale channel customers. AUR increased by a low-double digit percentage, primarily reflecting higher realized pricing and sales leverage. Unit volume increased by a low-single digit percentage primarily driven by our exclusive Carter’s brands, partially offset by off-price wholesale channel customers. U.S. Wholesale segment operating income increased $2.7 million, or 9.9%, to $29.7 million, primarily due to an increase in gross profit of $2.0 million and a decrease in SG&A expenses of $1.0 million. Segment operating margin decreased 20 bps to 13.8%, primarily driven by a 210 bps decrease in gross margin and a 20 bps decrease in royalty income as a percentage of net sales, partially offset by a 210 bps decrease in SG&A rate. The decrease in gross margin was driven by higher AUC, partially offset by higher AUR and decreased sales to low-margin off-price wholesale channel customers. AUC increased by a mid-teens percentage primarily driven by incremental tariff-related costs and investments in product make. The decrease in the SG&A rate reflected fixed cost leverage on higher net sales and lower distribution and performance-based compensation costs, partially offset by incremental marketing investments. International International segment net sales increased $2.5 million, or 2.7%, to $95.3 million, driven by growth in Mexico and Canada, partially offset by unfavorable timing of shipments to our international partners. In Mexico, net sales growth reflected higher AUR and the contribution from new retail stores, partially offset by the timing of the Easter holiday. Canada net sales growth reflected higher comparable net sales, which increased 1.3%, driven by increased AUR. AUR increased by a mid-single digit percentage, driven by the favorable impact of foreign currency exchange rates and pricing. International segment unit volume decreased by a low-single digit percentage driven by lower shipments to our international partners. Changes in foreign currency exchange rates used for translation had a $2.4 million favorable effect on International segment net sales. As of July 4, 2026, we operated 190 stores and 73 stores in Canada and Mexico, respectively. As of January 3, 2026, we operated 192 and 72 stores in Canada and Mexico, respectively. As of June 28, 2025, we operated 192 and 64 stores in Canada and Mexico, respectively. International segment operating income increased $1.8 million, or 50.0%, to $5.4 million, primarily due to an increase in gross profit of $3.3 million, partially offset by an increase in SG&A expenses of $1.6 million. Segment operating margin increased 180 bps to 5.7%, driven by a 230 bps increase in gross margin, partially offset by a 50 bps increase in the SG&A rate. The increase in gross margin was driven by higher AUR and channel mix, partially offset by a low-single digit percentage increase in AUC driven by incremental tariff-related costs and channel mix. The increase in the SG&A rate was driven by higher retail store rent and retail store employee costs, partially offset by fixed cost leverage on increased net sales and lower performance-based compensation. Unallocated Corporate Expenses 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. Unallocated corporate expenses decreased $1.4 million, or 6.1%, to $21.3 million. Unallocated corporate expenses, as a percentage of consolidated net sales, decreased 40 bps to 3.5%, driven by lower performance-based compensation and reduced costs resulting from previously implemented restructuring actions. 26 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) TWO FISCAL QUARTERS ENDED JULY 4, 2026 COMPARED TO TWO FISCAL QUARTERS ENDED JUNE 28, 2025 The following table summarizes our results of operations. Two fiscal quarters ended (dollars in thousands, except per share data) July 4, 2026 June 28, 2025 $ Change % / bps Change Consolidated net sales $ 1,296,603 $ 1,215,139 $ 81,464 6.7 % Cost of goods sold 590,131 642,289 (52,158) (8.1) % Gross profit 706,472 572,850 133,622 23.3 % Gross profit as % of consolidated net sales 54.5 % 47.1 % 740 bps Royalty income, net 7,981 8,580 (599) (7.0) % Royalty income, net as % of consolidated net sales 0.6 % 0.7 % (10) bps Selling, general, and administrative expenses 546,184 551,284 (5,100) (0.9) % SG&A expenses as % of consolidated net sales 42.1 % 45.4 % (330) bps Operating income 168,269 30,146 138,123 >100% Operating income as % of consolidated net sales 13.0 % 2.5 % 1,050 bps Interest expense 23,069 15,676 7,393 47.2 % Interest income (11,739) (7,434) (4,305) 57.9 % Other expense (income), net 438 (1,148) 1,586 nm Income before income taxes 156,501 23,052 133,449 >100% Income tax provision 37,207 7,067 30,140 >100% Effective tax rate(*) 23.8 % 30.7 % (690) bps Net income $ 119,294 $ 15,985 $ 103,309 >100% Basic net income per common share $ 3.26 $ 0.43 $ 2.83 >100% Diluted net income per common share $ 3.26 $ 0.43 $ 2.83 >100% Dividend declared and paid per common share $ 0.50 $ 1.05 $ (0.55) (52.4) % (*)Effective tax rate is calculated by dividing the provision for income taxes by income before income taxes. Note: Results may not be additive due to rounding. Percentage changes that are not considered meaningful are denoted with “nm”. Consolidated Net Sales Consolidated net sales increased $81.5 million, or 6.7%, to $1.30 billion. The increase in net sales was driven by increased net sales in each of our U.S. Retail, U.S. Wholesale, and International segments. AUR increased by a mid-single digit percentage, primarily reflecting higher realized pricing and sales leverage in U.S. Wholesale, as well as the favorable impact of changes in foreign currency exchange rates used for translation. Unit volume increased by a low-single digit percentage driven by growth in our U.S. Retail and International segments, partially offset by unit volume decline in our U.S. Wholesale segment. Changes in foreign currency exchange rates used for translation had a favorable effect on our consolidated net sales of $8.0 million. Gross Profit and Gross Margin Consolidated gross profit increased $133.6 million, or 23.3%, to $706.5 million and consolidated gross margin increased 740 bps to 54.5%. The increase in consolidated gross profit and gross margin was driven by $128 million of IEEPA tariff refund recoveries, higher AUR, and channel mix, partially offset by higher AUC. AUC, which excludes the impact of tariff refund recoveries, increased by a low-teens percentage, driven by incremental domestic and international tariff-related costs and investments in product make. Incremental tariff-related costs unfavorably impacted Cost of goods sold by approximately $78 million. Selling, General, and Administrative Expenses Consolidated SG&A expenses decreased $5.1 million, or 0.9%, to $546.2 million and decreased as a percentage of consolidated net sales by 330 bps to 42.1%. The decrease in SG&A rate was driven by fixed cost leverage on higher net sales, costs related to operating model improvements in the first two quarters of fiscal 2025 that did not reoccur in the first two quarters of fiscal 2026, reduced costs resulting from previously implemented restructuring actions, lower leadership transition costs, and lower distribution costs. This was partially offset by incremental marketing investments and inflationary pressure in retail store-related expenses. 27 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Operating Income Consolidated operating income increased $138.1 million to $168.3 million and increased as a percentage of net sales by 1,050 bps to 13.0%, primarily due to the factors previously discussed. Interest Expense Consolidated interest expense increased $7.4 million, or 47.2%, to $23.1 million, reflecting the impact of the Company’s fourth quarter of fiscal 2025 issuance of $575.0 million principal amount of 7.375% senior notes due 2031 and redemption of $500.0 million principal amount of 5.625% senior notes due 2027. Interest Income Consolidated interest income increased $4.3 million to $11.7 million, primarily driven by $4 million interest recognized on IEEPA tariff refund recoveries. Other Expense (Income), Net Consolidated other expense was $0.4 million in the first two quarters of fiscal 2026 compared to consolidated other income of $1.1 million in the first two quarters of fiscal 2025, which was primarily driven by changes in foreign currency exchange rates during the period. Income Taxes Consolidated income tax provision increased $30.1 million to $37.2 million, and the effective tax rate decreased 690 bps to 23.8%. The increase in the consolidated income tax provision was driven by higher pre-tax income, while the decrease in the effective tax rate was primarily attributable to discrete tax items recognized in the prior comparable period, including incremental tax expense related to expiring stock-based compensation, which had a disproportionate impact on the effective tax rate given the lower level of pre-tax income in that period. Net Income Consolidated net income increased $103.3 million to $119.3 million, primarily due to the factors previously discussed. 28 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Results by Segment - First Two Quarters of Fiscal 2026 compared to First Two Quarters of Fiscal 2025 The following table summarizes net sales and segment operating income, by segment, for the first two quarters of fiscal 2026 and fiscal 2025: Two fiscal quarters ended (dollars in thousands) July 4, 2026 % of consolidated net sales June 28, 2025 % of consolidated net sales $ Change % Change Net sales: U.S. Retail $ 636,925 49.1 % $ 593,980 48.9 % $ 42,945 7.2 % U.S. Wholesale 466,959 36.0 % 443,094 36.5 % 23,865 5.4 % International 192,719 14.9 % 178,065 14.6 % 14,654 8.2 % Consolidated net sales $ 1,296,603 100.0 % $ 1,215,139 100.0 % $ 81,464 6.7 % Segment operating income: Segment operating margin Segment operating margin U.S. Retail $ 13,290 2.1 % $ 6,076 1.0 % $ 7,214 118.7 % U.S. Wholesale 66,526 14.2 % 82,372 18.6 % (15,846) (19.2) % International 9,569 5.0 % 3,391 1.9 % 6,178 182.2 % Total segment operating income $ 89,385 6.9 % $ 91,839 7.6 % $ (2,454) (2.7) % Items not included in segment operating income: Consolidated operating margin Consolidated operating margin Tariff refund recovery(1) $ 127,669 n/a $ — n/a n/a n/a Unallocated corporate expenses(2) (42,842) n/a (44,699) n/a (1,857) (4.2) % Leadership transition costs(3) (4,726) n/a (7,194) n/a n/a n/a IP litigation costs(4) (1,217) n/a — n/a n/a n/a Operating model improvement costs(5) — n/a (9,800) n/a n/a n/a Consolidated operating income $ 168,269 13.0 % $ 30,146 2.5 % $ 138,123 458.2 % (1)Related to $128 million of IEEPA tariff 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)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. U.S. Retail U.S. Retail segment net sales increased $42.9 million, or 7.2%, to $636.9 million. The increase in net sales was driven by higher unit volume. Unit volume increased by a mid-single digit percentage driven by higher traffic, transactions, and units per transaction in both stores and eCommerce, partially offset by the sales impact of net store closures. AUR increased by a low-single digit percentage, reflecting higher pricing, partially offset by product mix, which reflects a higher proportion of opening price point product, and increased promotional activity. Comparable net sales, including retail stores and eCommerce, increased 7.8% driven by the factors mentioned above, as well as improved average transaction size in both stores and eCommerce. U.S. Retail segment operating income increased $7.2 million, or 118.7%, to $13.3 million, primarily due to an increase in gross profit of $11.8 million, partially offset by an increase in SG&A expenses of $4.8 million. Segment operating margin increased 110 bps to 2.1%, driven by a 330 bps decrease in the SG&A rate, partially offset by a 220 bps decrease in gross margin. The decrease in gross margin was driven by a high-single digit percentage increase in AUC as a result of incremental 29 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) tariff-related costs. The decrease in the SG&A rate was driven by fixed cost leverage on higher net sales, reduced costs resulting from previously implemented restructuring actions, and lower distribution costs, partially offset by incremental marketing investments and inflationary pressure in retail store-related expenses. U.S. Wholesale U.S. Wholesale segment net sales increased $23.9 million, or 5.4%, to $467.0 million, driven by growth in our exclusive Carter’s brands and the earlier demand for Fall product as compared to the prior comparable period, partially offset by decreased demand with certain customers and lower sales to our off-price wholesale channel customers. AUR increased by a high-single digit percentage, primarily reflecting higher realized pricing and sales leverage. Units sold decreased by a low-single digit percentage, primarily driven by lower unit volume with certain customers and with our off-price wholesale channel customers. U.S. Wholesale segment operating income decreased $15.8 million, or 19.2%, to $66.5 million, primarily due to a decrease in gross profit of $17.8 million, partially offset by a decrease in SG&A expenses of $2.8 million. Segment operating margin decreased 440 bps to 14.2%. The drivers of the decrease in operating margin were a 530 bps decrease in gross margin, partially offset by a 130 bps decrease in SG&A rate. The decrease in gross margin was driven by a high-teens percentage increase in AUC as a result of incremental tariff-related costs and investments in product make, partially offset by increased AUR and decreased sales to low-margin off-price wholesale customers. The decrease in the SG&A rate was driven by fixed cost leverage on increased net sales, lower distribution costs, and lower bad debt expense, partially offset by incremental marketing investments. International International segment net sales increased $14.7 million, or 8.2%, to $192.7 million, driven by growth in Mexico and Canada, partially offset by lower sales to international partners. In Mexico, net sales growth reflected higher AUR and the contribution from new retail stores. Canadian comparable net sales, including retail stores and eCommerce, increased 2.7% driven by higher unit volume and the favorable impact of foreign currency exchange rates. International segment AUR increased by a mid-single digit percentage driven by pricing and the favorable impact of foreign currency exchange rates. International segment units sold increased by a low-single digit percentage. Changes in foreign currency exchange rates used for translation had an $8.0 million favorable effect on International segment net sales. International segment operating income increased $6.2 million, or 182.2%, to $9.6 million, primarily due to an increase in gross profit of $12.0 million, partially offset by an increase in SG&A expenses of $5.7 million. Segment operating margin increased 310 bps to 5.0%, driven by a 280 bps increase in gross margin and a 40 bps decrease in the SG&A rate. The increase in gross margin was driven by higher AUR and channel mix, partially offset by increased AUC. AUC increased by a low-single digit percentage due to incremental tariff-related costs. The decrease in the SG&A rate was driven by fixed cost leverage on increased net sales and reduced costs resulting from previously implemented restructuring actions, partially offset by increased retail store rent and retail store employee costs. Unallocated Corporate Expenses Unallocated corporate expenses decreased $1.9 million, or 4.2%, to $42.8 million. Unallocated corporate expenses, as a percentage of consolidated net sales, decreased 40 bps to 3.3% driven by reduced costs resulting from previously implemented restructuring actions and lower consulting costs. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES We have provided non-GAAP adjusted cost of goods sold, gross profit, SG&A expenses, operating income, interest income, income tax provision, net income, and diluted net income per common share measures, which exclude certain items presented below. We believe that this information provides a meaningful comparison of our results and affords investors a view of what management considers to be our core performance, and we also, from time to time, use some of these non-GAAP measures, such as adjusted operating income, as performance metrics in awards under our annual and long-term incentive compensation plans. These measures are not in accordance with, or an alternative to, generally accepted accounting principles in the U.S. (GAAP). The most comparable GAAP measures are cost of goods sold, gross profit, SG&A expenses, operating income, interest income, income tax provision, net income, and diluted net income per common share, respectively. Adjusted cost of goods sold, gross profit, SG&A expenses, operating income, interest income, income tax provision, net income, and diluted net income per common share should not be considered in isolation or as a substitute for analysis of our results as reported in accordance with GAAP. Other companies may calculate adjusted cost of goods sold, gross profit, SG&A expenses, operating income, interest income, income tax provision, net income, and diluted net income per common share differently than we do, limiting the usefulness of the measure for comparisons with other companies. 30 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Fiscal quarter ended July 4, 2026 (dollars in millions, except earnings per share) Cost of Goods Sold Gross Profit SG&A expenses Operating Income % Net Sales Interest Income Income Taxes Net Income Diluted Net Income per Common Share As reported (GAAP) $ 202.9 $ 412.6 $ 276.1 $ 139.8 22.7 % $ 8.5 $ 31.7 $ 105.0 $ 2.87 Tariff refund recovery(1) 127.7 (127.7) — (127.7) (4.0) (31.6) (100.1) (2.73) Leadership transition costs(2) — — (4.7) 4.7 — 1.1 3.6 0.10 IP litigation costs(3) — — (1.2) 1.2 — 0.3 0.9 0.03 As adjusted $ 330.6 $ 284.9 $ 270.2 $ 18.1 2.9 % $ 4.5 $ 1.5 $ 9.4 $ 0.26 Two fiscal quarters ended July 4, 2026 (dollars in millions, except earnings per share) Cost of Goods Sold Gross Profit SG&A expenses Operating Income % Net Sales Interest Income Income Taxes Net Income Diluted Net Income per Common Share As reported (GAAP) $ 590.1 $ 706.5 $ 546.2 $ 168.3 13.0 % $ 11.7 $ 37.2 $ 119.3 $ 3.26 Tariff refund recovery(1) 127.7 (127.7) — (127.7) (4.0) (31.6) (100.1) (2.73) Leadership transition costs(2) — — (4.7) 4.7 — 1.1 3.6 0.10 IP litigation costs(3) — — (1.2) 1.2 — 0.3 0.9 0.03 As adjusted $ 717.8 $ 578.8 $ 540.2 $ 46.5 3.6 % $ 7.7 $ 7.0 $ 23.7 $ 0.65 (1)Related to $132 million of IEEPA tariff recoveries, including $4 million of interest received. (2)Related to the departure of Douglas C. Palladini, the Company’s former Chief Executive Officer, in the second quarter of fiscal 2026. (3)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. Fiscal quarter ended June 28, 2025 (dollars in millions, except earnings per share) Cost of Goods Sold Gross Profit SG&A expenses Operating Income % Net Sales Interest Income Income Taxes Net Income Diluted Net Income per Common Share As reported (GAAP) $ 303.6 $ 281.8 $ 281.0 $ 4.0 0.7 % $ 4.3 $ 1.3 $ 0.4 $ 0.01 Operating model improvement costs(1) — — (6.6) 6.6 — 1.6 5.0 0.14 Leadership transition costs(2) — — (1.1) 1.1 — 0.3 0.8 0.02 As adjusted $ 303.6 $ 281.8 $ 273.3 $ 11.8 2.0 % $ 4.3 $ 3.1 $ 6.3 $ 0.17 Two fiscal quarters ended June 28, 2025 (dollars in millions, except earnings per share) Cost of Goods Sold Gross Profit SG&A expenses Operating Income % Net Sales Interest Income Income Taxes Net Income Diluted Net Income per Common Share As reported (GAAP) $ 642.3 $ 572.9 $ 551.3 $ 30.1 2.5 % $ 7.4 $ 7.1 $ 16.0 $ 0.43 Operating model improvement costs(1) — — (9.8) 9.8 — 2.4 7.4 0.21 Leadership transition costs(2) — — (7.2) 7.2 — 0.6 6.6 0.18 As adjusted $ 642.3 $ 572.9 $ 534.3 $ 47.1 3.9 % $ 7.4 $ 10.0 $ 30.1 $ 0.83 (1)Primarily related to third-party consulting costs to support operating model improvements. (2)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. Note: Results may not be additive due to rounding. 31 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LIQUIDITY AND CAPITAL RESOURCES Our ongoing cash needs are primarily for working capital (consisting primarily of inventory), capital expenditures, employee compensation, interest on debt, the return of capital to our shareholders, and other general corporate purposes. We expect that our primary sources of liquidity will be cash and cash equivalents on hand, cash flow from operations, and available borrowing capacity under our secured asset-based revolving credit facility. We believe that our sources of liquidity are sufficient to meet our cash requirements for at least the next twelve months. However, these sources of liquidity may be affected by events described in the “Forward-Looking Statements” section of this Form 10-Q, including, but not limited to, our risk factors discussed under the heading “Risk Factors” in Part II, Item 1A. of this Quarterly Report on Form 10-Q, the risk factors discussed under the heading “Risk Factors” in our most recently filed Annual Report on Form 10-K, and in other reports filed with the Securities and Exchange Commission from time to time. As discussed under the heading “Known or Anticipated Trends” in our most recently filed Annual Report on Form 10-K, the impacts of new tariffs and other trade measures have had and may continue to have an adverse impact on our cost structure and supply chain, which may impact our working capital needs in the near term. While recent developments, including a decision by the U.S. Supreme Court that invalidated certain incremental tariffs, may affect our future exposure to these tariffs, the trade policy environment remains dynamic and the ultimate impacts are uncertain. We continue to evaluate and mitigate these impacts and may experience volatility in cash flows in the near term. However, we believe our sources of liquidity, including cash and available borrowing capacity under our secured asset-based revolving credit facility, will be sufficient to manage these developments. As of July 4, 2026, we had $653.6 million of cash and cash equivalents held at major financial institutions, including $67.9 million held at financial institutions located outside of the United States. We do not expect any material restrictions on our ability to access or use cash held outside of the United States. We maintain cash deposits with major financial institutions that exceed the insurance coverage limits provided by the Federal Deposit Insurance Corporation in the United States and by similar insurers for deposits located outside the United States. To mitigate this risk, we utilize a policy of allocating cash deposits among major financial institutions that have been evaluated by us and third-party rating agencies as having acceptable risk profiles. Balance Sheet Net accounts receivable at July 4, 2026 were $167.9 million compared to $140.4 million at June 28, 2025 and $178.6 million at January 3, 2026. The increase of $27.5 million, or 19.6%, at July 4, 2026 compared to June 28, 2025 primarily reflects the timing of wholesale customer shipments. Due to the seasonal nature of our operations, the net accounts receivable balance at July 4, 2026 is not comparable to the net accounts receivable balance at January 3, 2026. Inventories at July 4, 2026 were $577.7 million compared to $619.1 million at June 28, 2025 and $544.6 million at January 3, 2026. The decrease of $41.3 million, or 6.7%, at July 4, 2026 compared to June 28, 2025 was driven by lower days of supply and the timing of inbound inventory receipts, partially offset by increased product costs. Due to the seasonal nature of our operations, the inventory balance at July 4, 2026 is not comparable to the inventory balance at January 3, 2026. Prepaid expenses and other current assets at July 4, 2026 were $73.4 million compared to $60.6 million at June 28, 2025 and $60.5 million at January 3, 2026. The increase of $12.7 million, or 21.0%, at July 4, 2026 compared to June 28, 2025 was driven by the reclassification of Rabbi Trust assets from long-term to current to align with the anticipated settlement of associated deferred compensation liabilities in fiscal 2026. Accounts payable at July 4, 2026 were $323.6 million compared to $306.4 million at June 28, 2025 and $235.7 million at January 3, 2026. The increase of $17.2 million, or 5.6%, at July 4, 2026 compared to June 28, 2025 was driven by the timing of vendor payments. Due to the seasonal nature of our operations, the accounts payable balance at July 4, 2026 is not comparable to the accounts payable balance at January 3, 2026. Other current liabilities at July 4, 2026 were $139.9 million compared to $95.3 million at June 28, 2025 and $133.8 million at January 3, 2026. The increase of $44.6 million, or 46.8%, at July 4, 2026 compared to June 28, 2025 was primarily driven by additional income taxes accrued for the receipt of IEEPA tariff refunds, the timing of interest payments on long-term debt, and the reclassification of deferred compensation liabilities from long-term to current to reflect the anticipated settlement of plan participant balances. Other long-term liabilities at July 4, 2026 were $14.2 million compared to $33.4 million at June 28, 2025 and $19.4 million at January 3, 2026. The decrease of $19.2 million, or 57.6%, at July 4, 2026 compared to June 28, 2025 was primarily driven by 32 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) the reclassification of deferred compensation liabilities from long-term to current to reflect the anticipated settlement of plan participant balances. Cash Flow Net Cash Provided by (Used in) Operating Activities Net cash provided by operating activities was $202.3 million for the first two quarters of fiscal 2026 compared to net cash used in operating activities of $8.3 million in the first two quarters of fiscal 2025. Our cash flow provided by operating activities is driven by net income and changes in our working capital. The increase in operating cash flow was primarily driven by $132 million in IEEPA tariff refund recoveries, including interest, lower days of supply and the timing of inbound inventory receipts, and favorable timing of interest payments on our senior notes as compared to the prior period. The income taxes associated with the tariff refund recoveries are expected to be paid in the third quarter of fiscal 2026. Net Cash Used in Investing Activities Net cash used in investing activities was $12.8 million for the first two quarters of fiscal 2026 compared to $26.5 million in the first two quarters of fiscal 2025. The decrease in net cash used in investing activities was driven by decreased capital expenditures. Capital expenditures in the first two quarters of fiscal 2026 were driven by U.S. and international retail store openings and remodels and investments in our distribution facilities. We plan to invest approximately $50 million in capital expenditures in fiscal 2026, primarily for our distribution facilities and strategic information technology initiatives. Net Cash Used in Financing Activities Net cash used in financing activities was $21.4 million in the first two quarters of fiscal 2026 compared to $42.8 million in the first two quarters of fiscal 2025. This change in cash flow from financing activities was primarily driven by lower cash dividends distributed to shareholders during the period. Share Repurchases The Company did not repurchase and retire any shares of its common stock through open market transactions during the first two quarters of fiscal 2026 and 2025. The total remaining capacity under outstanding repurchase authorizations as of July 4, 2026 was approximately $599.0 million, based on settled repurchase transactions. The share repurchase authorizations have no expiration dates. 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 asset-based revolving credit facility and considerations given to market conditions, stock price, other investment priorities, excise taxes, and other factors. Dividends In each of the first two 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 cash dividend per common share of $0.50 for the first two quarters of fiscal 2026). Additionally, in the first and second quarters of fiscal 2025, the Board declared, and the Company paid, a cash dividend per common share of $0.80 and $0.25, respectively (for an aggregate cash dividend per common share of $1.05 for the first two quarters of fiscal 2025). Our Board will evaluate future dividend declarations based on a number of factors, including restrictions under our secured asset-based revolving credit facility (“ABL facility”), business conditions, our financial performance, and other considerations. Provisions in our ABL facility could have the effect of restricting our ability to pay cash dividends on, or make future repurchases of, our common stock, as further described in Note 6, Long-term Debt, to the condensed consolidated financial statements. Financing Activities Secured Revolving Credit Facility As of July 4, 2026 and January 3, 2026, we had no outstanding borrowings under our ABL facility, exclusive of $5.8 million and $6.3 million of outstanding letters of credit, respectively. As of June 28, 2025, we had no outstanding borrowings under our secured cash-flow-based revolving credit facility, exclusive of $6.9 million of outstanding letters of credit. As of July 4, 2026, January 3, 2026, and June 28, 2025, there was approximately $568.6 million, $743.7 million, and $843.1 million available for future borrowing, respectively. Any outstanding borrowings under our ABL facility and secured cash-flow-based revolving 33 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) credit facility are classified as non-current liabilities on our condensed consolidated balance sheets due to 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. ABL Facility On November 17, 2025, the Company, through its wholly owned subsidiary, The William Carter Company (“TWCC”), entered into a new five-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 $568.6 million and $743.7 million as of July 4, 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 July 4, 2026, the borrowing rate for a term Secured Overnight Financing Rate (“SOFR”) loan would have been 4.92%, which includes an excess availability-based adjustment of 1.25%. As of July 4, 2026, the Company was in compliance with its covenants and requirements under the ABL facility. Senior Notes As of July 4, 2026, the Company had $575.0 million principal amount of senior notes outstanding, bearing interest at a rate of 7.375% per annum, and maturing on February 15, 2031. On our condensed consolidated balance sheets, the $575.0 million of outstanding senior notes as of July 4, 2026 is reported net of $7.2 million of unamortized debt issuance-related costs. On November 13, 2025, TWCC issued the $575.0 million principal amount of senior notes due 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. Seasonality We experience seasonal fluctuations in our sales and profitability due to the timing of certain holidays and key retail shopping periods, which generally has resulted in lower sales and gross profit in the first half of our fiscal year versus the second half of the fiscal year. Accordingly, our results of operations during the first half of the year may not be indicative of the results we expect for the full year. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies and estimates are described under the heading “Critical Accounting Policies and Estimates” in Item 7 of our most recent Annual Report on Form 10-K for the 2025 fiscal year ended January 3, 2026. Our critical accounting 34 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) policies and estimates are those policies that require management’s most difficult and subjective judgments and may result in the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies and estimates include: revenue recognition and accounts receivable allowance, inventory, goodwill and other indefinite-lived intangible assets, accrued expenses, loss contingencies, accounting for income taxes, foreign currency, employee benefit plans, and stock-based compensation arrangements. There have been no material changes in these critical accounting policies and estimates from those described in our most recent Annual Report on Form 10-K. Goodwill and Indefinite-lived Intangible Assets In the fourth quarter of fiscal 2025, the Company performed an annual 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 as of January 3, 2026. The assumptions used in the quantitative impairment test of the goodwill of our reporting units include projected revenue growth and profitability, terminal growth rates, discount rates, market multiples, and applicable control premiums. The assumptions used in the quantitative impairment test of our indefinite-lived intangible tradename assets include projected revenue growth and profitability, terminal growth rates, discount rates, and royalty rates. Based upon this assessment, there were no impairments on the value of goodwill or indefinite-lived intangible tradename assets. The annual assessment indicated that the fair value of assets for the U.S. Wholesale, U.S. Retail, and Other International reporting units exceeded its carrying values by at least 25%. The fair value of assets for the Canada reporting unit exceeded its carrying value by approximately 8%. The assessment indicated that the fair value of our indefinite-lived tradename assets exceeded the carrying values by at least 35%. Sensitivity tests on the Canada reporting unit showed that a 100 bps increase in the discount rate, a 50 bps decrease in the long-term revenue growth rate, a 250 bps decrease in revenue growth rates, or a 50 bps decrease in operating margins would not change the conclusion and would not result in an impairment charge. The Company believes that the assumptions used in the impairment tests are reasonable and supportable as of July 4, 2026, and therefore, there were no impairment charges recorded in the second or first two quarters of fiscal 2026. As of July 4, 2026, the carrying value of the goodwill ascribed to the Canada reporting unit was $37.3 million. The degree of uncertainty associated with the assumptions used in our impairment tests is elevated in the current macroeconomic environment due to evolving trade policies. The Company continues to monitor these macroeconomic conditions, including the potential impacts from new tariffs or trade restrictions, which could adversely affect the financial performance of our reporting units and indefinite-lived intangible tradename assets. Should these conditions lead to a significant decline in projected financial results, there could be impairment charges to these assets mentioned above, to the goodwill ascribed to our other reporting units, or to our other indefinite-lived intangible tradename assets.