CARTERS INCCRI
CARTERS INC Revenue Disclosure
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. The Company’s revenue recognition policies are described in Note 2, Summary of Significant Accounting Policies.
Disaggregation of Revenue
The Company sells 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 customers (“wholesale channel”). The Company also earns royalties from certain of its licensees that sell products under the Company’s brands.
Disaggregated revenues from these sources were as follows:
| Fiscal year ended January 3, 2026 (53 weeks) | ||||||||||||||||||||||||||
| (dollars in thousands) | U.S. Retail | U.S. Wholesale | International | Total | ||||||||||||||||||||||
| Direct-to-consumer | $ | 1,466,128 | $ | — | $ | 287,952 | $ | 1,754,080 | ||||||||||||||||||
| Wholesale channel | — | 1,001,338 | 143,008 | 1,144,346 | ||||||||||||||||||||||
| $ | 1,466,128 | $ | 1,001,338 | $ | 430,960 | $ | 2,898,426 | |||||||||||||||||||
| Royalty income, net | $ | 4,653 | $ | 10,420 | $ | 3,029 | $ | 18,102 | ||||||||||||||||||
| Fiscal year ended December 28, 2024 (52 weeks) | ||||||||||||||||||||||||||
| (dollars in thousands) | U.S. Retail | U.S. Wholesale | International | Total | ||||||||||||||||||||||
| Direct-to-consumer | $ | 1,417,108 | $ | — | $ | 268,409 | $ | 1,685,517 | ||||||||||||||||||
| Wholesale channel | — | 1,021,396 | 137,189 | 1,158,585 | ||||||||||||||||||||||
| $ | 1,417,108 | $ | 1,021,396 | $ | 405,598 | $ | 2,844,102 | |||||||||||||||||||
| Royalty income, net | $ | 5,365 | $ | 11,072 | $ | 2,814 | $ | 19,251 | ||||||||||||||||||
| Fiscal year ended December 30, 2023 (52 weeks) | ||||||||||||||||||||||||||
| (dollars in thousands) | U.S. Retail | U.S. Wholesale | International | Total | ||||||||||||||||||||||
| Direct-to-consumer | $ | 1,501,780 | $ | — | $ | 268,596 | $ | 1,770,376 | ||||||||||||||||||
| Wholesale channel | — | 1,014,584 | 160,634 | 1,175,218 | ||||||||||||||||||||||
| $ | 1,501,780 | $ | 1,014,584 | $ | 429,230 | $ | 2,945,594 | |||||||||||||||||||
| Royalty income, net | $ | 6,549 | $ | 11,660 | $ | 3,201 | $ | 21,410 | ||||||||||||||||||
Accounts Receivable from Customers and Licensees
Accounts receivable primarily represent amounts due from wholesale customers and licensees and are recorded net of allowances for chargebacks and expected credit losses. The Company’s accounting policies for accounts receivable, including the assessment of chargebacks and expected credit losses, are discussed in Note 2, Summary of Significant Accounting Policies.
The components of Accounts receivable, net, were as follows:
| (dollars in thousands) | January 3, 2026 | December 28, 2024 | ||||||||||||
| Trade receivables from wholesale customers, net | $ | 174,566 | $ | 187,715 | ||||||||||
| Royalties receivable, net | 4,011 | 3,728 | ||||||||||||
Other receivables(1) | 11,705 | 13,444 | ||||||||||||
| Total receivables | $ | 190,282 | $ | 204,887 | ||||||||||
Less: Wholesale accounts receivable reserves(2)(3) | (11,716) | (10,053) | ||||||||||||
| Accounts receivable, net | $ | 178,566 | $ | 194,834 | ||||||||||
(1)Includes receivables related to tax recoveries, shipping volume rebates, healthcare-related rebates, amounts due from third-party gift card program partners, and recoveries related to provisional anti-dumping duties in Mexico.
(2)Includes allowance for chargebacks of $4.1 million and $4.4 million for the periods ended January 3, 2026 and December 28, 2024, respectively.
(3)Includes allowance for credit losses of $7.6 million and $5.7 million for the periods ended January 3, 2026 and December 28, 2024, respectively.
Information regarding the activity in wholesale accounts receivable reserves, which include both the allowance for chargebacks and allowance for expected credit losses, were as follows:
| (dollars in thousands) | Wholesale accounts receivable reserves | ||||
| Balance at December 31, 2022 | $ | 16,448 | |||
| Additional provisions | 5,220 | ||||
| Charges to reserve | (8,551) | ||||
| Balance at December 30, 2023 | $ | 13,117 | |||
| Additional provisions | 2,836 | ||||
| Charges to reserve | (5,900) | ||||
| Balance at December 28, 2024 | $ | 10,053 | |||
| Additional provisions | 6,597 | ||||
| Charges to reserve | (4,934) | ||||
| Balance at January 3, 2026 | $ | 11,716 | |||
Contract Assets and Liabilities
The Company’s contract assets are not material to the Company’s 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 consolidated balance sheets.
Contract Liabilities
Total contract liabilities were as follows:
| (dollars in thousands) | January 3, 2026 | December 28, 2024 | |||||||||
| Contract liabilities - current: | |||||||||||
| Unredeemed gift cards | $ | 25,994 | $ | 25,043 | |||||||
| Unredeemed customer loyalty rewards | 2,372 | 2,552 | |||||||||
| Carter’s credit card - upfront bonus | — | 714 | |||||||||
| Total contract liabilities - current | $ | 28,366 | $ | 28,309 | |||||||
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 fiscal 2025 and fiscal 2024, the Company recognized revenue of $10.3 million and $10.5 million related to the gift card liability balance that existed at the beginning of each respective year.
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.
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.