Carter‘s Inc. (CRI): Back In with Baby Steps

Research evidence excerpt

Carter‘s Inc. (CRI): Back In with Baby Steps

Foundation

June 24, 2026 06:42 PM GMT

Morgan Stanley & Co. LLCMRetail Credit Research | North America Jenna L Giannelli

Credit analyst

Carter's Inc. (CRI): Back In with Jenna.Giannelli@morganstanley.comRoopi Bhangu +1 212 761-4340

Credit Analyst

Roopi.Bhangu@morganstanley.com +1 212 761-1912

Baby Steps

We initiate credit coverage on Carter's with a neutral

fundamental view and see valuation on the bonds as fair to

cheap. We would hold the 2031s at current levels and look to

add on weakness, as strong leadership in baby apparel is

balanced by limited scale, brand concentration, and capped

pricing upside.

Key Takeaways

Carter's owns the #1 position in US baby apparel, supported by a quality/value

proposition in soft, durable, easy-care basics.

The core infant/toddler segment is attractive, but the competitive set broadens

as children age and parents prioritize fashion.

Smaller scale and more limited brand diversity versus VFC, LEVI, and other

apparel peers likely cap long-term ratings upside.

The 2031s screen moderately cheap versus LEVI, GAP, and KTB, although we

think some discount is warranted by growth constraints.

With bonds trading around $103, price upside appears limited; we would consider

turning more constructive on spread weakness.

Exhibit 1: Carter's, Inc. (CRI) – summary of views

Fundamental View Neutral - durable baby niche, but growth/rating upside capped

Valuation View Fair-to-cheap; discount partly warranted by concentration / growth constraints

Trade Recommendation None at current levels, add on weakness toward ~195-200bp OAS; do not chase at ~$103

Base Target Fair value near current levels; 170-180bp

Downside Target 225bp; tarriff headwinds prevail & downgrade occurs

Source: Morgan Stanley Credit Research