By Kelly Cloonan

Carter's slashed its quarterly dividend by more than two-thirds, citing the need to invest in its business during a challenging market and impending tariffs.

The children's clothing company on Tuesday said that its board has cut its quarterly dividend to 25 cents a share, down from its prior payout of 80 cents, and that future dividends will come at the discretion of the board.

Chief Executive Doug Palladini, who took the job last month, said part of the reason was the possibility that Carter's may incur significantly higher product costs due to the new proposed tariffs on products imported into the U.S.

He added that the company's cash position and liquidity are strong and will likely remain so.

"However, as we anticipate making strategic investments in our business in the coming years, our current dividend is misaligned with our current level of profitability," he said.

Shares of Carter's fell 10.3% to $33 in after-hours trading. Through Tuesday's close, the stock has declined 46% over the past 12 months.

Last month, Carter's reported a 37% drop in first-quarter profit after sales fell 4.8%, with the company citing a number of macroeconomic factors, including inflation, elevated interest rates and declining consumer confidence, behind the drop in demand.

The new payout, equal to $1 a year, represents an annual yield of 2.7% based on Tuesday's closing price of $36.77. The dividend will be payable on June 20 to shareholders of record as of June 2.

Palladini, the former global brand president of the retailer Vans, said he is working with the company's board to develop a new strategic plan for the company and plans to provide details during its second-quarter earnings call.

Write to Kelly Cloonan at kelly.cloonan@wsj.com

(END) Dow Jones Newswires

May 20, 2025 17:25 ET (21:25 GMT)

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