Carter's Inc. (CRI) Cash Flow Statement

The 2025Q2 ratio of 90.37 reflects net income of only $446K against $40.3M of operating cash flow, while 2025Q3 shows $11.6M of net income paired with a $128.0M operating cash outflow. Such extreme dispersion suggests that timing of working capital, not underlying earnings power, dominates the reported cash picture. Investors should monitor whether the reversals net out over a full year, since quarterly accruals alone cannot be relied upon to judge earnings quality.

The alternating pattern of large inflows and outflows in the fourth and third quarters respectively points to a seasonal inventory build followed by collection and payables unwinding. The magnitude of these swings relative to net income suggests that inventory and receivable timing is the primary driver of cash volatility. Analysts should weigh whether inventory levels are being cleared at healthy prices, since the reversal pattern can also mask markdown-driven liquidation.

Free cash flow has oscillated between roughly -19.0% and +31.5% of revenue over the ten-quarter window, with no sustained trend in either direction. The recent 2026Q3 deficit of $117.4M is driven mainly by a $161.6M working capital outflow rather than by capital expenditure, which remained near 2% of revenue. This suggests that cash generation depends more on balance sheet management than on the operating base, warranting caution in extrapolating any single period.

Capex consistently remained below 3% of revenue, consistent with a wholesale-weighted model that does not require heavy ongoing store investment. Depreciation and amortization of roughly $13-14M per quarter exceeded capex in most periods, suggesting maintenance spending is largely covered. Low reinvestment could support free cash flow durability, though it may also indicate limited investment in digital infrastructure.

The consistent dividend, funded in several quarters by cash from prior surpluses rather than current-period free cash flow, indicates a commitment to shareholder distributions despite earnings volatility. Repurchases were minimal in recent periods, suggesting capital is being prioritized toward the dividend and balance sheet stability. Investors should monitor whether dividend coverage by trailing free cash flow remains adequate across a full fiscal year.