11:06 AM EDT, 07/26/2024 (MT Newswires) -- Carter's (CRI) is facing "major challenges" in business, leading to a large cut in their sales and earnings growth forecasts for fiscal year 2024, Wedbush Securities said in a note Friday.

Analysts, including Tom Nikic, said that while the company's guidance for H2 of the fiscal year looks more attainable, it's hard to be optimistic about the company. Carter's is likely heading for its third consecutive year of double-digit declines in retail sales, significant margin losses, and falling earnings per share.

The marketer of children's apparel is now expecting a 9% to 12% decline in comps for H2, compared with its previous forecast of 2% to 7% growth. This means overall sales for the year will be down in the high single digits to low double digits, following a 12% decline in 2023 and a 10% decline in 2022, the analysts said.

The pressure is set to be worst in Q4, with gross margins projected to drop by more than 200 basis points. The company plans to spend an additional $10 million on marketing to boost traffic. Due to lower sales and decreased efficiency, earnings before interest and taxes margin is now expected to fall by 200 to 250 basis points this year, instead of the slight increase previously anticipated, the analysts said.

Wedbush slashed Carter's price target to $56 from $74 while keeping its neutral rating. Shares of the company fell past 7% in recent trading activity.

Price: 55.21, Change: -4.60, Percent Change: -7.69