03:24 PM EDT, 07/18/2024 (MT Newswires) -- There's an "elevated risk" that Carter's (CRI) will lower its full-year earnings guidance on the back of a weak Q2, UBS said in an earnings preview emailed Thursday.

The children's apparel retailer's annual sales growth trend did not show much improvement in Q2 compared with Q1 based on UBS' channel checks, according to the note.

The investment firm said it estimates Q2 adjusted EPS of $0.49, down nearly 25% from a year earlier, and net sales of $573 million, down 4.5% year over year.

Carter's will potentially cut its 2024 guidance amid a decline in average transaction sizes based on industry data and the pressure experienced by the company's core consumers. If the company lowers its guidance, its stock price could drop, UBS said.

The company's challenges include Simple Joys losing market share over the past quarter in both baby girls and baby boys categories and Google searches for Carter's falling 11% year over year as of July 6. Customer growth also declined 1.7% quarter over quarter, implying a negative low single-digit percentage sales growth year over year in Carter's US direct-to-consumer channel in Q2, UBS said.

UBS rated the company's stock neutral with a $72 price target.

Carter's shares were down 1.2% in recent Thursday trading.

Price: 62.27, Change: -0.75, Percent Change: -1.19