Does This Retailer Have an Inventory Problem or Margin Problem?

Market-leading baby and children's apparel company Carter's (NYSE: CRI), perhaps best-known for its popular Oshkosh B'Gosh brand, recently reported earnings that didn't seem to raise any eyebrows. But a further look at the report shows the company may face challenges in the coming quarters. 

In its first-quarter 2022 earnings report, the company revealed an all-time high inventory line item on its balance sheet. A slowing U.S. economy or inflationary pressure could make selling its inventory a tall task. Here's how the stock could be riskier than you think. 

In late 2020 and throughout 2021, as the U.S. economy recovered from its brief COVID recession, red-hot consumer demand left major retailers scrambling for inventory to stock shelves and fulfill e-commerce orders. At the same time, many of the countries that supply the U.S. market imposed pandemic-related shutdowns, crippling the global supply chain. As a large buyer, Carter's was able to flex its muscles and get the products it wanted.

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Source Fool.com