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When I drive from my southern Florida home to Orlando, Port Canaveral, or even Tampa, I’ll happily stop at a 7-Eleven for gas, something to drink, and maybe even a bathroom break, but never a meal.

I’ll buy packaged snacks from the chain, but I’ll opt for Wawa or even make a secondary stop at Starbucks if I want something more substantial to eat.

That’s a problem 7-Eleven has been addressing in recent years as it attempts to change how consumers perceive its hot food lineup. It has been a slow process, with the chain adding a new sandwich line nationwide in July.

“Customers are looking for craveable, great-tasting meals that fit seamlessly into their day, and this lineup delivers exactly that,” 7-Eleven Senior Vice President Brandon Brown said in a press release.

Now, the chain, which has been famous for its roller dogs, is taking a major step to fix a staple of its menu. 7-Eleven will roll out a new pizza crust nationwide beginning in September.

7-Eleven rolls out a new pizza crust

While 7-Eleven may be best-known for its hot dogs, taquitos, and other roller-based products, pizza has been a menu staple for decades. Now, the chain has decided to revamp its pizza crust across all of its U.S. locations.

“The new crust has a crispy, bubbly exterior and a light, airy interior, and will be available on several pizza varieties, including cheese, pepperoni and Extreme Meat, the spokesperson said. It will roll out Sept. 3 at participating 7-Eleven, Speedway and Stripes convenience stores,” C-Store Dive reported.

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The convenience store giant called the new crust “part of 7-Eleven’s ongoing commitment to enhancing its fresh food offerings and delivering an even better pizza experience for customers” in a statement to C-Store Dive.

“As pizza continues to be a key part of 7-Eleven’s fresh food lineup, the brand is always looking for opportunities to elevate quality, flavor and value,” 7-Eleven’s spokesperson said.

Food is considerably more important to convenience-store profitability than its share of sales would suggest.Shutterstock

Food sales drive convenience store profits

7-Eleven has been working to improve its menu because higher-quality food doesn’t just drive repeat visits. Food sales also add meaningfully to the bottom line.

Foodservice accounted for 28.0% of in-store sales in 2025, according to the NACS State of the Industry Report of 2025 Data. The impact of foodservice on profitability is even greater, accounting for 38.9% of in-store gross profit dollars in 2025.

“What I want you to take away is that every single customer that visits your c-store and goes up to the pump — that is a foodservice opportunity for you,” said Caitlin Root, executive vice president, customer experience at Datassential, on stage during the 2026 NACS State of the Industry Summit.

Foodservice includes prepared food, commissary, and hot, cold, and frozen dispensed beverages.

If all five foodservice categories were ranked within the top 10 merchandise categories, all except for commissary would fall into the total in-store top 10 in terms of sales, according to NACS Magazine.

“Foodservice delivers two of the three need states, ‘I’m thirsty, I’m hungry,’” Andrew Baill, Wawa’s senior category manager of fresh beverages, told the magazine. (The third need state is fueling/charging.)

Consumers want hot food

Consumers are also consistently opting for prepared over packaged food, especially when it comes to impulse purchases.

“Nearly four out of five consumers are already purchasing prepared food at c-stores at least occasionally. Packaged goods make up 47% of impulse purchases at c-stores, down 6 points compared to three years ago, while prepared food purchases (38% of impulse purchases) are up 9 points,” according to research from Datassential shared with NACS Magazine.

“Consumers are going into your store and instead of buying a bag of chips, they’re leaving your store with a sandwich, a specialty beverage or a slice of pizza,” said Root. “Top performing operators are recognizing the incredible profit margins that can be obtained from foodservice.”

7-Eleven has certainly been trying to embrace that trend, but it has been a slow evolution.

“At 7-Eleven, our commitment to customers goes beyond just convenience — we’re focused on building upon the innovation and quality that keeps our customers coming back every single day,” the chain’s former Senior Vice President Dave Strachan said in a 2024 press release.

“We are hyper-focused on curating our fresh food options to give our customers what they crave at any time of day.”

Fixing its pizza, assuming consumers like the change, will be a major step on the road to changing how consumers see 7-Eleven’s menu and whether they will stop there for prepared food.

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Transcript:

CAROLINE WOODS:Joining us now to kick off the week is Joe Tigay, Portfolio Manager, Rational Equity Armor Fund. Joe welcome back. Thanks for being here.

JOE TIGAY:Thank you for having me.

CAROLINE WOODS:So we’re wrapping up the month of August with some red arrows across the board. But overall it’s been an upbeat month, especially for the Nasdaq. We’re heading into September. Historically the worst month of the year for stocks. So get us ready for it. Should investors be bracing for a pullback here?

JOE TIGAY:I should always be aware of the potential. We should also also be wary. September is a tricky month. Seasonally. It’s a tricky month in a midterm year, and there’s other things going on as well. I think the key focus has been on inflation and interest rates lately. So that’s going to be critical to a lot of important stuff happening this week.

JOE TIGAY:We have oil back over 90. Of course that’s very inflationary. And obviously at the end of the week we have the jobs report that’s going to tell us a lot about the economy and how the inflation is, adding up, altogether, in the jobs market and economic growth.

CAROLINE WOODS:Okay. We’ll dig into both the jobs report and on Friday and oil in just a second. But if we do get a September pullback, what would tell you that it’s a buying opportunity rather than the start of something worse?

JOE TIGAY:Yeah, that’s a great great point. Great question. Just think thinking about the big picture. Something would have to fundamentally change for it to, be the end of this AI rally. So for me, just the short term pullback will be a buying opportunity. Would be an opportunity to look at which sectors are lower, which sectors are, being valued a little more harshly than others?

JOE TIGAY:Given the current climate, and I would probably look at it as a buying opportunity, something that would fundamentally change for me would be, you know, announcements from anthropic or OpenAI talking about their future potential profitability, that their future growth. I think that’s really the story right now. There’s a lot of pressure on these hyperscalers, a lot of pressure on the largest companies in the world because they’re expanding.

JOE TIGAY:They’re thinking about the next few years. They’re taking on debt. They’re building a lot of projects. And, the base case right now is that, the compute is not going to be needed. We’re going to be overbuilding. These companies like anthropic and OpenAI are not going to be profitable. So all of these projects are going to go to dust.

JOE TIGAY:I think that’s the case. And I haven’t really seen that in the reality so far. I’ve just only seen companies saying that we need more compute. We need more and more of this. So yeah. So for me, if something changes with anthropic or OpenAI, something changes where, the profitability won’t be for them. I think that’s an area where I think I think twice about buying on a debt.

JOE TIGAY:But other than that, I’d be happy to load up.

CAROLINE WOODS:Well, we’re technically getting a dip today if you count the S&P 500 down about a half percent, an actual dip. So if I have cash on the sidelines today, am I putting it to work now, or am I waiting for a better entry point in September?

JOE TIGAY:Yeah. Just today, I would maybe pick my spots, carefully. Just in general, I would pick my spots carefully, thinking about investing for the long term. It’s not great to just throw it all in on day one. So, yes, if I had cash, I would consider putting it to work, but not necessarily all of it.

JOE TIGAY:And I would be targeting a few stocks. I would be watching them closely. I’d be watching, where good entry spots would be to get into and kind of just waiting patiently for that. I think, over time, it definitely pays to stay invested and in the market. But also if you look over time also, it also pays to pick your spots, be patient and be tactical, when, deploying that capital.

CAROLINE WOODS:So, Joe, last time you were here, it was March and the VIX was actually above 30. Now I’m taking a look and it’s trading around 15. Are you concerned at all that investors are getting too comfortable.

JOE TIGAY:That’s a really important point to make out. We have very similar concerns today as we did back in March. The market has done quite well since then. And yet, yeah, you’re seeing volatility very low. The contrarian in me, yes, I am definitely a contrarian. It’s just in my blood. Says when everything whenever VIX is too low, it’s usually a time to be looking to add some protection and add some, add some downside, you know, insurance, so to speak.

JOE TIGAY:So yes, I do I do think that could be, a sign right here that, we are too complacent or too confident in the short term future. Given all the risks out there, very similar risks were there in, in March, and we decided that, you know, the risk premiums were double, what they are right now.

JOE TIGAY:So, yeah, for me, this is this is a sign that, you know, we’re maybe a little bit overconfident in the short term.

CAROLINE WOODS:You talk about the risks. What’s the risk investors aren’t properly prepared for right now, but.

JOE TIGAY:Oh, goodness. Well, yeah, if we, coil being back above 100 would be a very big, inflationary, inflationary shock. We have the jobs report coming out, of course, at the end of the week. Just an economic cooldown with high, inflation is kind of, a hard spot right here for the fed. So we definitely don’t want to see that inflationary environment.

JOE TIGAY:So that’s certainly the risk. But and then of course, the bear case on these big stocks is that the compute is not going to be needed or anthropic or OpenAI are going to flop. So, I, I’m maybe more concerned about the inflationary, and, inflationary shock in the short term right now.

CAROLINE WOODS:So oil’s currently trading around $85 a barrel. How inflationary is that. How is that the danger zone or is really just 100 or higher. The danger zone.

JOE TIGAY:I would well it it depends on the time frame. So we had a little below 60. We had around 70. That was obviously of course very good. It’s definitely higher than that now. So that is adding to the cost of everything, that we do. But it could be higher. It could be worse, obviously. So, the lower the better.

JOE TIGAY:I mean, needless to say, but, it was much more of a risk to me to, to cause a lot more economic damage above 100. We saw at 120, very briefly, there were fears that would be even higher. So that was certainly a big risk. And then having on the flip side of that, though, was that, when we saw cooldowns in the lower cooldowns, and geopolitically we saw oil drop very rapidly.

JOE TIGAY:So, it’s still can go both ways here. We need to remember that while we’re being very cognizant that, things could go south or north, you’re in oil, and that could that could lead to some economic pain. Could could very easily go back down, below 70. So just be very, very, very aware of that as we’re just really treading this, razor’s edge here.

JOE TIGAY:It’s very well might have a lot of things going on in the market where there’s a lot of these risks out there, but we still continue to, just, ride the volatility higher and continue higher, even though, the risks continue to be there on the side.

CAROLINE WOODS:So as you mentioned, we have the jobs report coming on Friday. What does the market actually want a strong number or weak one.

JOE TIGAY:Yeah, that’s a great question. You know, I always like to see strong economic data. I always like to see growth here. But, I think the risk right now is these interest rates. So I think the market’s going to be a little bit happier. Maybe not with, terrible disastrous number or we’re losing a lot of jobs, this month, but something cool, maybe in line with expectations or slightly cooler.

JOE TIGAY:I think the market would be happy to see that, just to maybe kind of put a lid on the number of rate hikes the fed will do or maybe limit maybe, maybe not even any rate hikes the fed will do. Just but just to limit the short term hiking that the federal do because that will slow down, economic activity.

JOE TIGAY:Now, there’s a lot of money being spent, by, some of the biggest companies in the world out there, some of the biggest company, those overall, they’re spending upwards of trillions of dollars in these investments, really eye spending, that is going to boost economic growth. That is going to make, things more expensive. They have a lot of people competing for fewer resources.

JOE TIGAY:That’s just naturally what happens with inflation. So it does make sense. The economy is running hot. It does make sense that we will need to have higher interest rates. So this jobs report is going to tell us exactly how hot, how how how high these interest rates need to go. So that’s what’s really important to me.

JOE TIGAY:And I think if we can put a lid on these interest rates, I think that, stock markets specifically like that a lot.

CAROLINE WOODS:Yeah. If someone was listening to me saying, why would the market once a week jobs number, it’s just because that would mean maybe the fed won’t actually hike rate hike interest rates in September or later on this year if the jobs report does come in hot though, and yields jump, stocks fall, would you buy that weakness? And what would be the first thing that you would buy?

JOE TIGAY:I would be yeah be watching policy. I don’t I don’t like making major preemptions on and there’s not been watching over the course of a couple of weeks and looking to put that money into work. I have a couple of big, big infrastructure plays that I do really like, though, my, some of my favorites, which of course, I own in my fund, the rest of our fund, our, Alphabet and Amazon, they are two of the biggest, infrastructure plays that are building out this infrastructure.

JOE TIGAY:They’re also two of the biggest, cloud plays. I, I, I’m a strong believer that there is this question whether we’re going to need all this, which is being laid out in the marketplace. People are betting against these companies that they’re not going to need this. But I’m a strong believer that we are going to use it.

JOE TIGAY:I think some of the smartest people in the world are spending their own money, putting their own capital at risk to build this out. We’re seeing, valuations for space in the trillions of dollars because they think that data centers will be needed in space. Well, I, I’m maybe I’m not quite there on space, but if people think that data centers will be needed in space and they think that space is worth that lofty with elevation, that I surely think that data centers will be needed on Earth.

JOE TIGAY:And I surely think those data centers will be profitable that are being built on Earth. So I’m, firmly in, a believer, that regardless even of what happens without anthropic, an open eye, that Amazon and Google are going to be their, winners in this, in this, eye game. So, yeah, I’m, I’m looking at them on pullbacks.

JOE TIGAY:I’m looking at them on strength. I’m just watching them closely because I think they’re going to be, companies are going to be around 50 years from now. And companies there that are going to thrive in the short term too.

CAROLINE WOODS:So last time you were here in March, alphabet was still one of your top picks then. But also Palantir was on there. Are you still a buyer of Palantir here?

JOE TIGAY:A lot bigger buyer, before trading around one 2100 wherever. I don’t remember exactly where it was. I think there was a narrative that for some reason, it got looped into the software as a service. For some reason, software names were being hammered because people were saying, hey, I can do all of these applications on my own without the need, for paying for an expensive subscription.

JOE TIGAY:A lot of people can do that, but some people might find it just easier to use, use their software provider. A big deal that happened last week, maybe underreported. I think CRM teaming up with and for to do I think it’s called Claude force is a kind of a new model. They’re burning out, which is kind of like an easy way to get into it, an easy way to use this compute and use their software.

JOE TIGAY:Yeah. For Palantir. I thought it was kind of a no brainer. I don’t know why it was so low then. The valuations, were just much better than when it was, where it is right now. And I, I want to lessen some of right now than it was. And then I was a few months ago for sure.

CAROLINE WOODS:What’s a popular stock or part of the market that you wouldn’t touch at these levels aside from space? It doesn’t sound like you’re interested in space theory either.

JOE TIGAY:I think I could be I could be sold on space six. I just need more time to kind of understand the technology and, and the future. But yeah, I think right now I’m, I love a lot of the, I love the inflation play, but I’m a little cautious on energy right now. Just because oil is so volatile, it can go up and down.

JOE TIGAY:But I am, I am, short term and medium term believer that inflation is going to run a little bit higher than expected. Maybe while economic growth is also higher than expected, I think that’s going to be a trade off. The fed is going to allow us to have. So yeah, I am, but I am said that there’s just a lot of volatility in the energy, space.

JOE TIGAY:I would think I would just avoid that and look for maybe some other metals, to to play the inflation game.

CAROLINE WOODS:What would you buy today that has nothing to do with I.

JOE TIGAY:It’s interesting you say that. I think that everything is just and is is touch with everything. Everything is included. You think about banks. Maybe that has nothing to do with AI, but it does. Are you there? Of course. Using it and becoming more productive, I think about, I, you know, traditional, transports. You would think that has nothing to do with that, but of, you know.

CAROLINE WOODS:All right. And maybe let me rephrase it. Okay. What would you buy today that isn’t a tech stock?

JOE TIGAY:Isn’t a tech, so. Yeah, so I do I do like, a lot of value stocks. I do have, you know, I, I’m allocating a lot, in my portfolio, for them, I, I have a large, a large allocation to very traditional, techs, like the famous one with the very famous investor, which will be passing on, in very shortly, a very big, Berkshire position and I.

JOE TIGAY:Yeah, I, I’m a big fan of his stock selection, big fan of, his process. And yeah, I think, there’s a very, very valid place, in portfolios for that in that. Yes. That has a lot less to do with technology than, some of the other spots in my portfolio. But I do think it’s, a core component which should be held by, by retail.

CAROLINE WOODS:And you also talked about adding downside protection to portfolios to prepare for what could be, seasonally weak September. How can the everyday retail investor do that?

JOE TIGAY:Yeah. So I think, very simply the way that I invest is, I have a long term view, that I think the stock market is going to be higher over long term, maybe a ten year horizon. I’m very confident stocks will be higher. But I also know that within that horizon there’s going to be some volatility.

JOE TIGAY:We’re going to have ups and downs. And that’s kind of measured with volatility index. And the VIX. People may get confused. They think of the VIX and say hey this is something that I can just buy and all that. I can own plots or I can buy mixed futures. And that’s just another staple investment. I I think that’s the wrong approach to it.

JOE TIGAY:The way that I do volatility is that as opposed to stocks that have a long term expected value, the expected value for volatility for me is that it will return to the average. And that simply means when it’s too high, it probably should sell it, get out of it, but it’s too low. It’s probably time to buy some of it.

JOE TIGAY:So it’ll go back to the average. Right now I think it’s on the low end. I think it’s time to be, putting on some protection, and anticipating, returning to the average.

CAROLINE WOODS:So some near-term weakness. But by your end, do you think this is a market the higher.

JOE TIGAY:Yeah, absolutely. Do I mean, someone’s going to happen, you know, even on a timeframe of four months now, you know, I can’t really predict it, but I do think base case, I do think, the the push will be higher, and it’s just coming from the enormous amount of capital being spent by, the largest companies in the world.

JOE TIGAY:And this this is in government spending. This isn’t, you know, this isn’t just a stimulus bill. This is like real capital being put to work by the largest companies in the world that have, a handle on what’s profitable out there. So, yeah, this money is going back into the economy, and I think that will push everything higher.

CAROLINE WOODS:Would a rate hike in September change your bullishness at all time?

JOE TIGAY:It would dampen my bullishness. I think it would make things harder. It would make valuations a little bit tougher. But it would I would still be bullish. I think it would just mean and it would just slow down the rate of growth instead of eliminating the growth.

CAROLINE WOODS:Okay. All right. I think this is a great time to pivot to our rapid fire round of this or that. Quick questions, quick answers. No hedging. You’ve played before. Are you ready, Joe I’m ready. Here we go September buying opportunity or trouble ahead. Buying opportunity VIX at 15. Calm or complacent.

JOE TIGAY:Complacent.

CAROLINE WOODS:Hold cash or deploy it. Deploy by strength or by weakness. By weakness tech or the rest of the market.

JOE TIGAY:Really depends I’m going to lean tech, but it’s it’s 5050.

CAROLINE WOODS:Big tech or small caps.

JOE TIGAY:Big tech.

CAROLINE WOODS:Alphabet or Amazon.

JOE TIGAY:Alphabet.

CAROLINE WOODS:The biggest risk to the market. Inflation or slowing growth.

JOE TIGAY:Slowing growth. But inflation can do it. That’s just the push pull. But yeah.

CAROLINE WOODS:Six six months from now higher or lower market.

JOE TIGAY:Higher.

CAROLINE WOODS:Finish this sentence quickly. The next buying opportunity will come when?

JOE TIGAY:

JOE TIGAY:And the next time any any dip any, any overreaction to, off. See, Chinese news about a new model, overreaction to, valuations being too high or. Yeah, an overreaction to tech stocks. And is is the simple answer.

CAROLINE WOODS:The first thing I should do when volatility surges is.

JOE TIGAY:Look for stocks that are oversold. Look for stocks that are, unfairly beaten down, that are sold just because the rest of the market went down. But their financials and fundamentals remain strong and had no business being a part of the selloff.

CAROLINE WOODS:The most crowded trade in the market is

JOE TIGAY:It was it was the memory stocks. That was that was the crowded. Too crowded I mean maybe chips are still very crowded. I will also say.

CAROLINE WOODS:The most underrated part of the market is.

JOE TIGAY:Still software. Software got ahead of itself. I think the recovery here, I think software names, look very good to me.

CAROLINE WOODS:One software, a name that look good. One software name that looks good to you is Palantir.

JOE TIGAY:That’s that’s one of my best.

CAROLINE WOODS:The biggest weak spot in the market is.

JOE TIGAY:The. Yeah. The there’s a push pull on debt. Whether or not this, this we’re overspending on the on the short term, I think, I think the weak spot will be, the need for anthropic and OpenAI have successful IPOs.

CAROLINE WOODS:The I stock investors are overlooking is.

JOE TIGAY:Yeah. Are we overbuilding? Are there too much debt? Is there too much compute? Are we going too fast? Too soon? You can look back. Sorry, this is going to be a long answer. Can I give it?

CAROLINE WOODS:Yeah. No. You know, the I stock investors are overlooking is.

JOE TIGAY:Yeah. Is it, Or are are these companies overbuilding? Are we investing more than we need?

CAROLINE WOODS:Is there one name, though, that you think that Wall Street isn’t paying enough attention to?

JOE TIGAY:Yeah, I don’t have. I don’t have a good name. I, I, I know that Wall Street’s paying a lot of attention to it, but I’m very curious about Oracle. I’m watching it closely. I know it’s it’s very closely analyzed. I know that they maybe they’re paying too much attention to it, but I, I’m, I’m just scratching my head with right now with why it doesn’t react the same way as some of the other companies.

CAROLINE WOODS:So curious on Oracle means that you’re interested in it or you aren’t.

JOE TIGAY:I’m interested in it, but I yeah, I, I’m not currently in it. I’m just just watching it, like, software names had a big bounce. They didn’t really respond. They, I’m curious. There’s there’s something going on there where there’s a bigger there’s a bigger emphasis on their balance sheet. Bigger, bigger concern for them than some of the other companies.

CAROLINE WOODS:Okay. We’ll leave it there. Joe Tigay, portfolio manager. Rationale Equity Armor refund. Always a pleasure. Thanks so much for joining us.

JOE TIGAY:Thank you for having me.

CAROLINE WOODS:If you enjoyed this street talk check out our full interview with Ben Emons. He says a rate hike is likely in September and explains how to position for it.

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“This initial necklace is the perfect size and has the perfect amount of bling,” raved one reviewer. They appreciated the hypoallergenic construction that’s free from lead and nickel, as well as the gorgeous design, adding, “The crystals are very sparkly, and when the light hits them, it is beautiful.”

Related: Walmart has $110 hypoallergenic hoop earrings for 88% off

The necklace has an 18-inch-long chain that secures with a sturdy lobster clasp closure. At this length, the necklace will hit just around the collarbone or a little lower. It looks great worn by itself, but the dainty size also makes it perfect for layering with other necklaces. You could even layer it with multiple initial necklaces for the mothers who want to honor their children. 

Details to know 

Necklace length: 18 inches.

Letter options: All 26 letters of the alphabet are available and discounted to $18.

Finish: 18-karat white gold plating.

Is it hypoallergenic?: Yes.

You can feel confident when buying from Cate and Chloe. The USA-owned brand offers a 30-day warranty that guarantees the quality of its craftsmanship. The premium quality jewelry also comes in a free luxury gift box, so it’s great for treating yourself or gifting to a special someone.

Shop more deals

Cate & Chloe Leah Gold-Plated Tennis Bracelet, $30 (was $60) at Walmart

Cate & Chloe Lauren Swarovski Hoop Earrings, $20 (was $40) at Walmart

Cate & Chloe Evie Swarovski Sun Pendant Necklace, $23 (was $40) at Walmart

Don’t miss your chance to score the Cate and Chloe Ethereal Collection Swarovski Crystal Initial Necklace for just $18 at Walmart. With similar fashion deals, we’ve seen certain selections begin selling out, so don’t wait to snag it for yourself.

Most investors have never heard of Ciena.

Most investors also don’t know what actually powers the Internet’s massive highway system. Ciena builds the engines that drive it. And right now, the world needs more of them than it can get.

The 34-year-old Hanover, Maryland, company makes high-speed optical networking equipment. Those are the specialized hardware and software that shoot data across long distances at the speed of light. Telecommunications companies, cloud giants, and governments all depend on them.

And with AI data centers multiplying faster than power grids can handle them, the demand for Ciena’s technology is accelerating in ways that weren’t fully visible even 18 months ago.

Ciena reports fiscal Q3 2026 results on Sept. 3. Morgan Stanley shared a preview note laying out exactly what to watch and why the results might be more important than the headline numbers suggest. 

The firm maintains an Equal-Weight rating with a $490 price target, according to a note shared with TheStreet. That’s not a ringing buy call. But it’s a constructive setup heading into a print the firm explicitly describes as having “positive catalysts.”

Also Read: Ciena Corporation Latest News and Stories

The backlog number that matters more than revenue right now

Here’s the dynamic at the centre of the Ciena story, and it’s worth understanding before the Sept. 3 numbers land.

Ciena is not supply-constrained because demand is weak. It’s supply-constrained because demand is outrunning its ability to source optical components, particularly pump lasers, which are critical to its networking hardware. 

Lumentum (LITE) is one of Ciena’s key suppliers, and LITE reported pump-laser shipments up more than 80% year over year last quarter, with plans to increase volumes roughly fourfold over the coming quarters, according to the Morgan Stanley note. 

New long-term agreements between suppliers and Ciena should improve supply visibility, but not in time to meaningfully impact Q3.

More AI:

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Microsoft just took sides in AI policy fight

OpenAI just disclosed something genuinely alarming

What that means for you as an investor is that the revenue number matters less than the backlog number. Backlog represents orders Ciena has won but can’t yet ship due to component constraints. 

In Q2, backlog grew by $600 million. Morgan Stanley expects Q3 backlog growth to exceed that figure, according to the note. If it does, it would signal that the demand is accelerating even as near-term revenue conversion remains limited.

My read is that a backlog beat is the most important signal in this print. It offers an early look at what fiscal 2027 revenue could look like before supply constraints fully normalize.

According to Morgan Stanley’s note, its specific Q3 bogeys are approximately $1.69 billion in revenue, a 45.5% gross margin, and a 21% operating margin. A clean print also requires Q4 guidance of approximately $1.73 billion in revenue with similar margin parameters.

Why distributed AI is quietly becoming Ciena’s biggest tailwind

Here’s the part of the Morgan Stanley thesis that I find most interesting, and most underappreciated by the market.

Everyone knows AI data centers require enormous amounts of connectivity. The conventional assumption is that this means building massive centralized campuses. 

Morgan Stanley’s thematics team is pushing back on that assumption, according to the note. 

Related: Morgan Stanley resets CIEN stock target after earnings

Political opposition and power constraints are rising non-linearly with campus size. The bigger the proposed campus, the harder it becomes to permit and power it.

The result, according to the note, is that workloads may increasingly be distributed across smaller, geographically dispersed sites, which then need to be interconnected over long-haul optical networks. 

That’s exactly what Ciena builds. If the mega-campus model hits structural limits, the scale-across optical networking opportunity doesn’t shrink. It potentially expands.

What about the Nvidia catalyst?

The Nvidia long-haul network build reinforces this thesis. Nvidia’s infrastructure project includes more than 8,000 miles of new fiber across 16 U.S. routes and targets 15,000 new route miles through 2030, according to Morgan Stanley’s note. 

Ciena is well-positioned to capture equipment orders as those routes are lit. Morgan Stanley estimates the total CIEN opportunity from this build at less than $1 billion over multiple years.

That’s roughly one-quarter to one-third the size of Lumentum’s deals with Meta and Microsoft, with initial deployments expected as early as 2027, according to the note.

It’s not a near-term catalyst. But it’s a real, named pipeline item that the Street hasn’t fully modeled.

A backlog beat is the most important signal in Q3 earnings for fiscal 2026.Cheng Xin/Getty Images

What Ciena’s Q2F26 showed, and what it sets up for September

Ciena’s most recent quarter, reported June 4, was genuinely impressive. 

Revenue reached $1.57 billion, up 40% year over year (YoY).

Adjusted EPS came in at $1.64, up 290% YoY.

The company raised its full-year fiscal 2026 revenue guidance to $6.3 billion, representing 32% YoY growth at the midpoint.Source: Ciena fiscal second-quarter 2026 results

CEO Gary Smith mentioned this in Ciena’s Q2 statement. 

“Our long-term strategy to be the global leader in high-speed connectivity is tightly aligned to the structural, multi-year opportunities created by AI-driven demand.”

Ciena’s own guidance calls for $1.625 billion in revenue, an adjusted gross margin of around 45%, and an operating margin between 19% and 20%.

Morgan Stanley’s bogey of $1.69 billion sits above that guidance midpoint. The firm is modeling upside relative to management guidance, according to Ciena’s Q2 statement. 

CIEN shares were trading at $378.44, down 5.35% on the week ended Aug. 28, but up 61.82% year to date and 286.60% over the past year, according to Yahoo Finance. 

Morgan Stanley’s $490 target, based on 37x its 2028 EPS estimate of $13.26, implies roughly 29% upside from current levels. 

The Equal-Weight rating reflects near-term caution on optical sector multiples, not a fundamental concern about the business. The Sept. 3 print gives us the chance to see whether the backlog inflection Morgan Stanley expects actually shows up in the numbers.

Related: Morgan Stanley rattles investors with bombshell HP stock verdict

Federal Reserve Chair Kevin Warsh sent a signal at his Jackson Hole speech that interest rates might need to rise again.

Inflation remains sticky and is still above the Fed’s 2% goal. Moreover, financial conditions are loose, and the labor market remains consistent with full employment. Traders bumped the odds of a September rate hike, but Treasury Secretary Scott Bessent sees something in the turmoil that investors might be missing.

That comes at a point when gross federal debt, as reported by Reuters, has surged over $40 trillion, twice its decade-ago level.

Additionally, Treasury data put public debt at $32.31 trillion, while the Congressional Budget Office expects net interest costs to rise to $1 trillion in fiscal 2026. At the same time, according to TradingEconomics, the 10-year Treasury yield hovered near 4.73%, elevating refinancing costs while intensifying scrutiny of Washington’s finances.

Yet Bessent isn’t joining the chorus of alarm. His answer doesn’t erase the debt burden, but it effectively challenges the assumption that investors are losing faith, placing unexpected meaning on the bond market’s latest signal.

 His answer challenges the biggest assumption rattling bond investors Andrew Harnik/Getty Images

Why Bessent sees strength behind the debt-market strain 

Bessent’s unexpected answer is that investors might be overstating U.S. debt-market stress.

More Economy:

Kevin O’Leary raises stark concern about inflation

Goldman Sachs delivers its verdict on inflation and jobs

Bank of America issues stark warning on Fed and economy

“First of all, I’m not sure where the bond market turmoil is,” he told Reuters, making the case that the U.S. bond market was “the best performing” among global peers in 2026.

His defense primarily rests on economic growth. 

“What’s important, too, is that we are growing,” Bessent said. Real GDP grew at a 1.5% annualized rate in Q2, after growing 2.1% in the first, according to the Bureau of Economic Analysis. Importantly, consumer spending, investment and exports have all contributed.

That backs up Bessent’s claim that the economy isn’t collapsing under the immense debt burden. Growth tends to expand income and tax receipts, which makes debt a lot easier to service relative to GDP.

However, 1.5% is hardly booming, and it has slowed down from the previous quarter. Inflation can also lift nominal sales while compelling investors to demand higher yields, which increases Washington’s refinancing costs.

Moreover, Bessent also defended Treasury’s decision to double buybacks of longer-dated bonds from $2 billion to $4 billion per operation starting September 10. 

Buybacks enable the Treasury to repurchase older, less-liquid securities, which improves trading conditions and reduces the risk that thinner demand ends up producing disorderly yield spikes.

Yet $4 billion represents nearly 0.01% of the $40 trillion gross debt. The program is a market-liquidity tool and not exactly a debt reduction.

Critics, including Stanley Druckenmiller, feel that the 30-year yield reached a 19-year high, which looks like an effort to suppress borrowing costs instead of taking on the deficit head-on.

Bessent acknowledges that constraint. “I don’t think I can change the equilibrium price,” he said. “My job is to slow things down … and make sure that the market doesn’t get disorderly.”

The $40 trillion problem behind Bessent’s optimism

Any debate over the stability of the Treasury market begins with the size of government’s obligations. Treasury data shows gross federal debt jumping to $40.08 trillion on August 27, after crossing $40 trillion on August 18.

Of that total, roughly $32.31 trillion is held by the public, which includes investors, banks, pension funds, the Federal Reserve and foreign governments. The remaining $7.76 trillion represents intragovernmental holdings, obligations owed to federal trust funds. 

The publicly held part matters most to markets, as it’s financed through Treasury issuance.

It’s important to note the incredible pace of accumulation. Gross debt stood at $19.49 trillion in August 2016, which means it has more than doubled in a decade. It has surged by $13.46 trillion since August 2020 and by $2.79 trillion over the past year alone. 

That increase amounts to about $7.65 billion per day, or $5.3 million per minute.

Higher interest rates make that growing balance increasingly expensive. The Congressional Budget Office projects Washington will need to spend $7.4 trillion while collecting $5.6 trillion in fiscal 2026, producing a mind-boggling $1.9 trillion deficit.

Net interest costs are likely to approach $1 trillion this year, or around $2.7 billion per day. CBO expects publicly held debt to rise to 120% of GDP by 2036, with annual interest costs skyrocketing to $2.1 trillion. By 2056, debt could reach 175% of GDP, showing why bond-market confidence remains critical.

How investors should read Bessent’s debt-market signal 

For investors, Bessent’s comments are far from being an all-clear. 

They suggest that the Treasury market remains functional but far from removing the risk that deficits and inflation can continue to keep borrowing costs elevated.

Bond investors need to distinguish liquidity from duration risk. Buybacks might improve trading in older securities while preventing dislocations, but they can’t guarantee lower yields. At the same time, long-bond buyers still face losses if inflation continues to persist or the Fed raises rates. A maturity ladder lowers the risk of one oversized duration bet.

Cash investors are incredibly well positioned. 

Treasury bills and money-market funds offer a lot more attractive income with limited choppiness, but the tradeoff is reinvestment risk if growth is sluggish and the Fed cuts rates.

For stock investors, the big question is whether long-term yields are high enough to constrict valuations, raise corporate interest costs and make bonds more competitive. Moreover, expensive growth stocks and heavily indebted companies are sensitive.

Gold might benefit if investors question U.S. fiscal credibility or the dollar. However, further Fed tightening and rising real yields could cap gold prices, making it a portfolio diversifier rather than a guaranteed crisis hedge.

Related: Jim Cramer reveals his 20% rule for winning stocks

A teenager opening Instagram may soon find the app works differently.

There might be a default two-hour daily limit, restrictions after midnight, fewer notifications during school hours, and more aggressive age verification.

Those changes are part of a sweeping settlement with nearly all U.S. states by Meta Platforms (META) over allegations Facebook and Instagram were designed in ways that harmed children. Meta denied any wrongdoing.

But for investors, perhaps the most important part of the deal is the provision that extends beyond Meta itself.

Roughly 30% of Meta’s potential payout, along with some of the tougher restrictions on teenage users, depends on competing platforms accepting comparable obligations.

That creates an unusual possibility. Meta could be helping to establish a new operating standard for social media that ultimately affects Alphabet’s (GOOGL) YouTube, TikTok, and Snap (SNAP) as well.

For parents, it could mean the apps kids use every day become more restrictive by default.

For investors it poses a different question.

What happens if the cost of protecting teenage users becomes an industrywide expense instead of a Meta-specific disadvantage?

Meta’s settlement reaches far beyond Facebook and Instagram

Meta will pay up to $18 billion over 10 years to settle lawsuits filed by nearly every U.S. state alleging that it intentionally made Facebook and Instagram addictive to children.

It also proposes sweeping changes to how young people use the platforms, including a default two-hour daily usage limit, restrictions on access between midnight and 6 a.m. without parental permission, and limits on notifications during school hours.

Those changes matter because engagement is the raw material of the social media business.

Related: Mark Zuckerberg sends shocking message to Meta employees

The more time someone spends watching videos, scrolling feeds, or engaging with posts, the more opportunities a platform usually has to serve ads. That makes time and notification limits potentially economically significant, especially for platforms that are in fierce competition for teen attention.

But Meta structured the deal in a way that could alleviate that competitive risk.

Competing platforms would only receive some 30% of the payout and stricter usage limits if they agreed to similar terms.

That’s the funny part.

If Instagram itself limits teens to two hours a day, competitors could be poised to steal some of the time that users no longer spend on Instagram.

That advantage is all but wiped out if TikTok, Snapchat, and YouTube are under similar rules.

Wall Street quickly noticed the difference

The initial stock moves were striking. Meta shares rose about 1% after the settlement. Alphabet fell 1.4%, and Snap dropped 8.4%.

Those moves don’t tell investors precisely why each stock moved, and a single trading session is never proof of a longer-term competitive shift.

The divergence, however, is striking.

Meta just agreed to a settlement of up to $18 billion. But investors hammered one of its smaller rivals much harder.

More Meta:

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Meta layoffs take disturbing turn in new lawsuit

Meta business model in trouble from $1.4 trillion lawsuit

The reason may be simple: Meta has vast financial resources and an advertising business that can absorb large legal and compliance costs.

Snap is on a whole different scale.

That means an industry-wide increase in compliance costs could be much more important for smaller platforms than it is for Meta.

Meta’s cash, cash equivalents, and marketable securities were $90.26 billion at the end of its most recent quarter. It had $31.86 billion cash flow from operations for the quarter.

This gives the company plenty of financial wiggle room to pay lawyers, develop age-verification systems, tweak products, and hire compliance teams.

The surprising number inside Meta’s teen restrictions

The shocking number lies in Meta’s limits for teens.

The settlement also raises another question investors may not have been expecting: What if some protections for teens have little impact on overall use?

Internal Meta testing suggests that hiding visible like counts would only reduce the company’s daily user base by about 0.09%, Reuters reported.

That’s very few.

That doesn’t mean every new restriction will have a similarly narrow effect. A daily two-hour usage cap could have a different impact on engagement; age verification could create friction.

But that 0.09% number is significant because it flies in the face of a long-standing assumption about social media.

Engagement features such as likes, notifications, recommendations, and endless feeds have long been considered central to user growth and advertising performance for platforms.

If it’s possible to add some safeguards without materially reducing usage, the business cost of changing social media may be smaller than investors once feared.

That could have implications far beyond Meta.

South Korea’s media regulator has already urged Meta to roll out its new youth protections globally, not just in the U.S., Reuters Reuters reported.

Following the U.S. settlement, Meta and Roblox also agreed to strengthen safety measures for young people in the Philippines, including age verification and stricter parental controls.

The direction of travel is becoming increasingly clear. Teen safety is shifting from a product feature into a cost of doing business.

Meta just turned a legal headache into a competitive weapon.COM & O / Getty Images

Meta can better afford that expense than most

Here’s where the investor angle gets juicy.

Meta earned $60.8 billion in the second quarter, up 28% annually. Advertising revenue rose 27% to $59.36 billion. Ad impressions increased 14% across its Family of Apps, while average ad price increased 12%. Its daily active population rose 3% to 3.60 billion.

Meta brings scale to the regulatory fight with those numbers. Nearly 98% of second-quarter revenue was advertising.

This allows the company to spread new compliance and safety costs across one of the world’s largest digital advertising operations.

Similarities are present in other heavily regulated industries.

Large banks, pharmaceutical firms and automakers can sometimes absorb costly new rules more easily than their smaller competitors because the fixed cost of compliance is spread over much larger revenue bases.

Perhaps social media is going the same way.

If every major platform needs better age verification, parental controls, safety auditing, and youth-specific product settings eventually, those systems become another fixed cost.

The biggest platforms may be best placed to soak it up.

Meta’s legal problem could become an industry rulebook

Meta’s legal headaches aren’t going away.

New Mexico and Florida were not part of the larger settlement, and the company still faces scrutiny outside the U.S. And the deal does not guarantee that TikTok, YouTube, or Snapchat will agree to similar terms.

But it gives investors something they haven’t had: a tangible model for what a big U.S. social-media settlement can look like.

For normal families, the effects might eventually show up on the screen.

Teen accounts may have time limits, overnight restrictions, muted notifications, hidden engagement metrics, and more parental involvement by default.

For investors, the question is who pays for that transition.

Meta on Thursday showed that one of the world’s biggest tech companies can absorb billions of dollars in legal costs and still grow its advertising business at more than 20%.

Its smaller competitors may not have the same luxury.

Maybe that’s why the biggest fallout from Meta’s $18 billion settlement isn’t the money Meta pays.

It may be the rules that everyone else will eventually be asked to follow.

More on Meta & its stock: 

Is Meta Platforms a good long-term investment? 

Does Meta pay dividends? Its yield and payouts explained

Has Meta conducted a stock split? What sets this ‘Mag 7’ stock apart

Meta’s stock buybacks: How the company’s AI spending could affect shareholder returns

Where is Meta Platforms’ headquarters? A look inside its Menlo Park home

TheStreet aims to feature only the best products and services. If you buy something via one of our links, we may earn a commission.

Why we love this deal

If you’re looking for a bedding set that offers the versatile coverage you need heading into fall, then you should probably opt for a lightweight comforter set. These bedcovers give you the breathable comfort you need at the tail end of the summer doldrums but can still keep you warm as temperatures begin to drop. Thanks to a great deal at Amazon during its Labor Day sale, you can have exactly that. It’s selling a beautiful seven-piece bedding set at a sale price that’s so low we can hardly believe it. 

The Easthome 7-Piece Lightweight Comforter Set is on sale for a limited time for only $29. That’s 46% off the original price of $53. This sale ends in just a few hours, and the price will go back up, so we recommend putting this in your cart as soon as humanly possible.

Easthome 7-Piece Lightweight Comforter Set, $29 (was $53) at Amazon

Courtesy of Amazon

Shop at Amazon

Why do shoppers love it?

There are so many reasons to buy this bedding set, but the most obvious ones are its impressive number of pieces, well-made construction, and its aesthetic beauty. Included with the set are a lightweight comforter, a fitted sheet, a flat sheet, two pillowcases, and two pillow shams. While most bedding sets tend to just come with a bedspread and two pillowcases, this set goes above and beyond, utilizing the bed-in-a-bag method that allows you to get everything you need with a single purchase. There’s just no way to beat getting a whole bedding set at such a low price.

In addition to everything you get with this comforter, you can also feel confident in its build quality. The quilt is made from lux high-density microfiber that’s incredibly soft to the touch. The down-alternative filling is breathable and comfortable in any climate. What’s more, it’s fully hypoallergenic, making it an ideal choice for anyone who suffers from seasonal allergies. The entire set is machine washable, so you can place it in the washer on the cold water setting and tumble dry it on low. Every piece is sure to come out looking and feeling brand new every time. 

The overall look of the bedspread is something to behold. It has a casual boho touch to it, with dimpled stitching throughout the billowy build. The sheets, pillowcases, and pillow shams all match the comforter’s color almost perfectly. Speaking of colors, the set is available in eight colorways, so there’s likely something for everyone. It also comes in six sizes, so you can get one for every bed in the house. Prices vary by color and size, so pay attention when choosing which one is right for you.

Related: Amazon is selling a 3-piece comforter set for $30 that’s perfect for all seasons

Details to know

Shell material: Lux high-density ultra-soft microfiber.

Filling: Hypoallergenic down alternative filling.

Included: Comforter, fitted sheet, flat sheet, two pillowcases, and two pillow shams.

Colors: Eight variants available.

Amazon shoppers were very happy with this set. One called it “incredibly soft, comfortable, and feels great against the skin. The comforter is lightweight yet warm enough to keep me cozy throughout the night without feeling too heavy.” 

Shop more deals 

Sasttie 7-Piece Comforter Set, $34 (was $40) at Amazon

Bedsure 7-Piece Comforter Set, $36 (was $54) at Amazon

Himeet 7-Piece Comforter Set, $27 (was $42) at Amazon

If you want something to keep you comfy all year long, then the Easthome 7-Piece Lightweight Comforter Set is for you. Just don’t wait too long, as this limited-time deal will be gone before you can say sweet dreams.

The stock market is trading sideways following Fed Chairman Kevin Warsh’s speech at Jackson Hole. I think investors can take advantage of market volatility by buying these 3 stocks on the dip.

No. 1: nVent Electric plc (NVT)

On August 24, nVent Electric plc (NVT) revealed its plans to acquire Maverick Power, a data center equipment maker, in a deal valued at $1.75 billion. Data centers have become one of Maverick Power’s biggest customers due to persistent demand for reliable power.

The acquisition is a strategic one for nVent Electric (NVT) and is expected to boost the company’s offerings to its data center customers. You may recall that nVent Electric develops cooling systems for data centers, as well as designs electrical solutions that connect and protect equipment, infrastructure and processes.

So, nVent Electric will now provide more complete system-level solutions for data centers.

The acquisition is also anticipated to add to the company’s top line. Thanks to a big backlog, Maverick Power was expected to make about $700 million in revenue this year.

The acquisition is expected to be complete in the fourth quarter. In the meantime, NVT remains a good buy on dips.

My stock grading system rates nVent as a B.

No. 2: Astronics Corporation (ATRO)

Astronics (ATRO) provides in-flight entertainment and connectivity, cabin lighting, airflow controls, emergency systems, powered seats, and other products. Its customers include commercial airlines, military aircraft and vehicles, business and VIP aircraft, mass transit systems and the space industry.

One of three stocks Louis Navellier believes can be bought on dips is Astronics, an aerospace services company.Jackyenjoyphotography / Getty Images

And demand remains strong.

Astronics’ backlog surged to a record $780.6 million in the second quarter of fiscal year 2026. It was the third straight quarter of record backlogs. The company also reported record second-quarter bookings of $306.2 million.

Related: Louis Navellier has blunt message on Nvidia’s reign before earnings

Second-quarter revenue rose 27% year-over-year to a record $260 million, beating estimates of $245.3 million. Earnings soared 125.8% year-over-year to $0.70 per share, compared to $0.31 per share a year ago. Analysts expected earnings of $0.61 per share, so Astronics posted a 14.8% earnings surprise.

Given the strong demand, Astronics expects to set more records in the coming quarters.

Wall Street agrees. Analysts have raised third-quarter earnings estimates over the past three months. Third-quarter earnings are now forecast to increase 47% year-over-year to $0.72 per share. Revenue is expected to grow 26.5% year-over-year to $267.39 million. As you know, positive analyst revisions typically precede future earnings surprises. ATRO is a buy below $90.

My stock grading system rates Astronics Corp as an A.

No. 3: Eurodry Ltd. (EDRY)

Shipping rates remain elevated. And the ongoing tensions in the Middle East, especially between the U.S. and Iran over the Strait of Hormuz, could keep tanker rates high for the foreseeable future. But oil tankers are not the only ships benefiting from higher rates.

Dry bulk shipping rates have also risen to three-year highs this year. Demand for large cargo ships has risen, while the supply of available ships remains tight. Eurodry provides shipping services through a fleet of 11 dry bulk vessels, mainly transporting large bulk goods such as iron ore, coal and grains. It also carries minor bulk goods like bauxite, phosphate and fertilizers. Demand for iron ore and bauxite has been especially strong this year.

That strong demand showed up in the second-quarter results. Revenue jumped to $17.7 million, up from $11.3 million in the second quarter of 2025. Adjusted earnings totaled $6.9 million, or $2.44 per share. That compares with a loss of $1.10 per share a year ago.

Analysts expected earnings of just $1.26 per share, so Eurodry posted a 93.7% earnings surprise. After that big surprise, analysts more than doubled their third-quarter earnings estimates. They now expect earnings of $2.06 per share, compared with a loss of $0.23 per share in the third quarter of 2025.

Eurodry is also preparing for demand to stay strong. The company plans to add two Ultramax vessels in 2027 and two Kamsarmax vessels in 2028. Once those ships join the fleet, Eurodry will have more than one million deadweight tons of total carrying capacity.

So, Eurodry is well-positioned to keep benefiting from strong dry bulk demand and elevated charter rates. Buy EDRY below $54.

My stock grading system rates EuroDry as an A.

For more information about my stock grading system, click here. 

Related: Louis Navellier sends urgent data center message as moratorium worry mounts

As parents continue to feel pressures on their household budgets, increasingly skipping specialty clothing stores in favor of one-stop shopping at big-box giants like Target and Walmart, another children’s apparel retailer is closing stores. 

Industry data confirms this shift, revealing that mass merchants now capture 80% of planned spending in the back-to-school category, according to Deloitte.  

This shift in consumer spending habits, paired with the shrinking malls data, including projection from Capital One Shopping suggesting that up to 87% of traditional shopping malls could close over the next decade, has forced a number of mall clothing retailers to shut a number of underperforming locations. 

A mall staple The Children’s Place has shuttered hundreds of locations in recent years as part of a major restructuring plan to shed costly real estate, and legacy specialty chain, Carter’s, has started its wave of planned closures in 2025. 

Carter’s closes 29 stores in the first two quarters of 2026 as sales grow. helen89 / Getty Images

Carter’s closes 29 stores in the first two quarters of 2026 

Founded in 1865, Carter’s grew from a modest Massachusetts knitting mill into North America’s largest children’s clothing maker by continually expanding its footprint and acquiring legacy brands like OshKosh B’gosh. 

Over 161 years of its existence, Carter’s nurtured generations of parent loyalty with its offering and prices. Now, the kids’ clothing giant is strategically closing certain locations in an effort to stay at the top of its game. 

During the first two quarters of fiscal 2026, Carter’s opened 4 stores and closed 29 stores in the United States, according to its Form 10-Q filing with the Securities and Exchange Commission (SEC).  

As of July 4, 2026, Carter’s had 1,042 company-operated retail stores in North America. 

Carter’s is closing stores, but shoppers are still buying

Carter’s shrinking store footprint does not necessarily mean shoppers are abandoning the brand. The company reported a 5.1% increase in comparable U.S. sales in the second quarter of 2026, marking its fifth consecutive quarter of positive comparable-sales growth.

However, the latest results came with important caveats. Nearly all of Carter’s operating income jump came from a one-time $128 million government refund of previously paid tariffs, not from stronger underlying profitability; stripped of that refund, adjusted operating income rose to $18.1 million from $11.8 million in the same period of 2025. 

 The company also narrowed its full-year outlook, and its stock fell more than 8% on the news as investors looked past the refund.

Carter’s Q2 2026 at a glance:

Comparable U.S. sales up 5.1%

Fifth consecutive quarter of positive comparable sales 

Operating income increased to $139.8 million, compared to $4.0 million in the second quarter of 2025, driven largely by a $128 million one-time tariff refund, and partially offset by new, ongoing tariff costs.

Returned $18 million to shareholders through dividends in the first half of fiscal 2026

Narrowed full-year outlook Source: Carter’s Q2 press release 

Carter’s already announced 150 closures 

Carter’s was also profitable in 2025, reporting net sales of $2.898 billion, up 2% from $2.844 billion in 2024, according to its fourth-quarter earnings release.

“2025 was a year of meaningful progress in stabilizing our business while responding to significant new tariffs. We took actions to right-size our cost structure and we launched several important initiatives to improve the productivity of our merchandise assortments and store fleet,” stated then-CEO Douglas C. Palladini.

In the third quarter of 2025, Carter started a cost-cutting program which includes a plan to close 150 stores, with closures spreading into 2028. 

“Regarding productivity, we are addressing our cost structure across several fronts. On our last earnings call, we announced a portfolio optimization strategy to improve fleet productivity, including plans to close approximately 150 lower margin stores in North America through 2028,” Palladini said during the fourth-quarter earnings call. 

In 2025, Carter’s closed around 35 stores as leases expired, with roughly 100 total closures expected for the year. 

Despite these closing initiatives, Carter’s has found a way to continue to reach customers widely across the country. 

Carter’s keeps betting on its exclusive lines at Target, Walmart 

As parents continue to shop for value deals, and increasingly seek not only the most affordable retailers but also the most convenient shopping experience, Carter’s has found a way to meet those needs. 

More than 20 years ago, in early 2000s Carter’s began launching store-exclusive lines to expand its reach through major mass retailers, such as Walmart and Target. The retailer has continued that practice offering several exclusive lines for major retailers, including e-commerce giant Amazon. 

Exclusive Carter’s lines for major retailers: 

Target: Just One You by Carter’s – Designed exclusively for Target stores and online, offering lower-priced multipacks, layette items, and sleepwear.

Walmart: Child of Mine by Carter’s – Distributed exclusively through Walmart locations and website, providing budget-friendly everyday baby apparel.

Amazon: Simple Joys by Carter’s – Created exclusively for Amazon to capture high-volume online shopping.

Through these collaborations with retail giants, Carter’s isn’t losing customers entirely because of massive closures, as parents are simply buying Carter’s products while grocery shopping at nearby Target. 

Thanks to these partnerships, Carter’s can focus on its cost-cutting strategy which includes closing  high-rent standalone stores. 

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Consumers continue to cut back on apparel and other discretionary purchases 

Apparel ranks among the highest categories for planned consumer spending cuts. McKinsey consumer survey found net spending intent for apparel plummeted to –24, compared to just –1 during the same period last year. 

 “Consumers reported plans to pull back across a broad range of discretionary purchases. Of the 22 categories in our survey, pet care services was the only one with net spending intent at zero or above; every other category was negative,” reads the report. 

Nearly three-quarters (72%) of consumers say they still have room to cut spending on discretionary categories such as dining, beauty and personal care, and apparel, according to the latest EY-Parthenon Consumer Sentiment Survey.

These cutbacks are happening as more than half (54%) of Americans report saving no money in June 2026, while one in five households spent more than they earned and relied on savings or debt to help cover expenses.

“For retailers, demand remains intact but increasingly selective, making value, affordability and clear differentiation more important than ever,” stated Will Auchincloss, EY-Parthenon Americas retail sector leader. 

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