NASDAQ:CRWS Crown Crafts Q3 2025 Earnings Report $2.86 -0.01 (-0.35%) Closing price 04/17/2025 03:58 PM EasternExtended Trading$2.90 +0.04 (+1.40%) As of 04/17/2025 04:07 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings History Crown Crafts EPS ResultsActual EPS$0.09Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ACrown Crafts Revenue ResultsActual RevenueN/AExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ACrown Crafts Announcement DetailsQuarterQ3 2025Date2/12/2025TimeBefore Market OpensConference Call DateWednesday, February 12, 2025Conference Call Time9:00AM ETUpcoming EarningsCrown Crafts' Q4 2025 earnings is scheduled for Thursday, June 26, 2025Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Crown Crafts Q3 2025 Earnings Call TranscriptProvided by QuartrFebruary 12, 2025 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good day, everyone, and welcome to the Crown Crafts Incorporated Third Quarter Fiscal twenty twenty five Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to John Beisler with three Part Advisors, the company's Investor Relations firm. Operator00:00:40Please go ahead. Speaker 100:00:43Thank you, Jamie, and good morning, everyone. We appreciate you joining us for the Crown Crafts third quarter fiscal twenty twenty five conference call. Joining Speaker 200:00:51me Speaker 100:00:52on the call this morning are Crown Crafts' President and CEO, Olivia Elliott and the company's CFO, Craig Demarest. Earlier today, Crown Crafts filed its Form 10 Q and issued a press release regarding their third quarter fiscal twenty twenty five financial results. Copy of this release is available on the company's website crowncrafts.com. During today's call, the company will make certain forward looking statements and actual results may differ materially from those expressed or implied. These statements are subject to risks and uncertainties that may be beyond Crown Craft's control and the company is under no obligation to update these statements. Speaker 100:01:29For more information about the company's risk factors and other uncertainties, please refer to the company's filings with the Securities and Exchange Commission. Finally, I would like to remind you today's call is being recorded and a replay will be available through the company's Investor Relations page. Now, I would like to turn the call over to the President and CEO, Olivia Elliott. Speaker 300:01:50Thank you, John. Good morning, everyone, and thank you for joining today's call. Our third quarter results reflect our ability to generate cash flow and profitability during this challenging period of economic uncertainty. In spite of the headwinds we have continued to face this fiscal year, our team has remained focused on delivering strong operating cash flow and proactively managing our controllable expenses. We also continue to refresh some of our categories and develop new products, so that we are well positioned to capitalize on future growth when consumers are ready to spend more on discretionary items. Speaker 300:02:26During the quarter, we completed the integration of our most recent acquisition, Baby Boom, which we are excited to report added 3,800,000 in sales this quarter. We remain optimistic about the future of these product categories, including diaper bags, which are a new category for us. With that, I'd like to turn it over to Craig to cover the financials in more detail, then I will follow-up with additional comments before taking questions. Speaker 200:02:51Thank you, Olivia, and good morning, everyone. Net sales for the third quarter of fiscal twenty twenty five were $23,300,000 compared to $23,800,000 in the prior year quarter. The decrease is primarily attributable to lower online toy sales and the loss in November of 'twenty three of a bid program at a major retailer. This was partially offset by the addition of the $3,800,000 in net sales related to Baby Boom, which we acquired in the second quarter of this fiscal year. Gross profit for the quarter was 26.1% compared to 27% in the third quarter of fiscal 'twenty four. Speaker 200:03:29The margin decrease can be attributed to slight changes in product mix together with higher lease costs for our warehouse in California. We continue to evaluate our footprint and look to reduce our warehousing costs through strategic consolidation in fiscal 'twenty six. Our third quarter marketing and administrative expenses were $4,400,000 compared to $4,100,000 in the prior year quarter. The increase is primarily related to expenses associated with the purchase of Baby Boom, including $186,000 in acquisition related costs. Interest expense for the quarter increased $183,000 from the prior year quarter due to the higher borrowings related to the Baby Boom acquisition. Speaker 200:04:13Net income for the quarter was $893,000 or $0.09 per diluted share compared to net income of $1,700,000 or $0.17 per diluted share in the prior year quarter. Turning now to our balance sheet. We remain in a strong financial position as cash and cash equivalents at the end of the third quarter were $1,100,000 compared to $829,000 at the end of fiscal 'twenty four. Borrowings under our credit facility at the end of the quarter were $20,900,000 compared to $8,100,000 at the end of fiscal 'twenty four, reflecting amounts borrowed in the second quarter to fund the Baby Boom acquisition. Year to date through the end of the third quarter, cash flow from operations was 7,000,000 compared to $4,100,000 in the same period last year. Speaker 200:05:05We expect to use our cash flow to repay our borrowings. However, as always, our debt balance may fluctuate from quarter to quarter due to the timing of inventory purchases and other working capital needs. Our inventory balance has declined from $34,900,000 in December of 'twenty three to $32,400,000 in December of 'twenty four even with the inventory added in the Baby Boom! Acquisition. Finally, we paid our regular quarterly dividend of $0.08 per share and declared our next dividend, which will be paid in April. Speaker 200:05:40Now I'll turn the call back over to Olivia for additional comments. Speaker 300:05:44Thank you, Craig. Looking ahead, our focus is on growing the top line while maintaining our cost discipline. In addition to refreshing our high end toy and diaper bag lines acquired over the past couple of years, our product development teams are also focused on new products to complement our current categories. We're monitoring the ongoing updates out of Washington regarding tariffs, particularly as it pertains to announced 10% on Chinese imports, where virtually all of our products are made. As China remains our best sourcing option, we will need to work with our suppliers to absorb the increase and consider price increases. Speaker 300:06:21We continue to review potential locations to relocate our warehouse. After visiting three locations, we've narrowed that down to two and continue to evaluate the financial profiles of each. Overall, we remain well positioned to navigate the current economy, while preparing our brands to perform as conditions improve. Our balance sheet is strong and we're able to effectively manage our borrowings and continue to pay our dividend through operating cash flow, which stands as a key component in our strategy to deliver long term value to our shareholders. With that, I'd like to open up the line for questions. Speaker 300:06:55Jamie? Operator00:07:40And our first question today comes from Doug Ruth from Lennox Financial Services. Please go ahead with your question. Speaker 400:07:48Good morning, Olivia and Craig. Thank you for hosting the conference call today. Could you give us a little more color and tell us how now that you've got the warehouse possibilities down to two, could you tell us some of the things that you're seeing or some of the things that you're thinking about how you'll ultimately make the decision on what time to locate the warehouse? Speaker 300:08:15A big part of the consideration is going to obviously be cost. That being said, we need to look at lead times. One of our final options is on closer to the West Coast and one is closer to the East Coast. And while you may save a little bit more in the lease cost going to the East Coast, the cost to get the goods all the way across the country is going to be higher. It's going to take longer. Speaker 300:08:43And there's also a bigger impact should freight rates go up on the downside. So we're looking at the whole big picture. For the most part, all the warehouses look exactly the same. We're mainly focused on the location and any type of technology that we may want to put into the warehouses can be done at either location. Speaker 400:09:08Are you like leaning towards one location over another or you're totally undecided at this point? Speaker 300:09:17Probably leaning a little bit towards the West Coast location just from the overall package. But we're still trying to get all of the information together and get the actual quotes for the locations that we were specifically looking at. Speaker 400:09:33Okay. Now changing, could you give us an update on the diaper bag business and some of the initiatives that you're focused on? Speaker 300:09:45Sure. So we've had some really good meetings with both some potential new licensors for diaper bags. It seems to be a category that a lot of people are interested in. We've also had some good meetings with the retailers. We've done some what I think are very good designs, some refreshed silhouettes, some refreshed looks. Speaker 300:10:13I think we've got a great deck that we've been showing and we're hoping to get some new placement in that, though it won't be until 2026 because most of the lines for 2025 had already been placed by the time we did the acquisition in July. So I think we've got a good opportunity coming in the next year or so to pick up some placement. Speaker 400:10:38Now you had talked about both potentially both domestic and international. Is that still what you're thinking that there's opportunities in both places? Speaker 300:10:49Yes. I think there's opportunities in both places. We're focusing on domestic first, because we think that's a bigger opportunity. But yes, we can do both. Speaker 400:10:59Okay. And what's the status of Manhattan Toy? How were the holiday sales and anything you can share with and then also the placement through Walmart? Speaker 300:11:13So I'll take the easy one first. The placement at Walmart is doing well. We expect to keep that placement in Walmart at least for another year. We found that out. So we think we still think we have opportunities to get more placements. Speaker 300:11:29So we think that's going well. The holiday sales were disappointing. That's where we saw the biggest decline in sales was at the Manhattan Toy brand. We think that most people were trading down to maybe the less expensive lines of toys, it just didn't go as well as it had the year before. So that's where I think our biggest disappointment was for this holiday season. Speaker 300:12:00That being said, we continue to develop new products. We think that we've done a really good job of refreshing that. We've had positive, I guess, the customer itself, the retailers, the specialty stores, etcetera, they have positive things to say about the new development. So I think there's still an opportunity there. It just didn't come this holiday season. Speaker 400:12:29Okay. And what about working with the distributor overseas for the Manhattan Toy, has that been effective for the company? Speaker 300:12:40Yes. And so what we've we closed the London office and we've gone strictly to a distributor system based on the international front. And yes, our distributors have had most of them are picking up some of the Manhattan toy sales. And so that's definitely a bigger opportunity to continue to grow. Speaker 400:13:00Okay. And then what about what's the relationship what's happening with LEGOLAND at this point? Speaker 300:13:07LEGOLAND continues to grow. They're building new parks. I think we expect the Shanghai Park to open here in 2025. And so we continue to grow there. Speaker 400:13:22Yes. Were the fourth quarter sales up at LEGOLAND? Speaker 300:13:28So a lot of the LEGOLAND parks are closed for the winter. So you have a couple of the ones in The U. S. I think Florida and California stay open during the winter season, but the rest of them are closed. I think they open mainly April to October. Speaker 400:13:45Okay. I have a few more questions, but maybe I could let somebody else ask some questions and can come back for some more. Speaker 300:13:53Okay. Operator00:13:57Your next question comes from John Deysher from Pinnacle. Please go ahead with your question. Speaker 500:14:04Good morning, everyone. I just have a quick question on the real estate. I just want to confirm when the various leases are expiring. I understand the Compton lease expires in June of 'twenty eight. The Minneapolis headquarters expires June of 'twenty seven and Eden Valley warehouse expires June of 'twenty six. Speaker 500:14:30Are all of those correct? Speaker 300:14:32I believe the Minneapolis is March of 'twenty seven, but yes, that's close. The Eden Valley and the Compton ones are correct. Speaker 200:14:41June 26, Compton is definitely the June quarter of twenty eight. You're right. That office one is Operator00:14:48in that range. Okay. Speaker 500:14:49Okay. So they're all pretty close. I mean, given that Eden Valley is going to expire in about a year and a quarter or so, it sounds like you're going to be making a decision on the new warehouse pretty soon? Speaker 300:15:07Yes. I think we'll make a decision on the final location pretty soon. We'll have to sublease in Compton in the meantime. So we're going to have to get the timing right. And if for whatever reason the Eden Valley warehouse expires before we are ready, we'll take some kind of interim step. Speaker 300:15:26We're thinking through that process, but it could be that we move those go ahead and move those goods to the final location, but use a 3PL temporarily until the warehouse is ready. So it's kind of a balancing act that we're working through. Speaker 500:15:40Right. I understand. So is it fair to say we might know by your fiscal year end what the decision is going to be? Speaker 300:15:49I think it's not visibility. Okay. Yes. I mean, if not June, by August, I think we'll be able to tell you the final location. Speaker 500:15:57Okay. So mid year. And what about the Minneapolis headquarters? What's that transition going to be? Speaker 300:16:06We need to get into a smaller space. It was too big for the personnel that was there on the date of acquisition, certainly too big for what we have now. And so we were working to try to come up with a solution to downsize sooner rather than later, but that didn't really work out. So we're stuck there until the lease runs out, but we won't go back into that particular location. We could get a much smaller, less expensive location and quite frankly out of downtown, maybe on the outskirts. Speaker 500:16:41Okay. But you're going to keep it in Minneapolis. You're not going to move everybody to Gonzales? Speaker 300:16:46No. We won't move everybody to Gonzales. It will be a small office, but we'll need to keep something. Operator00:17:02Something. And our next question is a follow-up from Doug Ruth from Lennox. Please go ahead with your follow-up. Speaker 400:17:09Okay. You had talked about developing some new toys. Is there any certain toy that you have in development that you're especially excited about? Speaker 300:17:20Well, on the toy side specifically, I think we're really excited about the new dollar line that is actually starting to ship now. We redesigned the Stella program and we think that it's going to be a better option for specifically in the specialty store side. And then mostly on the toy side, if you're looking at Manhattan Toy, we're really just still refreshing the line. There's only so many new products that you can develop and get into production each year. So we're still working on just the overall refresh of those products. Speaker 300:17:59Sassy just continues to knock it out of the ballpark and everything we develop is really working out well. Speaker 400:18:10What is it specifically about the Stella Dow that is a selling point, do you think? Speaker 300:18:18So, I mean, the biggest thing is that there were two sizes of dolls. There was I forget what the second one is, but one of them was smaller than the other one and the price differential was pretty great on it and so everybody stopped buying the bigger doll and started getting the smaller doll. And so what we've done is we've just refreshed really the size of the dolls and we've moved manufacturing facilities and so that we can hit the price point better. Speaker 400:18:54So the difference in price between the bigger doll and the smaller doll is not as great. So possibly you'll sell more of the bigger dolls? Speaker 300:19:03Well, what happened in that case was is the dolls look the same except for they were two different sizes. So everybody traded down to the smaller size. And so we're still going to have two separate dolls, but we're gearing them mainly. One is the baby's first doll and it's more of an infant doll. It doesn't have removable clothes. Speaker 300:19:21It doesn't have hair. And then you kind of grow into the next size doll as you become a toddler. So we differentiated the dolls more. Speaker 400:19:30Okay. All right. Now I noticed quite a change in the marketing expense for in the third quarter. Do you did you feel like the ad spend was approximately at the right level now? Speaker 300:19:50So third quarter this year versus third quarter last year? Speaker 400:19:53Yes. Yes. It looked like the marketing expense was lower if I read that correctly. Speaker 300:20:01No, it's actually up a little bit and it's mostly the difference is mostly going to be the continued integration costs for Baby Boom. Otherwise marketing expenses were flat. Speaker 400:20:12I misspoke. I meant the advertising expense. I'm sorry. Speaker 300:20:20No, I think we're going to have to spend a little bit more on advertising to drive those online sales. Operator00:20:27I think Speaker 300:20:27that's probably where we missed the mark the most is when we first acquired Manhattan Toy, advertising costs were more than the sales. And so we pulled back on that spend and I think we pulled back too far. So I think in order to drive higher sales online, we're going to have to do some more spend. Speaker 400:20:47Yes. You explained previously that this was sort of an experiment and you were so possibly if you would have spent more possibly the Manhattan toy sales might have been higher than they actually were? Speaker 300:21:04I think it's likely, yes. Speaker 400:21:07Okay. And then when you talk about just the big picture, what should like on an annual basis, what should the marketing and administrative expense, what should that be as a percent of revenue? Speaker 300:21:27That's something we're probably not going to answer because we just don't forecast. Speaker 500:21:34Okay. Speaker 400:21:37How about when we talk about the one large category, bibs, toys or disposables, was most of the decline then in the are you able to provide any kind of additional breakdown of the decline from the three different categories? Speaker 300:22:01So the decline in BIPs Toys and Disposables was primarily the Manhattan toys. We also had a small part of the decline was going to be the last bit of run out for the loss of the Target Bib program that we lost in November of twenty twenty three. And so Q3 of last fiscal year had about half of the quarter had bid sales whereas this year we had none for that one customer. But the vast majority of it was the Manhattan toy brand. Speaker 400:22:32Okay. I think that you folks are doing a terrific job. I like the progression of what's happening with the warehouse. I really appreciate the care that you're taking for the shareholders, just really trying to make the best decision that you can to get the right location for the warehouse. And I'm very grateful for what you're doing there for the shareholders. Speaker 300:22:59Thank you, Doug. Operator00:23:00Thanks Doug. Speaker 400:23:00Okay. That's the end of my questions. Thank you. Speaker 300:23:04Thanks. Operator00:23:06And our next question is another follow-up from John Deysher from Pinnacle. Please go ahead with your follow-up. Speaker 500:23:13Good morning. Regarding the tariffs, the 10% increase, I guess, when does that go into effect? And I guess, what measures are you taking to either offset that or share it with vendors or what are the options? Speaker 300:23:37So it goes into effect pretty much immediately. Actually our initial conversations with our suppliers out of China indicates that we're probably going to be able to roll back prices, our initial first cost purchase prices out of China enough to cover the vast majority of it. So while we may have to raise some prices to our retailers to a small degree depending on category, depending on supplier, we are hopeful that we can minimize the impact to our customers and to the consumer. And it feels like that's really a likely option based on our initial conversations with suppliers. Speaker 500:24:19Okay, good. That's encouraged. When will that go into effect one way or the other, the rollback of the purchase prices? Speaker 300:24:28Immediately. So I mean, we need to have those rollbacks pretty much concurrent with the increase in the tariffs. So there may be some product that was already in either on the ocean or some that was already in production that we may not be able to roll back that quickly. But oftentimes we do say, look, you've got to lower the price on what's already in production, but certainly for any new production. Speaker 500:24:56Right. But do you have those agreements in writing at this point? Speaker 300:25:01We don't actually have agreements with our suppliers. It's on a PO by PO basis, which makes it much easier to change as soon as possible. Speaker 500:25:11Okay. And the POs that you submitted recently have been okayed by the vendors? Speaker 300:25:19Well, we haven't submitted any with the new lower prices, but we can. I mean, absolutely, we can go back and change the prices. We've done it before. Speaker 500:25:28Okay. All right. Okay. That's fine. It sounds like it's a work in process at this point. Speaker 300:25:37Yes, absolutely. It's kind of ever changing here for the past couple of weeks. Speaker 500:25:42Right. Okay, great. I appreciate it and good luck. Speaker 300:25:46Thank you. Thanks. Operator00:25:50And ladies and gentlemen, with that, we'll be concluding today's question and answer session. At this time, I'd like to turn the floor back over to Olivia Elliott for any closing remarks. Speaker 300:26:05Thank you, Jamie. Thank you for your continued interest in our company. We look forward to speaking with you again when we report our fourth quarter and fiscal year twenty twenty five results in June.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCrown Crafts Q3 202500:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Crown Crafts Earnings HeadlinesDividend Investors: Don't Be Too Quick To Buy Crown Crafts, Inc. (NASDAQ:CRWS) For Its Upcoming DividendMarch 9, 2025 | uk.finance.yahoo.comCrown Crafts (NASDAQ:CRWS) Will Pay A Dividend Of $0.08February 15, 2025 | finance.yahoo.comAltucher: Turn $900 into $108,000 in just 12 months?We are entering the final Trump Bump of our lives. But the biggest returns will not be in the stock market.April 20, 2025 | Paradigm Press (Ad)Crown Crafts, Inc. (NASDAQ:CRWS) Q3 2025 Earnings Call TranscriptFebruary 13, 2025 | msn.comCrown Crafts, Inc.: Crown Crafts Announces Third Quarter Fiscal 2025 Financial ResultsFebruary 12, 2025 | finanznachrichten.deCrown Crafts projects growth in diaper bags and toy categories while optimizing warehouse costsFebruary 12, 2025 | msn.comSee More Crown Crafts Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Crown Crafts? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Crown Crafts and other key companies, straight to your email. Email Address About Crown CraftsCrown Crafts (NASDAQ:CRWS), through its subsidiaries, operates in the consumer products industry in the United States and internationally. It provides infant, toddler, and juvenile products, including infant and toddler beddings; blankets and swaddle blankets; dolls and plush toys; nursery and toddler accessories; room décors; reusable and disposable bibs; burp cloths; hooded bath towels and washcloths; reusable and disposable placemats, and floor mats; disposable toilet seat covers and changing mats; developmental toys; feeding and care goods; and other infant, toddler, and juvenile soft goods. The company sells its products primarily to mass merchants, large chain stores, mid-tier retailers, juvenile specialty stores, value channel stores, grocery and drug stores, restaurants, internet accounts, wholesale clubs and internet-based retailers through a network of sales force and independent commissioned sales representatives. Crown Crafts, Inc. was incorporated in 1957 and is headquartered in Gonzales, Louisiana.View Crown Crafts ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Aviation Unveils NYC Network Ahead of Key Earnings Report3 Reasons to Like the Look of Amazon Ahead of EarningsTesla Stock Eyes Breakout With Earnings on DeckJohnson & Johnson Earnings Were More Good Than Bad—Time to Buy? Why Analysts Boosted United Airlines Stock Ahead of EarningsLamb Weston Stock Rises, Earnings Provide Calm Amidst ChaosIntuitive Machines Gains After Earnings Beat, NASA Missions Ahead Upcoming Earnings Tesla (4/22/2025)Intuitive Surgical (4/22/2025)Verizon Communications (4/22/2025)Canadian National Railway (4/22/2025)Novartis (4/22/2025)RTX (4/22/2025)3M (4/22/2025)Capital One Financial (4/22/2025)General Electric (4/22/2025)Danaher (4/22/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 6 speakers on the call. Operator00:00:00Good day, everyone, and welcome to the Crown Crafts Incorporated Third Quarter Fiscal twenty twenty five Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to John Beisler with three Part Advisors, the company's Investor Relations firm. Operator00:00:40Please go ahead. Speaker 100:00:43Thank you, Jamie, and good morning, everyone. We appreciate you joining us for the Crown Crafts third quarter fiscal twenty twenty five conference call. Joining Speaker 200:00:51me Speaker 100:00:52on the call this morning are Crown Crafts' President and CEO, Olivia Elliott and the company's CFO, Craig Demarest. Earlier today, Crown Crafts filed its Form 10 Q and issued a press release regarding their third quarter fiscal twenty twenty five financial results. Copy of this release is available on the company's website crowncrafts.com. During today's call, the company will make certain forward looking statements and actual results may differ materially from those expressed or implied. These statements are subject to risks and uncertainties that may be beyond Crown Craft's control and the company is under no obligation to update these statements. Speaker 100:01:29For more information about the company's risk factors and other uncertainties, please refer to the company's filings with the Securities and Exchange Commission. Finally, I would like to remind you today's call is being recorded and a replay will be available through the company's Investor Relations page. Now, I would like to turn the call over to the President and CEO, Olivia Elliott. Speaker 300:01:50Thank you, John. Good morning, everyone, and thank you for joining today's call. Our third quarter results reflect our ability to generate cash flow and profitability during this challenging period of economic uncertainty. In spite of the headwinds we have continued to face this fiscal year, our team has remained focused on delivering strong operating cash flow and proactively managing our controllable expenses. We also continue to refresh some of our categories and develop new products, so that we are well positioned to capitalize on future growth when consumers are ready to spend more on discretionary items. Speaker 300:02:26During the quarter, we completed the integration of our most recent acquisition, Baby Boom, which we are excited to report added 3,800,000 in sales this quarter. We remain optimistic about the future of these product categories, including diaper bags, which are a new category for us. With that, I'd like to turn it over to Craig to cover the financials in more detail, then I will follow-up with additional comments before taking questions. Speaker 200:02:51Thank you, Olivia, and good morning, everyone. Net sales for the third quarter of fiscal twenty twenty five were $23,300,000 compared to $23,800,000 in the prior year quarter. The decrease is primarily attributable to lower online toy sales and the loss in November of 'twenty three of a bid program at a major retailer. This was partially offset by the addition of the $3,800,000 in net sales related to Baby Boom, which we acquired in the second quarter of this fiscal year. Gross profit for the quarter was 26.1% compared to 27% in the third quarter of fiscal 'twenty four. Speaker 200:03:29The margin decrease can be attributed to slight changes in product mix together with higher lease costs for our warehouse in California. We continue to evaluate our footprint and look to reduce our warehousing costs through strategic consolidation in fiscal 'twenty six. Our third quarter marketing and administrative expenses were $4,400,000 compared to $4,100,000 in the prior year quarter. The increase is primarily related to expenses associated with the purchase of Baby Boom, including $186,000 in acquisition related costs. Interest expense for the quarter increased $183,000 from the prior year quarter due to the higher borrowings related to the Baby Boom acquisition. Speaker 200:04:13Net income for the quarter was $893,000 or $0.09 per diluted share compared to net income of $1,700,000 or $0.17 per diluted share in the prior year quarter. Turning now to our balance sheet. We remain in a strong financial position as cash and cash equivalents at the end of the third quarter were $1,100,000 compared to $829,000 at the end of fiscal 'twenty four. Borrowings under our credit facility at the end of the quarter were $20,900,000 compared to $8,100,000 at the end of fiscal 'twenty four, reflecting amounts borrowed in the second quarter to fund the Baby Boom acquisition. Year to date through the end of the third quarter, cash flow from operations was 7,000,000 compared to $4,100,000 in the same period last year. Speaker 200:05:05We expect to use our cash flow to repay our borrowings. However, as always, our debt balance may fluctuate from quarter to quarter due to the timing of inventory purchases and other working capital needs. Our inventory balance has declined from $34,900,000 in December of 'twenty three to $32,400,000 in December of 'twenty four even with the inventory added in the Baby Boom! Acquisition. Finally, we paid our regular quarterly dividend of $0.08 per share and declared our next dividend, which will be paid in April. Speaker 200:05:40Now I'll turn the call back over to Olivia for additional comments. Speaker 300:05:44Thank you, Craig. Looking ahead, our focus is on growing the top line while maintaining our cost discipline. In addition to refreshing our high end toy and diaper bag lines acquired over the past couple of years, our product development teams are also focused on new products to complement our current categories. We're monitoring the ongoing updates out of Washington regarding tariffs, particularly as it pertains to announced 10% on Chinese imports, where virtually all of our products are made. As China remains our best sourcing option, we will need to work with our suppliers to absorb the increase and consider price increases. Speaker 300:06:21We continue to review potential locations to relocate our warehouse. After visiting three locations, we've narrowed that down to two and continue to evaluate the financial profiles of each. Overall, we remain well positioned to navigate the current economy, while preparing our brands to perform as conditions improve. Our balance sheet is strong and we're able to effectively manage our borrowings and continue to pay our dividend through operating cash flow, which stands as a key component in our strategy to deliver long term value to our shareholders. With that, I'd like to open up the line for questions. Speaker 300:06:55Jamie? Operator00:07:40And our first question today comes from Doug Ruth from Lennox Financial Services. Please go ahead with your question. Speaker 400:07:48Good morning, Olivia and Craig. Thank you for hosting the conference call today. Could you give us a little more color and tell us how now that you've got the warehouse possibilities down to two, could you tell us some of the things that you're seeing or some of the things that you're thinking about how you'll ultimately make the decision on what time to locate the warehouse? Speaker 300:08:15A big part of the consideration is going to obviously be cost. That being said, we need to look at lead times. One of our final options is on closer to the West Coast and one is closer to the East Coast. And while you may save a little bit more in the lease cost going to the East Coast, the cost to get the goods all the way across the country is going to be higher. It's going to take longer. Speaker 300:08:43And there's also a bigger impact should freight rates go up on the downside. So we're looking at the whole big picture. For the most part, all the warehouses look exactly the same. We're mainly focused on the location and any type of technology that we may want to put into the warehouses can be done at either location. Speaker 400:09:08Are you like leaning towards one location over another or you're totally undecided at this point? Speaker 300:09:17Probably leaning a little bit towards the West Coast location just from the overall package. But we're still trying to get all of the information together and get the actual quotes for the locations that we were specifically looking at. Speaker 400:09:33Okay. Now changing, could you give us an update on the diaper bag business and some of the initiatives that you're focused on? Speaker 300:09:45Sure. So we've had some really good meetings with both some potential new licensors for diaper bags. It seems to be a category that a lot of people are interested in. We've also had some good meetings with the retailers. We've done some what I think are very good designs, some refreshed silhouettes, some refreshed looks. Speaker 300:10:13I think we've got a great deck that we've been showing and we're hoping to get some new placement in that, though it won't be until 2026 because most of the lines for 2025 had already been placed by the time we did the acquisition in July. So I think we've got a good opportunity coming in the next year or so to pick up some placement. Speaker 400:10:38Now you had talked about both potentially both domestic and international. Is that still what you're thinking that there's opportunities in both places? Speaker 300:10:49Yes. I think there's opportunities in both places. We're focusing on domestic first, because we think that's a bigger opportunity. But yes, we can do both. Speaker 400:10:59Okay. And what's the status of Manhattan Toy? How were the holiday sales and anything you can share with and then also the placement through Walmart? Speaker 300:11:13So I'll take the easy one first. The placement at Walmart is doing well. We expect to keep that placement in Walmart at least for another year. We found that out. So we think we still think we have opportunities to get more placements. Speaker 300:11:29So we think that's going well. The holiday sales were disappointing. That's where we saw the biggest decline in sales was at the Manhattan Toy brand. We think that most people were trading down to maybe the less expensive lines of toys, it just didn't go as well as it had the year before. So that's where I think our biggest disappointment was for this holiday season. Speaker 300:12:00That being said, we continue to develop new products. We think that we've done a really good job of refreshing that. We've had positive, I guess, the customer itself, the retailers, the specialty stores, etcetera, they have positive things to say about the new development. So I think there's still an opportunity there. It just didn't come this holiday season. Speaker 400:12:29Okay. And what about working with the distributor overseas for the Manhattan Toy, has that been effective for the company? Speaker 300:12:40Yes. And so what we've we closed the London office and we've gone strictly to a distributor system based on the international front. And yes, our distributors have had most of them are picking up some of the Manhattan toy sales. And so that's definitely a bigger opportunity to continue to grow. Speaker 400:13:00Okay. And then what about what's the relationship what's happening with LEGOLAND at this point? Speaker 300:13:07LEGOLAND continues to grow. They're building new parks. I think we expect the Shanghai Park to open here in 2025. And so we continue to grow there. Speaker 400:13:22Yes. Were the fourth quarter sales up at LEGOLAND? Speaker 300:13:28So a lot of the LEGOLAND parks are closed for the winter. So you have a couple of the ones in The U. S. I think Florida and California stay open during the winter season, but the rest of them are closed. I think they open mainly April to October. Speaker 400:13:45Okay. I have a few more questions, but maybe I could let somebody else ask some questions and can come back for some more. Speaker 300:13:53Okay. Operator00:13:57Your next question comes from John Deysher from Pinnacle. Please go ahead with your question. Speaker 500:14:04Good morning, everyone. I just have a quick question on the real estate. I just want to confirm when the various leases are expiring. I understand the Compton lease expires in June of 'twenty eight. The Minneapolis headquarters expires June of 'twenty seven and Eden Valley warehouse expires June of 'twenty six. Speaker 500:14:30Are all of those correct? Speaker 300:14:32I believe the Minneapolis is March of 'twenty seven, but yes, that's close. The Eden Valley and the Compton ones are correct. Speaker 200:14:41June 26, Compton is definitely the June quarter of twenty eight. You're right. That office one is Operator00:14:48in that range. Okay. Speaker 500:14:49Okay. So they're all pretty close. I mean, given that Eden Valley is going to expire in about a year and a quarter or so, it sounds like you're going to be making a decision on the new warehouse pretty soon? Speaker 300:15:07Yes. I think we'll make a decision on the final location pretty soon. We'll have to sublease in Compton in the meantime. So we're going to have to get the timing right. And if for whatever reason the Eden Valley warehouse expires before we are ready, we'll take some kind of interim step. Speaker 300:15:26We're thinking through that process, but it could be that we move those go ahead and move those goods to the final location, but use a 3PL temporarily until the warehouse is ready. So it's kind of a balancing act that we're working through. Speaker 500:15:40Right. I understand. So is it fair to say we might know by your fiscal year end what the decision is going to be? Speaker 300:15:49I think it's not visibility. Okay. Yes. I mean, if not June, by August, I think we'll be able to tell you the final location. Speaker 500:15:57Okay. So mid year. And what about the Minneapolis headquarters? What's that transition going to be? Speaker 300:16:06We need to get into a smaller space. It was too big for the personnel that was there on the date of acquisition, certainly too big for what we have now. And so we were working to try to come up with a solution to downsize sooner rather than later, but that didn't really work out. So we're stuck there until the lease runs out, but we won't go back into that particular location. We could get a much smaller, less expensive location and quite frankly out of downtown, maybe on the outskirts. Speaker 500:16:41Okay. But you're going to keep it in Minneapolis. You're not going to move everybody to Gonzales? Speaker 300:16:46No. We won't move everybody to Gonzales. It will be a small office, but we'll need to keep something. Operator00:17:02Something. And our next question is a follow-up from Doug Ruth from Lennox. Please go ahead with your follow-up. Speaker 400:17:09Okay. You had talked about developing some new toys. Is there any certain toy that you have in development that you're especially excited about? Speaker 300:17:20Well, on the toy side specifically, I think we're really excited about the new dollar line that is actually starting to ship now. We redesigned the Stella program and we think that it's going to be a better option for specifically in the specialty store side. And then mostly on the toy side, if you're looking at Manhattan Toy, we're really just still refreshing the line. There's only so many new products that you can develop and get into production each year. So we're still working on just the overall refresh of those products. Speaker 300:17:59Sassy just continues to knock it out of the ballpark and everything we develop is really working out well. Speaker 400:18:10What is it specifically about the Stella Dow that is a selling point, do you think? Speaker 300:18:18So, I mean, the biggest thing is that there were two sizes of dolls. There was I forget what the second one is, but one of them was smaller than the other one and the price differential was pretty great on it and so everybody stopped buying the bigger doll and started getting the smaller doll. And so what we've done is we've just refreshed really the size of the dolls and we've moved manufacturing facilities and so that we can hit the price point better. Speaker 400:18:54So the difference in price between the bigger doll and the smaller doll is not as great. So possibly you'll sell more of the bigger dolls? Speaker 300:19:03Well, what happened in that case was is the dolls look the same except for they were two different sizes. So everybody traded down to the smaller size. And so we're still going to have two separate dolls, but we're gearing them mainly. One is the baby's first doll and it's more of an infant doll. It doesn't have removable clothes. Speaker 300:19:21It doesn't have hair. And then you kind of grow into the next size doll as you become a toddler. So we differentiated the dolls more. Speaker 400:19:30Okay. All right. Now I noticed quite a change in the marketing expense for in the third quarter. Do you did you feel like the ad spend was approximately at the right level now? Speaker 300:19:50So third quarter this year versus third quarter last year? Speaker 400:19:53Yes. Yes. It looked like the marketing expense was lower if I read that correctly. Speaker 300:20:01No, it's actually up a little bit and it's mostly the difference is mostly going to be the continued integration costs for Baby Boom. Otherwise marketing expenses were flat. Speaker 400:20:12I misspoke. I meant the advertising expense. I'm sorry. Speaker 300:20:20No, I think we're going to have to spend a little bit more on advertising to drive those online sales. Operator00:20:27I think Speaker 300:20:27that's probably where we missed the mark the most is when we first acquired Manhattan Toy, advertising costs were more than the sales. And so we pulled back on that spend and I think we pulled back too far. So I think in order to drive higher sales online, we're going to have to do some more spend. Speaker 400:20:47Yes. You explained previously that this was sort of an experiment and you were so possibly if you would have spent more possibly the Manhattan toy sales might have been higher than they actually were? Speaker 300:21:04I think it's likely, yes. Speaker 400:21:07Okay. And then when you talk about just the big picture, what should like on an annual basis, what should the marketing and administrative expense, what should that be as a percent of revenue? Speaker 300:21:27That's something we're probably not going to answer because we just don't forecast. Speaker 500:21:34Okay. Speaker 400:21:37How about when we talk about the one large category, bibs, toys or disposables, was most of the decline then in the are you able to provide any kind of additional breakdown of the decline from the three different categories? Speaker 300:22:01So the decline in BIPs Toys and Disposables was primarily the Manhattan toys. We also had a small part of the decline was going to be the last bit of run out for the loss of the Target Bib program that we lost in November of twenty twenty three. And so Q3 of last fiscal year had about half of the quarter had bid sales whereas this year we had none for that one customer. But the vast majority of it was the Manhattan toy brand. Speaker 400:22:32Okay. I think that you folks are doing a terrific job. I like the progression of what's happening with the warehouse. I really appreciate the care that you're taking for the shareholders, just really trying to make the best decision that you can to get the right location for the warehouse. And I'm very grateful for what you're doing there for the shareholders. Speaker 300:22:59Thank you, Doug. Operator00:23:00Thanks Doug. Speaker 400:23:00Okay. That's the end of my questions. Thank you. Speaker 300:23:04Thanks. Operator00:23:06And our next question is another follow-up from John Deysher from Pinnacle. Please go ahead with your follow-up. Speaker 500:23:13Good morning. Regarding the tariffs, the 10% increase, I guess, when does that go into effect? And I guess, what measures are you taking to either offset that or share it with vendors or what are the options? Speaker 300:23:37So it goes into effect pretty much immediately. Actually our initial conversations with our suppliers out of China indicates that we're probably going to be able to roll back prices, our initial first cost purchase prices out of China enough to cover the vast majority of it. So while we may have to raise some prices to our retailers to a small degree depending on category, depending on supplier, we are hopeful that we can minimize the impact to our customers and to the consumer. And it feels like that's really a likely option based on our initial conversations with suppliers. Speaker 500:24:19Okay, good. That's encouraged. When will that go into effect one way or the other, the rollback of the purchase prices? Speaker 300:24:28Immediately. So I mean, we need to have those rollbacks pretty much concurrent with the increase in the tariffs. So there may be some product that was already in either on the ocean or some that was already in production that we may not be able to roll back that quickly. But oftentimes we do say, look, you've got to lower the price on what's already in production, but certainly for any new production. Speaker 500:24:56Right. But do you have those agreements in writing at this point? Speaker 300:25:01We don't actually have agreements with our suppliers. It's on a PO by PO basis, which makes it much easier to change as soon as possible. Speaker 500:25:11Okay. And the POs that you submitted recently have been okayed by the vendors? Speaker 300:25:19Well, we haven't submitted any with the new lower prices, but we can. I mean, absolutely, we can go back and change the prices. We've done it before. Speaker 500:25:28Okay. All right. Okay. That's fine. It sounds like it's a work in process at this point. Speaker 300:25:37Yes, absolutely. It's kind of ever changing here for the past couple of weeks. Speaker 500:25:42Right. Okay, great. I appreciate it and good luck. Speaker 300:25:46Thank you. Thanks. Operator00:25:50And ladies and gentlemen, with that, we'll be concluding today's question and answer session. At this time, I'd like to turn the floor back over to Olivia Elliott for any closing remarks. Speaker 300:26:05Thank you, Jamie. Thank you for your continued interest in our company. We look forward to speaking with you again when we report our fourth quarter and fiscal year twenty twenty five results in June.Read morePowered by