Crown Crafts Q2 2024 Earnings Report

Crown Crafts EPS Results

• Actual EPS: $0.18
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Crown Crafts Revenue Results

• Actual Revenue: $24.13 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Crown Crafts Announcement Details

• Quarter: Q2 2024
• Date: 11/15/2023
• Time: N/A
• Conference Call Date: Wednesday, November 15, 2023
• Conference Call Time: 9:00AM ET

Crown Crafts (NASDAQ:CRWS) (NASDAQ: CRWS) is a U.S.-based designer, marketer and distributor of infant, toddler and juvenile consumer products. The company develops a wide range of softlines and related accessories, including crib and toddler bedding, blankets, decorative pillows, bath towels and washcloths. Since its founding in 1957, Crown Crafts has focused on combining creative design with functional quality to meet the shifting preferences of young families and caregivers.

The company operates two primary business segments. Its Domestic Products segment encompasses the design, sourcing and marketing of finished goods under proprietary and private labels for major mass merchants, online retailers and specialty stores in North America. Key product lines include crib and toddler bedding sets, nursery décor items and infant bath linens. The International Sourcing segment manages relationships with offshore manufacturers—primarily in Asia—to procure fabrics and finished products that are then sold into the domestic market. This dual‐segment structure allows Crown Crafts to balance creative control with global cost efficiencies.

Crown Crafts markets its products under a variety of brand names, including Crown Crafts Baby, NoJo and Lambs & Ivy, and supplies a broad retail network that includes department stores, warehouse clubs and e-commerce platforms. The company’s headquarters is located in Gonzales, Louisiana, and it maintains a field sales organization to support key customers in the United States and Canada. Crown Crafts also collaborates with international retail partners, leveraging its sourcing capabilities to serve markets beyond North America.

Over more than six decades of operations, Crown Crafts has evolved from a regional textile concern into a specialized juvenile-products provider. The company’s senior leadership team is focused on product innovation, supply‐chain management and strategic partnerships to drive long‐term growth. By blending creative design with sourcing expertise, Crown Crafts aims to deliver durable, attractive and affordable nursery and infant care essentials to families worldwide.

Crown Crafts Q2 2024 Earnings Call Transcript

Key Takeaways

• Net sales rose 28.9% year-over-year to $24.1 million, driven primarily by the acquisition of Manhattan Toy, which contributed $4.8 million in Q2 sales.
• Gross profit margin declined to 27.3% from 29.1% year-over-year, mainly due to increased lease costs at the company’s California warehouse.
• Management effectively reduced inventory for its Sassy and Nojo brands from $28 million to $21 million compared to a year ago, reflecting tighter inventory controls.
• The company paid its regular quarterly dividend of $0.08 per share, yielding 7.6% on an annualized basis based on yesterday’s closing price.
• Since acquiring Manhattan Toy in March, the business followed its seasonal trend—anticipating the holiday quarter to generate 35–40% of its annual sales—and is pursuing cost-reduction initiatives to improve margins.

Presentation

[Operator]

Hello, and welcome to the Crown Crafts, Inc. second quarter fiscal year 2024 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw from the question queue, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to John Beisler, Three Part Advisors. Please go ahead.

[John Beisler, Managing Director at Three Part Advisors]

Thank you, MJ, and good morning, everyone. We appreciate you joining us for the Crown Crafts second quarter fiscal 2024 conference call. Joining me on the call today are Crown Crafts President and CEO, Olivia Elliott, and the company's CFO, Craig Demarest. Earlier this morning, Crown Crafts filed its 10-Q and issued a press release regarding their second quarter fiscal 2024 results. A copy of this release is available on the company's website at 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.

[John Beisler, Managing Director at Three Part Advisors]

These statements are subject to risks and uncertainties that may be beyond Crown Crafts' control, and the company is under no obligation to update these statements. For 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.

[Olivia Elliott, President and CEO at Crown Crafts]

Thank you, John, and good morning, everyone. Our second quarter results reflect the continued progress at Manhattan Toy and year-over-year sales growth within our two legacy categories. While encouraging, cost pressures facing consumers continue to constrain spending, even though overall inflation has trended lower in recent months. The reopening of 11 buybuy BABY stores is a welcome addition to the marketplace, but this represents only a fraction of the brick-and-mortar stores that were closed as part of its bankruptcy earlier this year. Having a physical location to experience the difference between our products and others is a key differentiator, and we believe specialty retailers represent an opportunity going forward. We continue to work with our existing customers to maintain our strong relationships and look for additional cost reduction opportunities across the company. We are effectively managing our inventory.

[Olivia Elliott, President and CEO at Crown Crafts]

At the end of the quarter, inventory for our Sassy and NoJo brands was $21 million, compared to almost $28 million a year ago. With that, I would like to turn the call over to Craig to cover some financial information.

[Craig J. Demarest, CFO at Crown Crafts]

Thank you, Olivia, and good morning, everyone. Net sales for the second quarter of fiscal 2024 increased 28.9% to $24.1 million, compared to $18.7 million in the prior year quarter, or an increase of $5.4 million. The increase is primarily attributable to the addition of Manhattan Toy, which added $4.8 million in net sales to the current year quarter and due to slight increases in our NoJo and Sassy businesses. Gross profit for the second quarter was 27.3%, compared to 29.1% in the second quarter of fiscal 2023. The profit decrease was primarily attributable to higher lease costs for our warehouse in California.

[Craig J. Demarest, CFO at Crown Crafts]

Our second quarter marketing and administrative expenses were $4 million, up $1.3 million from $2.7 million in the prior year quarter, and increased from 14.6% of net sales for the prior year quarter to 16.7% of net sales currently. The increase is primarily driven by expenses of Manhattan Toy. Net income for the quarter was $1.8 million, or $0.18 per diluted share, compared to net income of $2 million or $0.20 per diluted share in the prior year quarter. Now turning to our balance sheet.

[Craig J. Demarest, CFO at Crown Crafts]

Cash and cash equivalents at the end of the quarter were $1.9 million, compared to $1.7 million at the end of fiscal 2023, and borrowings on our revolver at the end of the quarter were $9.8 million, compared to $12.7 million at the end of fiscal 2023. And finally, we paid our regular quarterly dividend of $0.08 per share and declared our next dividend, which will be paid in January. On an annualized basis, our shares currently offer a 7.6% yield based on yesterday's closing price. And now I'll turn the call back over to Olivia for additional comments.

[Olivia Elliott, President and CEO at Crown Crafts]

Thank you, Craig. Since we acquired Manhattan Toy in March, its sales have followed their historical trend, with the September quarter outpacing June. We expect the upcoming holiday quarter to be their largest sales quarter, representing between 35%-40% of its annual sales. We continue to find ways to reduce costs, which should lead to better margins for Manhattan Toy. We're encouraged by the favorable response we received at last month's New York Toy Fair, where we introduced new toy designs. We will continue to proactively manage our business in the current challenging economic environment so that we remain in a position to capitalize on growth opportunities.

[Olivia Elliott, President and CEO at Crown Crafts]

We continue to be optimistic about the long-term prospects of the company and look forward to updating you on our progress next quarter. With that, I'd like to open up the line for questions. MJ?

[Operator]

Thank you. We will now begin the Q&A session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Again, if you have a question, please press star, then one. This concludes our Q&A session. I would now like to hand the call back to Olivia Elliott for closing remarks.

[Olivia Elliott, President and CEO at Crown Crafts]

Thank you for your continued interest in our company. We will be participating in the Three Part Advisors IDEAS Conference in Dallas tomorrow, November 16. We look forward to speaking with you again when we report our third quarter results in February. Thank you.

[Operator]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Craig J. Demarest, CFO
• Olivia Elliott, President and CEO

Analysts

• John Beisler, Managing Director at Three Part Advisors