CROWN CRAFTS INC Q2 FY2025 earnings call

• The highlight of the quarter was the purchase of Baby Boom assets, which positively contributed to the bottom line and enhanced presence in the toddler segment with diaper bags.
• Gross profit improved due to slight product mix change, partially offset by higher lease costs; actively evaluating warehouse footprint for consolidation in fiscal 2026.
• Net income for the quarter was $860,000 or $0.08 per diluted share, down from prior year. Paid regular dividend of $0.08 per share and declared next dividend in January.
• Progress made in integrating Baby Boom into NoJo; Manhattan Toy products in Walmart with cross-selling opportunities; diaper bag business focus with retained design team in New Jersey.

Net sales for the second quarter of fiscal 2025 were $24.5 million, up from $24.1 million in the prior year quarter. The increase is primarily due to the addition of Baby Boom, which added $3.4 million of net sales. Gross profit for the quarter was 28.4%, improved from 27.3% a year earlier. Marketing and administrative expenses were $5.4 million, up $1.4 million from the prior year quarter. Cash and cash equivalents at the end of the second quarter were $2 million. Borrowings on revolver were $20.8 million. The acquisition of Baby Boom Consumer Products closed on July 19 for a total purchase price of $18 million.

• Baby Boom sales expected to be a $20 million annual run rate, though not in fiscal 2025 as it was owned for only eight months.
• Expect to have NoJo’s website up and running for direct-to-consumer before holidays and Sassy Babies website ready to go.
• Aim to achieve warehouse consolidation in fiscal 2026.

• Macro environment uncertainties that may impact sales; potential impact of tariffs on sourcing as almost all products come from China, though exploring other countries.
• Debt balance may fluctuate due to timing of inventory purchases and working capital needs.

Q: Could you tell us the status of the warehouse consolidation?

A: We're currently at three locations considering, will do site visits before holidays, hoping to narrow down to at least two by end of fiscal year.

Q: Feedback on Manhattan Toy sell through at Walmart?

A: Sell through is doing well, products are popular in Walmart's better stores.

Q: Progress on using Sassy toy distributor in Europe for Manhattan Toys?

A: Both lines were in the same booth in Germany in September, making progress on selling through those distributors.

Q: Baby Boom sales expected run rate?

A: It's a good estimate, $20 million annual run rate, but won't happen in fiscal 2025 as owned for eight months.

Q: Marketing and administration expenses excluding acquisition costs?

A: Probably around 19% of sales, which is a reasonable run rate.

Q: Sales decline in legacy businesses?

A: About $600,000 from loss of a bid program at a major retailer, with weak point of sale across the board.

Q: Sourcing strategy and impact of tariffs?

A: Almost all products from China, better costing and infrastructure, but exploring other countries in case of higher tariffs