Crown Crafts, Inc. Q1 FY2026 earnings call

• Inflation and tariffs are impacting the environment, but the company is navigating them. - Expanded product portfolio via Baby Boom acquisition. - Extended license agreement with Disney, including sales in Canada and diaper bags. - Encouraged by July sales and solid balance sheet and cash flow. - Declared a cash dividend to shareholders.

First quarter net sales were $15.5 million, a 4.5% decrease compared to the first quarter of fiscal year 2025. The decrease was driven by a decline in bibs, toys, and disposable products sales, partially offset by an increase in bedding and diaper bags from the Baby Boom acquisition. Gross profit decreased by $448,000, with gross margin dropping from 24.5% to 22.7% of net sales. Marketing and administrative expenses increased. Inventories were $31.6 million, an increase of 13.6% from the prior year. The company had $13.9 million in indebtedness and $12.2 million available under the revolving line of credit. A $0.08 per share cash dividend was declared.

• Cautiously optimistic about the rest of the fiscal year. - Encouraged by July sales. - Continuing to navigate tariffs and explore ways to increase sales and market share. - Look forward to updating progress in coming quarters.

• Uncertainty over tariff levels. - Inventory shortages due to tariff management. - Impact of retailers' low inventory levels on sales.

Q: Target is considering less direct sourcing, could this create an opportunity for Crown Crafts?

A: We hope so, and hope it opens up opportunity to get back some programs they had taken for direct sourcing.

Q: With a 30% tariff as the new normal, could the company be profitable?

A: We're doing everything to mitigate tariffs, started price increases in late June, hopeful to mitigate costs enough to be profitable.

Q: Opportunities to expand Manhattan Toy's sales overseas?

A: Combined Manhattan Toy and Sassy brands with distributors, seeing this as a big opportunity.

Q: Promoting Sassy Stack of Circles featured in Ms. Rachel on Netflix?

A: Sassy should share that on social media as it's a NoJo brand product.

Q: Stabilization of Manhattan Toy operations?

A: Yes, operations have stabilized, redesigned products and released Stella dolls, working on plush and expansions.

Q: Feedback on plush figures selling at new LEGOLAND in Shanghai?

A: Sold initial set for park opening and got a reorder, which is a good sign.

Q: Commentary on Stella dolls sales after redesign?

A: They're doing well, impacted by tariff situation but well received at shows.

Q: Retailers' inventory levels and impact on sales?

A: Retailers have lower in-stock levels, but hope order patterns return to normal as shelves are restocked.

Q: Circumstances for dividend reduction/mission?

A: Board and management are confident with cash flow and balance sheet, no immediate concern for dividend change