Crown Crafts, Inc. Q2 FY2026 earnings call

• Stronger second quarter net income reflects resilience and prudent management despite macro challenges like tariffs and supply chain issues.
• Tariffs on Chinese-sourced goods drive costs and margin pressure, but the company is navigating uncertainty and seeking growth opportunities.
• Began consolidating internal operations post-quarter end to reduce payroll and redundant costs, including merging subsidiaries Sassy and NoJo's back offices and potentially merging sales/design teams.
• Solid balance sheet and cash flow, and declared a $0.08 per share cash quarterly dividend to shareholders.
• Strong relationships with suppliers, customers, and licensors, with ongoing licensing agreement renewals and product development for future launches.

Second quarter net sales were $23.7 million, down from $24.5 million in the prior year. Bedding and diaper bags sales decreased by $1.6 million, while bibs, toys, and disposable products sales increased by $800,000. Gross profit was $6.6 million, with a margin of 27.7% compared to 28.4% in the prior year, primarily due to increased tariff costs. Marketing and administrative expenses were $740,000 lower, at 19.9% of net sales. GAAP net income was $1.2 million or $0.11 per diluted share, up from $0.08 in the prior year quarter.

• Will adapt strategies to offset tariff impact on margins and profitability as market conditions evolve.
• Anticipates savings from internal consolidation to be better understood by end of February/March when budgeting for fiscal '27 begins.
• Positioning the company to respond quickly to environmental changes.

• Ongoing tariff landscape on Chinese-sourced goods drives costs and pressures margins.
• Volatility in global supply chains and raw material costs complicates operations.
• Contracts related to internal consolidation can't be exited early, delaying full realization of savings.

Q: Could you explain where the increase from bibs, toys, and disposable products came from?

A: It's across the board in various product lines and at several retailers.

Q: How do you feel about the company's inventory?

A: Comfortable with inventory levels, with some shifts in retailer program resets but generally in a good place.

Q: Elaborate on consolidation of internal operations and anticipated savings/timetable?

A: Consolidating 2 subsidiaries (Sassy and NoJo) to eliminate duplicate positions and IT costs, savings to be better understood by end of February/March when budgeting for fiscal '27 begins.

Q: Commentary on diaper bag business?

A: Struggling with tariffs, working to move production from China to other countries to reduce costs, focusing on U.S. and Canada initially with international opportunities later.

Q: Commentary on Manhattan Toy at Walmart?

A: Mixed bag with some SKUs continuing, others dropped and replaced, as Manhattan Toy is higher-end and placed in better departments at Walmart.

Q: Update on international sales?

A: Bright spot with Sassy bibs and toys selling internationally, including at K&J show in Germany, with Europe showing good opportunities.