Koss Corporation Reports Wider Loss Amid Sales Decline
In the first quarter of fiscal 2025, Koss Corporation (KOSS) reported a loss of 5 cents per share, an increase from a 3 cents loss per share in the same quarter a year prior.
The company’s net sales for the quarter totaled $3.2 million, down 5.1% from $3.4 million in the first quarter of fiscal 2024.
Koss Corporation encountered difficulties this quarter, particularly due to a downturn in net sales stemming from challenges in domestic distribution and declines in the Education and Music sectors. Conversely, there was a significant upswing in sales within European markets and direct-to-consumer (DTC) channels, highlighting the company’s strategic adaptability in some areas despite overall challenges.
Sales Trends & EPS Movement
Koss Corporation price-consensus-eps-surprise-chart | Koss Corporation Quote
Challenges and Emerging Opportunities
The 5.1% year-over-year drop in sales was primarily linked to lower demand from U.S. distributors, compounded by a significant decrease in orders from Education and Music sectors. CEO Michael J. Koss noted that the timing of domestic orders contributed to the sales decline among U.S. distributors.
Nonetheless, this setback was somewhat countered by robust international sales, especially with over a 30% increase from Koss’ two largest European distributors. The company also thrived in its direct-to-consumer sales, particularly through Amazon, where the launch of the Porta Pro Wireless 2.0 led to record-setting sales days. Management highlighted that an improved customer and product mix positively impacted gross margins through higher-margin products.
For the first quarter of fiscal 2025, Koss registered a cost of goods sold of $2 million, a decrease from $2.3 million in the same quarter last year. This cost reduction allowed for an improvement in gross margins.
The gross profit rose to $1.2 million, up from $1.1 million in the previous year, while gross margins improved from 31.6% to 36.6%, aided by the successful launch of higher-margin items like the Porta Pro Wireless 2.0.
Selling, general and administrative (SG&A) expenses increased to $1.8 million from $1.5 million year-over-year, a rise of 17.8%. This increase likely reflects higher spending linked to product launches and enhancements to DTC channels aimed at boosting digital sales.
During the quarter, Koss faced an inventory write-off for some older excess items. To offset these costs, the company planned for seasonal inventory shipping. Additionally, Koss encountered slight increases in freight rates and ongoing supply chain issues, which are expected to impact lead times into the next quarter.
The net loss for the quarter amounted to $0.4 million, larger than a loss of $0.3 million in the first quarter of fiscal 2024. This wider loss can be attributed to mixed sales performance and elevated SG&A costs that surpassed revenue gains from new products and DTC channels.
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