Crown Crafts Faces Challenges as Earnings Decline in Q3 2025
Shares of Crown Crafts, Inc. (CRWS) have dropped 4.7% since the company’s earnings announcement for the quarter that ended on December 29, 2024. In comparison, the S&P 500 Index gained 0.8% during the same period. Over the last month, CRWS stock fell 5.2%, while the S&P 500 recorded a 2.6% rise.
Check out the latest EPS estimates and surprises on Zacks Earnings Calendar.
Overview of Financial Performance
In the third quarter of fiscal 2025, Crown Crafts posted net sales of $23.4 million, a decrease of 1.9% from $23.8 million in the same quarter last year. The decline was largely due to reduced online toy sales and the loss of a major retailer’s bid program in November 2023. This was partially balanced by $3.8 million in revenue from its Baby Boom acquisition.
Gross profit fell by 5.2% year over year to $6.1 million, down from $6.4 million, leading to a gross margin decrease from 27% to 26.1%. This resulted from shifts in the product mix and rising warehouse lease costs in California.
Additionally, marketing and administrative expenses climbed 7.1% to $4.4 million, attributed mainly to costs related to acquisitions. Consequently, operating income decreased by 26.9%, falling to $1.7 million from $2.3 million a year earlier. The net income for the quarter was $0.9 million, or $0.09 per diluted share, down 47.5% from the previous year’s $1.7 million, or $0.17 per diluted share.
On a segment level, sales of bedding and diaper bags rose 24.3% to $11.2 million, buoyed by the Baby Boom acquisition, which added $3.8 million. However, this growth was countered by a 17.8% decline in sales of bibs, toys, and disposable products, which dropped to $12.2 million from $14.8 million, primarily due to dwindling toy sales and the loss of a key retail program.
Crown Crafts, Inc. Price, Consensus, and EPS Surprise
Crown Crafts, Inc. price-consensus-eps-surprise-chart | Crown Crafts, Inc. Quote
Additional Business Metrics
Crown Crafts saw its interest expense rise by 87.9% year over year, reaching $0.4 million from $0.2 million, due to increased borrowings related to the Baby Boom acquisition. As of December 29, 2024, cash and cash equivalents were at $1.1 million, up from $0.8 million on March 31, 2024, while total debt surged to $20.9 million from $8.1 million.
The company has been actively managing its inventory, which stood at $32.4 million compared to $29.7 million earlier this year. Operating cash flow increased to $6.9 million year to date compared to $4.1 million in the same period last year, aided by better accounts payable management.
Comments from Management
CEO Olivia Elliott highlighted a commitment to profitability amid ongoing economic challenges, pointing to robust operating cash flow and disciplined expense management. The company aims to expand product offerings, especially in diaper bags and premium toys. However, management noted that consumer discretionary spending is squeezed, affecting overall sales.
Rising costs are being addressed, especially due to new 10% tariffs on imports from China, which encompass most of Crown Crafts’ products. Management is in talks with suppliers about cost absorption while considering selective price increases. They are also exploring options to relocate warehouses to reduce long-term leasing expenses.
Factors Impacting Results
The drop in revenue stemmed mainly from weaker online toy sales and the loss of a bid program at a key retailer. While the Baby Boom acquisition provided some balance, increased costs from financing and integrating the new business ached profitability.
Looking ahead, the new U.S. tariffs on Chinese imports could further inflate costs for Crown Crafts, as nearly all its products come from China. Management is working to offset these impacts, but price increases for consumers might still be needed.
Strategic Plans and Guidance
Although Crown Crafts did not provide specific future guidance, management emphasized the need for cost discipline and a drive for revenue growth. Upcoming product refresh initiatives and potential new retail placements in 2026 are intended to boost sales. However, uncertainties in the economic environment and higher tariffs pose risks.
Recent Developments
During this quarter, Crown Crafts completed its integration of Baby Boom, which was acquired in July 2024 for $18 million. This acquisition has enhanced the company’s diaper bag offerings, seen as a significant growth area long-term. The company is also in the process of reviewing its warehouse locations, with an expected decision by mid-2025.
Crown Crafts declared a quarterly dividend of $0.08 per share, payable on April 4, 2025.
Expert Picks for Future Growth
From thousands of stocks, five Zacks analysts each selected a favorite they believe could skyrocket by +100% or more in the coming months. Among them, the Director of Research Sheraz Mian has singled out one with the most potential upside. This affiliate targets millennial and Gen Z consumers, boasting nearly $1 billion in revenue last quarter alone. With its recent decline, now presents an excellent entry point.
While not every pick succeeds, this one might outperform previous high-flyers from Zacks, like Nano-X Imaging, which surged by +129.6% within nine months.
Discover Our Top Stock and Four Runners-Up
Crown Crafts, Inc. (CRWS): Free Stock Analysis Report
Read more about this article on Zacks.com.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
