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As companies report Q3 earnings, those reliant on China for product sourcing are facing a 50-700 basis points decline in Gross Margin due to tariffs. This has negatively impacted the share prices of micro-cap stocks like Crown Crafts, Inc. (CRWS) and Hamilton Beach Brands Holding Company (HBB), both of which are adapting to these challenges.
Crown Crafts, which specializes in infant and juvenile products, reported a 3.1% drop in sales and 70 basis points erosion in Gross Margin. However, it achieved a year-over-year EPS increase from $0.08 to $0.11 despite a 13.2% decline in bedding and diaper bag sales. Walmart and Amazon comprise 47% and 19% of its gross sales for fiscal 2025. Meanwhile, Hamilton Beach experienced a one-time 690-basis points hit to Gross Margin but is implementing pricing actions and diversifying manufacturing. Walmart and Amazon account for approximately 29% and 24% of its revenues, respectively.
Both companies are adjusting their strategies with cost restructurings and diversification in sourcing, positioning themselves attractively in the current market. CRWS is trading at 3.2X trailing 12-month EV/EBITDA, while HBB is at 6.26X, with both stocks showing some resilience in a challenging retail landscape.
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