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Date
Wednesday, August 13, 2025 at 9 a.m. ET
Call participants
Chairman, President & Chief Executive Officer — Olivia W. Elliott
Vice President & Chief Financial Officer — Claire K. Spencer
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Risks
Net Loss-- GAAP net loss totaled $1,100,000, or $0.10 per diluted share (GAAP), attributed primarily to increased tariffs and inventory-related sales declines.
Gross Margin Compression-- Gross profit margin fell 1.8% to 22.7% as tariff costs from Chinese imports increased.
Elevated Marketing and Administrative Costs-- increasing to 30.5% of net sales, due to Baby Boom acquisition and increased advertising spend.
Declining Cash Position-- Cash and cash equivalents decreased to $227,000 from $521,000 at prior fiscal year-end.
Takeaways
Net Sales-- only partially offset by bedding and diaper bags from Baby Boom acquisition.
Inventory Position-- Inventories increased 13.6% to $31,600,000, aligning with normal first-quarter seasonal build ahead of retail programs.
Disney License Expansion-- The company extended its licensing agreement with Disney, now covering Canada and adding diaper bags as a new product category.
Dividend Declaration-- continuing the trend of shareholder returns despite operational headwinds.
Line of Credit Availability-- $12,200,000 remains available under the revolving credit facility, supporting future liquidity requirements.
Tariff Mitigation Efforts-- CEO Elliott stated, "starting in late June, I would say, we started getting our price increases with our customers." aiming to offset increased import tariff costs.
Operational Stabilization at Manhattan Toy-- CEO Elliott said, "We do believe that it has stabilized." following prior management systems and product redesign issues.
Retail Inventory Depletion-- CEO Elliott noted a key retailer reduced its on-hand supply from roughly ten weeks to one to two weeks, as discussed during the earnings call, affecting order patterns and short-term sales visibility.
Summary
The quarter was defined by operational pressure from tariff constraints, inventory shortages, and elevated costs driven by the Baby Boom acquisition and increased advertising. A notable expansion of the Disney license introduced additional country and category reach, which may diversify future revenue. Indications of stabilized Manhattan Toy operations and recent July sales improvements suggest potential for a sales rebound, though ongoing uncertainty in tariff policy and retailer inventory strategies continues to affect demand timing and visibility.
Management described July sales performance as "Very encouraging" and expressed cautious optimism for subsequent periods.
The company reported a successful reorder of plush figures for the new LEGOLAND in Shanghai, suggesting favorable international demand for certain licensed products.
CEO Elliott acknowledged the potential to expand Manhattan Toy and Sassy brand distribution by consolidating both under a distributor-led model for overseas markets.
Dividend sustainability was addressed as a function of cash flow and balance sheet health.
Industry glossary
Tariff: Government-imposed duty on imported goods, significantly impacting product costs for import-reliant businesses.
SKU: Stock Keeping Unit, a unique identifier for each distinct product and service that can be purchased.
Full Conference Call Transcript
Olivia Elliott: Thank you, John. Good morning, everyone. When we spoke with you in June to discuss our results for fiscal 2025, we identified a few key themes that we expected would have a continuing impact on our financial results. Inflation has been one of those themes, and while the official rate of increase has leveled off, consumers are still feeling the impact of the initial surge, which continues to affect discretionary spending habits. Tariffs, of course, have been a headline concern this quarter, and that concern is compounded by the uncertainty over what their final levels will look like. However, we also outlined how we were working to navigate these concerns and continue to execute our long-term strategic plan.
We recently noted that we expanded our product portfolio with the acquisition of Baby Boom and continue to drive growth with these new offerings. We've noted our solid relationships with suppliers, customers, and licensors. To that end, we're delighted to announce that we have extended our license agreement with Disney. The Disney license now extends our reach to sales in Canada and will include diaper bags to our list of licensed products. Looking more broadly at sales, we are very encouraged by the numbers we've seen for sales in July and are cautiously optimistic about the rest of the fiscal year. Through all this, our balance sheet and cash flow remain solid.
So while the overall environment remains challenging, we believe that we are well-positioned to respond to circumstances as they arise and continue to grow the business and create value for our shareholders. With that, I'll now turn the call over to our recently named Chief Financial Officer, Claire K. Spencer, who will walk you through some of the financial details.
Claire K. Spencer: Thank you, Olivia. I'm delighted to be here. I will begin with an overview of the quarter results and then provide some color. First quarter net sales were $15,500,000, a 4.5% decrease compared to 2025. The decrease was driven by a decline in the sales of bibs, toys, and disposable products, partially offset by an increase in the sales of bedding and diaper bags related to the Baby Boom acquisition. The decrease in net sales was largely a result of inventory shortages, resulting from the company's strategy to minimize the impact of extremely high tariffs in effect during the first half of the quarter. Gross profit decreased by $448,000 from the prior three-month period ended 06/30/2024.
As a percentage of net sales, there was a decrease of 1.8% from 24.5% in the prior year to 22.7% of net sales for the three-month period ended 06/29/2025. The decrease is primarily a result of increased tariff costs associated with products imported from China. Marketing and administrative expenses increased by $454,000 from 26.3% of net sales for the three-month period ended June 30, 2024, to 30.5% of net sales for the three-month period ended 06/29/2025. The current year includes increased costs associated with the acquisition of Baby Boom, as well as increased advertising costs.
GAAP net loss for the first quarter was $1,100,000 or a $0.10 loss per diluted share, which was driven primarily by the impact of increased tariffs and the decline in sales related to inventory shortages that were a result of our tariff management approach. Turning now to our balance sheet. As of the end of the first quarter, cash and cash equivalents totaled $227,000 compared to $521,000 at the end of fiscal 2025. Inventories were $31,600,000, an increase of 13.6% compared to $27,800,000 at the end of last fiscal year. The inventory balance is in line with the first quarter of last year.
Fiscal year-end is typically our lowest inventory levels, followed by an increase during the first quarter ahead of programs that set at retailers during the second quarter. As of 06/29/2025, the company had $13,900,000 in indebtedness, and $12,200,000 remains available under our revolving line of credit. Finally, we declared an $0.08 per share cash dividend to shareholders as we continue a long history of returning value to our shareholders. Now I will turn the call back to Olivia for additional commentary.
Olivia Elliott: Thank you, Claire. We remain focused on navigating the current environment, which is dominated by the impact of tariffs and expectations for what their levels will be on a longer-term timeframe. We're encouraged by developments such as the renewal and expansion of our license agreements with Disney and by the sales level we saw in the month of July. We will continue to explore ways to increase sales and gain market share while managing our financial flexibility. In closing, I would like to thank our shareholders for your support. We look forward to updating you on our progress in the coming quarters. With that, I'd like to open the line up for questions.
Operator: We will now begin the question and answer session. Our first question comes from Doug Ruth, Laxman Financial Services. Please go ahead.
Doug Ruth: Olivia and Claire, I want to offer my congratulations. I think you did a wonderful job with the first quarter. You kept the operation stable during a large period of uncertainty. So I'm thankful as a shareholder for what you've done for the investors.
Olivia Elliott: Thank you, Doug.
Doug Ruth: I have a few questions. I had read recently that Target is considering doing less direct sourcing. Do you think that might be able to create an opportunity for Crown Crafts, Inc.?
Olivia Elliott: We hope so. We've heard rumors like that as well, and so hopefully that opens up an opportunity to get back some programs that they had taken and started direct sourcing themselves.
Doug Ruth: Okay. And then do you think that, with the 30% tariff, if that is the new normal, you think that the company could be profitable, maybe not immediately, but somewhere looking ahead?
Olivia Elliott: We're certainly doing everything we can to mitigate the tariffs, and starting in late June, I would say, we started getting our price increases with our customers. And those will work their way through, some more in July all the way through the end of September. And I think at that point in time, yes, we're hopeful that we've done enough to mitigate the cost. I mean, we have to. That's kind of what we're gonna have to do.
Doug Ruth: Very good. And then is there some opportunities you think to expand the Manhattan Toy sales overseas?
Olivia Elliott: Yes. So, as you know, we closed that London office that came with the Manhattan Toy acquisition last year's first quarter. A little of it bled over into the second quarter. The Manhattan Toy sales were sold direct to the retailers, so not through a distributor. Whereas the SASE model is through a distributor, and we think that's a better opportunity to expand the sales. And so now that we've combined both of those brands into one set of distributors, we think that's a big opportunity.
Doug Ruth: Okay. Then a completely different question. An associate of mine told me that they were watching Miss Rachel on Netflix, and the Sassy stack of circles was featured in an episode. I know you had promoted the Miss Rachel doll. Would you be doing something, would the company be doing something like that? Promoting the stack of circles and sharing that news?
Olivia Elliott: Yes. And so I believe we have. So it's the Love Stella doll was Megan Markle had put that on her show, and that's one of the Manhattan Toy products. So Miss Rachel is a license with our toddler bedding. It's a No Joke brand, and so I believe actually, sorry. Miss Rachel is actually our No Joke brand, but it was a Sassy product. So I believe that Sassy should be sharing that on their social media.
Doug Ruth: Okay. And then I know that the company got off to a little bit of a rough start with the Manhattan Toy acquisition, that there were some issues with the management system and then with redesigning some of the dolls. Do you think that the operations of Manhattan Toy have stabilized at this point?
Olivia Elliott: Yes. We do believe that it has stabilized. We've gone through several different product lines starting with the infant toys. We redesigned those, and those are some of what we placed into Walmart, you know, very few products, and in not all the stores, it's kind of the better stores. And then we started working on the Stella dolls, and so those have now been released. And we're currently working on plush and maybe some more expansions on the dolls. So I do believe that it has stabilized, and hopefully, we'll see that turning and the sales going up very soon.
Doug Ruth: That sounds positive. And then how about the, I know that there's a new LEGOLAND in Shanghai. Is there any, are you getting, is the company receiving any feedback on how the plush figures are selling?
Olivia Elliott: So we sold in the initial set for the park opening, and we did get a reorder. So, I think that it is bigger than what we expected, and so that seems like it's a very good sign.
Doug Ruth: That's great. And my last question, we had talked, you just mentioned about the dolls, and I know we had talked previously that there was the Stella doll, then there's a WeBaby Stella, and then there's a new Love doll. Is there any commentary on how the Stella dolls are selling now with the redesign?
Olivia Elliott: I think that they're doing well. Obviously, with the tariff situation and sales were impacted all across all the lines because we stopped bringing goods in kind of at the end of the fourth quarter of last year through mid-May. And so all of the lines have been impacted by that. But yes, I mean, I think it's been well received at the shows that we have presented them at. And that they're doing fine.
Doug Ruth: Thank you very much for answering my questions.
Olivia Elliott: Thank you.
Operator: Our next question comes from Josh Peters, Limburg Family Office. Please go ahead.
Josh Peters: Yes, thank you. Good morning, Olivia. I'd like to add my congratulations as well for navigating this extraordinarily difficult environment as elegantly as you have so far. Very encouraging to hear that you are getting the price increases that are necessary to function as a business and to restore profitability, but I'm also curious about the potential for some pent-up demand. My understanding, broadly speaking, is that retailers have been reluctant to order at higher prices, especially when the tariff rates aren't known. And they've been depleting their own inventories while waiting for things to start shaking out. Is that something you have any insight into?
Are your retailers really depleted on stocks and so that they're going to have to catch up and replenish here over, let's say, the next couple of quarters or a year or so?
Olivia Elliott: That's all absolutely true. I mean, we are seeing retailers lower their in-stock levels. One of our major retailers has gone from about ten weeks of supply on hand to an average of one to two weeks. And so that definitely impacted the sales. As those SKUs run out though, we're hopeful that we're going to see the order patterns get back to a normal level. You know, when you have empty shelves, there's some sales that's gonna be a lost sale. But for the most part, you know, there is demand for these products. And so I think that as everything gets back in stock, yes, I think we're hopeful that we're going to see normal order patterns.
It's so hard to predict when point of sale is off and inventory levels are off both with us and with our retailers. But we think that what we saw in July is a good sign.
Josh Peters: Okay. And then as a quick follow-up, execution-wise, to that, are your order patterns also responding in kind so that you can source the product and have it ready for when those reorder or restock orders come in?
Olivia Elliott: Yes. We believe so. So, I mean, we use forecasts for models both from the retailers as well as from our history, and then we have to kind of go in and say, okay, what are the abnormal patterns that we've had historically so that we can make sure we have the right amount of inventory. Because if our retailers are only keeping one to two weeks of in-stock, then that means we have to have it in our stock to be able to fill the demand.
Josh Peters: Okay. And then, that's very helpful and quite promising. Just want to add one final question about the dividend. And I know it's always at the Board's discretion, but what kind of circumstances do you think that you would need to see to feel like a dividend reduction or omission would be necessary? Because I almost feel like at this point, if the dividend has survived this kind of category five storm, that might betray an awful lot of confidence in the company's ability to generate at least that amount of cash going forward. So what would be the trigger to actually have to revisit the dividend rate?
Olivia Elliott: That's a question I'm gonna have to tell you. I don't think that I will answer. I think the best answer I can give you is that the Board and management remain confident that with the company's cash flow and balance sheet, and at this point in time, we're not concerned.
Josh Peters: All right. Well, that is helpful perspective. Thank you very much.
Olivia Elliott: Thank you.
Operator: This concludes our question and answer session. I would now like to turn the conference back over to Olivia Elliott for closing remarks.
Olivia Elliott: Thank you. We thank all of you for joining us today and for your support, and we look forward to talking again in mid-November when we release our second quarter earnings. Thank you all.
Operator: Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye.