Q4 2024 Crown Crafts Inc Earnings Call
Ladies and gentlemen, thank you for your patience. The call will begin shortly.
Speaker Change: ?? ?? ?? ?? ??
Operator: Good day, and welcome to the Crown Crafts, Inc. fourth quarter fiscal year 2024 conference call. All participants will be in a listen-only mode.
Operator: Good day and welcome to the Crown Crafts Inc. 4th quarter, fiscal year 2024 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: Good day and welcome to the Crown Crafts, Inc. fourth quarter fiscal year 2024 conference call.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then one on a touch-tone phone.
Speaker Change: All participants will be in a listen-only mode.
Speaker Change: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-turn zone. To withdraw your question, please press star, then two. Please note, this event is being reported.
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2.
Operator: To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to John Beisler, Investor Relations. Please go ahead.
John Beisler: I would now like to turn the conference over to John Beisler and that's your relations. Please go ahead.
Speaker Change: Please note, this event is being recorded.
Speaker Change: I would now like to turn the conference over to John Beisler, Investor Relations. Please go ahead.
John Beisler: Thank you, Betsy. And good morning, everyone. We appreciate you joining us for the Crown Crafts fourth quarter and fiscal 2024 conference call. Joining me on the call today are Crown Crafts President and CEO, Olivia Elliott, and the company's CFO, Craig Demarest. Earlier this morning, Crown Crafts filed its 10k and issued a press release regarding its fourth quarter and fiscal 2024 financial results.
John Beisler: Thank you, that's seeing good morning, everyone. We appreciate you joining us for the Crown Crafts 4th quarter and fiscal 2024 conference call. Joining me on the call today are Crown Crafts President and CEO Olivia Elliott and the company CFO Craig Demarest.
John Beisler: Thank you, Betsy, and good morning, everyone. We appreciate you joining us for the Crown Crafts fourth quarter and fiscal 2024 conference call.
John Beisler: Joining me on the call today are Crown Crafts President and CEO , Olivia Elliott, and the company's CFO , Craig Demarest.
John Beisler: Earlier this morning, Crown Crafts 5th is 10K in issue to press release regarding the 4th quarter and fiscal 2024 financial results. A copy of this release is available on the company's website, CrownCrafts.com.
John Beisler: Earlier this morning, Crown Crafts filed its 10K and issued a press release regarding the fourth quarter and fiscal 2024 financial results.
John Beisler: A copy of this release is available on the company's website, crowncrafts.com. During today's call, the company will make certain forward-looking statements, and actual results may differ materially from those expressed or implied. These statements are subject to risks and uncertainties that may be beyond Crown Crafts' control, and the company is under no obligation to update these statements. For more information about the company's risk factors and other uncertainties, please refer to the company's filings with the Securities and Exchange Commission.
John Beisler: A copy of this release is available on the company's website, crowncrafts.com.
John Beisler: During today's call, the company will make certain forward-looking statements, and actual results may differ materially from those expressed or implied. These statements are subject to risks and uncertainties that may be on Crown Crafts' control, and the company is under no obligation to update these statements.
John Beisler: During today's call the company will make certain forward-looking statements and actual results may differ materially from those expressed or implied. These statements are subject to risks and uncertainties that may be on Crown Crafts control and the company is under no obligation to update these statements.
John Beisler: For more information about the company's risk factors and other uncertainties, please refer to the company's file and stroke of Securities and Exchange Commission.
John Beisler: For more information about the company's risk factors and other uncertainties, please refer to the company's filings with the Securities and Exchange Commission.
John Beisler: Finally, I would like to remind you today's call is being recorded and a replay will be available through the company's investor relations page. Now, I'd like to turn the call over to the President and CEO, Olivia Elliott. Thank you, John, and good morning, everyone.
John Beisler: Finally, I would like to remind you today's call is being recorded, and a replay will be available through the company's investor relationship page.
John Beisler: Finally I would like to remind you today's call is being recorded and a replay will be available through the company's investor relations page.
Olivia Elliott: Now I'd like to turn the call over to the President and CEO, Olivia Elliott. Thank you, John, and good morning, everyone.
Speaker Change: Now I'd like to turn the call over to the President and CEO , Olivia Elliott.
Olivia W. Elliott: Fiscal 2024 was a transitional year for the company. We started the year on the heels of acquiring and integrating Manhattan Toy, as well as exploring the cross-selling opportunities made possible by the acquisition. We remain enthusiastic about the addition of Manhattan Toy as our offerings across the toy category continue to grow. Additionally, we plan to leverage our longstanding relationships with major retailers and specialty stores to gain shelf space and position our brands for future growth.
Olivia Elliott: Fiscal 2024 was a transitional year for the company. We started the year on the heels of acquiring and integrating Manhattan Toy, as well as exploring the cross-selling opportunity made possible by the acquisition. We remain enthusiastic about the addition of Manhattan Toy, as our offerings across the toy category continue to grow. Additionally, we plan to leverage our long-standing relationships with major retailers and specialty stores to gain shelf space and position our brains for future growth.
Olivia W. Elliott: Thank you, John , and good morning, everyone. Fiscal 2024 was a transitional year for the company. We started the year on the heels of acquiring and integrating Manhattan toy, as well as exploring the cross selling opportunities made possible by the acquisition.
Olivia W. Elliott: We remain enthusiastic about the addition of Manhattan Toy as our offerings across the toy category continue to grow. Additionally, we plan to leverage our long-standing relationships with major retailers and specialty stores to gain shelf space and position our brands for future growth.
Olivia W. Elliott: We also continue to proactively manage the impact of the economic headwinds facing our operations and our customers. Inflationary pressures continue to linger, raising costs for materials and labor and reducing the discretionary income of consumers, which has a more meaningful impact on lower-income households.
Olivia Elliott: We also continued to proactively manage the impact of the economic headwinds facing our operations and our customers. Inflationary pressures continue to linger, raising costs for materials and labor, and reducing the discretionary income of consumers, which has a more meaningful impact on lower-income households. We will continue to strategically manage our cost structure and sales process, but remain well positioned with our balance sheet and expect to see some of the macro pressure lessons throughout the remainder of the year. Despite these current challenges, we were able to minimize the impact on growth margin by proactively managing costs across the business.
Olivia W. Elliott: We also continue to proactively manage the impact of the economic headwinds facing our operations and our customers.
Olivia W. Elliott: Inflationary pressures continue to linger, raising costs for materials and labor, and reducing the discretionary income of consumers, which has a more meaningful impact on lower-income households.
Olivia W. Elliott: We will continue to strategically manage our cost structure and sales process but remain well positioned with our balance sheet and expect to see some of the macro pressure lessen throughout the remainder of the year. Despite these current challenges, we are able to minimize the impact on growth margin by proactively managing costs across the business. As a result, we reported another year of profitability, and we reduced our debt by $4.6 million at the end of fiscal 2023. With that, I would like to turn it over to Craig to cover the financials in more detail. Thank you, Olivia, and good morning, everyone.
Olivia W. Elliott: We will continue to strategically manage our cost structure and sales process, but remain well positioned with our balance sheet and expect to see some of the macro pressure lessen throughout the remainder of the year.
Olivia W. Elliott: Despite these current challenges, we were able to minimize the impact on gross margin by proactively managing costs across the business.
Olivia Elliott: As a result, we reported another year of profitability, and we reduced our debt by 4.6 million from the end of fiscal 2023.
Olivia W. Elliott: As a result, we reported another year of profitability, and we reduced our debt by $4.6 million from the end of fiscal 2023.
Craig Demarest: With that, I would like to turn it over to Craig to cover the financials and more details. Thank you, Olivia, and good morning, everyone. That's sales for the fourth quarter of 2024. We're 22.6 million compared to 21.6 million in the prior year quarter. The increase reflects a full quarter of contribution from Manhattan Tory this year compared to two weeks in the fourth quarter of fiscal 23. This more than offset reduced orders from our customers, including a prior feature from a major customer that was not repeated in the current year, and the impact of consumers' response to the current macroeconomic conditions and adjusted inventory levels.
Speaker Change: With that, I would like to turn it over to Craig to cover the financials in more detail.
Craig J. Demarest: Net sales for the fourth quarter of 2024 were $22.6 million, compared to $21.6 million in the prior year quarter. The increase reflects a full quarter's contribution from Manhattan Toy this year, compared to two weeks in the fourth quarter of fiscal twenty three. This more than offset reduced orders from our customers, including a prior year feature from a major customer that was not repeated in the current year and the impact of consumers' response to the current macroeconomic conditions and adjusted inventory level. Gross profit for the quarter was 23.2% compared to the 21.9% in the fourth quarter of fiscal 23. The margin increase is primarily related to the effect of reserves recorded in the prior year associated with the customer who declared bankruptcy.
Craig J. Demarest: Thank you, Olivia, and good morning, everyone.
Craig J. Demarest: Net sales for the fourth quarter of 2024 were $22.6 million compared to $21.6 million in the prior year quarter.
Craig J. Demarest: The increase reflects a full quarter's contribution from Manhattan Toy this year, compared to two weeks in the fourth quarter of fiscal 23.
Craig J. Demarest: This more than offset reduced orders from our customers, including a prior year feature from a major customer that was not repeated in the current year, and the impact of consumers' response to the current macroeconomic conditions and adjusted inventory levels.
Craig Demarest: Gross profit for the quarter was 23.2% compared to the 21.9% in the fourth quarter of fiscal 23. The margin increase is primarily related to the effect of reserves recorded in the prior year associated with the customer who declared bankruptcy. Marketing in administrative expenses were 3.9 million in the fourth quarter of fiscal 24, relatively unchanged to the prior year quarter, despite the addition of Manhattan Tory's marketing and administrative costs for a full quarter. We worked throughout fiscal 24 to reduce the historical cost of both Manhattan Tory and our legacy businesses. Net income for the quarter was 1 million, or 10 cents per diluted share, compared to net income of 828,000, or 8 cents per diluted share in the full year.
Craig J. Demarest: Gross profit for the quarter was 23.2% compared to the 21.9% in the fourth quarter of fiscal 23.
Craig J. Demarest: The margin increase is primarily related to the effect of reserves recorded in the prior year associated with the customer who declared bankruptcy.
Craig J. Demarest: Marketing and administrative expenses were $3.9 million in the fourth quarter of Fiscal 24, relatively unchanged from the prior year quarter, despite the addition of Manhattan Toys marketing and administrative costs for a full quarter. We worked throughout fiscal 24 to reduce the historical cost of both Manhattan Toys and our legacy business. Net income for the quarter was $1,000,000, or $0.10 per diluted share, compared to net income of $828,000 or $0.08 per diluted share in the prior year.
Craig J. Demarest: Marketing and administrative expenses were $3.9 million in the fourth quarter of fiscal 24, relatively unchanged to the prior year quarter, despite the addition of Manhattan Toys marketing and administrative costs for a full quarter.
Craig J. Demarest: We work throughout fiscal 24 to reduce the historical cost of both Manhattan Toy and our legacy businesses.
Craig J. Demarest: Net income for the quarter was $1,000,000 or $0.10 per diluted share compared to net income of $828,000 or $0.08 per diluted share in the prior year.
Craig J. Demarest: Turning now to our results for the full year. Net sales for fiscal 24 were $87.6 million compared to $75.1 million in the prior year. The increase was primarily driven by the addition of Manhattan Toy, which generated 18.5 million net sales during fiscal 24, partially offset by a decline in our bedding blankets and accessories business. Gross profit for the year was 26.2% compared to 26.4% in fiscal 23, reflecting the rent increase at our California warehouse last February, partially offset by the impact of product mix. Marketing and Administrative Expenses were $16.1 million, versus $12.7 million in the prior year.
Craig Demarest: Net sales for fiscal 24 were 87.6 million compared to 75.1 million in the prior year. The increase was primarily driven by the addition of Manhattan Tory, which generated 18.5 million of net sales during fiscal 24, partially offset by a decline in our betting blankets and accessories business. Gross profit for the year was 26.2% compared to 26.4% in fiscal 23. Reflecting the rent increase at our California warehouse last February, partially offset by the impact of product mix. Marketing in administrative expenses were 16.1 million versus 12.7 million in the prior year. The increase primarily reflects the addition of Manhattan Tory at the end of fiscal 23.
Speaker Change: Turning now to our results for the full year, net sales for fiscal 24 were $87.6 million compared to $75.1 million in the prior year.
Speaker Change: The increase was primarily driven by the addition of Manhattan Toy, which generated $18.5 million of net sales during fiscal 24, partially offset by a decline in our bedding blankets and accessories business.
Speaker Change: Gross profit for the year was 26.2% compared to 26.4% in fiscal 23, reflecting the rent increase at our California warehouse last February partially offset by the impact of product mix.
Speaker Change: Marketing and administrative expenses were $16.1 million versus $12.7 million in the prior year. The increase primarily reflects the addition of Manhattan Toy at the end of fiscal 23.
Craig Demarest: Net income for the year was 4.9 million, or 48 cents per diluted share, compared to net income of 5.7 million, or 56 cents per diluted share, in fiscal 23.
Speaker Change: Net income for the year was $4.9 million, or $0.48 per diluted share, compared to net income of $5.7 million, or $0.56 per diluted share in fiscal 23.
Craig J. Demarest: The increase primarily reflects the addition of Manhattan Toy at the end of fiscal 23, and net income for the year was $4.9 million or $0.48 per diluted share compared to net income of $5.7 million or $0.56 per diluted share in fiscal 23. Turning now to our balance sheet, cash and cash equivalents as of the end of fiscal 24 totaled $830,000 compared to $1.7 million at the end of the prior year. Inventory at the end of fiscal 24 was 29.7 million compared to 34.2 million at the end of fiscal 23. Our long-term debt at the end of fiscal 24 was 8.1 million compared to 12.7 million at the end of 2023.
Craig Demarest: Turning now to our balance sheet, cash and cash equivalence as of the end of fiscal 24 total 830,000 compared to 1.7 million at the end of the prior year. In the Doris of the end of fiscal 24 were 29.7 million compared to 34.2 million at the end of fiscal 23. Our long-term debt at the end of fiscal 24 was 8.1 million compared to 12.7 million at the end of 2023. And finally, we paid 32 cents per share in cash dividends to shareholders in fiscal 24. With a yield of 6.4% based on yesterday's clothes, we continue to believe our dividend is a key component towards offering long-term returns to our shareholders.
Speaker Change: Turning now to our balance sheet, cash and cash equivalents as of the end of fiscal 24 totaled $830,000 compared to $1.7 million at the end of the prior year.
Speaker Change: Inventories at the end of fiscal 24 were $29.7 million compared to $34.2 million at the end of fiscal 23.
Speaker Change: Our long-term debt at the end of fiscal 24 was $8.1 million compared to $12.7 million at the end of 2023.
Craig J. Demarest: And finally, we paid 32 cents per share in cash dividends to shareholders in fiscal 2024, with a yield of 6.4% based on yesterday's close. We continue to believe our dividend is a key component towards offering long-term returns to our shareholders. Now, I will turn the call back over to Olivia for additional comments. Thank you, Craig. We recently passed the one-year mark since our acquisition of Manhattan Toy. In that time, we have successfully completed the brand's integration into SASE, and the IT conversion is nearly finished.
Speaker Change: And finally, we paid $0.32 per share in cash dividends to shareholders in fiscal 2024.
Speaker Change: With a yield of 6.4% based on yesterday's close, we continue to believe our dividend is a key component towards offering long-term returns to our shareholders.
Olivia Elliott: Now I'll turn the call back over to Olivia for additional comments.
Olivia Elliott: Thank you, Craig. We recently passed the one-year mark since our acquisition of Manhattan Tory. In that time, we have successfully completed the brand's integration in DeSassy, and the IT conversion is nearly finished. On the operations side, we adjusted the brand's advertising spending and worked through the excess inventory to substantially improve the profitability of the brand compared to pre-acquisition periods. We are very encouraged by the strides Manhattan Toys made on the product development front. Customers have given positive feedback on the items viewed at recent events, and they look forward to having these products on their shelves.
Speaker Change: Now I will turn the call back over to Olivia for additional comments. Thank you, Craig. We recently passed the one-year mark since our acquisition of Manhattan Toy. In that time, we have successfully completed the brand's integration into SASE, and the IT conversion is nearly finished.
Olivia W. Elliott: On the operations side, we adjusted the brand's advertising spending and worked through the excess inventory to substantially improve the profitability of the brand compared to the pre-acquisition period. We are very encouraged by the strides Manhattan Toy has made on the product development front. Customers have given positive feedback on the items seen at recent events, and they look forward to having these products on their shelves. As stated earlier, these new designs expand our offerings across the toy category, which now represents the largest portion of sales across our portfolio.
Olivia W. Elliott: On the operations side, we adjusted the brand's advertising spending and worked through the excess inventory to substantially improve the profitability of the brand compared to pre-acquisition periods.
Olivia W. Elliott: We are very encouraged by the strides Manhattan Toy has made on the product development front.
Olivia W. Elliott: Customers have given positive feedback on the items viewed at recent events, and they look forward to having these products on their shelves. As stated earlier, these new designs expand our offerings across the toy category, which now represents the largest portion of sales across our portfolio.
Olivia Elliott: A stated earlier, these new designs expand our offerings across the toy category, which now represents the largest portion of sales across our portfolio. Looking ahead to fiscal 2025, we will continue to manage the macroeconomic challenges facing our business and consumers, and expand the product offering across our brands. We believe we are well positioned for when the economy improves, and are about strong balance sheet will allow us to consider favorable acquisition opportunities that can strengthen our existing categories.
Olivia W. Elliott: Looking ahead to fiscal 2025, we will continue to manage the macroeconomic challenges facing our business and consumers and expand the product offering across our brand. We believe we are well positioned for when the economy improves, and our strong balance sheet will allow us to consider favorable acquisition opportunities that can strengthen our existing category. We would like to thank our team for their efforts over the past year and our customers and licensors for their continuing support.
Olivia W. Elliott: Looking ahead to fiscal 2025, we will continue to manage the macroeconomic challenges facing our business and consumers and expand the product offering across our brands.
Olivia W. Elliott: We believe we are well positioned for when the economy improves, and our strong balance sheet will allow us to consider favorable acquisition opportunities that can strengthen our existing categories.
Olivia Elliott: We would like to thank our team for their efforts over the past year, and our customers and licensed awards for their continuing support. We look forward to updating you on our progress throughout the year, and thank you, our shareholders, for your continued support.
Olivia W. Elliott: We would like to thank our team for their efforts over the past year, and our customers and licensors for their continuing support. We look forward to updating you on our progress throughout the year, and thank you, our shareholders, for your continued support. With that, I'd like to open up the line for questions.
Olivia W. Elliott: We look forward to updating you on our progress throughout the year and thank you, our shareholders, for your continued support. With that, I'd like to open up the line for questions. Betsy, we will now begin the question and answer session. To ask a question, you may press star and one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Olivia Elliott: With that, I'd like to open up the line for questions.
Operator: Betsy. We will now begin the question and answer session. To ask a question, you may press star and one on your touchstone zone.
Olivia W. Elliott: Betsy?
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star and 1 on your touch-tone phone.
Operator: If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star and two.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Doug Ruth with Lenox Financial Services. Please go ahead. Olivia and Craig, congratulations.
Operator: At this time, we will pause momentarily to assemble our roster.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Douglas Ruth: The first question today comes from Doug Ruth with Linux Financial Services. Please go ahead. A living in Craig, congratulations. It was a very solid report. It checks all the boxes: revenue growth, margin expansion, strong cash flow, debt production, and of course the dividend. So thank you for what you did for the shareholders.
Speaker Change: The first question today comes from Doug Ruth with Lenox Financial Services.
Unknown Speaker: It was a very solid report. It checks all the boxes, revenue growth, margin expansion, strong cash flow, debt reduction, and, of course, dividends. So, thank you for what you did for the shareholders. Thank you very much.
Doug Ruth: Olivia and Craig, congratulations. It was a very solid report. It checks all the boxes, revenue growth, margin expansion, strong cash flow, debt reduction, and of course the dividend.
Olivia Elliott: Thank you very much. We appreciate your support.
Olivia W. Elliott: We appreciate your support. Okay. Could you tell us a little bit more about uh, so we we know you had sales of 18.5 million for the Manhattan toy. Would there be an are you able to make a projection of what the goal might be for the Manhattan toy for fiscal 2025? You know, we really don't give projections. We kind of stay away from forecasting. I think the best thing to do is probably go back to what we said when we acquired Manhattan Toy, and that's the goal over the long term. You know, it won't happen in fiscal twenty five.
Doug Ruth: Thank you for what you did for the shareholders.
Olivia Elliott: Could you tell us a little bit more about, so we know you had sales of 18.5 million of the man he had in toy. Would there be any? Are you able to make a projection? What the goal might be for man he had in toy for fiscal 2025? You know, we really don't give projections. We kind of stay away from forecasting. I think the best thing to do is probably go back to what we said when we acquired Man He Had in Toy. And that's the goal in the long term. You know, it won't happen in Fiscal 25.
Speaker Change: Thank you very much. We appreciate your support.
Speaker Change: Could you tell us a little bit more about, so we we know you had sales of 18.5 million of the Manhattan Toy. Would there be, are you able to make a projection what the what the goal might be for Manhattan Toy for you know for fiscal 2025?
Speaker Change: You know, we really don't give projections. We kind of stay away from forecasting. I think the best thing to do is probably go back to what we said when we acquired Manhattan Toy, and that's the goal in the long term.
Olivia W. Elliott: I think we said it was going to be twenty-four million. It's going to take three or four years to get there, but the projections are that we will grow steadily over those few years. Okay, is it? Is it possible to maybe get some placement for Manhattan toys like in Walmart, maybe in fiscal 2025? Or would it take a longer time period than that? Note we have some placement in Walmart already, and that will be shipping sometime between the first and second quarters of fiscal 25. It's just a handful of items, and it's in a limited number of stores, but it's a start. Oh, very good. Congratulations.
Olivia Elliott: I think we said it was going to be 24 million. It's going to take three or four years to get there. But the projections are that we will grow steadily over those few years.
Speaker Change: You know, it won't happen in fiscal 25. I think we said it was going to be $24 million. It's going to take three or four years to get there, but the projections are that we will grow steadily over those few years.
Olivia Elliott: Okay, is it possible to get maybe get some placement for man he had in toy? Like in Walmart, maybe in fiscal 2025, or would it take be a longer time period than that? No, we had some placement in Walmart already, and that will be shipping. Sometime between the first and second quarter of fiscal 25. Just a handful of items in it's an unlimited number of stores, but it's a start.
Speaker Change: Okay, is it is it possible to get maybe get some placement for Manhattan Toyed like in Walmart maybe in fiscal 2025 or would it take be a longer time period than that?
Speaker Change: No, we have some placement in Walmart already and that will be shipping sometime between the first and second quarter of fiscal 25. It's just a handful of items and it's in a limited number of stores, but it's a start. Very good. Congratulations.
Olivia Elliott: I'll be very good in regulation.
Olivia Elliott: and then you also had talked about possibly combining the two warehouses, the Compton warehouse, and then the Manhattan toy warehouse. Is there any progress on that? We're still exploring that opportunity. We have engaged a third party to help us kind of figure out where the best place to place those warehouses are, that minimize the impact on our customers as well as to anybody that's working in those warehouses. Would you expect maybe something to happen in fiscal 2025, or would we be looking beyond that? I think you'll be looking beyond that. I think by the end of fiscal 2025, I think we will have a plan, but I think any changes will happen in fiscal 26.
Olivia W. Elliott: And then you also talked about possibly combining the two warehouses, the Compton warehouse and then the Manhattan Toy Warehouse. Is there any progress on that? We're still exploring that opportunity. We have engaged a third party to help us kind of figure out where the best place to place those warehouses is that minimizes the impact on our customers as well as to, you know, anybody that's working in this warehouse. Would you expect, maybe, something to happen in fiscal 2025? Or would we be looking beyond that?
Speaker Change: and you also had talked about possibly combining the two warehouses, the Compton Warehouse
Speaker Change: and then the Manhattan Toy Warehouse. Is there any progress on that?
Speaker Change: We're still exploring that opportunity. We have engaged a third party to help us.
Speaker Change: kind of figure out where the best place to place those warehouses are that minimize the impact to our customers as well as to you know anybody that's
Speaker Change: that's working in those warehouses.
Speaker Change: Would you expect maybe something to happen in fiscal 2025 or would we be looking beyond that?
Olivia W. Elliott: I think you'll be looking beyond that. I think by the end of fiscal 2025, I think we will have a plan. But I think any, any changes will happen in fiscal. Okay, and what about the sales and product development office in Minneapolis? You had previously stated that possibly we were hoping to do something with the lease. Is there any progress on that? That one's going to be a more long-term process. I think that lease ends at the beginning of 2027, and unfortunately, downtown Minneapolis has way too much open office space to be able to sublease it.
Speaker Change: I think you'll be looking beyond that. I think we, by the end of fiscal 2025, I think we will have a plan, but I think any, any changes will happen in fiscal 26.
Olivia Elliott: Okay, and where about the sales and product development office in Minneapolis, you had previously stated that possibly we're hoping to do something with the lease. Is there any progress on that? That one's going to be a more long-term process. I think that lease ends in the beginning of 2027, and unfortunately, downtown Minneapolis has way too much open office space to be able to sublace it. So that's going to be a longer-term issue.
Speaker Change: Okay, and what about the sales and product development office in Minneapolis, you had previously stated that possibly were hoping to do something with the lease, is there any progress on that?
Speaker Change: That one's going to be a more long-term process. I think that lease ends in the beginning of 2027 and unfortunately downtown Minneapolis has way too much open office space to be able to sublease it so that's going to be a longer term
Olivia W. Elliott: So that's going to be a longer-term issue. Okay, and what about the direct-to-consumer? How do you feel like you're making any progress with that? We have not gotten anybody except for Manhattan Toy up and running on the direct-to-consumer for our own website.
Olivia Elliott: Okay, and what about the direct-to-consumer? How do you feel like you're making any progress with that? We have not gotten anybody except for Manhattan Toy up and running on the direct-to-consumer for our own website, but we have Nojo's website is now complete and able to sell direct-to-consumer, and we are working through right now getting Sassy's website up and running. And so I do believe by the end of fiscal 2025, we will have all of these subsidiaries selling direct-to-consumer.
Speaker Change: Yes.
Speaker Change: Okay, and what about the direct-to-consumer? Do you feel like you're making any progress with that?
Speaker Change: We have not gotten anybody except for Manhattan Toy up and running on the direct-to-consumer for our own website But we have no Joe's website is now complete and able to sell direct-to-consumer
Olivia W. Elliott: But we have no Joe's website is now complete and able to sell direct to consumers, and we are working through right now getting Sassy's website up and running. And so I do believe by the end of fiscal 2025, we will have all of these subsidiaries selling directly to customers. Okay. And how are things going for the company with Bye Bye Baby? You had previously told us that Bye Bye Baby had, you know, opened up or reopened some stores.
Speaker Change: and we are working through right now getting SASE's website up and running. And so I do believe by the end of fiscal 2025, we will have all of these subsidiaries selling direct to consumer.
Olivia Elliott: Okay, and what about how are things going for the company with Buy Buy Baby? You had previously told us that Buy Buy Baby had opened up, reopened some stores. Is there any progress with that initiative at all? They did reopen, I believe, the left-hand stores, and we are shipping to all 11 of those stores, but I believe any expansion by them is slower, I think, than we had hoped it would be, and they haven't opened up any new stores since the initial grand openings.
Speaker Change: Okay, and what about, how are things going for the company with Bye Bye Baby? You had previously told us that Bye Bye Baby had opened up, reopened some stores. Is there any progress with that initiative at all?
Olivia W. Elliott: Is there any progress on that initiative at all? They did reopen, I believe, 11 stores, and we are shipping to all 11 of those stores, but I believe any expansion by them is slower, I think, than we had hoped it would be, and they haven't opened up any new stores since the initial grand opening. Okay, and then a couple more.
Speaker Change: They did reopen, I believe, 11 stores, and we are shipping to all 11 of those stores, but I believe any expansion by them is slower, I think, than we had hoped it would be. And they haven't opened up any new stores since the initial grand openings.
Olivia W. Elliott: There was recently an article about the expansion of Legoland, and I know that was one of the things that came with the Manhattan toy acquisition. How is how is that business going for the company? That business is actually going very well. And we are. We believe there will be three new parks, two of which will be in China, and those will be opened in, I believe, the summer of twenty twenty five. And so we're continuing to grow that business, and we look forward to them opening the new parks. One of the ones in China will be the largest one in the world.
Olivia Elliott: Okay, and then I'll get a couple more. There was recently an article about the expansion of LEGOLAND, and I know that was one of the things that came with the man he had in toy acquisition. How is that business going for the company? That business is actually going very well, and we believe there will be three new parks, two of which will be in China, and those will be opened in, I believe, the summer of 2025. And so we're continuing to grow that business, and we look forward to them opening the new parks. One of the ones in China will be the largest one in the world.
Speaker Change: Okay, and then I'll get a couple more. There was recently an article about expansion of Legoland and I know that was one of the things that came with the Manhattan Toy acquisition. How is how is that business going for the company?
Speaker Change: That business is actually going very well and we are
Speaker Change: We believe there will be three new parks, two of which will be in China, and those will be opened in, I believe, the summer of 2025. And so we're continuing to grow that business, and we look forward to them opening the new parks. One of the ones in China will be the largest one in the world. Wow.
Olivia Elliott: That would potentially really expand the international sales.
Olivia W. Elliott: Wow. Well, that would potentially really expand the inner international sales. Correct. And then the last question that I have was, you just did a tremendous job reducing the inventory. Are you happy with the inventory level where it's at, or is there an objective for that?
Speaker Change: Well, that would potentially really expand the international sales.
Olivia Elliott: And then the last question that I have was, you did just did a tremendous job reducing the inventory. Are you happy with the inventory level at where it's at, or is it an objective for that? I always think we have too much inventory. I do think we make great strides. We still have a little bit more, I'm going to say close out inventory to work through, but I don't think it's not a huge number, but we always have something that we need to get rid of.
Speaker Change: Correct.
Speaker Change: And then the last question that I have was, you just did a tremendous job reducing the inventory. Are you happy with the inventory level, where it's at, or is there an objective for that?
Olivia W. Elliott: I always think we have too much inventory. I do think we've made great strides. We still have a little bit more, I'm going to say close-out inventory to work through, but I don't think it's... It's not a huge number, but we always have something that we need to get rid of. Thank you for answering my questions. Congratulations to the team there.
Speaker Change: I always think we have too much inventory. I do think we made great strides. We still have a little bit more, I'm going to say close out inventory to work through, but I don't think it's...
Speaker Change: It's not a huge number, but we always have had something that we need to get rid of.
Douglas Ruth: Thank you for answering my questions. Congratulations to the team there. You've just done a really good job integrating the man he had in toy business and to the core operation.
Olivia W. Elliott: You've just done a really good job integrating the Manhattan Toy business into your core operation. Thank you. As a reminder, if you would like to ask a question, please press star and then one to join the question queue. The next question comes from John Dasher with Pinnacle. Please go ahead.
Speaker Change: Thank you for answering my questions. Congratulations to the team there. You've just done a really good job integrating the Manhattan Toy business into your core operation.
Operator: Thank you. As a reminder, if you would like to ask a question, please press star, then one to join the question queue.
Speaker Change: Thank you.
Speaker Change: As a reminder, if you would like to ask a question, please press star then 1 to join the question queue.
John Deysher: The next question comes from John Deysher with Clinical. Please go ahead. Good morning, thanks for taking my question. Good morning.
Speaker Change: The next question comes from John Dasher with Pinnacle. Please go ahead.
Operator: Good morning. Thanks for taking my question. Good morning.
Unknown Speaker: Manhattan Tool, you said, I think was $18.5 million in this fiscal year. I think you indicated last fiscal year it was about $25.8 on a pro forma basis. Um, if that's the case, that seems like a pretty significant drop, and I know you're going to let some accounts go, but... How should we think about that decline in Manhattan toy sales year over year? Some of the decline was planned. There were some sales in the legacy business to the original Bye Bye Baby that was bankrupt, so that was a little bit of a decline. We had some customers that we stopped shipping to because they didn't have good credit, so that was planned as well.
Speaker Change: Good morning. Thanks for taking my question.
John Deysher: I think you indicated last fiscal year was about 25.8 on a pro-forma basis. If that's the case, it seems like a pretty significant drop.
John Beisler: Good morning. Manhattan Tool you said I think it was $18.5 million in this fiscal year. I think you indicated last fiscal year it was about $25.8 on a pro forma basis. If that's the case, that seems like a pretty
Olivia Elliott: I know you're going to let some accounts go, but how should we think about that decline in inventory year over year? Some of the decline was planned. There were some sales in the legacy business to the original Bob I-80 that bankrupt, so that was a little bit of the decline. We had some customers that we stopped shipping to because they didn't have good credit, so that was planned as well. Once we got into it a little bit, it was a bigger drop, I guess, than we had planned initially because we realized that, for example, the direct-to-consumer business, they were spending as much on advertising as the top line sales.
John Beisler: Significant drop and I know you're going to let some accounts go but how should we think about that decline in Manhattan Toy year over year?
Speaker Change: Some of the decline was planned, there were some sales in the legacy business to the original Bye Bye Baby that went bankrupt, so that was a little bit of the decline.
Speaker Change: We had some customers that we stopped shipping to because they didn't have good credit.
Olivia W. Elliott: Once we got into it a little bit, it was a bigger drop, I guess, than we had planned initially because we realized that, for example, the direct-to-consumer business, they were spending as much on advertising as on top-line sales, so obviously, when you're looking at something like that, these sales were at a 30% loss. We sacrificed some top-line sales to improve the bottom line, but we've been working throughout the year to get better costs, to move our products to new factories where we can get better prices out of China, and I think that as time goes by, you'll see those sales pick back up.
Speaker Change: So that was planned as well.
Speaker Change: Once we got into it a little bit, it was a bigger drop, I guess, than we had planned initially, because we realized that, for example, the direct-to-consumer business.
Olivia Elliott: Obviously, when you're looking at something like that, these sales were at a 30% loss. We sacrificed some top line sales to improve the bottom line, but we've been working throughout the year to get better costings, to move our products to new factories where we can get better prices out of China.
Speaker Change: They were spending as much on advertising as the top line sales. So obviously when you're looking at something like that, these sales were at a 30% loss.
Speaker Change: So we sacrificed some top line sales to improve the bottom line.
Speaker Change: But we are, we've been working throughout the year to get better costings to move our products to new factories where we can get better, better prices out of China. And I think that, you know, as time goes by, you'll see those sales pick back up.
John Deysher: I think that as time goes by, you'll see those sales pick back up. Okay, so do you think the 18.5 million this fiscal year was the trough? I do think that. Okay, all right, so the sugar will go up. On the flip side, if we back out Manhattan Toy from the legacy business, it looks like the legacy year sales were about 69 million versus 49 million. Obviously, a big jump.
Olivia W. Elliott: Okay, so do you think the 18.5 million this fiscal year was the trough? I do think so. All right, so that should go up. And on the flip side, if we, you know, back out Manhattan toy from the legacy business. It looks like the legacy year sales were about 69 million versus 49 million, obviously a big jump. So what do you attribute that to? That was last year versus this year. Yeah, are you looking for your back?
Speaker Change: Okay, so do you think the $18.5 million this fiscal year was the trough?
Speaker Change: I do think that.
Speaker Change: Okay, all right, so that should go up. On the flip side, if we back out Manhattan Toy from the legacy business,
Speaker Change: It looks like legacy year sales were about $69 million versus $49 million. Obviously a big jump. So what do you attribute that?
John Deysher: So, what do you attribute that? That was last year versus this year. What are you looking further back? No, I'm just looking if we subtract the 18.5 from the 87.6.
Speaker Change: That was last year versus this year.
Unknown Speaker: Now I'm just looking if we subtract the 18.5 from the 87.6, you know, that's about 69 million and if we do, Okay, that's it from me. Thank you. Thank you. The next question comes from Dennis Dannell with Rutabaga Capital. Please go ahead.
Speaker Change: I'm just looking if we subtract the 18.5 from the 87.6.
Rudy Baker-Catville: You know, that's about 69 million, and if we subtract the 25.8, I'm sorry, I'm, I'm, with Rudy Baker-Catville, please go ahead.
Speaker Change: Jeff Beisler, Craig Demarest, Olivia Elliott, Unknown Executive
Speaker Change: Okay, that's it from me. Thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from Dennis Stanmill with Rutabaga Capital. Please go ahead.
Craig Demarest: Yes, good morning, Olivia and Craig. I did a couple quick things for me. A quick question on gross margins in the fourth quarter. So gross margins were down, I'm sorry, gross margins were up year over year nicely, but down sequentially kind of what we were doing in the first three quarters, it looks like we're kind of around 27%. Is that just a seasonal issue or, or, or mix, or just any commentary on the decline relative to the previous three quarters? That's, that's more of a timing issue. You see a little bit of a pullback when, you know, I hate to, I hate to talk about burden variances, et cetera.
Unknown Speaker: Just a couple quick things for me. A quick question on gross margins in the fourth quarter. So gross margins were down, I'm sorry, gross margins were up year over year nicely, but down sequentially, kind of what we were doing in the first three quarters, it looks like we're kind of around 27%. Is that just a seasonal issue or mix or just any commentary on the decline relative to the previous three quarters?
Speaker Change: Transcribed by https://otter.ai
Dennis Stanmill: Yes, good morning, Olivia and Craig.
Dennis Stanmill: Just a couple quick things for me. A quick question on gross margins in the fourth quarter. So gross margins were down, I'm sorry, gross margins were up year over year nicely, but down sequentially kind of what we were doing in the first
Dennis Stanmill: 3 quarters, it looks like we're kind of around 27%. Is that just a seasonal issue or or or mix or just any commentary on the on the on on the decline relative to the previous three quarters?
Unknown Speaker: That's that's more of a timing issue. You see a little bit of a pullback when you know, I hate to talk about burden variances, etc. But I mean, you see a little bit of a negative burden variance when you get into Q4 because of the Chinese New Year. So we're bringing less inventory in during that time of year. So it's more of a seasonal or a timing thing.
Speaker Change: That's more of a timing issue. You see a little bit of a pullback when, you know, I hate to talk about.
Craig Demarest: But I mean, you see a little bit of a negative burden variance when you get into Q4 because of Chinese New Year. So we're bringing less inventory in during that time of year. So it's more of a seasonal or a timing thing. Got it. Okay, great.
Speaker Change: burden variances, etc. But I mean, you see a little bit of a negative burden variance when you get into Q4 because of Chinese New Year. So we're bringing less inventory in during that time of year. So it's more of a seasonal or a timing thing.
Unknown Speaker: Got it. Okay, great. Thank you. So and then looking at, you know, for the full year, notes, when around 26%. I, you know, in the past years, certainly before inflation really took off when we saw the softness on the consumer side, we had seen kind of gross margins of 29, maybe even 30%. Looks like fiscal 21 is recognizing that the mix of business has changed somewhat, particularly with the acquisition of Manhattan Toys. Is 29%, 30% gross margins a potential for the business going forward, or is that not realistic?
Craig Demarest: Thank you. So, and then looking at, you know, for the four year, you know, around, I'm sorry, look for my notes one, around 26%. You know, in pastures, certainly before inflation really took off when we saw the softness on the consumer side, you know, we had seen kind of gross margins, 29, maybe even 30%. Looks like fiscal 21. Is, you know, recognizing that the mix of business has changed somewhat, you know, particularly with the acquisition of Manhattan Toys. It's, it's 29%, 30% gross margins, a potential for the business going forward, or is that, is that not realistic?
Speaker Change: Got it. Okay, great. Thank you. So, and then looking at, you know, for the full year, you know, around, I'm sorry.
Speaker Change: who look for my notes, went around 26%.
Speaker Change: In past years, certainly before inflation really took off and we saw the softness on the consumer side,
Speaker Change: We had seen kind of gross margins 29 maybe even 30% looks like fiscal 21 is
Speaker Change: It's
Speaker Change: 29%, 30% gross margins, a potential for the business going forward, or is that is that not realistic?
Craig Demarest: I think it's a potential in the, in the longer term future; the biggest thing that's impacting us right now is the increase in the rent at the warehouse in California. So that's had a big impact on us. And until we, we get that long term solution, there's, it's not going to be that it's 30% I don't think. Yep. Okay. And we take just out of curiosity on the, so in, in, for the, for the rents in California, it's not that you're looking to exit that or you're looking for another, maybe a, a lower cost facility.
Craig J. Demarest: I mean, I think it's potential in the longer term future. The biggest thing that's impacting us right now is the increase in the rent at the warehouse in California. So that's had a big impact on us.
Craig J. Demarest: And until we get that long-term solution, there's it's not going to be that 30% I don't, Yep. Okay. Okay. And we just had a curiosity about the so in for the rents in California, it's not that you're looking to exit, but are you looking for another, maybe a lower cost facility? Is there a solution to that, Rand? I guess that's my question.
Speaker Change: I mean, I think it's a potential in the longer term future. The biggest thing that's impacting us right now is the increase in the rent at the warehouse in California. So that's had a big impact on us. And until we get that.
Speaker Change: Long-term solution, it's not going to be that because it's 30%, I don't think.
Speaker Change: Yeah, okay. Okay. And when you say just out of curiosity on the so in for the for the rents in California, it's not that you're looking to exit that or you're looking for another, maybe a lower cost facility.
Craig Demarest: Is there, is there a solution in that brand, I guess, is, is my question. We are working on that solution. And so we're, we've engaged to start party to help us with that move, because if you're going to move a warehouse that you've been in for 25, 30 years, we need to have the plan to be there for, you know, 10 to 20 years at least on the forward looking side. So we want to make sure that we do it right. So it is something that's going to take us 18 months to 2 years to get the long term solution.
Craig J. Demarest: We're working on that solution, and so we've engaged a third party to help us with that move. Because if you're going to move a warehouse that you've been in for 2530 years, we need to have the plan to be there for, you know, 10 to 20 years, at least on the forward-looking side. So we want to make sure that we do it right.
Speaker Change: Is there a solution to that, Brent, I guess is my question.
Speaker Change: We are working on that solution and so we're we've engaged a third party to help us with that move because if you're going to move a warehouse that you've been in for 25-30 years
Speaker Change: We need to have the plan to be there for, you know, 10 to 20 years at least on the on the forward looking side. So we want to make sure that we do it right. So it is something that's going to take us 18 months to two years to get the long term solution.
Craig Demarest: Got it. Interesting. Okay. And so an opportunity there.
Craig J. Demarest: So it is something that's going to take us 18 months to two years to get the long-term solution. Got it. Interesting. Okay. And so there is an opportunity there.
Rudy Baker-Catville: Great. Thank you very much.
Speaker Change: Got it. Interesting. Okay. And so an opportunity there. Great. Thank you very much.
Rudy Baker-Catville: Thank you.
Operator: This concludes our question-and-answer session.
Craig J. Demarest: Great. Thank you very much. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Olivia Elliott for any closing remarks. We'd just like to thank you for your support over the years, and we look forward to updating you on our Q1 earnings, which will be announced in mid-August. Thank you very much. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: Thank you.
Olivia Elliott: I would like to turn the conference back over to Olivia Elliott for any closing remarks. We'd just like to thank you for your support over the years, and we look forward to updating you on our Q1 earnings, which will be in mid-August. Thank you very much. Thank you.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Olivia Elliott for any closing remarks.
Olivia W. Elliott: We'd just like to thank you for your support over the years, and we look forward to updating you on our Q1 earnings, which will be in mid-August.
Olivia W. Elliott: Thank you very much.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now. Let's go next.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.