Q2 2026 Crown Crafts Inc Earnings Call
Good day and welcome to the crown Crafts Inc. Fiscal 2026. Second quarter conference, call and webcast all participants will be in listen-only mode.
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I would now like to turn the conference over to John mcnamera of 3-part advisors. Please go ahead.
Thank you, Michael. Good morning, everyone. And thank you again for joining the crown crafts. Fiscal year, 2026 second quarter conference call,
With us on the call this morning, our Crown crafts, president and chief executive officer, Olivia Elliott and vice president and Chief Financial Officer. Claire Spencer
During today's call the company may 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 risks, risk factors and other uncertainties, please refer to the company's filings with the Securities and Exchange Commission.
Go ahead.
Thank you, John. And good morning everyone.
As we noted in the press release, we issued this morning, we reported stronger second quarter, net income, which we believe reflects positively on our ability, to navigate the current environments.
The ongoing tariff landscape, particularly on good source, from China continues to drive costs and pressure margins.
These tariff policies affect many products in our sector, and many brands are being forced to pass on price increases.
We are encouraged by recent trade talks between the US and China and will continue to navigate persistent uncertainty in a macro environment.
We will seek opportunities when growth potential, presents itself and prudently manage cost, including capitalizing on synergies Following last year's acquisition.
To that end. As previously, reported after quarter end, we began consolidating some internal operations which will not only result in reduced payroll expenses, but will eliminate some redundant costs as well.
Our relationships with our suppliers customers and licensors remain strong and we can expect to continue. Renewing, our licensing agreements while our product development team is hard at work on exciting future launches
Our balance sheet and cash flow remain solid. As we manage the business and we are positioning the company to respond quickly to any change in the overall environment.
With that, I'll turn the call over to our Chief Financial Officer. Claire Spencer who will walk us through the financial details.
Thank you, Olivia. I will begin with an overview of the quarterly results along with additional color on our financial performance.
Second quarter. Net sales were 23.7 million compared to 24.5 million in the second quarter of fiscal year 2025.
Due to a 1.6 million decline in the sales of betting and diaper bags. Partially offset by 800,000 dollar increase in the sales of bibs toys and disposable products,
The decrease in betting and diaper bags is primarily due to a decrease in the number of items included in a program at a major retailer. This was partially offset by increased sales and bibs toys and the social products across various distribution channels.
Gross profit was 6.6 million. Reflecting a margin of 27.7% and second quarter as compared to 28.4% in the year earlier period primarily a result of increased tariff costs associated with products, imported from China.
We reduced marketing administrative expenses by 740,000.
The 19.9% of net sales for the quarter relative to 22.3% and the prior year period.
This reduction was due to acquisition related costs in the prior period which was partially offset by increased advertising cost.
Gaap net income for the second quarter was 1.2 million or 11 cents per diluted share up from 8 cents and the year ago quarter which was driven primarily by the reduction in marketing and administrative expenses from the prior year period as previously mentioned.
turning now, to our balance sheet,
As of the end of the second quarter, cash and cash equivalents totaled 810,000 up from 521,000 at the end of fiscal 2025.
The inventory balance of 32.6 million is in line with our prior quarter and prior year quarter.
The balance is higher than at.
Than at the end of fiscal 2025 at fiscal year end is typically our lowest inventory levels followed by increases throughout the year ahead of new program sets in Chinese New Year.
As of September 29th, 2025 the company had 16.3 million in indebtedness, and 13.7 million remains available under our revolving line of credit.
Finally, we declared an 8 cent per share cash, quarterly dividend to shareholders. As we continue our long history of returning, value to our shareholders. Now, I'll turn the call back to Olivia for additional commentary. Thank you, Claire.
We entered the second quarter, fully aware of the macro challenges, especially the elevated tariff, environment and its effect on profitability.
Yet. We managed to achieve a slight increase in net income. A testament to our resilience and prudent management.
While tariffs continue to weigh on our growth margins. And overall profitability, we will adapt and adjust our strategies as needed to help offset. Its impacts ensuring, we remain well, positioned to capitalize on opportunities and drive stronger growth and profitability as market conditions evolve.
In closing, I would like to thank our shareholders for your support and we look forward to updating you on our progress, in the coming quarters with that, we'd like to open the line up for questions, Michael.
We will now begin the question and answer session.
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At this time, we'll pause momentarily to assemble our roster.
In your first question comes from, Doug Ruth with Lennox financial services. Please go ahead.
Uh, Olivia and Claire. I want to offer my congratulations. The report was really fantastic. You really exceeded my expectations.
Thank you, Doug.
Uh, could you uh, explain uh, where did the increase from the uh, bibs toys and the Disposable products? Where did that increase come from?
You know, it's kind of across the board. It's in in all of the, the different product lines and it's at at several retailers. So we really just saw an increase there, um, pretty much everywhere.
Wonderful. And then, how do you feel about the company's inventory? Uh, I noted that it's a little bit lower than it was uh in the second quarter of fiscal 2025.
Um, I'm comfortable with the inventory levels. Um, we've had some shifts throughout this year and the timing of when some of the retailers are going to reset new programs. Um, but for the most part, you know, I think we're in a good place.
Okay. Uh I had looked at the Manhattan toy website. It looks really uh it's very inviting uh really professional. I was curious uh if you're getting any kind of feedback on how that's been going
Um, yes, I think that overall most people like the look of it, but more importantly, I think they like the ability to navigate and to purchase from the website. So, I think we've gotten a lot of good response.
Okay, and then, um, I know that the, the, the large, um, Lego Land opened up in, in, uh, China. And I was curious to hear how, um, Manhattan toys sales are going at legal land at this point.
Um, I think the sales are good at Lego Land. I think the park opened a little bit later than planned. Um, so that did impact I guess according to, to what we budgeted. But for the most part I think it's going well.
Okay.
Um, in the past you had talked some about that there was a trial and error period with the Manhattan toy advertising budget. And I noted that in the second quarter, there was a fairly large increase. I was curious how how you feel, uh, how you're doing with the budget and, uh, the kind of results that you thought were generated from The increased spend,
You know I think the sales are coming slower than we had hoped, um, but at the end of the day, I think it's important for us to invest in the advertising and the marketing in order to begin driving those sales.
Okay. And then, um, I know you had previously talked about, the, the redesigned Stella doll and then, uh, I saw there was this article in the New York Times, uh, noting that, um, Margaret, Meghan Markle had bought a Stella doll for herself. I was curious to hear if, um, if uh, uh, all the hype and stuff, is if that's helping sell some of the Stella dolls and maybe any anything you could share about that.
I mean, I think the Stella dolls have been well received. I mean, for the most part, it's a specialty store item. Um, it's not at placed at any of the major brick and mortar retailers. Um, so, obviously any, any kind of marketing we can get from it, especially from somebody such as Meghan Markle, it's got to help.
More questions. But perhaps I'll let somebody else asked some questions and maybe I can come back on the line.
Okay, thanks.
Again, if you have a question, please press star. Then 1 your next question comes from John Deere with Pinnacle.
Please go ahead.
Hi, uh, good morning. I was just wondering if you could
Elaborate on the consolidation of internal operations, and what that involves, and what the anticipated savings might be, as well as a timetable.
Website, whether it's your EDI, um, contracts. Uh, you know, our pretty much any IT contract. You have to have 1 for every single subsidiary. And so, we believe we have a lot of opportunities to get rid of some of those redundant costs by only having to have 1 contract for everything. Um, you know, we're still going through the process of everything that we can eliminate, um, but we do anticipate that throughout the year. Um, it will, it will be a little bit more, you know, with each quarter, you know, you've got contracts, you can't get out of them early will obviously try. Um, but for the most part, we're not able to get out of too many of them early, but as the year goes on and these contracts expire, then we'll be able to consolidate them.
Okay, and when you say the 2 subsidiaries, you're talking sassy and dojo.
Okay. All right, but you're keeping the brands.
The brands will stay. Absolutely.
You're just kind of consolidating the the back offices for both of those.
today, our sales and
Design teams have been very separated, and so we'll merge those design departments as well. And so we may see people who didn't sell Sassy now start selling Sassy and vice versa.
Okay, and I realized the contracts, uh, mature over, you know.
A period of months. But when will you have an idea as to what the, uh, savings might be just on a rough basis as a result of the consolidation?
we'll begin our budgeting process for fiscal 27. Um, when we come back from the Christmas holidays. And so, I think by, you know,
the end of February March, we'll have a better idea of the impact. So I'm not sure, you know, we don't forecast earnings. So I don't know how much information will give publicly but internally, we'll have a better idea.
By the end of February or so.
Okay. All right, good. Uh thank you very much.
Thank you.
Next question, is a follow-up from Doug Ruth with Linux financial services. Please go ahead.
Uh, Olivia and Claire. I know that, uh, the diaper bag situation has been somewhat fluid. I was wondering if you could maybe offer a little bit of commentary. What what, uh, what your thoughts are with that, uh, with that business?
Um, we've been struggling with the diaper bags as you're aware. Um, the the tariffs really, really hurt the diaper bag category in in total, um, and we've been struggling to find new sources and to keep those costs down and so we're still working on moving, um, from China to other countries.
In finding new sources to be able to bring the cost of those down.
and, and so, um, you you
Fundamentally though, you still feel that there's opportunities with um with diaper bags but possibly the country of production might have to change. Is that is that what you're thinking or that's true. So our design team has really done a great job of refreshing. The look, bring making them more modern. So we have some great designs, we just need to get the cost down in order to get them to retail.
Okay. And with that being true, both in in America and and also uh outside of America
Or right now we're really focusing on the US, um, US and Canada. But you know, I think there is an opportunity particularly on company branded uh, designs that we can go internationally. Um, we just haven't explored that yet, as we need to, we need to focus on the US first.
Okay. And then I know there was a a learning curve with the Manhattan toy and uh, you uh, I was just curious if you could offer any kind of commentary, uh how man head and toy might be doing it at Walmart at at this point
Manhattan toy at Walmart has been a mixed bag. I mean we've got a few skus that are continuing on and then we've um, had some that are dropped and then they're going to re be replaced with some other um, products. But Manhattan toy was always a higher-end um product. And so it wasn't placed in all stores for Walmart, it was kind of in what was considered. They're better departments at some of their stores.
And then, how about, um, International sales? I know you had reworked how you were Distributing the products outside of America. Uh, are you, uh, maybe you could just give us a little bit of update as far as how those sales are going now.
That have come internationally. We um, were at the K&J show in Germany, at the beginning of September, um, we've we're signing up some new Distributors and some countries. We we are not currently in and so that's, that's probably 1 of The Brighter spots in in the business right now.
Uh so uh the bright spot is international Manhattan, toy sales.
Is that Manhattan toy and Sassy. All right, mad man hadn't. Okay and then was it. Is there any particular country that seems to be doing a specialy? Well,
um,
there may be a few, I mean, I know that um, really I'm going to say Europe in general.
Are you encouraged that that trend could maybe continue looking, you know, through the balance of fiscal 2026?
I do think I do think so. Yes.
Okay.
And is there any particular uh uh skew that uh, the the people seem to like or
Oh internationally. Um, I mean, I know domestically our ring stacker is the number 1 bestselling item. I think that does pretty well internationally as well. Um, but other than that, I can't tell you, if there's a specific SKU, um internationally.
we do limit the
The ring stacker on the Amazon website sells uh, shows a 20,000 of those are sold per month. I mean that's in a phenomenal uh sale. Yeah.
It's our single best-selling toy item.
Yeah.
And has been for years.
When when was that Toyota, you know?
It's been around for quite some time. Um,
I, I think I think they had that toy when we acquired sassy baby, so I don't really know when it was invented, but it's been a a number 1 bestseller for many years.
Every child in in the world should have that. That particular toy. That that is a, we agree.
That is a fabulous toy.
We agree.
Oh, thank you very much for answering my questions. I am just really thrilled with how great that report was. Thank you for doing what you did. Thank you, Doug, we appreciate your support.
You're welcome.
This concludes our question and answer session.
I would like to turn the conference back over to Olivia Elliott for any closing remarks.
Thank you for your interest in our company. We look forward to speaking with you. Again, when we report our third quarter (Q3) results in February,
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect