Executive Summary
Crown Crafts reported Q1 2025 net sales of $16.21 million, down 5.3% year over year and 28.2% quarter over quarter, as inflationary pressures and retailer inventory reductions constrained demand. The quarter delivered a net loss of $0.322 million ($0.0312 per share) and a negative operating margin of 1.83%, driven by higher warehouse-related costs and an unfavorable absorption of overhead into cost of sales. EBITDA stood at $1.171 million with an EBITDA margin of 7.2%, reflecting ongoing cost discipline even as gross margin compressed to 24.5% from 27.7% a year ago. Cash flow remained robust, with operating cash flow of $8.01 million and free cash flow of $7.73 million, supporting deleveraging efforts and funding of strategic initiatives.
Management highlighted two major strategic developments: (1) the acquisition of Baby Boom Consumer Products for $18 million, financed via an $8 million term loan and revolver enhancements that extend the credit facility to 2029 and lift capacity to $40 million; and (2) the closure of the Manhattan Toys UK subsidiary as part of an efficiency program to optimize the international distribution model. Management characterized Baby Boom as immediately accretive to earnings and viewed the acquisition as expanding the bedding category, licenses (Bluey, Cocomelon, Ms. Rachel, Paw Patrol), and diaper bags, with potential cross-sell opportunities across Walmart, Target and international channels.
Looking forward, Crown Crafts sees ongoing focus on cost-structure optimization, product development (including Manhattan Toy), and warehouse footprint optimization. Management did not provide formal GAAP earnings guidance for the upcoming quarters, but signaled confidence in the earnings trajectory from Baby Boom and bedding improvements, while cautions remain regarding consumer spend volatility and retailer inventory dynamics. The company remains financially solid on an equity basis, with total assets of $76.4 million and a solid equity base (~$50.7 million) after the quarter, but net debt remained elevated at ~$15.2 million, underscoring the need for disciplined cash management as integration progresses.
Key Performance Indicators
QoQ: -28.20% | YoY:-5.32%
QoQ: -21.90% | YoY:-16.36%
QoQ: -121.21% | YoY:-142.67%
QoQ: -132.07% | YoY:-187.98%
QoQ: -131.84% | YoY:-186.67%
Key Insights
Revenue: $16.212 million (Q1 2025) versus $17.1 million prior year; YoY revenue change: -5.32%; QoQ revenue change: -28.20%.
Gross profit: $3.966 million; gross margin 24.46% (vs. 27.77% in Q1 2024).
Operating income: -$0.297 million; operating margin: -1.83%.
Net income: -$0.322 million; net margin: -1.99%; EPS: -$0.0312.
EBITDA: $1.171 million; EBITDA margin: ~7.22%.
Weighted average shares: 10.311 million.
Cash flow: net cash from operating activities $8.013 million; capex $-0.284 million; fr...
Financial Highlights
Revenue: $16.212 million (Q1 2025) versus $17.1 million prior year; YoY revenue change: -5.32%; QoQ revenue change: -28.20%.
Gross profit: $3.966 million; gross margin 24.46% (vs. 27.77% in Q1 2024).
Operating income: -$0.297 million; operating margin: -1.83%.
Net income: -$0.322 million; net margin: -1.99%; EPS: -$0.0312.
EBITDA: $1.171 million; EBITDA margin: ~7.22%.
Weighted average shares: 10.311 million.
Cash flow: net cash from operating activities $8.013 million; capex $-0.284 million; free cash flow $7.729 million.
Balance sheet: total assets $76.359 million; cash and equivalents $1.103 million; inventories $30.61 million; net receivables $15.822 million; PP&E net $15.878 million; total liabilities $25.703 million; total stockholders’ equity $50.656 million.
Debt: total debt $16.346 million; long-term debt $12.683 million; net debt $15.243 million.
Liquidity: current ratio 3.89; quick ratio 1.46; cash ratio 0.0874.
Dividend: $0.08 per share; management indicated a 6.7% annualized yield (based on the reported price at the time), though the segment quotes show a 1.57% dividend yield in the ratios.
Acquisition & financing: Baby Boom acquisition completed for $18 million, financed with an $8 million term loan and revolver extensions to July 2029; Baby Boom expected to be immediately accretive; UK subsidiary closed to reduce expenses; bedding and diaper bag growth potential remains a key driver.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
16.21M |
-5.32% |
-28.20% |
| Gross Profit |
3.97M |
-16.36% |
-21.90% |
| Operating Income |
-297.00K |
-142.67% |
-121.21% |
| Net Income |
-322.00K |
-187.98% |
-132.07% |
| EPS |
-0.03 |
-186.67% |
-131.84% |
Key Financial Ratios
operatingProfitMargin
-1.83%
operatingCashFlowPerShare
$0.78
freeCashFlowPerShare
$0.75
dividendPayoutRatio
-251%
priceEarningsRatio
-40.11
Management Commentary
Key takeaways from management commentary on the earnings call and investor presentation:
- Inflationary pressure dampened discretionary spend, with management noting that excluding one-time UK closure and acquisition costs, quarterly performance was broadly breakeven (Olivia Elliott).
- Baby Boom acquisition represents a strategic expansion into popular licenses (Bluey, Cocomelon, Ms. Rachel) and diaper bags, with management projecting immediate earnings accretion. The deal was funded via an $8M term loan and extended revolver facility to 2029 (Olivia Elliott / Craig Demarest).
- Margin pressures were attributed to higher warehousing costs and the timing of purchases, which led to unfavorable cost absorption into inventory; management underscored ongoing cost-structure optimization and potential warehouse rationalization (Craig Demarest).
- Management signaled positive early feedback on Manhattan Toy product development, including Wimmer infant line and Stella Doll updates, with cross-selling opportunities via Manhattan Toy’s distribution channel (Olivia Elliott).
- The UK subsidiary closure (Manhattan Toy) was pursued to optimize international go-to-market strategy, favoring a distributorship model, reducing overhead, and reallocating resources to the US footprint (Olivia Elliott).
- Management acknowledged retailer inventory volatility as a persistent challenge, noting erratic POS-driven orders and ongoing need to monitor inventory flows (Olivia Elliott).
- No formal quarterly or full-year forecast was provided for Manhattan Toy contributions; management suggested a multi-year timeline to achieve earlier projections for this segment (Olivia Elliott).
Our first quarter fiscal '25 results were impacted by the prolonged inflationary pressures facing consumers, limiting their discretionary income.
— Olivia Elliott
The acquisition is expected to be immediately accretive to earnings.
— Olivia Elliott
Forward Guidance
Given the lack of a numeric guidance framework, the forward view rests on qualitative factors:
- Near-term catalysts: integration of Baby Boom licenses (Bluey, Cocomelon, Ms. Rachel) and diaper bags with cross-selling; Bedding line recovery and Manhattan Toy product launches (Wimmer line, Stella updates).
- Margins: margin recovery depends on absorption of warehousing costs and overhead allocation; management expects ongoing cost optimization and potential favorable mix as Baby Boom scales.
- Balance sheet: debt reduction driven by cash from operations remains a priority; no material debt maturities in the near term but leverage will be monitored as Baby Boom is integrated.
- Macro risks: inflation, unemployment concerns, and potential recessionary pressure remain headwinds; any improvement in consumer sentiment and anticipated Fed rate cuts could support discretionary purchases in Crown Crafts’ categories.
- Monitoring points for investors: (1) actual contribution from Baby Boom and Manhattan Toy by quarter; (2) gross margin trajectory as warehousing costs normalize; (3) inventory levels at major customers and any changes in POS-driven demand; (4) progress on warehouse optimization and potential new locations; (5) net debt trajectory and free cash flow sustainability.