EPS of $0.09 decreased by 49.5% from previous year
Gross margin of 26.1%
Net income of 893.00K
"“During the quarter, we completed the integration of our most recent acquisition, Baby Boom, which we are excited to report added $3.8 million in sales this quarter.”" - Olivia Elliott
Crown Crafts reported Q3 FY2025 net sales of $23.351 million, a narrow year-on-year decline of 1.89% versus $23.8 million in the prior-year quarter, driven by weaker online toy sales from a major retailer bid and partially offset by the Baby Boom acquisition, which contributed $3.8 million in quarterly net sales. Gross margin came under pressure at 26.1% (vs. 27% prior-year Q3), due to product-mix shifts and higher California warehousing lease costs. Operating income was $1.701 million (8.28% of revenue) with a 7.28% operating margin, down from a year-ago margin of 7.28% to 7.28%? The report shows 7.28% as the operating margin; net income was $0.893 million or $0.0859 per diluted share, versus $1.7 million and $0.17 in the prior year, implying a diluted EPS decline of roughly 49% YoY. Year-to-date cash flow from operations totaled $7.0 million, while free cash flow remained negative at approximately -$0.22 million for the quarter, reflecting ongoing acquisition-related spend and working-capital dynamics. Crown Crafts ended Q3 with cash and equivalents of about $1.05 million and total debt of $34.68 million (net debt ≈ $33.63 million), resulting in a modest leverage profile by historical standards but with elevated debt following the Baby Boom acquisition. The company declared a quarterly dividend of $0.08 per share and signaled ongoing use of operating cash flow to deleverage, though quarterly cash flow can fluctuate with working-capital timing. Management emphasized a multi-pronged strategy: (1) completing integration of Baby Boom and leveraging new diaper bag and infant/toddler lines, (2) optimizing the warehousing footprint to reduce costs in fiscal 2026, (3) protecting margins amid tariff shifts by absorbing some costs and potentially raising prices where needed, (4) expanding Walmart placements and international distributor channels for Manhattan Toy, and (5) continuing brand-refresh programs to drive discretionary categories when demand improves. The earnings call reiterated a cautious but constructive view on mid-term growth, with the 2026 horizon viewed as a potential inflection point as supply-chain and product-refresh programs mature.
Net Income: $0.893 million, Net Margin 3.82%, YoY -47.53%, QoQ +3.84%
Earnings per Share (diluted): $0.0859, YoY -49.47%, QoQ +3.37%
Financial Highlights
Revenue and profitability metrics (USD) for Q3 FY2025 vs FY2024:
- Revenue: $23.351 million, YoY -1.89%, QoQ -4.53%
- Gross Profit: $6.098 million, Gross Margin 26.1%, YoY -5.22%, QoQ -12.35%
- Operating Income: $1.701 million, Operating Margin 7.28%, YoY -26.90%, QoQ +12.72%
- Net Income: $0.893 million, Net Margin 3.82%, YoY -47.53%, QoQ +3.84%
- Earnings per Share (diluted): $0.0859, YoY -49.47%, QoQ +3.37%
- EBITDA: $3.326 million, EBITDA margin ~14.24%
- Cash flow: Net cash from operating activities -$0.036 million; Free cash flow -$0.22 million; Capital expenditure -$0.184 million
- Balance sheet: Cash and cash equivalents $1.053 million; Total assets $98.741 million; Total debt $34.678 million; Net debt $33.625 million; Total stockholders’ equity $51.076 million; Current ratio 3.36; Quick ratio 1.60; Days sales outstanding 98.29; Days inventory outstanding 168.89; Days payables outstanding 45.09; Cash conversion cycle 222.09 days
- Leverage and valuation (as of 12/29/2024): Debt ratio 0.351; Debt/equity 0.679; Long-term debt to capitalization 0.27; Total debt to capitalization 0.404; Price/earnings ~13.1; Price/sales 2.0; Price/book 0.916; Dividend yield ~1.74%.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
23.35M
-1.89%
-4.53%
Gross Profit
6.10M
-5.22%
-12.35%
Operating Income
1.70M
-26.90%
12.72%
Net Income
893.00K
-47.53%
3.84%
EPS
0.09
-49.47%
3.37%
Key Financial Ratios
currentRatio
3.36
grossProfitMargin
26.1%
operatingProfitMargin
7.28%
netProfitMargin
3.82%
returnOnAssets
0.9%
returnOnEquity
1.75%
debtEquityRatio
0.68
operatingCashFlowPerShare
$-0
freeCashFlowPerShare
$-0.02
dividendPayoutRatio
91.3%
priceToBookRatio
0.92
priceEarningsRatio
13.09
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management themes from the QQ3 2025 earnings call:
- Acquisition integration and near-term growth: Baby Boom integration completed; Baby Boom added $3.8 million in Q3 sales, with management highlighting diaper bags as a growth category and ongoing collaboration with licensors and retailers (Olivia Elliott).
- Margin dynamics and cost control: Gross margin decline attributed to product mix shifts and higher California warehousing lease costs; management said they will pursue footprint reductions and warehouse consolidation in fiscal 2026 to lower costs (Craig Demarest).
- Tariffs and sourcing strategy: Management discussed potential 10% tariffs on Chinese imports and indicated they expect supplier price rollbacks on the new tariffs to mitigate impact; if needed, selective price increases could be passed to retailers (Olivia Elliott).
- Warehouse strategy and timing: Two final location options (West Coast vs East Coast) with a lean toward West Coast; decision timing anticipated by August (Olivia Elliott).
- Manhattan Toy performance and advertising investment: Holiday season was challenging for Manhattan Toy due to consumer shifts; plan to restore online advertising spend to support online sales growth (Olivia Elliott).
- Walmart and international distribution: Walmart placement is ongoing and viewed as a stable channel; London office closed with a shift to distributor-based international sales for Manhattan Toy (Olivia Elliott).
- Real estate and operations: Minneapolis HQ downsizing contemplated; Eden Valley warehouse lease expiry approaching; subleasing and interim 3PL arrangements under consideration (Olivia Elliott).
“During the quarter, we completed the integration of our most recent acquisition, Baby Boom, which we are excited to report added $3.8 million in sales this quarter.”
— Olivia Elliott
“We’re monitoring the ongoing updates out of Washington regarding tariffs, particularly as it pertains to the announced 10% on Chinese imports, where virtually all of our products are made. As China remains our best sourcing option, we will need to work with our suppliers to absorb the increase and consider price increases.”
— Olivia Elliott
Forward Guidance
Forward-looking assessment: Crown Crafts is navigating a difficult macro environment with mixed growth signals. Near-term drivers include the Baby Boom integration, refreshed diaper bag and high-end toy lines, and ongoing cost-control measures (notably warehouse consolidation targeted for fiscal 2026). Management has signaled a focus on cash flow generation and debt repayment, with a plan to deploy operating cash flow to reduce borrowings. Tariff-related cost volatility remains a key uncertainty; the company expects some price rollback opportunities at the PO level from Chinese-sourced inputs and anticipates only selective price increases where necessary. The combination of stronger top-line opportunities in newer categories (diaper bags, premium toy refreshes) and potential cost savings from footprint rationalization could yield margin improvement in fiscal 2026, supporting cash generation and balance-sheet resilience. Investors should monitor: (1) progress and timing of warehouse consolidation (and any interim 3PL arrangements), (2) trajectory of online sales and marketing efficiency for Manhattan Toy, (3) tariff-related pricing actions and supplier adaptations via POs, (4) top-line progression from diaper bags and other refreshed lines, and (5) debt levels and liquidity as working-capital needs evolve. Management’s commentary suggests a cautious but constructive path to 2026, with the potential for margin stabilization and cash-flow expansion if cost savings materialize and new product cycles gain distribution traction.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CRWS Focus
26.11%
7.28%
1.75%
13.09%
BSET
53.00%
-8.41%
-2.73%
-6.89%
KBAL
37.60%
2.51%
3.17%
20.11%
HOFT
23.00%
-6.96%
-1.98%
-10.24%
NTZ
31.90%
-5.07%
-13.90%
-1.38%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Investment thesis: Crown Crafts trades at a modest multiple given a stabilizing growth trajectory supported by Baby Boom synergies and new product categories (diaper bags, refreshed Manhattan Toy lines) alongside near-term cost optimization in logistics. The company’s leverage is manageable, and cash flow generation remains present, though near-term free cash flow is negative due to acquisition-related spending. The key catalysts are (1) successful completion of the two-final-warehouse decision and transition to lower-cost logistics, (2) expansion of diaper bag and premium toy lines into new licenses and retail placements, (3) favorable tariff pass-through dynamics or supplier price rollbacks, and (4) sustained Walmart and international distribution momentum. Investors should monitor the timing and realization of warehouse consolidations, the trajectory of online toy sales, and the degree to which tariff dynamics translate into price adjustments or supplier concessions. If cost reductions and new product placements materialize as anticipated, Crown Crafts could see margin stabilization and improved free cash flow in 2026, supporting a constructive longer-term outlook.
Key Investment Factors
Growth Potential
Strategic expansion in diaper bags and refreshed infant/toddler lines (Baby Boom integration) could unlock new licensing partnerships and retail placements. Manhattan Toy brand refreshes and Walmart distribution provide scalable revenue channels, supported by ongoing product development and international distributor network growth.
Profitability Risk
Tariff exposure on Chinese imports and potential pass-through pricing; dependence on narrow online toy channels; past exposure to retailer bid programs (e.g., online toy bid) which can cause revenue volatility; elevated leverage post-acquisition and working-capital sensitivity to seasonality and supply chain disruptions.
Financial Position
Solid liquidity relative to debt with current ratio above 3x, but elevated total debt post-acquisition ($34.7m) and negative near-term free cash flow require close monitoring. Long-term perspective favorable due to diversified product categories, modest growth opportunities, and potential cost savings from warehouse consolidation in 2026.