Doug Ruth

Doug Ruth asked about the sales channels for the relaunched Groovy Girls line, its international availability, and the company's satisfaction with current inventory levels. He also sought updates on the Disney license in Canada, the new Canadian distributor for Sassy Toy and Manhattan Toys, the performance of international distributors, and the impact of increased advertising on Facebook and Instagram. Finally, Mr. Ruth inquired about future warehouse plans and the origin of the Representations and Warranties Insurance policy.

Answer

Crown Crafts President and CEO Olivia Elliott stated that Groovy Girls will initially be sold in specialty stores and manhattantoy.com, with international sales through distributors. She confirmed general satisfaction with inventory levels. Ms. Elliott reported that the Disney license in Canada began in January, with product rollout underway, and the new Canadian distributor partnership is progressing well since December/January. She noted over 30 international distributors in 50+ countries are performing well, though she couldn't provide specific Q3 international sales figures. Ms. Elliott indicated increased marketing spend, particularly on social media, is crucial for consumer engagement and will likely increase next fiscal year. Warehouse consolidation plans are on hold, with discussions resuming around November. Regarding the insurance policy, Ms. Elliott clarified it was specific to a recent acquisition and part of that agreement, not a standard practice.

Doug Ruth from Lenox Financial Services asked about the sales channels for the newly relaunched Groovy Girls, the company's inventory levels, updates on the Disney license in Canada, the new Canadian distributor for Sassy and Manhattan Toys, the status of international distribution, and the increased advertising budget. He also inquired about warehouse consolidation plans and the origin of the Representations and Warranties Insurance policy.

Answer

Crown Crafts President and CEO Olivia Elliott stated that Groovy Girls will initially be sold in specialty stores and on manhattantoy.com, with international sales through distributors. She expressed satisfaction with current inventory levels. Ms. Elliott provided updates on the Disney Canada license, which began in January, and the new Canadian distributor for Sassy and Manhattan Toys, both progressing well. She confirmed over 30 international distributors in more than 50 countries, with ongoing expansion efforts. Ms. Elliott also noted a continuous increase in marketing and advertising presence, including on platforms like Facebook and Instagram, with further budget increases planned. The warehouse consolidation plan is currently on hold, with discussions resuming around November. Regarding the insurance policy, Ms. Elliott clarified it was a mutual agreement specific to a recent acquisition.

Asked for updates on a wide range of topics including the warehouse consolidation, performance at the New York Toy Show, the Stella doll redesign and sales, supplying the new LEGOLAND in Shanghai, opportunities for new diaper bag brands, a potential child tax credit, the effectiveness of the new European distribution model, and the impact of the redesigned Manhattan Toy website.

Answer

The company responded that the warehouse decision is pending due to a focus on tariffs. The Toy Show was successful, and the redesigned 'Love Stella' doll line is performing well, boosted by a celebrity mention. The company is supplying plush for the new LEGOLAND in Shanghai and expects sales to grow. Diaper bag expansion is currently challenged by tariffs. The European distribution model is expected to increase international sales over time, and the redesigned website has been beneficial. The company was unaware of the final status of a potential tax credit for parents.

Asked for a Q1 revenue projection, clarification on the typical backlog duration, details about an expected Q2 revenue "bump," and the company's top three priorities for fiscal 2025.

Answer

The company declined to provide Q1 guidance. They explained that the long 4-year backlog is not typical but results from the nature of acquired military contracts. The Q2 "big bump" is anticipated because Honeywell will likely pull in shipments before transferring the product line. The top three priorities for 2025 are: launching their new AI-capable UMS product, in-sourcing subassemblies to maintain gross margins, and continuing opportunistic product line acquisitions.