CC
CROWN CRAFTS INC (CRWS)·Q1 2026 Earnings Summary
Executive Summary
- Q1 FY26 net sales declined 4.5% YoY to $15.5M; gross margin compressed to 22.7% from 24.5% YoY, and diluted EPS was a loss of $0.10, primarily due to tariff impacts and inventory shortages tied to tariff management .
- Category mix: bedding and diaper bags grew +$0.54M, offset by declines in bibs, toys and disposables (-$1.3M); Baby Boom contributed $2.1M to net sales .
- Management cited tariff-driven strategy shifts and retail inventory drawdowns; noted “encouraging” July sales and an expanded Disney license (Canada, diaper bags), while maintaining the quarterly dividend at $0.08 per share .
- Consensus estimates from S&P Global were not available for EPS or revenue, limiting beat/miss analysis for this microcap; actuals shown where available (values retrieved from S&P Global)*.
- Near-term catalysts: tariff mitigation via price increases flowing through by September, expanded Disney licensing, and stabilization in Manhattan Toy redesign pipeline; dividend continuity reinforces capital return strategy .
What Went Well and What Went Wrong
What Went Well
- Expanded Disney license to Canada and diaper bags; management emphasized strategic partner relationships and optimism from July sales: “we have extended our license agreement with Disney… very encouraged by the numbers we’ve seen for sales in July” .
- Baby Boom acquisition added $2.1M to Q1 sales and supported category growth in bedding and diaper bags (+$0.54M) .
- Dividend of $0.08 per share maintained, underscoring balance sheet confidence despite macro headwinds .
What Went Wrong
- Gross margin fell to 22.7% (vs. 24.5% YoY) and OpEx rose to 30.5% of sales, driven by increased tariff costs and acquisition/advertising spending; net loss widened to ($1.10M) vs. ($0.32M) YoY .
- Inventory shortages from tariff management strategy constrained sell-through; retailers reduced weeks of supply from ~10 to 1–2, depressing orders and causing lost sales .
- The tariff backdrop intensified; management acknowledged necessity of executing price increases across customers and further mitigation actions through September .
Financial Results
Values retrieved from S&P Global*
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- Strategy and licensing: “we… extended our license agreement with Disney. The Disney license now extends our reach to sales in Canada and will include diaper bags…” .
- Demand and retail dynamics: “we are very encouraged by the numbers we’ve seen for sales in July… retailers [reduced] in stock levels… from about ten weeks… to one to two weeks” .
- Tariff mitigation: “we started getting our price increases with our customers… all the way through September… we’re hopeful that we’ve done enough to mitigate the cost” .
- Balance sheet and capital return: Cash stable, dividend declared; “at this point in time [re: dividend] we’re not concerned” .
Q&A Highlights
- Retail sourcing opportunity: Potential upside if Target reduces direct sourcing; management “hopeful” this opens opportunities .
- Profitability under 30% tariff: Management implementing price increases and supplier negotiations; expresses confidence in mitigation by September .
- Manhattan Toy stabilization and redesigns: Operations stabilized; Stella lines redesigned and released; further plush expansion underway .
- Legoland Shanghai: Initial set supplied; received reorder bigger than expected—positive indicator .
- Retail inventory behavior: Major retailer cut weeks of supply from ~10 to 1–2; CRWS adjusting inventory to meet demand volatility .
- Dividend sustainability: Board and management confident; no current concern about reduction .
Estimates Context
- S&P Global consensus estimates for Q1 FY26 revenue and EPS were not available; therefore, formal beat/miss vs. Street cannot be assessed for CRWS this quarter (values retrieved from S&P Global)*.
- Actuals: Revenue $15.478M and diluted EPS ($0.10); EBITDA actuals in S&P reflect ($0.717M), but lack of consensus means no surprise calculation (values retrieved from S&P Global)* .
Key Takeaways for Investors
- Tariffs are the principal earnings headwind; price actions and supplier negotiations are underway, expected to mitigate by September, but margin risk persists until mitigation fully flows through .
- Category momentum is mixed: bedding/diaper bags up (+$0.54M), but toys/bibs/disposables down (−$1.3M); Baby Boom contribution ($2.1M) supports revenue diversification .
- Retailer inventory drawdowns (1–2 weeks of supply) create near-term order volatility; management reports encouraging July sales—watch Q2 sell-through and replenishment cadence .
- Brand/licensing tailwinds: Disney license expansion and Manhattan Toy/Stella refresh should aid product appeal; Legoland reorder in Shanghai is a positive datapoint .
- Balance sheet/liquidity: Inventories seasonally increased into Q1 ahead of programs; total debt declined sequentially, revolver availability $12.2M provides flexibility .
- Dividend maintained at $0.08; management/Board express confidence in sustaining payouts, a key element of capital return strategy .
- With limited sell-side coverage and unavailable consensus, focus shifts to operational execution, tariff mitigation, and licensing-driven growth as near-term stock narrative catalysts .
Notes:
- Consensus estimates and EBITDA actuals where noted are values retrieved from S&P Global*.