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    CROWN CRAFTS (CRWS)

    CRWS Q2 2025: Confident on $20M Baby Boom Annual Run Rate

    Reported on Nov 12, 2024 (Before Market Open)
    Pre-Earnings Price$4.47Last close (Nov 11, 2024)
    Post-Earnings Price$4.22Open (Nov 12, 2024)
    Price Change
    $-0.25(-5.59%)

    What went well

    • Strong Growth from Baby Boom Acquisition: The Baby Boom acquisition added $3.4 million in net sales this quarter and is expected to reach an annual run rate of $20 million. This demonstrates clear revenue growth potential and enhanced product portfolio.
    • Robust Brand Performance: Key licenses such as Bluey—described as "on fire"—and Ms Rachel are generating strong consumer interest, underscoring the company's market leadership in popular licensed products.
    • Proactive Strategic Initiatives: The company is advancing initiatives such as launching its direct-to-consumer channels before the holidays and planning a cost-saving warehouse consolidation, which should improve margins and support sustainable long-term growth.

    What went wrong

    • Warehouse Consolidation Risk: The company is still evaluating three potential warehouse sites with a plan to narrow them down only by the end of the fiscal year, which could result in delayed cost savings and continued higher operating expenses.
    • Margin Improvement Challenges: Efforts to enhance margins—especially for legacy brands like Manhattan Toy—are taking time since existing inventory and established pricing make rapid improvements difficult, potentially impacting profitability.
    • Tariff and Sourcing Vulnerability: Heavy reliance on Chinese manufacturing exposes the company to risks from potential tariff hikes or supply chain issues, which could raise costs if alternative sourcing options prove less efficient.

    Q&A Summary

    1. Acquisition Outlook
      Q: Expect $20M Baby Boom run rate?
      A: Management remains confident that Baby Boom will hit an annual run rate of about $20M once a full year of sales is achieved, noting fiscal 2025 reflects only 8 months of operations.

    2. Cost Structure
      Q: What’s the marketing/admin expense run rate?
      A: Excluding the one-time acquisition cost of $788K, expenses run at roughly 19% of sales, reflecting steady cost management.

    3. Legacy Sales Impact
      Q: How did legacy sales suffer recently?
      A: Legacy sales declined partly due to the loss of a $600K bib program, amidst generally weak point-of-sale performance.

    4. Margin Improvement
      Q: Are Manhattan Toy margins improving?
      A: Yes, margins are gradually rising as new products, pricing adjustments, and manufacturer changes drive improved profitability.

    5. Direct-to-Consumer
      Q: When will NoJo’s website launch?
      A: The NoJo direct-to-consumer website is expected to be live before the holiday season, enhancing online engagement.

    6. Sourcing Strategy
      Q: What is the plan for China sourcing?
      A: Nearly all products are sourced from China due to superior cost and infrastructure, although alternatives are under review if tariffs rise.

    7. Warehouse Consolidation
      Q: What’s the warehouse consolidation status?
      A: The company is considering three locations and expects to narrow its options to two by year-end, aligning with operational efficiencies.

    8. Legoland Expansion
      Q: Update on Legoland expansion?
      A: The Legoland segment is growing, with new products and park openings slated for summer 2025, underlining potential expansion opportunities.

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