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CROWN CRAFTS INC (CRWS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered steady revenue and profitability amid macro headwinds: Net sales $23.351M, gross margin 26.1%, net income $0.893M, diluted EPS $0.09; dividend maintained at $0.08 per share .
  • Year-over-year softness driven by Manhattan Toy holiday weakness and the prior-year loss of a bib program at a major retailer; partially offset by Baby Boom, which contributed $3.8M in Q3 sales following its Q2 acquisition .
  • Operating cash flow YTD strengthened to $7.0M and inventory reduced to $32.4M despite acquisition; borrowings rose to fund Baby Boom, with plans to repay via cash flow .
  • Key near-term narrative drivers: tariff exposure on Chinese imports with intent to offset via supplier price rollbacks, warehouse relocation to reduce lease costs, and increased digital advertising to support online toy sales .
  • CFO Craig Demarest announced retirement effective June 30, 2025, with vesting adjustments; transition plan underway—an incremental governance/continuity watch item for investors .

What Went Well and What Went Wrong

What Went Well

  • Cash generation and balance sheet resilience: “Year-to-date…cash flow from operations was $7 million…We expect to use our cash flow to repay our borrowings” .
  • Baby Boom integration and contribution: “completed the integration…Baby Boom…added $3.8 million in sales this quarter” .
  • Dividend continuity: quarterly dividend of $0.08 per share declared for April 4, 2025; reinforces capital return consistency .

What Went Wrong

  • YoY margin/earnings compression: gross margin 26.1% vs. 27.0% prior year; EPS $0.09 vs. $0.17 due to product mix, higher lease costs, and increased interest expense from acquisition debt .
  • Manhattan Toy holiday sales disappointment with consumer trade-down behavior; online toy sales underperformed after advertising pullback .
  • Ongoing headwinds from loss of Target bib program and constrained consumer discretionary spending impacted legacy businesses .

Financial Results

Quarterly Trend (oldest → newest)

MetricQ1 FY2025 (Jun 30, 2024)Q2 FY2025 (Sep 29, 2024)Q3 FY2025 (Dec 29, 2024)
Revenue ($USD Millions)$16.212 $24.460 $23.351
Gross Margin (%)24.5% 28.4% 26.1%
Net Income ($USD Millions)-$0.322 $0.860 $0.893
Diluted EPS ($USD)-$0.03 $0.08 $0.09
Income from Operations ($USD Millions)-$0.297 $1.509 $1.701

Year-over-Year Comparison (Q3 FY2025 vs Q3 FY2024)

MetricQ3 FY2024Q3 FY2025YoY Change
Revenue ($USD Millions)$23.801 $23.351 -$0.450 (decline)
Gross Margin (%)27.0% 26.1% -90 bps
Net Income ($USD Millions)$1.702 $0.893 -$0.809
Diluted EPS ($USD)$0.17 $0.09 -$0.08

Estimates vs Actuals

  • Wall Street consensus (S&P Global) for Q3 FY2025 was unavailable at time of analysis due to data access limits, so a formal beat/miss assessment cannot be provided. If required, we will update when SPGI access is restored.*

Balance Sheet and KPIs

KPIQ1 FY2025Q2 FY2025Q3 FY2025
Cash & Equivalents ($USD Millions)$1.103 $1.982 $1.053
Inventories ($USD Millions)$30.610 $33.394 $32.376
Total Assets ($USD Millions)$76.359 $99.350 $98.741
Long-Term Debt ($USD Millions)$1.466 $18.761 $18.870
Current Maturities of LT Debt ($USD Millions)N/A $1.990 $1.990
Borrowings Under Credit Facility ($USD Millions)——$20.9
Operating Cash Flow YTD ($USD Millions)——$7.0
Dividend per Share ($USD)$0.08 (declared Oct 4, 2024) $0.08 (paid Jan 3, 2025) $0.08 (to be paid Apr 4, 2025)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2025Not provided Not provided Maintained (no quantitative guidance)
Gross MarginFY2025Not provided Not provided; commentary on product mix and lease costs Maintained (no quantitative guidance)
OpEx (Marketing & Admin)FY2025Not provided No formal guidance; incremental acquisition-related costs noted ($186k in Q3) Maintained (no quantitative guidance)
TariffsCY2025N/AMonitoring 10% on Chinese imports; intent to offset via supplier price rollbacks; selective price increases if necessary New risk management posture
Warehouse RelocationFY2026N/AEvaluating two locations; decision targeted by June–August; aim to reduce lease costs starting FY2026 Added detail/timing
DividendOngoing$0.08 per quarter $0.08 per quarter (Apr 4, 2025 payment) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 FY2025)Trend
AI/Technology initiativesNot discussed Not discussed Unchanged
Supply chain & warehouseQ1: evaluating new warehouse to reduce lease expense ; Q2: rent increases at Compton facility pressured margins Two locations shortlisted; decision by June–August; considering West Coast due to freight/lead-time trade-offs Progressing toward decision
Tariffs/macroQ1: consumer discretionary pressure; potential Fed cuts sentiment Monitoring announced 10% tariffs on Chinese imports; plan to offset via supplier price rollbacks and selective pricing Heightened focus; mitigation plan
Product performanceQ1: Bedding segment encouraging; Manhattan Toy product development Manhattan Toy holiday sales disappointing; Walmart placement extended; Stella doll line refreshed Mixed; rebuilding via refresh
Regional/internationalQ1: Closed UK subsidiary, shifting to distributors Distributor model working; overseas distributors picking up Manhattan Toy Execution improving
Advertising/digitalQ1: Not highlightedPullback too far; plan to increase advertising to drive online sales Reinvesting to support e-comm
Licensing/diaper bagsQ2: Baby Boom added $3.4M sales; licenses (e.g., Eddie Bauer diaper bags) Strong interest from licensors/retailers; domestic focus first; new placements targeted for 2026 Building pipeline
Regulatory/legalQ1: N/ACFO retirement effective June 30, 2025; vesting adjustments disclosed in 8-K Management transition planning

Management Commentary

  • Olivia Elliott: “Our third quarter fiscal 2025 results reflect our continued ability to generate cash flow and profitability in a challenging macroeconomic environment…we believe we are well positioned for long-term growth when more favorable economic conditions return.”
  • On Baby Boom: “completed the integration…added $3.8 million in sales this quarter” .
  • On tariffs: “monitoring…10% on Chinese imports…we will need to work with our suppliers to absorb the increase and consider price increases” .
  • Craig Demarest: “Year-to-date…cash flow from operations was $7 million…Borrowings…were $20.9 million…reflecting amounts borrowed…to fund the Baby Boom acquisition.”

Q&A Highlights

  • Warehouse relocation: Two finalist locations; leaning West Coast given total cost/lead-time; decision expected by June–August; possible interim 3PL solution to bridge lease timing .
  • Diaper bags & licensing: Strong licensor/retailer interest; refreshed designs; domestic focus first; new placements likely in 2026 due to line timing .
  • Manhattan Toy: Holiday sales were disappointing; Walmart placement extended for at least another year; product refresh underway (e.g., Stella doll redesign) .
  • Tariffs mitigation: Immediate supplier price rollbacks targeted to offset tariff impact; selective retail price increases if needed; PO-by-PO basis enables rapid updates .
  • Digital advertising: Prior pullback curtailed online sales; plan to increase spend to drive e-commerce results .

Estimates Context

  • S&P Global consensus estimates for Q3 FY2025 (EPS, revenue, EBITDA) were unavailable due to access limits at the time of analysis; as a result, we cannot determine beat/miss versus Street for this quarter. We will update this section once SPGI access is restored.*

Key Takeaways for Investors

  • Operating momentum: Despite consumer headwinds, CRWS generated $7.0M YTD operating cash flow and reduced inventories to $32.4M while integrating Baby Boom—supports deleveraging trajectory .
  • Margin watch: Gross margin compression (26.1% vs 27.0% YoY) tied to product mix and higher lease costs; warehouse relocation in FY2026 is a structural lever to improve costs .
  • Category rebuild: Manhattan Toy holiday weakness and online softness are being addressed via product refreshes and increased advertising; monitor Q4/Q1 e-commerce inflection .
  • Licensing and diaper bags: Baby Boom introduces attractive licenses and a new category with growing interest—expect pipeline conversion in calendar 2026 retail resets .
  • Tariff risk management: Immediate supplier price rollbacks targeted to blunt 10% tariff impact; price increases may be selective—assess margin resilience as this executes .
  • Governance/continuity: CFO retirement in June 2025 with vesting adjustments—watch transition process and the replacement hire for financial discipline continuity .
  • Dividend stability: $0.08 per share maintained; in combination with deleveraging from cash flow, this supports income profile but watch capital allocation vs. growth initiatives .

Footnote: S&P Global consensus estimates were unavailable due to data access limits at the time of analysis; we will refresh the Estimates Context section once access is restored.*