Executive Summary

Q4 FY2025 net sales grew 2.9% year over year to $23.2M, but gross margin compressed 490 bps to 18.3% due to higher close-out mix and $324K in tariff costs; GAAP net loss was $(10.8)M ($(1.04) diluted EPS) driven by a non-cash goodwill impairment of $13.8M; adjusted diluted loss per share was $(0.04) .
Fiscal 2025 was essentially flat on sales at $87.3M, with gross margin down 180 bps to 24.4% and adjusted net income of $1.0M after excluding the impairment; cash ended at $0.5M with inventory reduced 6.4% YoY to $27.8M .
Management highlighted tariff escalation (additional ~30% on orders) and mitigation plans with suppliers; Baby Boom acquisition aided sales, while legacy categories, especially Manhattan Toy, faced softer demand and higher rent/royalty/marketing costs .
The Board declared a $0.08 quarterly dividend (paid July 3, 2025), and announced a CFO transition (Claire Spencer replacing Craig Demarest effective June 30, 2025), both potential near-term narrative catalysts alongside tariff developments and warehouse consolidation decisions .

What Went Well and What Went Wrong

What Went Well

Baby Boom contributed to Q4 sales growth (+2.9% YoY); management expects cross-selling opportunities across brand portfolio .
Operating cash flow for FY2025 was $9.8M, supporting dividends and debt service; inventories declined 6.4% YoY to $27.8M, reflecting active working capital management .
Strategic execution continued: Manhattan Toy fully integrated, ecommerce capabilities expanded (website redesign improving engagement), and international distribution using distributors progressing, with Legoland plush supply opportunity expanding including Shanghai park .

Quote: “Our fourth quarter sales were 2.9% higher than the prior year quarter… we acquired Baby Boom Consumer Products in the second quarter, fully integrated Manhattan Toy, continued to reduce operational costs, expanded ecommerce capabilities…” — Olivia Elliott, CEO .

What Went Wrong

Gross margin fell to 18.3% (from 23.2% prior-year) on higher close-out mix and tariff headwinds; adjusted net income below expectations .
Marketing and administrative expense rose 17% YoY in Q4 to $4.6M, driven by acquisition-related costs and Baby Boom-related spend; rent and royalty expenses also weighed on profitability .
Non-cash goodwill impairment of $13.8M led to removal of goodwill from the balance sheet, causing the Q4 GAAP net loss; borrowings were materially higher YoY to fund acquisitions and working capital .

Financial Results

Metric	Q4 2024	Q2 2025	Q3 2025	Q4 2025
Revenue ($USD Millions)	$22.6	$24.5	$23.4	$23.2
Gross Margin %	23.2%	28.4%	26.1%	18.3%
GAAP Diluted EPS ($)	$0.10	$0.08	$0.09	$(1.04)
Adjusted Diluted EPS ($)	N/A	N/A	N/A	$(0.04)
Marketing & Admin Expense ($USD Millions)	$3.9	$5.4	$4.4	$4.6

Notes: Q4 2025 adjusted EPS excludes the $13.8M goodwill impairment (tax-adjusted impact ~$10.4M) .

KPIs and Balance Sheet

KPI	Q4 2024	Q2 2025	Q3 2025	Q4 2025
Cash & Equivalents ($USD Millions)	$0.83	$1.98	$1.05	$0.52
Inventories ($USD Millions)	$29.71	$33.39	$32.38	$27.80
Long-Term Debt ($USD Millions)	$8.11	$18.76	$18.87	$16.51
Shareholders’ Equity ($USD Millions)	$51.60	$50.84	$51.08	$39.62
Operating Cash Flow (FY) ($USD Millions)	N/A	N/A	N/A	$9.8 (FY2025)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Quarterly Dividend per Share	Q4 2025	$0.08 (declared Feb 12, 2025)	$0.08 (declared May 14, 2025; paid July 3)	Maintained
Tariffs on Orders	FY2026 start	No quantitative guidance	“Goods we order will incur an additional 30% tariff”; mitigation underway with suppliers/retail partners	External increase; mitigation plan
Revenue/Margins/OpEx/Tax Rate	Q4 2025/FY2026	Not provided	Not provided	N/A

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2025)	Previous Mentions (Q3 2025)	Current Period (Q4 2025)	Trend
Tariffs/Macro	Monitoring 10% China tariffs; China remains best sourcing; evaluating alternatives	Watching policy updates; plan to absorb increases partly via suppliers and possible price increases	Additional ~30% tariff on orders; active mitigation with manufacturers/retail partners	Intensifying headwind; proactive mitigation
Warehouse/Footprint	Evaluating consolidation; expect fiscal 2026	Narrowed to two locations; leaning West Coast; timing balances leases and logistics	Focus shifted temporarily to tariff mitigation; decisions likely in FY2026	Progress paused short-term; decision still expected
Product Performance	Baby Boom added $3.4M Q2 sales; Manhattan Toy margin improvement focus; Walmart sell-through strong	Manhattan Toy holiday sales disappointing; redesigning Stella doll; online ad spend likely needs to increase	“Love Stella” relaunch; newborn/toddler differentiation; social media boost; diaper bag licensing interest	Mixed: toys recovering via refresh; diaper bags opportunity
Ecommerce/Tech	Manhattan Toy site redesign improving engagement; expanding DTC for NoJo/Sassy	Pullback in online marketing spend hurt sales; plan to invest more	Website UX better; driving more traffic via social media	Renewed investment; improving
International/Distribution	Using Sassy distributor to sell Manhattan Toy in Europe; progress at fairs	Distributors picking up Manhattan Toy after London office closure	Expect international sales to increase; Legoland Shanghai supply	Building momentum
Capital Allocation	Dividend maintained; revolver increased for acquisition	Strong OCF; plan to repay borrowings; 10% yield commentary	Dividend declared again; continue returning value	Stable dividends; focus on deleveraging

Management Commentary

“Gross margin was 18.3%, a 4.9% decrease versus the prior year quarter due to a higher mix of close-out sales… and $324,000 of higher tariffs associated with products imported from China.” — Press Release .
“Following the impairment charge, we have no goodwill in our balance sheet at March 30, 2025.” — CFO Craig Demarest .
“As of now, the goods we order will incur an additional 30% tariff. We are working with our manufacturers and our retail partners to absorb a portion…” — CEO Olivia Elliott .
“Our cash flow for the year was $9.8 million, providing us the ability to pay regular dividends and service debt.” — CFO Craig Demarest .
“We acquired Baby Boom… added diaper bags to our portfolio… licenses such as Bluey and Miss Rachel.” — CEO Olivia Elliott .

Q&A Highlights

Warehouse footprint: Management is weighing West vs East Coast options, balancing lease costs, transit times, and potential subleases; timeline likely FY2026 decisions with interim 3PL options if needed .
Manhattan Toy and ecommerce: Holiday sales were soft; Stella doll redesigned into “Love Stella” with infant/toddler differentiation; online advertising spend to be increased to drive DTC .
Legoland and licensing: Supplying plush for Shanghai park with expectation to become exclusive LEGO-branded plush in parks; sales to Legoland increased in FY2025 .
Diaper bags: Active discussions with licensors and retailers; tariffs impact diaper bag costs most; exploring cost containment to expand category .
Tariff mitigation: Expect suppliers to roll back first costs to offset a substantial portion of increases; changes implemented on a PO-by-PO basis .

Estimates Context

Consensus EPS and revenue estimates for Q4 FY2025 were not available via S&P Global; report compares actuals only and notes estimates unavailability [GetEstimates]*.
Actual results: Revenue $23.2M, GAAP EPS $(1.04), Adjusted EPS $(0.04); EBITDA approximately $0.27M* (actual) [GetEstimates]*.

Actual vs Consensus (Q4 FY2025)

Metric	Actual	Consensus
Revenue ($USD Millions)	$23.2	N/A*
GAAP Diluted EPS ($)	$(1.04)	N/A*
Adjusted Diluted EPS ($)	$(0.04)	N/A*
EBITDA ($USD Millions)	$0.27* [GetEstimates]*	N/A*

*Values retrieved from S&P Global.

Key Takeaways for Investors

Tariffs are the primary near-term headwind; management is proactively negotiating supplier cost rollbacks and working with retail partners to mitigate the ~30% additional tariff burden on orders .
Mix shift (close-out sales) and higher rent/royalty costs depressed Q4 margin; watch for normalization as inventory clears and warehouse consolidation decisions progress in FY2026 .
Baby Boom acquisition is contributing to sales and broadening categories (diaper bags, toddler bedding) with strong licenses (Bluey, Ms. Rachel); cross-selling across brands should aid growth .
Manhattan Toy recovery hinges on refreshed products and increased digital marketing; Walmart placement remains solid, and international distribution is scaling via partners .
Balance sheet levered vs prior year due to acquisition financing; nevertheless, FY2025 operating cash flow of $9.8M supports deleveraging and dividend continuity ($0.08 quarterly) .
Non-cash goodwill impairment cleans up the balance sheet and drove the GAAP loss; investors should focus on adjusted results and margin recovery trajectory .
Near-term catalysts: tariff policy developments, warehouse footprint decision, DTC ramp, and performance in Legoland and licensed categories; these are narrative drivers to monitor for estimate revisions and sentiment shifts .

CROWN CRAFTS INC (CRWS)·Q4 2025 Earnings Summary