Crown Crafts, Inc. (CRWS) Q4 2026 Earnings Report, Transcript and Summary

Greetings, and welcome to the Crown Crafts Fiscal Fourth Quarter 26 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Olivia W. Elliott, Chief Executive Officer. Please go ahead.

Thank you, operator, and welcome, everyone, to this morning's call. We are glad you can join us. We generated solid quarterly results in an operating environment that continues to be challenging. This reflects the strength of our business model, the broad appeal of our brands, and, of course, the hard work of our dedicated team. Despite global conflicts, fluctuating tariffs, higher gas prices, and consistently high inflation weighing on the American consumer, we were able to hold net sales almost flat with the prior year at $22 million bringing our full year net sales to more than $80 million. In addition, our gross margin improved to nearly 23% during the fourth quarter, up 460 basis points versus the prior year period. The result was positive net income for the quarter, and operating cash flow of more than $8 million for the fiscal year. An exciting fourth quarter highlight was February announcement of the relaunch of Manhattan Toy's Groovy Girls. Which we kicked off at the North American International Toy Fair following a ceremonial ringing of the closing bell at Nasdaq. This iconic collection of soft fashion dolls, has already been met with a strong reception since its official rollout to specialty retailers just last month. And it is perfectly timed to tap into today's retro inspired consumer market. We are excited about the potential for this beloved brand and other opportunities as we continue to focus on innovative internal product development to expand our product offering. In addition to driving revenue growth, another priority of ours is margin expansion and the resulting bottom line growth. We believe our gross margin of 22.9% for the quarter while improved over the prior year's results, has further room to expand as we grow sales, improve operating leverage, and continue our spending discipline. This includes our continued efforts to execute on cost initiatives, with our previously communicated plan to consolidate certain internal operations to eliminate redundant activities and create a leaner operating structure. Turning to our balance sheet and capital allocation. Which Claire will provide further details on in a moment, As I mentioned, we generated more than $8 million of operating cash flow during fiscal 26 despite the soft operating environment. And we continue to have sufficient liquidity to support our growth plans. Our capital allocation strategy is well balanced And during the fourth quarter, we paid our regular dividend while continuing to invest in internal product development and marketing efforts to grow our market share over time. In closing, Crown Crafts is executing effectively. We are focused on driving our long term growth opportunities, while managing inventories, tightly controlling costs, and strategically allocating capital toward growth initiatives. As well as returning capital to our loyal shareholders. Looking ahead, our foundation for success includes our strong brands and licenses, our valued retail and licensing partners, our solid balance sheet, and, of course, the talented people who drive our success each day and will ultimately help us create meaningful shareholder value over time as a leading producer of infant, toddler, and juvenile consumer products. With that, I will turn it over to Claire to take us through additional financial details on our quarterly results.

Thank you, Olivia, and thanks, everyone, for being with us today. For the fourth quarter of our fiscal year, we generated net sales of $22.4 million despite continued softness in consumer spending. Which compares to $23.2 million in the year ago fourth quarter. Our gross profit of 5.1 million represented a 22.9% margin which was up from 18.3% in the fourth quarter of 25. As Olivia mentioned, this 460 basis point improvement was driven by our strategic pricing initiatives and more favorable mix of higher margin products. We were able to hold marketing and administrative expense almost entirely flat versus the prior year quarter at $4.6 million despite continued inflationary dynamics. We were also able to reduce interest expense of 194 thousand for the fourth quarter of 26 compared to 333 thousand a year earlier. Benefiting from a sizable reduction in debt. The bottom line result was positive net income for the quarter of 280 thousand Dollars which improved from a loss of approximately $11 million in the prior year fourth quarter due to a noncash goodwill impairment charge in the year ago period. Our basic and diluted earnings per share were $0.03 up from a loss of $1.04 per share in the prior year. Moving on to our balance sheet. We ended the fiscal year with total assets of 70.7 million. Inventories were $28.4 million as of March 29, up slightly from 27.8 million at the end of fiscal 25. Our total debt balance was $14.1 million at year end, a reduction from $18.5 million at the end of fiscal 25. And we had $12.5 million of undrawn availability on our revolving credit facility. Lastly, as Olivia referenced, our net cash from operating activities was $8.3 million for the fiscal year, further supporting our solid financial foundation and the execution of our business plan. Wrapping up, we executed well during the final quarter of the fiscal year despite a less than robust macro environment as we were able to significantly improve our gross margin versus the year ago quarter. We have the necessary competitive advantages, strategic plans and financial strength for our skilled team members to continue their efforts day in and day out. Grow the business, and enhance profitability as we move into fiscal year 27. With that, operator, Olivia and I would be happy to take questions. If you could please open the lines.

Thank you. Please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Ethan Calder with Mountain Equities. Please proceed with your question.

Well, good morning. Thank you for taking my call. And Sounds like a great quarter. And a great performance. I just wanted to ask regarding, generally, relationships with Walmart or Target. And anyone else, and if you could tell us how that stands, if you are pursuing other relationships. And if you can just give us some information on that. Thank you.

Sure. Relationships with Walmart and Target remain good. We have multiple salespeople that talk to them regularly. I meet with people at trade shows as well. And as always, we are always searching for other retail partners. I mean, we have got plenty of mass retailers, specialty stores, focusing a little bit on some international sales. there is not as many out there that are as big as Walmart, Target, and Amazon for sure. But we look for new opportunities all the time. Thank you very much. Thank you.

Thank you.

Our next question comes from the line of Douglas Scott Ruth with Lennox Financial Services. Proceed with your question.

Olivia and Claire, I want to congratulate you. I thought you did a fabulous job. it is a really strong report. Thank you for what you are doing on behalf of the shareholders.

Thank you, Douglas.

Could you give us some more commentary on what you are thinking about Groovy Girls. Is there-- is the higher inventory possibly a reflection of inventory to support that rollout.

There is an inventory that is at year end for Groovy Girls. Probably the majority of the higher inventory is just the capsule of the tariffs into the inventory cost. Which obviously increased the value of the inventory over the fiscal year.

And then as far as Groovy Girls, when you are saying we are thinking about Groovy Girls, were you just asking about inventory or more in general?

Well, more in general. What can you tell us about sales and also the way you are you are selling the product? I think you are you are using some newer, methods. Maybe you could share a little bit about that.

So right now, we rolled out sales to the specialty stores beginning May 1. And so that is when we started shipping to the specialty store. So it probably set in the stores until later in the month. And that is really I mean, both specialty stores in The US and then through our distributor into Canada which those sales have not even set in Canada yet. And then we plan to roll out in the fall at Amazon and then also internationally when we go to the K&J trade show in September. So right now, it is only at specialty stores, and we are very happy with the sales so far. I think it is-- you know, we did not have a lot in our budget for fiscal 27, but we are happy with where we are so far.

And then we will in the fall, Amazon will have the basically, the whole full offering of whatever you are selling for Groovy Girls.

Correct. Okay. Correct.

Oh, that sounds terrific. And I know in the past, you, part of the real big success with Groovy Girls was the relationship you had with Target Is that something that you are also thinking about?

At this point in time, we are not talking about rolling out Groovy Girls into mass. that is possibly an opportunity for the future, but we have probably changed the product a little bit.

So that we are not selling the same exact product in the mass as we are in the specialty.

Okay. And what is What can you tell us about the tariffs? Are you expecting a tariff refund? Have you received a tariff refund?

So we have applied for the tariff refund. As of 2 weeks ago, I think it is the number we put in the 10-K. We had received about $175 thousand back. Of which I think $165 thousand was actually tariffs and maybe $10 thousand was interest.

It was about a $5.5 million number that we requested and we are hopeful. You know, anything can happen, but we have received some. And so we are we are hoping that we will receive what we requested.

Very good. And then what is the status now? I know that the Eden Valley warehouse, that lease is going to expire I believe, at the end of this month. What is the company thinking? What is your strategy here?

We extended that lease to be more around the same time as the Compton facility. And then we are going to restart looking for a new warehouse. And with plans to move in the next 2 years closer to the expiration of both of those leases.

Okay. And then how about the Stella doll? That doll, I know you hit redesigned it. What can you tell us about how is that been going since the redesign?

Stella's doing well. Once again, it is mostly in specialty store, Amazon, on our own website, but Stella sales are doing fine.

Okay. And then I noticed that the facility, your the corporate headquarters that you had shrink the size of that quite a bit. Could you maybe offer any kind of commentary on that when you signed the new lease?

Yeah. So we are old headquarters where we had been for almost 25 years, that needed a little bit of updating, and the price was going up substantially, so we decided that we would move not far down the road to a new facility, less space. Everything is a new build out, and so everything fresh and new and we are all on 1 floor and altogether, so we are enjoying that.

Very good. And what are you thinking about, with the diaper bag business? Now?

We are still working on diaper bags. As you know, with the tariffs, that was the worst impact was on the diaper bags. And then Target had taken the diaper bags direct source. Walmart shrunk the space in half for what they were carrying. And so we are working right now on kind of redeveloping and thinking again about the diaper bags. Still have a little bit of placement. We have 1 bag at Walmart, and then we are selling on Amazon in our own warehouse.

Okay. And then I know that, now the Manhattan toy Minneapolis office that lease is down to less than 1 year. Are you starting to think about what you might be doing with that facility?

Yes. So we are going to move out of that facility. Obviously, it is way too big for what we need. And we are still kind of trying to figure out what we want to do.

Oh, okay. So maybe more information in the next couple quarters? That might be reasonable. Sure.

Yeah. Oh, okay.

And then, I am also pleased that, that you have been able to increase the advertising budget Can you maybe talk about that at all?

Yeah. We did not. We have increased the advertising budget. We have also added a few people on our marketing team in order to build out our photography, our social media, and then also advertising, you know, primarily on dot coms and for our own warehouse. I mean, our own website. Sorry.

Okay. And I have you been pleased with how that is been going?

Yes. I mean, we are certainly at the beginning of our marketing efforts, you know, just expanding that. But so far, yes.

Okay. And then I also see that the international sales are growing. there is not often a lot of commentary about that. Are you can you tell us you know, I feel like that is really been successful. Could you could you share us share what is working and how that is been growing?

So there is really 2 main efforts that I think we are seeing flow through there. 1 of them is that we have, you know, we have worked since the Manhattan toy acquisition on consolidating the distributors for Manhattan Toy and Sassy so that we have, you know, instead of having 2 distributors or really, it was not even 2 distributors in a lot of places, but Manhattan Toy was going direct to the retailers and then Sassy was using distributors. So we have consolidated those sales into all of the Sassy distributor model. And that is helped. And then also, We Changed Distributors In Canada, and I think that is been very successful for us. That happened not long after probably, sometime in December. Well, that made a positive difference.

Yes. Yeah.

Okay.

My last question is, I know that the, that new facility had opened up the LEGOLAND facility in Shanghai, and you had previously mentioned that the company was getting some growth in FICO land. Could you just offer a little bit of commentary about LEGOLAND and what is happening for the company there?

Yes. Should we did ship Shanghai LEGOLAND. They opened a little bit later than we expected, so sales were not what we had hoped they would be for, that opening. But we did ship to them, and, actually, that is probably leading to part of the international sales increase as well.

Okay. Well, thank you for answering my questions, and congratulations to you and Claire and the board of directors. And thank you again for what you are doing on behalf of the shareholders.

Great. Thank you. Thank you.

Our next question comes from the line of Anthony with Sidoti and Company. Please proceed with your question.

Good morning, everyone, and thanks for taking the question. So the certainly nice gross margin expansion. You mentioned that part of the reason for that was the strategic pricing actions that you took. So any way you guys can quantify for us, as far as, you know, the extent of pricing had a benefit, and then how do you see that going forward, whether you think that is sustainable on an ongoing basis.

We really do not quantify that, but I can explain probably the majority of it is that when we got the tariffs hit, it is a delayed time period from when you can raise your prices with the retailer. So a lot of them have a 60- or a 90-day window, And then we also waited at the beginning of the fiscal year to see where the tariffs would actually land because, obviously, we did not want to go to the retailer and say, hey. We are raising your prices 150%. And so we waited a little while to see where the tariffs would land. And so the last of the price increases really did not go through till sometime in the third quarter. So I think what we are seeing in the fourth quarter is the benefit of having the entire quarter have the retail price increases equal the tariffs or be closer to that? Thank you very much, and best of luck. Thank you. Thank you.

Our next question comes from the line of John Deysher with Pinnacle Value Fund. Please proceed with your question.

Hi. Good morning. Thanks for taking my questions. I was just curious, is there any thing good morning.

Anything on the horizon that might change your outlook for tariffs I know the last time we spoke in February, there was nothing imminent, but I am just curious at the fluid situation.

Is there anything on the horizon that might alter the tariff situation?

I do not think so. I think, you know, we keep up with the news the same as you, and you really never know what is gonna happen. But right now, it feels like it is stable. it is a steady state.

Okay. Good. When did you move from the old headquarters to the new? And is there any significant dollar savings from doing so?

We moved at the end of April, and there is really no significant dollar savings They were really going up on the rent at the old building, and so the move allowed us to keep the rates pretty much close to what we had been paying before. Okay.

Alright. that is good to hear. And in terms of the bigger real estate situation, So you have extended Eden Valley's lease to match kind of what-- when Compton matures. I think that is May 2028. You are going to move from Downtown Minneapolis When do you start discussions with potential replacements for Compton Is that the end of the year or a year from now, or when do you start looking for alternatives?

Pretty much the end of the calendar year. So starting in late fall, maybe beginning of winter, we will start looking again at potential really at potential cities and then identify exactly where we want to move. And then following that, we would start looking at specific sites.

It takes about 18 months 18 months from when to when?

From identifying where we wanna move to be I mean, because most of most likely, it is gonna have to be a build out and so dealing with all of that. And then we would not want to just move everything at 1 time, so we would start moving maybe Eaton Valley earlier and then move Compton a little bit-- you know, maybe a month or 2 behind that.

Okay. Do you have a laundry list of locations that are at the top of the list right now?

We do not right now. When we had looked at it, in about a year ago, 18 months ago, I think we had narrowed it down to Reno, Houston, and Memphis, and we are probably heavily leaning towards Reno. But at this point in time, I think we are gonna probably I do not want to say, start completely over, but we may add some more cities to the list and look at those.

Okay. Alright. Good. And that will start later this year or early calendar 2027?

Yes. Okay.

Good. Great. Thanks very much.

Thank you. Thank you.

Ladies and gentlemen, as a reminder, please press 1 on your telephone keypad. Pause a moment to allow for any other questions. Our next question comes from the line of Robert Johnston with Intertek Group. Please proceed with your question.

Good morning. Just a very sort of top level question. You probably cannot give me a direct answer, but just looking at the cash flow generation and the valuation of the company, is the dividend is that sort of a sacrosanct issue for the company? Is that something you consider quarterly? Just any commentary around the dividend policy would be nice.

We really do not have a dividend policy per se. The board considers it every single quarter, and we talk about it at that time. Okay. Thank you. Thank you. Thank you.

Ladies and gentlemen, this concludes our question-and-answer session. I will turn the floor back to Ms. Elliott for any final comments.

Thank you, and thank you again, everyone, for joining today's call. We appreciate your support and look forward to providing additional updates as we move through our new fiscal year. If you have any additional questions, please do not hesitate to reach out. Thanks again.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.