Crown Crafts Reports Decline in Sales and Gross Profit Amid Acquisition of Baby Boom

Crown Crafts, Inc. reported a decline in financial performance for the three and nine-month periods ending December 29, 2024, compared to the same periods in the previous fiscal year. For the three months, net sales decreased to $23.4 million, down 1.9% from $23.8 million in the prior year. The nine-month figures also reflected a decrease, with sales totaling $64.0 million, a 1.6% drop from $65.1 million. The company attributed the decline primarily to reduced sales in its bibs, toys, and disposable products segment, which fell by $2.6 million in the latest quarter, despite a $2.2 million increase in bedding and diaper bag sales, bolstered by the acquisition of Baby Boom Consumer Products, Inc.

Gross profit for the three-month period decreased to $6.1 million, representing 26.1% of net sales, down from 27.0% in the prior year. For the nine-month period, gross profit also fell to $17.0 million, or 26.6% of net sales, compared to 27.3% previously. The decline in gross profit margins was attributed to changes in product mix and increased rental costs at the company's Compton facility. Marketing and administrative expenses rose significantly, increasing by 7.1% for the three-month period and 15.7% for the nine-month period, largely due to acquisition-related costs and the closure of the company’s UK subsidiary.

Crown Crafts completed the acquisition of Baby Boom on July 19, 2024, for $18.0 million, funded through a combination of a term loan and borrowings under its revolving credit line. The acquisition contributed $3.8 million in net sales for the three-month period and $7.2 million for the nine-month period. The company recognized $5.3 million in goodwill from the acquisition, reflecting expected synergies and intangible assets. The integration of Baby Boom is expected to enhance Crown Crafts' market position in the infant and toddler product segment.

Operationally, the company reported an increase in net cash provided by operating activities, which rose to $7.0 million for the nine-month period, compared to $4.1 million in the previous year. This increase was driven by higher accounts payable and accrued liabilities, offset by a decrease in net income. The company’s cash flow from financing activities also improved, with net borrowings under its revolving line of credit and a term loan contributing to a net cash inflow of $10.2 million for the nine-month period.

Looking ahead, Crown Crafts faces potential challenges due to new tariffs on imports from China, which could impact product costs and sourcing strategies. The company is currently evaluating the implications of these tariffs on its operations. Despite these uncertainties, Crown Crafts remains focused on leveraging its recent acquisition and improving its product offerings to enhance market share in the competitive infant and toddler products sector.