Crown Crafts, Inc. (NASDAQ:CRWS) reported its fourth quarter and full fiscal year 2024 results, showcasing improved earnings and gross margin performance compared to the prior year period.

Financials

Fourth Quarter Results

For the fourth quarter of fiscal 2024, CRWS reported net sales of $22.6 million, up 4.5% from $21.6 million in the prior year quarter. This increase was driven by a full quarter's contribution from the acquired Manhattan Toy business, which offset reduced orders from customers and the impact of macroeconomic pressures on consumer spending.

Gross profit in the fourth quarter was $5.2 million, up 10.7% year-over-year. The gross margin expanded to 23.2% from 21.9% in the prior year quarter, primarily due to the effect of reserves recorded in the prior year associated with a customer bankruptcy.

Marketing and administrative expenses in the quarter were $3.9 million, relatively flat compared to the prior year period despite the addition of Manhattan Toy's costs. CRWS worked throughout fiscal 2024 to reduce costs across both the legacy business and the newly acquired Manhattan Toy operations.

Net income for the fourth quarter was $1 million, or $0.10 per diluted share, compared to $828,000, or $0.08 per diluted share, in the prior year quarter. This 21.3% year-over-year increase in net income reflects the improved gross margin performance.

Full Fiscal Year 2024 Results

For the full fiscal year 2024, CRWS reported net sales of $87.6 million, up 16.8% from $75.1 million in the prior fiscal year. This increase was driven by $18.5 million in net sales from the Manhattan Toy acquisition, partially offset by a decline in the company's bedding, blankets and accessories segment.

Gross profit for fiscal 2024 was $23 million, up 15.9% from the prior year. However, the gross margin declined slightly to 26.2% from 26.4% in the prior fiscal year, primarily due to a rent increase at the company's California warehouse.

Marketing and administrative expenses for the full year were $16.1 million, up 27.3% from $12.7 million in the prior fiscal year. This increase was largely attributable to the addition of Manhattan Toy's costs, including higher credit losses and advertising expenses.

Net income for fiscal 2024 was $4.9 million, or $0.48 per diluted share, compared to $5.7 million, or $0.56 per diluted share, in the prior fiscal year. The 13.4% year-over-year decline in net income was driven by the higher marketing and administrative expenses.

Liquidity

CRWS's balance sheet remained strong, with cash and cash equivalents of $830,000 at the end of fiscal 2024, compared to $1.7 million at the prior fiscal year-end. Inventories decreased to $29.7 million from $34.2 million, and long-term debt was reduced to $8.1 million from $12.7 million.

The company's operations generated $7.1 million in net cash from operating activities during fiscal 2024, compared to $7.7 million in the prior fiscal year. Free cash flow for the year was $6.3 million.

Business Overview

CRWS's business segments include Bedding, blankets and accessories, and Bibs, toys and disposable products. In fiscal 2024, the Bedding, blankets and accessories segment reported revenues of $32 million, down 12.8% from the prior fiscal year, due to continued softness in the infant and toddler bedding and blankets market, the impact of retailers managing inventory levels, and reduced consumer spending.

The Bibs, toys and disposable products segment, which includes the acquired Manhattan Toy business, generated revenues of $55.6 million in fiscal 2024, up 45.1% from the prior fiscal year. This strong performance was driven by the $18.5 million contribution from Manhattan Toy.

Outlook

Looking ahead, CRWS remains focused on managing the ongoing macroeconomic challenges, including inflationary pressures and their impact on consumer spending. The company is working to expand its product offerings across its brands, particularly in the toy category, which now represents the largest portion of its sales portfolio.

The integration of the Manhattan Toy acquisition continues to progress, with the brand's IT conversion nearing completion and the company having adjusted advertising spending and worked through excess inventory to improve profitability. CRWS sees opportunities to leverage its relationships with major retailers and specialty stores to gain additional shelf space and drive future growth for the Manhattan Toy brand.

While the company did not provide specific financial guidance for fiscal 2025, management expressed optimism about the long-term potential of the Manhattan Toy business, stating that the goal is to grow its sales to $24 million over the next three to four years.

Conclusion

CRWS's strong balance sheet, with reduced debt and improved inventory management, positions the company well to navigate the current economic environment and consider favorable acquisition opportunities that can strengthen its existing product categories.

Overall, Crown Crafts' fourth quarter and full fiscal year 2024 results demonstrate the company's ability to adapt to market conditions, integrate acquisitions, and maintain profitability. The expansion of the toy category, combined with the company's focus on cost management and balance sheet optimization, suggest CRWS is well-positioned for future growth and value creation.