For the first quarter of fiscal 2025, Koss Corporation (KOSS Quick QuoteKOSS - Free Report) incurred a loss per share of 5 cents, widening from the 3 cents loss per share recorded in the same quarter of the previous year. 

Net sales for the quarter were $3.2 million, a 5.1% decline from the $3.4 million achieved in the first quarter of fiscal 2024. 

Koss Corporation faced a challenging quarter with a decrease in net sales, particularly affecting the domestic distribution and Education and Music segments. However, notable growth was achieved in its European markets and direct-to-consumer (DTC) channels, demonstrating strategic resilience in selected areas despite overall headwinds.

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The 5.1% year-over-year decline in sales was primarily due to lower demand from U.S. distributors and a notable reduction in orders from Education and Music customers. CEO Michael J. Koss acknowledged the timing of domestic orders as a contributing factor to the drop in U.S. distributor sales. 

However, these challenges were partially offset by strong international sales, driven largely by a more-than 30% increase from Koss’ two largest European distributors. This improvement was augmented by direct-to-consumer sales, particularly on Amazon, where the company saw record-setting sales days, reflecting the success of its Porta Pro Wireless 2.0 launch. Management noted that a favorable customer and product mix contributed positively to the gross margin, with higher-margin products and DTC sales positively influencing profitability.

The cost of goods sold for the first quarter of fiscal 2025 was $2 million, reflecting a decrease from $2.3 million in the first quarter of fiscal 2024. This cost reduction aligns with the decline in sales but, importantly, allows for an improvement in gross margin.

The gross profit reached $1.2 million, up from $1.1 million in the previous year. Gross margin climbed from 31.6% to 36.6%, benefiting from a more favorable product mix, especially with the launch of higher-margin products like the Porta Pro Wireless 2.0.

Selling, general and administrative (SG&A) expenses rose to $1.8 million from $1.5 million in the same quarter last year, indicating a 17.8% increase. This rise suggests heightened spending, likely associated with product launch initiatives and DTC channel enhancements to drive sales growth, especially in digital sales avenues.

From a cost perspective, Koss encountered an inventory write-off during the quarter for some older, excess items. However, the company sought to mitigate this impact by capitalizing on freight costs associated with upcoming seasonal inventory. Additionally, Koss saw a minor rise in freight rates and ongoing supply chain congestion, issues that have lengthened lead times and are anticipated to continue into the next quarter.

The net loss for the quarter was $0.4 million, wider than a loss of $0.3 million in the first quarter of fiscal 2024. This increase in losses reflects the mixed sales performance and higher SG&A costs that exceeded the revenue gains from new product lines and DTC channels.