Shares of Koss Corporation (KOSS Quick QuoteKOSS - Free Report) have declined 5.7% since the company reported its earnings for the quarter ended Sept. 30, 2025, underperforming the S&P 500 index, which registered a modest 0.4% decline over the same period. The stock has also seen a steeper drop of 10.1% over the past month, in contrast to the S&P 500’s 2.1% gain, highlighting a period of investor caution despite the company’s return to profitability.

For the fiscal first quarter, Koss reported earnings per share (EPS) of 3 cents against a loss of 5 cents per share a year earlier, reflecting better cost discipline and higher-margin sales.

The company posted net sales of $4.1 million, a 27.1% increase from $3.2 million in the year-ago quarter. This marks a strong turnaround driven by improved demand dynamics. 

Net income stood at $0.2 million, a reversal from the net loss of $0.4 million reported in the same period last year.

Koss Corporation Price, Consensus and EPS Surprise

Koss Corporation price-consensus-eps-surprise-chart | Koss Corporation Quote

Other Key Business Metrics

The company’s gross profit surged to $1.6 million from $1.2 million a year ago, with gross margin expanding 340 basis points to 40% from 36.6%. This improvement was primarily attributed to a favorable shift in the customer and market mix, led by increased sales in the direct-to-consumer (DTC) channel.

Selling, general and administrative (SG&A) expenses were $1.7 million, down from $1.8 million in the prior-year quarter, contributing to a reduction in operating losses. The company narrowed its operating loss significantly to $0.05 million from $0.6 million last year. Interest income also improved, increasing to $0.3 million from $0.2 million, helping to lift overall profitability.

Management Commentary

Chairman and CEO Michael J. Koss credited the revenue growth to a large order from the company’s biggest Education sector customer and a 22.5% rise in DTC sales. The latter was buoyed by the launch of new products and updated colorways for existing models. While European sales declined due to delayed orders from key distributors, strong performance in Asian markets helped mitigate some of that shortfall.

Koss also highlighted the positive impact of higher DTC sales on margins, which tend to carry better profitability than traditional retail or wholesale channels. However, he cautioned that the company faced margin pressure from high-tariff inventory, specifically on goods produced in China subject to a 145% tariff rate. The impact was partially offset by improved absorption of fixed manufacturing costs and lower provisions for excess or obsolete inventory.

Factors Influencing the Headline Numbers

The recovery in profitability can be traced to multiple drivers. A key factor was the strategic focus on expanding the DTC segment, which not only increased top-line growth but also improved gross margin structure.

Operational efficiencies further contributed, with SG&A expense reductions enhancing cost control.

However, tariff-related challenges remain a concern. Koss noted the ongoing monitoring of the U.S.-China tariff environment, emphasizing its material effect on operations due to the company's sourcing dependencies. This external risk could weigh on future margins if tariffs persist or increase.

Other Developments

During the quarter, Koss Corporation announced the promotion of Michael J. Koss, Jr. to executive vice president. His expanded role now includes oversight of the sourcing and logistics teams, in addition to his existing responsibilities in Marketing and Product. This move underscores the company’s focus on strengthening leadership around product innovation and operational execution. Koss Jr. has also played a key role in direct-to-consumer growth and intellectual property enforcement initiatives.