Shares of Crown Crafts, Inc. (CRWS Quick QuoteCRWS - Free Report) have gained 5.7% since the company released its results for the quarter ended Sept. 28, 2025, outperforming the S&P 500 Index’s 1.9% decline over the same period. However, over the past month, the stock lost 3.1%, lagging the S&P 500’s 0.1% rise.

CRWS’ Earnings Snapshot

Crown Crafts’ second-quarter fiscal 2026 results showed mixed top-line performance but stronger earnings. Net sales declined 3.1% to $23.7 million from $24.5 million a year earlier, weighed down by a 13.2% drop in bedding and diaper bag sales. This was partially offset by a 6.6% increase in bibs, toys and disposable products, reflecting broad gains across retailers.

Despite lower revenue, net income rose 34.5% to $1.2 million, or $0.11 per share, from $0.9 million, or $0.08 per share, driven by a 13.6% reduction in marketing and administrative expenses to $4.7 million from $5.4 million in the prior-year period. Gross margin slipped to 27.7% from 28.4% due to higher tariff costs on China-sourced goods.

Crown Crafts’ Operational Performance and Other Key Metrics

Management emphasized that elevated tariffs and supply-chain volatility continued to weigh on margins. CEO Olivia Elliott noted during the earnings call that the tariff environment continued to drive costs and pressure margins, though Crown Crafts remains encouraged by ongoing U.S.–China trade discussions. Inventory ended the quarter at $32.6 million, consistent with seasonal patterns and slightly above fiscal year-end levels. Cash increased to $0.8 million as of Sept. 28, 2025, from $0.5 million as of March 30, 2025, while total indebtedness stood at $16.3 million with $13.7 million available on the credit line.

Segment-specific dynamics varied. Bedding and diaper bags were the lone weak spot, hurt by fewer items in a major retailer’s program and by continued margin strain in diaper bags tied to tariffs. Meanwhile, toys and bibs performed well across multiple retailers and benefited from stronger international demand. International sales — particularly in Europe — were cited as a bright spot for both the Sassy and Manhattan Toy brands.

CRWS’ Management Commentary

Elliott highlighted CRWS’ ability to expand earnings despite a challenging backdrop, pointing to disciplined cost controls and ongoing integration of last year’s acquisition. She emphasized that while advertising expenses increased, they remain essential to building brand presence, especially for Manhattan Toy products. CFO Claire Spencer reiterated that the improved bottom line was primarily the result of lower marketing and administrative costs compared with last year’s acquisition-related expenses.

Management also expressed confidence in product development efforts. The redesigned Stella doll — boosted by media attention following a high-profile purchase — continues to perform well in specialty channels. Meanwhile, the ring stacker toy remains Crown Crafts’ top-selling SKU worldwide, with strong Amazon sales.

Factors Influencing Crown Crafts’ Quarterly Results

Tariffs remained the biggest headwind, particularly for diaper bags, prompting Crown Crafts to search for suppliers outside China to restore category profitability. The company also continued to navigate fluctuating retailer program resets, which affected inventory timing and product availability. Despite these pressures, broad gains across toy and bib categories helped offset softness elsewhere.

Higher advertising spending, while dilutive to near-term margins, reflects a strategic decision to strengthen long-term sales momentum — especially for the Manhattan Toy brand in both domestic and international markets. Growth in Europe, aided by new distributors signed at the K&J show in Germany, contributed meaningfully to the segment’s recent strength.

CRWS’ Guidance

Crown Crafts did not issue formal quantitative guidance for fiscal 2026. Management did, however, acknowledge continued macroeconomic uncertainty, particularly related to tariffs and global supply-chain conditions. Still, they expressed optimism about long-term growth opportunities and the potential for improved profitability as cost-reduction measures take hold.

Crown Crafts’ Other Developments

After the quarter ended, Crown Crafts began consolidating internal operations across its two subsidiaries — NoJo and Sassy — to eliminate redundant costs. This restructuring includes merging sales and design teams and reducing duplicate IT contracts, a process expected to yield increasing savings as vendor agreements expire over the coming quarters. While CRWS has not yet quantified expected savings, management plans to refine estimates during fiscal 2027 budget planning early next year.

Additionally, Crown Crafts declared a quarterly dividend of $0.08 per share payable Jan. 2, 2026, continuing its policy of returning capital to shareholders.