EPS of $-0.10 decreased by 202% from previous year
Gross margin of 22.7%
Net income of -1.10M
"Inflation has been one of those things. And while the official rate of increase has leveled off, consumers are still feeling the impact of the initial surge, which continues to affect discretionary spending habits. Tariffs, of course, have been a headline concern this quarter, and that concern is compounded by the uncertainty over what their final levels will look like." - Olivia W. Elliott
Crown Crafts Inc (CRWS) QQ1 2026 Results: Tariff Headwinds, Strategic Acquisitions and Early Signs of Revenue Stabilization
Executive Summary
Crown Crafts reported Q1 2026 net sales of $15.48 million, down 4.5% year-over-year, as the company faced persistent tariff-related cost pressures and planned inventory reductions to mitigate tariff exposure. Gross profit declined to $3.52 million, yielding a gross margin of 22.7%, down 1.8 percentage points from the year-ago period, driven largely by tariff costs tied to Chinese-sourced goods. The quarter produced a GAAP net loss of $1.10 million ($0.10 per diluted share) and an operating loss of $1.13 million, reflecting elevated SG&A costs from the Baby Boom acquisition and higher advertising spend. Notably, the company generated positive operating cash flow of $5.25 million and ended the quarter with modest liquidity ($0.23 million cash on hand) but a sizable inventory position of $31.6 million. Crown Crafts maintains a disciplined approach to managing tariffs via price increases to be implemented through July–September, and management remains focused on long-term strategic initiatives, including the Disney license extension to Canada, the Baby Boom portfolio, and the integration of Manhattan Toy, which management believes should support growth and market share expansion. The balance sheet shows total debt of $26.0 million and net debt of approximately $25.8 million, with $12.2 million available under the revolving credit facility, highlighting a path to liquidity improvement as operations rebound and inventory cycles normalize. The company declared an $0.08 per share dividend, underscoring a continuous capital return policy as it navigates a challenging near-term backdrop.
Operating income: -$1.129; operating margin: -7.29% (vs -0.72% in prior year as a percentage of net sales).
EBITDA: $0.546; EBITDA margin: 3.53%.
Net income: -$1.104; net income margin: -7.13%; EPS (diluted): -$0.10.
Financial Highlights
Overview of key quarterly metrics and trend implications (USD in millions, unless noted):
- Revenue: $15.478 vs prior-year Q1; YoY change: -4.5% (revenue YoY). QoQ change: -33.72% (quarter-over-quarter).
- Gross profit: $3.518; gross margin: 22.73% (vs 24.53% prior year; -1.80 pp).
- Operating income: -$1.129; operating margin: -7.29% (vs -0.72% in prior year as a percentage of net sales).
- EBITDA: $0.546; EBITDA margin: 3.53%.
- Net income: -$1.104; net income margin: -7.13%; EPS (diluted): -$0.10.
- Cash flow: Operating cash flow $5.248; free cash flow $5.162; capital expenditures $0.086; net change in cash -$0.294.
- Balance sheet highlights: Total assets $76.023; total liabilities $38.154; total stockholders’ equity $37.869; cash $0.227; inventory $31.572; accounts receivable $17.204; debt (short- and long-term) $26.017; revolving line of credit available $12.2.
- Dividend: $0.08 per share declared during the period.
- Notable operational drivers: Baby Boom acquisition contributing bedding and diaper bag sales; Disney license extended to Canada, broadening licensed product reach; Manhattan Toy integration expanding distribution channels; tariff costs and inventory management cited as primary margin and supply chain pressures.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
15.48M
-31.45%
-33.72%
Gross Profit
3.52M
-30.72%
-42.31%
Operating Income
-1.13M
-180.64%
-166.37%
Net Income
-1.10M
-209.96%
-223.63%
EPS
-0.10
-202.04%
-216.41%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways and quotes from the QQ1 2026 earnings call (thematic groupings):
- Tariffs, inflation and pricing dynamics
• Olivia W. Elliott: Inflation remains a headwind with discretionary spending impacted by tariff uncertainty; “inflation has been one of those things… tariffs… uncertainty over what their final levels will look like.”
• Claire K. Spencer: Tariffs contributed to margin erosion; “the decrease in gross profit was primarily a result of increased tariff costs.”
• Olivia W. Elliott: Tariffs will be mitigated via price increases; “we started getting our price increases with our customers, and those will work their way through some more in July… end of September.”
- Strategic portfolio and licensing momentum
• Elliott: Disney license expanded to Canada and diaper bags addition; “Disney license now extends our reach to sales in Canada and will include diaper bags.”
• Elliott: Acquisition of Baby Boom expanding product portfolio; “expanded our product portfolio with the acquisition of Baby Boom.”
• Elliott: Manhattan Toy integration progressing; “we believe the Manhattan Toy business has stabilized… brick by brick we’re expanding Stella dolls and plush across a consolidated distributor network.”
- Retail dynamics and demand resilience
• Elliott: Retailers depleting in-stock levels; Peters: “retailers have been depleting their own inventories… one major retailer has gone from about 10 weeks… to 1–2 weeks.”
• Elliott: Expectation of pent-up demand as inventories rebuild; “as SKUs run out… we’re hopeful order patterns return to normal.”
- Capex, liquidity and dividends
• Elliott: Balance sheet remains solid with cash flow generation despite near-term headwinds; “cash and cash equivalents totaled $227k… inventories $31.6 million.”
• Spencer: Dividend maintained; “declared an $0.08 per share cash dividend.”
- Operational stabilization and cadence
• Elliott: Manhattan Toy line stabilization with product redesigns and new introductions; “Stella dolls” and expanding into plush suggest likely revenue uplift as channels reopen and stock replenishment occurs.
Inflation has been one of those things. And while the official rate of increase has leveled off, consumers are still feeling the impact of the initial surge, which continues to affect discretionary spending habits. Tariffs, of course, have been a headline concern this quarter, and that concern is compounded by the uncertainty over what their final levels will look like.
— Olivia W. Elliott
We're certainly doing everything we can to mitigate the tariffs. And starting in late June, I would say, we started getting our price increases with our customers, and those will work their way through some more in July all the way through to the end of September. And I think at that point in time, yes, we're hopeful that we've done enough to mitigate the cost.
— Olivia W. Elliott
Forward Guidance
Assessment of near-term outlook and ongoing trajectory: Crown Crafts acknowledged a difficult external environment dominated by tariff volatility, inflation, and uncertain tariff levels. Management signaled a cautiously optimistic stance for the balance of fiscal 2026, underscored by several catalysts and deliberate actions:
- Tariff mitigation and price pass-through: The company began implementing price increases in late June with customers, with expectant progression through September, which should help stabilize gross margins as tariff headwinds pass through product pricing.
- Licensing and portfolio growth: Renewal and expansion of the Disney license (to Canada) and the Baby Boom acquisition are expected to broaden addressable markets and diversify product contribution, potentially lifting top-line progression in the back half of 2026.
- International and distribution expansion: Manhattan Toy integration and consolidated distributor strategy are positioned to enhance reach and efficiency, potentially lifting sell-through and assortments across key retailers.
- Inventory replenishment cycle: With retailer inventories severely depleted (one retailer from 10 weeks to 1–2 weeks), there is a potential for a rebound in order activity as shelf replenishment occurs. This could translate into a meaningful step-up in revenue and a normalization of margins once supply chains stabilize.
- Risks to monitor: Tariff clarity and potential further adjustments; customer concentration risk; effectiveness of price increases in fully offsetting cost inflation; macro consumer spending volatility; and potential execution risk in integrating Baby Boom and Manhattan Toy at scale.
- Guidance statement: Management did not provide explicit revenue or margin targets, but emphasized ongoing execution of strategic initiatives and a cautious optimism for the second half of fiscal 2026. Investors should monitor the pace of tariff relief, retailer replenishment cycles, and the contribution from new licenses and product lines as key indicators of the trajectory.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CRWS Focus
22.73%
N/A
N/A
N/A
BSET
57.00%
2.99%
1.11%
18.49%
KBAL
33.50%
3.52%
3.02%
8.87%
HOFT
19.60%
-5.53%
-1.86%
-11.10%
NTZ
36.90%
-0.59%
-2.53%
-9.37%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
CRWS faces near-term profitability challenges under tariff-driven cost inflation and working-capital pressure. However, the combination of strategic acquisitions (Baby Boom), expanded licensing (Disney into Canada), and a reoriented go-to-market for Manhattan Toy provide multiple catalysts for a medium-term rebound in revenue and margin. Positive cash flow generation and a revolving credit facility offer liquidity support, while the dividend signal maintains investor confidence in capital return discipline. The core thesis rests on (1) successful tariff pass-through and cost management, (2) meaningful contribution from Baby Boom and Disney licensing, and (3) accelerated replenishment-driven demand as retailers rebuild inventories. Given the absence of explicit guidance but the presence of multiple growth levers, CRWS could offer upside if tariff volatility stabilizes and retailer demand normalizes, though the stock remains exposed to commodity and tariff risk, warranting a cautious stance with a focus on next-quarter cadence, cost management, and the trajectory of the Disney/Manhattan Toy initiatives.
Key Investment Factors
Growth Potential
- Disney license expansion to Canada broadens licensed product reach and cross-border merchandising opportunities, potentially lifting mix and average selling prices.
- Baby Boom integration adds bedding and diaper bag lines, diversifying revenue streams beyond traditional bibs and toys and enabling higher margin assortments as the product mix evolves.
- Manhattan Toy portfolio consolidation and redirected go-to-market strategy (distributors) can improve channel efficiency and geographic reach, supporting higher sell-through in multiple retailers.
- Ongoing price realization efforts to offset tariff costs, with pass-throughs anticipated through July–September guidance window, potentially stabilizing gross margins if tariff costs stabilize.
Profitability Risk
- Tariff volatility remains a key earnings risk, with the need to sustain price increases without eroding demand.
- Margin compression driven by elevated tariffs and inventory-related disruptions could persist into the near term if pricing power is insufficient or if retailer stock rebuild lags.
- Execution risk related to the integration of Baby Boom and Manhattan Toy, including product redesign, supply chain alignment, and channel diversification.
- Revenue concentration in the infant/toddler soft goods and specialty channels could magnify sensitivity to retailer inventory cycles and macro consumer trends.
Financial Position
- Very lean cash position at period-end ($0.23 million) with modest liquidity relative to debt; revolving line of credit shows $12.2 million availability, providing liquidity headroom.
- Total debt of $26.0 million and net debt ~ $25.8 million; positive free cash flow of $5.16 million demonstrates cash generation capability despite near-term net losses.
- Inventory elevated at $31.6 million, consistent with a pre-program build prior to retailer promotions; prudent working capital management will be critical to preserve liquidity as the tariff environment evolves.
SWOT Analysis
Strengths
Diversified infant and juvenile product portfolio including bedding, bags, toys, and soft goods.
Strategic acquisitions (Baby Boom) broaden product lineup and cross-sell opportunities.
Expanded licensing relationships (Disney) extending distribution reach to Canada.
Manhattan Toy brand integration with a consolidated distributor strategy, enhancing channel efficiency.
Weaknesses
Significant near-term margin pressure from tariff costs and inventory management strategy.
Negative quarterly profitability (Q1 2026) with operating loss and net loss, reflecting cost inflation and mix shifts.
Relatively small cash balance and elevated working capital (inventory) burden, impacting liquidity.
Execution risk in integrating new acquisitions and aligning disparate product lines into a cohesive go-to-market approach.
Opportunities
Tariff-driven price realization could unlock margin improvement if passed through effectively.
Licensing expansion and international sales via Disney can unlock higher-margin, premium product segments.
Retail replenishment cycle could trigger a surge in orders as inventories normalize, particularly in July–October window.
Cross-brand synergies from Manhattan Toy and Sassy distribution network to broaden geographic and retailer coverage.
Threats
Tariff policy uncertainty remains a material macro risk to cost of goods sold and pricing power.
Retail inventory discipline and competitive dynamics may cap near-term top-line recovery.
Macro consumer spending volatility in the cited segment could delay demand normalization.