Crown Crafts reported a solid Q2 2025 with net sales of $24.46 million, modest YoY growth primarily aided by the acquisition of Baby Boom assets, which contributed $3.4 million in net sales during the quarter. Gross margin expanded to 28.44% from 27.3% a year earlier, supported by favorable product mix, though offset by higher California warehouse lease costs. Net income was $0.86 million ($0.08 per diluted share), down year over year due to acquisition-related costs and ongoing legacy declines, but the quarter showed meaningful earnings leverage as Baby Boom integrates into NoJo and cross-selling opportunities across Manhattan Toy, Baby Boom, and legacy brands intensify. Management highlighted workload from the Baby Boom integration as a key driver of near-term SG&A expansion (SG&A as a percentage of net sales rose to 22.3% from 16.7% in the prior year).
The balance sheet remained leveraged, with total debt of $35.44 million and net debt of $33.46 million, while cash and cash equivalents stood at $2.0 million. Operating cash flow was negative ($0.98 million), and free cash flow was negative (~$1.17 million), reflecting the financing of the Baby Boom acquisition and working-capital needs. The company’s near-term actions focus on: (1) consolidating warehouse footprint in fiscal 2026 to reduce occupancy costs; (2) accelerating cross-selling across Baby Boom, Manhattan Toy, and legacy brands; (3) advancing direct-to-consumer initiatives (NoJo and Sassy Babies) before the holiday season; and (4) pursuing growth through Legoland partnerships as new parks come online in 2025. Management remains optimistic about a broader macro backdrop (lower inflation and consumer spending strength) supporting topline growth and market-share gains.
In summary, QQ2 2025 marks a meaningful inflection point driven by Baby Boom and early integration benefits, but Crown Crafts must execute on cost control, de-leveraging, and the timing of its DTC rollouts to translate revenue strength into sustainable profitability and free cash flow.