Crown Crafts Margin Takes Hit

Gonzales, La. —Crown Crafts Inc. broke through with a profitable second quarter, posting $844,000 in net income for the time frame. While this result was off by nearly 9 percent from the second quarter of fiscal 2004, it did improve on the bedding and bath products manufacturer's first quarter, in which it logged a $102,000 net loss.

The company also recorded operating income of $1.9 million, down by more than 8 percent from the fiscal 2004 second quarter. Second-quarter sales increased by almost 5 percent, reaching slightly more than $23 million. Crown Crafts was able to boost its bedding sales thanks to higher shipments of modular bedding placements, although that rise was offset by declining bath-products shipments — due, according to the company's 10-Q filing with the Securities and Exchange Commission, to the loss of a bath program with “a major customer” — and the transition of the Classic Pooh license to direct-to-retail.

Crown Crafts also took a hit on its gross margin, which fell by 200 basis points, due to decreases in average selling prices per unit. This offset the company's 80-basis-point reduction in its selling, general and administrative expenses as a ratio of total sales. On a dollar basis, the company was able to shave more than 8 percent of its SG&A in the quarter.

E. Randall Chestnut, chairman, president and CEO, viewed the reduced margin as part of the “tremendous change” in the U.S. retailing and sourcing environment.