Crown Crafts Profits Tumble

Gonzales, La. —Hit hard by falling sales and thinning margins — due in part to the loss of a major program and the elimination of quota on Chinese imports — fourth fiscal quarter profits at Crown Crafts Inc. were virtually slashed in half, tumbling 49.6 percent, to $780,000 from $1.5 million last year.

Sales at the producer of infant's and juvenile products slipped 6.9 percent, to $23.3 million from $25 million.

Putting earnings under pressure, in addition to declining sales, average gross margin contracted sharply, 480 basis points, or 4.8 percentage points, to 19.4 percent from 24.2 percent a year ago. But providing some relief, the company continued to hack away at costs, reducing expenses 150 basis points, or 1.5 percentage points, to 11.6 percent from 13.1 percent last year. Measured in absolute dollars, costs were whittled 18 percent, to $2.7 million from $3.3 million, yielding a cash savings of $593,000.

Crown Crafts attributed the decline in sales “to the direct-to-retail shift in the company's Classic Pooh license and a decrease in bib and bath sales due to the loss of a significant bath program. In addition, the elimination of quota on goods from China effective Jan. 1, 2005, led to a reduction in the company's top-line sales volume.”

E. Randall Chestnut, CEO, said, “2005 was a difficult year of transition as we moved from domestic contracting on many of our products to Asian sourcing. In addition, the elimination of quota on several of our products created a top-line erosion and squeezed margins, as prices to retailers were reduced before we could obtain lower prices from our suppliers and work through our inventory.”