Core Viewpoint - Crown Crafts, Inc. reported mixed results for the second quarter of fiscal 2026, with a decline in net sales but a significant increase in net income, highlighting the impact of cost control measures and ongoing challenges from tariffs and supply chain issues [2][3][4]. Financial Performance - Net sales decreased by 3.1% to $23.7 million from $24.5 million year-over-year, primarily due to a 13.2% drop in bedding and diaper bag sales, partially offset by a 6.6% increase in bibs, toys, and disposable products [2]. - Net income rose by 34.5% to $1.2 million, or $0.11 per share, compared to $0.9 million, or $0.08 per share, driven by a 13.6% reduction in marketing and administrative expenses [3]. - Gross margin decreased to 27.7% from 28.4% due to higher tariff costs on goods sourced from China [3]. Operational Insights - Management noted that elevated tariffs and supply chain volatility continued to pressure margins, with CEO Olivia Elliott emphasizing the ongoing impact of the tariff environment [4]. - Inventory at the end of the quarter was $32.6 million, slightly above fiscal year-end levels, while cash increased to $0.8 million from $0.5 million [4]. - Total indebtedness stood at $16.3 million, with $13.7 million available on the credit line [4]. Segment Performance - Bedding and diaper bags were identified as weak spots due to fewer items in a major retailer's program and continued margin strain from tariffs [5]. - Strong performance was noted in toys and bibs, particularly benefiting from international demand, especially in Europe [5][9]. Management Commentary - Management expressed confidence in the company's ability to expand earnings despite challenges, attributing improved bottom line results to lower marketing and administrative costs [6]. - The redesigned Stella doll and the ring stacker toy were highlighted as successful products, with the latter being the top-selling SKU worldwide [7]. Strategic Initiatives - The company is actively seeking suppliers outside of China to mitigate tariff impacts on diaper bags [8]. - Higher advertising spending is viewed as a strategic decision to strengthen long-term sales momentum, particularly for the Manhattan Toy brand [9]. Future Outlook - Crown Crafts did not provide formal quantitative guidance for fiscal 2026 but acknowledged macroeconomic uncertainties related to tariffs and supply chain conditions [11]. - Management expressed optimism about long-term growth opportunities and potential for improved profitability as cost-reduction measures are implemented [11]. Recent Developments - The company began consolidating operations across its subsidiaries, NoJo and Sassy, to eliminate redundant costs, with expected savings to be refined during fiscal 2027 budget planning [12]. - Crown Crafts declared a quarterly dividend of $0.08 per share, continuing its policy of returning capital to shareholders [13].