Core Insights - The company is focused on maintaining quality and compliance while exploring alternative supply sources, primarily due to the concentration of production in China and the impact of tariffs on costs [1][3][21] - The relaunch of the Groovy Girls product line is expected to enhance the company's market presence and direct-to-consumer sales starting in May 2026 [2] - Despite a decline in net sales to $20.7 million from $23.4 million year-over-year, net income increased to $1.5 million, indicating resilience in the business model [4][7] Financial Performance - Third quarter gross margin decreased to 23.5% from 26.1% due to elevated U.S. tariff rates and one-time costs [3][6] - Marketing and administrative expenses rose to $5 million, influenced by $600,000 in severance expenses related to operational consolidation [5][6] - The company reported a net cash flow from operating activities of $7.1 million for the nine-month period, slightly up from $7 million in the previous year [9] Inventory and Supply Chain - The company maintains a conservative inventory strategy to minimize excess inventory exposure amid volatile pricing and tariffs, with inventories at $31.2 million at quarter-end [1][8] - The majority of products are sourced from China, with over 90% of production concentrated there, although the company is exploring alternative sourcing options [12][21] Strategic Initiatives - Cost initiatives are being executed to streamline operations and reduce payroll and administrative expenses, aiming for a leaner structure to better absorb external factors [5][9] - The company is committed to disciplined capital allocation, including regular dividends, to enhance long-term shareholder value [5][9] Market Environment - The macroeconomic environment remains challenging, with uneven consumer spending and price sensitivity affecting sales, particularly in the bedding category [3][4][11] - The company is optimistic about the long-term fundamentals of the infant, toddler, and juvenile category, despite current market pressures [10]