Crown Crafts(US:CRWS)2020-08-13 00:07Financial Data and Key Metrics Changes - Net sales for Q1 FY 2021 were $16.205 million, an increase of $263,000 or 1.6% compared to $15.942 million in the same quarter last year [7] - Net income for the same period was $1.215 million, up by $136,000 or 12.6% from $1.079 million last year [7] - Diluted earnings per share increased to $0.12 from $0.11 in the prior year [7] - Gross profit increased by $472,000, with gross margin rising from 28.5% to 31% of net sales [12] Business Line Data and Key Metrics Changes - Sales of bedding and blankets increased by approximately 30%, while sales of bibs, toys, and disposables decreased by 25% [18] - The increase in sales was primarily due to higher sell-through at major retailers, offset by lower sales in the bib and bath segment [12] Market Data and Key Metrics Changes - The internet business, including direct-to-consumer and e-commerce, saw significant growth during the pandemic, benefiting from the closure of many brick-and-mortar retailers [8] - The company established a drop-ship warehouse in Compton, California, which facilitated direct-to-consumer sales [8] Company Strategy and Development Direction - The company plans to maintain its drop-shipping capabilities to capitalize on the growth of e-commerce [19] - Management emphasized the importance of cost control, with marketing and administrative expenses decreasing to 20.9% of net sales from 21.7% [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the COVID-19 pandemic but expressed pride in the company's performance during this period [33] - The company is optimistic about sustaining the current level of marketing and administrative expenses [20] Other Important Information - The Board of Directors declared a quarterly cash dividend of $0.08 per share, representing an annualized yield of 6.5% [9] - The company received a $1.9 million PPP loan, which is currently recorded as debt until forgiveness is granted [31] Q&A Session Summary Question: What caused the significant difference in performance between bedding and bibs? - Management explained that the decline in the bib segment was due to the closure of Chipotle restaurants and material shortages for disposable bibs [18] Question: Is the growth in bedding attributable to e-commerce? - Management confirmed that the growth in bedding sales was primarily driven by e-commerce and direct-to-consumer sales [19] Question: Are the current marketing and administrative expenses sustainable? - Management indicated that the current level of expenses is sustainable for the future [20] Question: What is the status of the PPP loan? - Management stated that the loan is carried as debt until forgiveness is granted, and if forgiven, it would be recognized as income [31] Question: How has the product and channel mix affected gross margins? - Management noted that both product and channel mix improvements contributed to better gross margins, with fewer closeout sales during the quarter [26] Question: Is there a significant Disney license expiring soon? - Management acknowledged a Disney license expiring but indicated it is not significant and is not in danger of non-renewal [27] Question: Can the company achieve past peak operating margins? - Management refrained from making forward-looking statements but noted that the exit of Babies"R"Us had a positive impact on gross margins [29]