Crown Crafts 3Q Sales Up, Net Income Struggles
March 18, 2011,
Record high raw material costs, primarily cotton, as well as increases in labor, transportation and currency costs associated with the company's operations in China, had a negative impact on Crown Crafts' net income and earnings per diluted share - a trend the company expects will discontinue going forward.
"From a timing standpoint, we were limited in our ability to pass along these higher costs during the third quarter," said E. Randall Chestnut, chairman, president and ceo. "We do not expect that to be the case in future quarters."
Net income for the three-month period, ended Dec. 26, declined 31.8% to $775,000, or 8 cents per diluted share, compared with net income of $1.1 million, or 12 cents per diluted share, in the third quarter of 2010.
Better off was net income year to date, which for the nine-month period grew 8.0% to $2.7 million, or $0.28 per diluted share, on net sales of $62.8 million, compared with net income of $2.5 million, or $0.26 per diluted share, on net sales of $60.1 million in the same year-ago period.
The bright spot for the quarter was net sales, which grew 6.31% to $21.9 million from $20.6 million last third quarter. The company noted that even those one of its major retail customers delayed some of its regular orders to adjust its inventory levels, Crown Crafts' net sales grew during the quarter primarily as a result of promotional sales to that customer.
In particular, Crown Crafts' net sales of its branded products, especially its NoJo brand of infant bedding, blankets and accessories, increased by 22.9% and 24.1%, respectively in the third quarter and year-to-date periods.
"We are quite pleased with the strong response our fashion- forward designs are having with consumers at major retailers across the country," said Chestnut. "Driving revenue growth and margin expansion through our creative and well-crafted branded products will continue to be a point of strategic emphasis for us going forward."
Chestnut added the company "continued to enjoy steady customer demand as well as positive market response" to its new designs across our various product lines in the third quarter. "Although our ability to translate our top-line growth into increased earnings during the quarter was muted by lower gross margins resulting from certain promotional activities and higher than expected raw material costs, we remain confident in the strength of our underlying business and the soundness of our long-range growth strategy as evident in our solid nine-month results."