Crown's 1Q hurt by show shift

Don Hogsett, August 26, 2002

Hitting a small speed bump as it continues along a turnaround course, Crown Crafts Inc. posted a modest first-quarter loss of $727,000 as sales in its core infant products business declined when a major trade show was rescheduled and delayed in the aftermath of Sept. 11, pushing orders and sales back until later in this year.

"Historically this is always our weakest quarter, and with all the shifts and changes this year after the trade show was rescheduled, it just made it all the weaker," said Randall Chestnut, chairman and ceo.

Because of the terrorist attacks of Sept. 11, 2001, and the travel restrictions that followed, said Chestnut, the JPMA, a major infant's and juvenile products trade show originally scheduled for October 2001 was postponed until May 2002. "That means that all those orders and all those sales dollars got pushed back until later this year," Chestnut told Home Textiles Today. "That put a big crimp in things."

Even given the double whammy of the sales blip and a historically soft quarter, Crown Crafts continued a recovery from years of losses, a restructuring and a massive down-sizing as it sold off its big adult bedding business. The refocused company managed to pare its quarterly loss by more than 70 percent, to $727,000 from $2.7 million last year, as it strengthened margins, whittled down its costs and lowered its debt and interest expense.

Reflecting last year's sale of the adult bedding business to former Crown Crafts chief Michael H. Bernstein, and the earlier sale of the woven products business to Mohawk Industries, sales were shaved by more than half, to $17.9 million from $38.7 million in the year-before quarter.

Because of the shift in buying patterns and delayed sales that followed Sept. 11, sales in the core infant's and juvenile products segment, sales declined by 13.2 percent, to $17.4 million from $20.0 million last year.

But even with the shortfall in sales, operating profits continued their recovery, improving to $459,000 and rebounding from a prior-year loss of $74,000.

Fueling the recovery in operating profits, Crown improved its average gross margin by 80 basis points, to 20.2 percent from 19.4 percent a year ago. "A lot of that is just cleaning up stuff from the old company and putting all that behind us. The margins on the infant's side remain strong."

In an even bigger prop to the bottom line, the company slashed its overhead by 300 basis points, to 17.6 percent of sales from 20.6 percent last year. "Costs are way down and they will remain way down," said Chestnut. "We run a very low overhead operation. We don't waste money, we don't spend money unnecessarily. I pride myself on that," said Chestnut.

Crown Crafts Inc.

Qtr. 6/30 (x000) 2002 2001 % chg
a-First fiscal quarter results include miscellaneous income of $43,000, compared with $557,000 the prior year; and a loss of $34,000 on foreign currency conversion, compared with a $136,000 gain a year ago. Prior-year results included a $370,000 gain on the sale of assets.
Sales $17,928 $38,699 -53.7
Oper. income (EBIT) 459 (74)
Net income (727)a (2,723)a
Per share (diluted) (0.07) (0.32)
Average gross margin 20.2% 9.4%
SG&A expenses 17.6% 20.6%

Crown Crafts Segment Results

2002 2001 % chg
*Since the sale last year of the adult bedding business, the adult home furnishings business now consists of the company's Churchill Weaves division, a Berea, KY-based producer of high-quality, hand-woven throws sold into upscale channels of distribution.
Adult home furnishings* $531 $18,651 -97.2
Infant and juvenile 17,397 20,048 -13.2
Operating income
Adult home furnishings* (54) (1,744)
Infant and juvenile 513 2,670 -69.3

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