CRWS Crown Crafts, Inc.

Management Discussion

• Net Sales: Sales decreased by $2.0 million, or 9.6%, for the three-month period ended September 29, 2019 compared with the same period in the prior year, primarily due to timing of shipments to certain retailers as well as a program that was discontinued during the quarter. Sales decreased by $1.5 million, or 4.2%, for the six-month period ended September 29, 2019 compared with the same period in the prior year. Sales of bibs, bath, developmental toys, feeding, baby care and disposable products in the current year increased by $485,000 over the prior year, while sales of bedding, blankets and accessories in the current year decreased by $2.0 million.
• Gross Profit: Gross profit decreased by $501,000 but increased from 31.0% of net sales for the three-month period ended September 30, 2018 to 31.6% of net sales for the three-month period ended September 29, 2019. Gross profit decreased by $78,000 but increased from 29.2% of net sales for the six-month period ended September 30, 2018 to 30.2% of net sales for the six-month period ended September 29, 2019. The decrease in amount is primarily due to the net lower sales levels in the current year.
• Marketing and Administrative Expenses: Marketing and administrative expenses decreased in amount by $351,000 but was mostly flat at 18.7% of net sales for the three-month period ended September 29, 2019 compared with 18.6% of net sales for the three-month period ended September 30, 2018. Marketing and administrative expenses decreased in amount by $584,000 and decreased from 20.9% of net sales for the six months ended September 30, 2018 to 20.1% of net sales for the six months ended September 29, 2019. Contributing to the decrease is the elimination in the current year of $210,000 in charges incurred in the prior year associated with transferring most of the Sassy-branded developmental toy, feeding and baby care product line inventory from Grand Rapids, Michigan to the Company’s distribution facility in Compton, California. Also, outside services and advertising decreased in the current year by $216,000 and $129,000, respectively.