Crown Crafts Inc (CRWS) 2023 Q2 法說會逐字稿

Good morning, and welcome to the Crown Crafts Second Quarter Fiscal Year 2023 Conference Call. (Operator Instructions) Please note this event is being recorded.

早上好，歡迎來到 Crown Crafts 2023 財年第二季度電話會議。 （操作員說明）請注意正在記錄此事件。

I would now like to turn the conference over to Craig Demarest, Vice President and Chief Financial Officer. Please go ahead, sir.

我現在想將會議轉交給副總裁兼首席財務官 Craig Demarest。請繼續，先生。

Thank you, Joe. Welcome to the Crown Crafts investor conference call for the second quarter of fiscal year 2023. With me today is Olivia Elliott, the company's President and Chief Executive Officer. A telephone replay of this call will be available 1 hour after the end of the call through 4:00 p.m. Central Time on February 16. Also, a web replay of this call will be available for 90 days and can be accessed by visiting our website at www.crowncrafts.com.

謝謝你，喬。歡迎參加 2023 財年第二季度 Crown Crafts 投資者電話會議。今天和我在一起的是公司總裁兼首席執行官奧利維亞·埃利奧特 (Olivia Elliott)。通話結束後 1 小時至下午 4:00 將提供此通話的電話重播。中部時間 2 月 16 日。此外，此電話會議的網絡重播將提供 90 天，可通過訪問我們的網站 www.crowncrafts.com 進行訪問。

Before we begin, I would like to remind listeners of the cautionary language regarding forward-looking statements contained in the press release. That same language applies to comments made in today's conference call.

在我們開始之前，我想提醒聽眾注意新聞稿中有關前瞻性陳述的警示性語言。同樣的語言適用於今天的電話會議中發表的評論。

I will now turn the call over to Olivia.

我現在將把電話轉給奧利維亞。

Thank you, Craig. Good morning, and thank you for joining us for our second quarter fiscal year 2023 conference call.

謝謝你，克雷格。早上好，感謝您加入我們的 2023 財年第二季度電話會議。

As expected, the current macroeconomic challenges related to inflation and excess inventories at our retailers continued to impact us in the second quarter. However, our balance sheet remains strong, and we believe that we are well positioned to withstand the current headwinds and take advantage of future growth opportunities when the markets return to more normal conditions.

正如預期的那樣，當前與我們零售商的通貨膨脹和庫存過剩相關的宏觀經濟挑戰在第二季度繼續影響著我們。然而，我們的資產負債表依然強勁，我們相信我們有能力抵禦當前的逆風，並在市場恢復正常時利用未來的增長機會。

Looking at the second quarter results at a high level. Second quarter net sales were $18.7 million, down from $20.2 million last year. Year-to-date net sales were $34.4 million, down from $38.9 million last year. Multiple forces in the marketplace have contributed to the sales decline. After experiencing empty shelves during the 2021 holiday season due to port congestion, retailers responded by building up their inventory levels during the first calendar quarter of 2022, resulting in an over-inventory situation by late spring.

從高水平看第二季度的結果。第二季度淨銷售額為 1870 萬美元，低於去年的 2020 萬美元。年初至今的淨銷售額為 3440 萬美元，低於去年的 3890 萬美元。市場上的多種力量導致了銷售額的下降。在經歷了 2021 年假日季因港口擁堵導致貨架空置之後，零售商的應對措施是在 2022 年第一季度增加庫存水平，導致晚春出現庫存過剩情況。

This situation has been exacerbated by a change in consumer buying patterns whereby many consumers are now trading down to lower-priced items, buying fewer items or foregoing some items altogether due to the inflationary concerns. It's important to note that we have maintained our overall shelf space at our retailers and our partnerships with them remain strong.

消費者購買模式的變化加劇了這種情況，許多消費者現在由於對通貨膨脹的擔憂而降價購買價格較低的商品，購買較少的商品或完全放棄某些商品。值得注意的是，我們在零售商處保持了整體貨架空間，我們與他們的合作關係依然牢固。

Second quarter net income was $2 million or $0.20 per diluted share compared with $2.4 million or $0.24 per diluted share last year. Year-to-date net income was $3.5 million or $0.34 per diluted share compared with $5.1 million or $0.50 per diluted share last year. Prior year-to-date net income included an almost $2 million gain of forgiveness of our Paycheck Protection Program loan and a $795,000 net loss related to Carousel Designs. Excluding the impact of the loan forgiveness and Carousel Designs, prior year-to-date net income would have been $3.9 million or $0.38 per diluted share.

第二季度淨收入為 200 萬美元或每股攤薄收益 0.20 美元，而去年為 240 萬美元或每股攤薄收益 0.24 美元。年初至今的淨收入為 350 萬美元或每股攤薄收益 0.34 美元，而去年為 510 萬美元或每股攤薄收益 0.50 美元。年初至今的淨收入包括近 200 萬美元的薪資保護計劃貸款免除收益和與 Carousel Designs 相關的 795,000 美元淨虧損。排除貸款減免和 Carousel Designs 的影響，上年迄今的淨收入為 390 萬美元或每股攤薄收益 0.38 美元。

For the current year, we continue to see increased costs throughout the supply chain which we pass along to our customers whenever we can. The good news is that these costs have somewhat stabilized over the past several months.

今年，我們繼續看到整個供應鏈的成本增加，我們會盡可能地轉嫁給客戶。好消息是，這些成本在過去幾個月中有所穩定。

On the balance sheet side, we finished the quarter with $2.3 million in cash and no borrowings on our revolving line of credit. Our inventory remains high at $27.7 million at the end of the quarter compared with $24.2 million at the end of September 2021. This is due primarily to the market trends mentioned earlier.

在資產負債表方面，我們以 230 萬美元的現金結束了本季度，並且我們的循環信貸額度沒有借款。與 2021 年 9 月底的 2420 萬美元相比，我們的庫存在本季度末保持在 2770 萬美元的高位。這主要是由於前面提到的市場趨勢。

We continue to be diligent in managing inventory, which is mostly current in-line products. However, in order to move some inventory to make room for some new programs, we may need to provide higher-than-normal discounts to retailers. We hope to see closer to normal levels by the end of the fiscal year.

我們繼續努力管理庫存，主要是當前在線產品。但是，為了移動一些庫存以為一些新計劃騰出空間，我們可能需要向零售商提供高於正常水平的折扣。我們希望在本財政年度結束時看到更接近正常水平。

We also announced that our Board of Directors declared an $0.08 per share cash dividend on the company's common stock that will be paid on January 6, 2023 to shareholders of record at the close of business on December 16, 2022. This represents an annualized yield of 5.4% based on yesterday's closing price. We're very pleased that our balance sheet remains strong, and we can continue to reward our stockholders with an attractive dividend.

我們還宣布，我們的董事會宣布將於 2023 年 1 月 6 日向 2022 年 12 月 16 日營業結束時登記在冊的股東派發每股 0.08 美元的公司普通股現金股息。這代表年化收益率為基於昨日收盤價的 5.4%。我們很高興我們的資產負債表保持強勁，我們可以繼續以有吸引力的股息回報我們的股東。

As I mentioned during last quarter's conference call, we're excited about our long-term opportunities and we are moving forward with our strategic plan, which includes expanding in the toy category, growing our product offerings both organically and through acquisition, increasing our direct sales to consumers, and making further investments to enhance our technology and improve our organizational structure. At the same time, we're managing our business to maximize profitability in the face of current challenges.

正如我在上一季度的電話會議中提到的，我們對我們的長期機會感到興奮，我們正在推進我們的戰略計劃，其中包括擴大玩具類別，通過有機和收購增加我們的產品供應，增加我們的直接向消費者銷售，並進一步投資以增強我們的技術和改善我們的組織結構。與此同時，面對當前的挑戰，我們正在管理我們的業務以最大限度地提高盈利能力。

I'll now turn the call over to Craig.

我現在將電話轉給克雷格。

Thanks, Olivia. I'm only going to give financial highlights. For a more detailed analysis, please refer to the company's Form 10-Q filed with the SEC this morning.

謝謝，奧利維亞。我只會提供財務亮點。如需更詳細的分析，請參閱公司今天上午向美國證券交易委員會提交的 10-Q 表格。

As Olivia mentioned, net sales were $18.7 million for the second quarter of fiscal '23 compared with $20.2 million for the second quarter of the prior year, a decrease of $1.5 million or 7.4%. Sales of bedding, blankets and accessories decreased by $1.6 million which was offset by an increase in sales of bibs, toys and disposable products of $104,000. Sales decreased to $34.4 million for the first 6 months of fiscal '23 compared with $38.9 million for the same period in the prior year, a decrease of $4.5 million or 11.5%.

正如 Olivia 提到的那樣，23 財年第二季度的淨銷售額為 1870 萬美元，而去年第二季度為 2020 萬美元，減少了 150 萬美元或 7.4%。床上用品、毯子和配件的銷售額減少了 160 萬美元，這被圍嘴、玩具和一次性產品銷售額增加 104,000 美元所抵消。 23 財年前 6 個月的銷售額下降至 3440 萬美元，而去年同期為 3890 萬美元，下降 450 萬美元或 11.5%。

Sales of bedding, blankets and accessories decreased by $4.1 million and sales of bibs, toys and disposable products decreased by $439,000. The decreases in sales were primarily due to lower replenishment orders at retailers as the company's customers began to reduce their purchases because their inventories increased, which we believe resulted from customers' excessive inventory purchases during the first quarter of calendar 2022 and consumers' response to macroeconomic conditions.

床上用品、毯子和配件的銷售額減少了 410 萬美元，圍嘴、玩具和一次性產品的銷售額減少了 439,000 美元。銷售額下降的主要原因是零售商的補貨訂單減少，因為公司客戶因庫存增加而開始減少採購，我們認為這是由於客戶在 2022 日曆年第一季度過度庫存採購以及消費者對宏觀經濟的反應所致情況。

Gross profit decreased by $622,000 and decreased from 30% of net sales for the prior year quarter to 29.1% of net sales for the current year quarter. Gross profit decreased by $125,000 but increased from 27.5% of net sales for the prior year 6-month period to 30.8% of net sales for the same period in the current year.

毛利潤減少了 622,000 美元，從去年同期占淨銷售額的 30% 下降到佔本年度季度淨銷售額的 29.1%。毛利潤減少了 125,000 美元，但從去年同期 6 個月期間淨銷售額的 27.5% 增加到本年度同期淨銷售額的 30.8%。

The decrease in the gross profit amount is net of the positive impact of the closure of Carousel, which in the prior year recognized losses from the sale of inventory below cost and the recognition of charges of $334,000 associated with the settlement with a supplier of a commitment to purchase fabric and $265,000 associated with the liquidation of Carousel's remaining inventory upon the closure of the business.

毛利潤額的減少扣除了關閉 Carousel 的積極影響，Carousel 在上一年確認了以低於成本的價格出售存貨的損失，以及確認與供應商達成和解承諾相關的 334,000 美元費用購買麵料和 265,000 美元，用於在業務關閉時清算 Carousel 的剩餘庫存。

Although the gross profit in the prior year period was impacted by increases in costs across the entire supply chain, the company in the current year has realized some stabilization in its input costs. Finally, we are also beginning to see the benefit from recent increases in the selling prices of our products.

雖然上年同期毛利受到全供應鏈成本上升的影響，但公司本年度投入成本有所企穩。最後，我們也開始看到近期產品售價上漲帶來的好處。

Marketing and administrative expenses decreased by $428,000 and decreased from 15.6% of net sales for the prior year quarter to 14.6% of net sales for the current year quarter. The prior year quarter included $85,000 of charges incurred by Carousel. Marketing and administrative expenses decreased by $381,000, but increased from 16.8% of net sales for the prior year 6-month period to 17.9% of net sales for the same period in the current year. The prior year 6-month period includes $495,000 for charges incurred by Carousel.

營銷和管理費用減少了 428,000 美元，從去年同期占淨銷售額的 15.6% 降至本年度季度淨銷售額的 14.6%。上一季度包括 Carousel 產生的 85,000 美元費用。營銷和管理費用減少了 381,000 美元，但從去年 6 個月期間淨銷售額的 16.8% 增加到本年度同期淨銷售額的 17.9%。前一年的 6 個月期間包括 495,000 美元的 Carousel 費用。

Other items in the prior year 6-month period include of just under $2 million gain recognized from the forgiveness of our PPP loan. The current year-to-date provision for income taxes is based upon an estimated annual effective tax rate from continuing operations of 23.5% as compared with an estimated annual effective tax rate from continuing operations of 19.6% for the prior year. The gain on the extinguishment of debt associated with the forgiveness of the PPP loan was permitted to be excluded from taxable income, the effect of which lowered the effective tax rate for the prior year period by approximately 4 percentage points.

前一年 6 個月期間的其他項目包括因免除我們的 PPP 貸款而確認的略低於 200 萬美元的收益。本年初至今的所得稅撥備是根據持續經營業務的估計年度有效稅率為 23.5%，而上一年持續經營業務的估計年度有效稅率為 19.6%。與免除 PPP 貸款相關的債務清償收益被允許從應稅收入中扣除，其影響使上年同期的實際稅率降低了約 4 個百分點。

During both the current and prior year quarters, the company recorded discrete reserves for unrecognized tax liabilities as well as adjustments to income tax expense associated with excess tax benefits or shortfalls arising from the vesting of non-vested stock and the exercise of stock option. The effective tax rate from continuing operations, combined with the effect of the discrete income tax items, resulted in an overall provision for income taxes of 24.7% for the current year 6-month period and 19.2% for the comparable prior year period.

在本年度和上一年季度，公司記錄了未確認稅收負債的離散準備金，以及與未歸屬股票歸屬和行使股票期權引起的超額稅收優惠或短缺相關的所得稅費用調整。持續經營的有效稅率，加上離散所得稅項目的影響，導致本年度 6 個月期間的所得稅總準備金為 24.7%，上年同期為 19.2%。

Net income for the second quarter of fiscal '23 was $2 million or $0.20 per diluted share compared to net income of $2.4 million or $0.24 per diluted share for the second quarter of fiscal '22. Net income for the first 6 months of fiscal '23 was $3.5 million or $0.34 per diluted share compared to net income of $5.1 million or $0.50 per diluted share for the same period in fiscal '22.

23 財年第二季度的淨收入為 200 萬美元或攤薄後每股收益 0.20 美元，而 22 財年第二季度的淨收入為 240 萬美元或攤薄後每股 0.24 美元。 23 財年前 6 個月的淨收入為 350 萬美元或攤薄後每股收益 0.34 美元，而 22 財年同期的淨收入為 510 萬美元或攤薄後每股收益 0.50 美元。

And with that, I will turn the call back over to Olivia.

有了這個，我會把電話轉回給奧利維亞。

Thank you, Craig. Joe, we'll now open up the line for questions.

謝謝你，克雷格。喬，我們現在打開提問熱線。

(Operator Instructions) And with no questions, we will conclude our question-and-answer session. I'd like to turn the conference back over to Olivia Elliott for closing remarks.

（操作員說明）沒有問題，我們將結束我們的問答環節。我想將會議轉回給 Olivia Elliott 作閉幕詞。

Thank you, Joe. Thank you to everyone for your continued support and interest in our company and special thanks to all of our employees, suppliers and customers. We look forward to talking with you again in mid-February when we release our third quarter earnings.

謝謝你，喬。感謝大家一直以來對我們公司的支持和興趣，特別感謝我們所有的員工、供應商和客戶。我們期待在 2 月中旬發布第三季度收益時再次與您交談。

The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.

會議現已結束。非常感謝您參加今天的演講。您現在可以斷開線路。