Q1 2024 Crown Crafts Inc Earnings Call
Participants
Craig J. Demarest; VP, CFO & Corporate Secretary; Crown Crafts, Inc.
Olivia W. Elliott; CEO, President & Director; Crown Crafts, Inc.
John Beisler
Presentation
Operator
Hello, and welcome to the Crown Crafts, Inc. First Quarter FY 2024 Conference Call. (Operator Instructions) Please note, today's event is being recorded. I would now like to turn the conference over to John Beisler, Investor Relations. Please go ahead.
John Beisler
Thank you, operator, and good morning, everyone. We appreciate you joining us for the Crown Crafts' First Quarter Fiscal 2024 Conference Call. Joining me on the call today are Crown Crafts' President and CEO, Olivia Elliott, and the company's CFO, Craig Demarest.
Earlier this morning, Crown Crafts filed its 10-Q and issued a press release regarding their first quarter fiscal '24 financial results. A copy of this release is available on the company's website, crowncrafts.com. During today's call, the company will make certain forward-looking statements and actual results may differ materially from those expressed or implied. These statements are subject to risks and uncertainties that may be beyond Crown Crafts control and the company is under no obligation to update these statements. For more information about the company's risk factors and other uncertainties, please refer to the company's filings with the Securities and Exchange Commission.
Finally, I would like to remind you today's call is being recorded, and a replay will be available through the company's Investor Relations page. Now I would like to turn the call over to the President and CEO of Crown Crafts, Olivia Elliott.
Olivia W. Elliott
Thank you, John, and good morning, everyone. I would first like to thank our entire team for their resiliency as we reported another profitable quarter despite the multiple headwinds impacting our business. We also completed our first full quarter integrating Manhattan Toy, and we'll share our progress with you a little bit later. Our results for the first quarter of fiscal 2024 reflect the ongoing challenges facing the consumer. Food and housing costs continue to run above the overall inflation rate and gasoline prices have begun to rise again.
All of these items continue to limit the amount of discretionary income available to consumers causing them to either purchase fewer items or trade down to lower-priced products. Retailers are also carrying less inventory, in some cases, going from 10 weeks of product on hand to 6. Additionally, the recent closure of all Buy Buy Baby stores has left the marketplace without a national brand with brick-and-mortar locations to sell higher-end company branded infant bedding.
Although some of the prior Buy Buy Baby locations are reopening under a different brand, and the Babies "R" Us brand has been revised, they are both in the very early stages and represent a small fraction of the locations both of these brands previously operated. As a result, we believe that specialty retailers will be a key player to fill the existing void. We are responding to these ongoing challenges by further strengthening relationships with current customers and implementing cost reduction initiatives across our business. Lastly, we paid our regular quarterly dividend, which is a testament to our long-term commitment to drive shareholder value.
With that, I would like to turn it over to Craig to cover the financials in more detail.
Craig J. Demarest
Thank you, Olivia. Good morning, everyone. Net sales for the first quarter of fiscal '24 increased 9% to $17.1 million compared to $15.7 million in the prior year quarter. The increase is primarily attributable to the addition of Manhattan Toy, which added $3.7 million in net sales to the current year quarter and more than offset reduced orders from our customers as a result of ongoing macroeconomic conditions as well as the closure of Buy Buy Baby stores, which accounted for approximately $1.4 million in sales in the prior year quarter.
Gross margin for the quarter was 27.7% compared to 32.8% in the first quarter of fiscal '23. The margin decrease was primarily attributable to the higher lease costs for our warehouse in California. Marketing and administrative expenses were $4 million versus $3.4 million in the prior year quarter. The increase is primarily driven by expenses of Manhattan Toy, including transaction costs of approximately $116,000, which were partially offset by lower compensation costs.
Net income for the quarter was $366,000 or $0.04 per diluted share compared to net income of $1.4 million or $0.14 per diluted share in the prior year quarter. Turning to our balance sheet. Cash and cash equivalents at the end of the first quarter were $765,000 compared to $1.7 million at the end of fiscal '23, and borrowings on our revolver decreased from $12.7 million at the end of '23 to $6.5 million at the end of the first quarter.
Finally, we paid our regular quarterly dividend of $0.08 per share and yesterday declared our next quarterly dividend, which will be paid in October. On an annualized basis, our shares currently offer a 6.6% yield based on yesterday's closing price. Now I will turn the call back over to Olivia for additional comments.
Olivia W. Elliott
Thank you, Craig. We made progress on a number of the strategic opportunities we identified last quarter with Manhattan Toy, including negotiating better pricing with vendors in China, and we have received positive initial feedback from customers on new products.
As Craig mentioned, Manhattan Toy added $3.7 million in sales for the quarter. As we noted on our last call, the March and June quarters are typically the slowest period for Manhattan Toy with an increase in the September quarter, peaking in the December quarter which has historically accounted for 35% to 40% of annual sales.
We believe the previously mentioned items, combined with expanding our sales channels and improved freight costs can lead Manhattan Toy to be accretive to earnings by the end of fiscal 2024. Our subsidiaries are collaborating together to share contacts and expand their reach as they pursue cross-selling and international opportunities. Finally, all of our subsidiaries will be displaying at the K + J Trade Show in Germany next month, where we will show some of our newer designs to the international markets. We will also be in attendance at the New York Toy Fair the first weekend in October.
Overall, we continue to proactively manage our business to address the ongoing, macroeconomic pressures and continue the integration of Manhattan Toy. We remain optimistic about the prospects of our company and look forward to updating you on our progress next quarter.
With that, I'd like to open up the line for questions. Keith?
Operator
(Operator Instructions) All right. At this time, I would like to return the floor to Olivia Elliott for any closing comments.
Olivia W. Elliott
Thank you for your continued interest in our company. We will be participating in the Three Part Advisors IDEAS Conference in Chicago on August 23, and we look forward to speaking with you again when we report our second quarter results in November. Thank you.
Operator
Thank you. The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines.
