Crown Crafts Inc., a Gonzales-based baby products maker, reported earnings for its first fiscal quarter dipped to $822,000, or 8 cents per share, compared with $897,000, or 9 cents per share a year ago.
Sales for the quarter, which ended June 30, were also down. The company’s sales dropped to $16.6 million from $17.5 million for the same period a year ago.
Stock analysts surveyed by Thomson Reuters had forecast earnings of 10 cents per share.
David M. King, a senior analyst with Roth Capital Partners, said the company’s earnings appear worse than they actually are.
The sales drop resulted from two long-running trends: weakness in the retail sector and the United States’ low birth rate.
“What I do think is notable is the miss on the earnings side came from higher stock-based compensation and legal fees,” King said.
The increase in stock-based compensation increased — $193,000 versus $147,000 a year ago — because Crown’s stock price rose, King said.
Crown shares closed Wednesday at $6.67 per share, down 15 cents. The company’s stock is trading at its highest levels in five years.
Crown’s report also included a $172,000 pre-tax charge for legal fees from a Minnesota patent infringement lawsuit and a class-action lawsuit filed in California. The company said it believes both cases are without merit.
Without those two charges, Crown would have beaten the earnings forecast, King said. The stock-based pay is a non-cash item that some companies back out in their earnings reports.
“For me, I just think it shows continued momentum for this company. Even with the revenue pressures that have plagued the industry, they continue to show that they have pretty good profitability,” King said. “For me it (the quarter) was pretty good.”
King said none of his pay is, was or will be, directly or indirectly related to his views on Crown.
During a conference call with analysts and investors, Chairman, President and Chief Executive Officer E. Randall Chestnut said the first quarter of the fiscal year is traditionally Crown’s weakest.
However, the company is seeing some positive momentum in the second quarter, Chestnut said. Crown is seeing good results from a previously announced deal with Cambridge Towel Co. Inc., a Canadian distributor, and a signature line of infant bedding products by celebrity designer Wendy Bellissimo.
“That one we are really excited about …. That we feel really, really good about,” Chestnut said.