Operator: Greetings, and welcome to the Crown Crafts fiscal fourth quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Olivia Elliott, Chief Executive Officer. Please go ahead.

Olivia Elliott: Thank you, operator, and welcome everyone to this morning's call. We're glad you can join us. We generated solid quarterly results in an operating environment that continues to be challenging. This reflects the strength of our business model, the broad appeal of our brands, and the hard work of our dedicated team. Despite global conflicts, fluctuating tariffs, higher gas prices, and consistently high inflation weighing on the American consumer, we were able to hold net sales almost flat with the prior year at $22 million, bringing our full-year net sales to more than $80 million. Our gross margin improved to nearly 23% during the fourth quarter, up 460 basis points versus the prior year period. The result was positive net income for the quarter and operating cash flow of more than $8 million for the fiscal year.

An exciting fourth quarter highlight was our February announcement of the relaunch of Manhattan Toy's Groovy Girls, which we kicked off at the North American International Toy Fair following a ceremonial ringing of the closing bell at Nasdaq. This iconic collection of soft fashion dolls has already been met with a strong reception since its official rollout to specialty retailers just last month and is perfectly timed to tap into today's retro-inspired consumer market. We're excited about the potential for this beloved brand and other opportunities as we continue to focus on innovative internal product development to expand our product offerings.

In addition to driving revenue growth, another priority of ours is margin expansion and the resulting bottom-line growth. We believe our gross margin of 22.9% for the quarter, while improved over the prior year, has further room to expand as we grow sales, improve operating leverage, and continue our spending discipline. This includes our continued efforts to consolidate certain internal operations to eliminate redundant activities and create a leaner operating structure.

Turning to our balance sheet and capital allocation — we generated more than $8 million of operating cash flow during fiscal 2026 despite the soft operating environment, and we continue to have sufficient liquidity to support our growth plans. Our capital allocation strategy is well-balanced. During the fourth quarter, we paid our regular dividend while continuing to invest in internal product development and marketing efforts to grow our market share over time.

In closing, Crown Crafts is executing effectively. We're focused on driving our long-term growth opportunities while managing inventories, tightly controlling costs, and strategically allocating capital toward growth initiatives, as well as returning capital to our loyal shareholders. Our foundation for success includes our strong brands and licenses, our valued retail and licensing partners, our solid balance sheet, and the talented people who drive our success each day. With that, I'll turn it over to Claire to take us through additional financial details on our quarterly results.

Claire Spencer: Thank you, Olivia, and thanks everyone for being with us today. For the fourth quarter of our fiscal year, we generated net sales of $22.4 million, which compares to $23.2 million in the year-ago fourth quarter. Our gross profit of $5.1 million represented a 22.9% margin, up from 18.3% in the fourth quarter of 2025. This 460 basis point improvement was driven by our strategic pricing initiatives and a more favorable mix of higher-margin products. We were able to hold marketing and administrative expense almost entirely flat versus the prior year quarter at $4.6 million despite continued inflationary dynamics. We were also able to reduce interest expense to $194,000 for the fourth quarter of 2026 compared to $333,000 a year earlier, benefiting from a sizable reduction in debt. The bottom line result was positive net income for the quarter of $280,000, which improved from a loss of approximately $11 million in the prior year fourth quarter due to a non-cash goodwill impairment charge in the year-ago period. Our basic and diluted earnings per share were $0.03, up from a loss of $1.04 per share the prior year.

Moving on to our balance sheet. We ended the fiscal year with total assets of $70.7 million. Inventories were $28.4 million as of March 29th, up slightly from $27.8 million at the end of fiscal 2025. Our total debt balance was $14.1 million at year-end, a reduction from $18.5 million at the end of fiscal 2025. We had $12.5 million of undrawn availability on our revolving credit facility. Our net cash from operating activities was $8.3 million for the fiscal year, further supporting our solid financial foundation and the execution of our business plan. We executed well during the final quarter of the fiscal year despite a less than robust macro environment, and we have the necessary competitive advantages, strategic plan, and financial strength to continue growing the business and enhancing profitability as we move into fiscal year 2027. With that, Operator, Olivia and I would be happy to take questions.

Operator: Our first question comes from the line of Ethan Khaldar with Mountain Equities.

Ethan Khaldar: Good morning. Thank you for taking my call. Sounds like a great quarter and a great performance. I just wanted to ask about relationships with Walmart and Target and anyone else — how that stands and if you're pursuing other relationships.

Olivia Elliott: Relationships with Walmart and Target remain good. We have multiple salespeople that talk to them regularly, and I meet with people at trade shows as well. As always, we're always searching for other retail partners. We've got plenty of mass retailers and specialty stores, and we're focusing a little bit on some international sales. There's not as many out there that are as big as Walmart, Target, and Amazon, but we look for new opportunities all the time.

Operator: Our next question comes from the line of Doug Ruth with Lenox Financial Services.

Doug Ruth: Olivia and Claire, congratulations — I thought you did a fabulous job. It's a really strong report. Could you give us some more commentary on what you're thinking about Groovy Girls? Is the higher inventory possibly a reflection of inventory to support that rollout?

Olivia Elliott: There is some inventory at year-end for Groovy Girls. Probably the majority of the higher inventory is just the capitalization of the tariffs into the inventory cost, which increased the value of the inventory over the fiscal year. As far as Groovy Girls more generally — we rolled out sales to specialty stores beginning May 1st, that's when we started shipping, and it probably didn't set in the stores until later in the month. That is both specialty stores in the U.S. and through our distributor into Canada, though those sales haven't even set in Canada yet. We plan to roll out on Amazon in the fall, and then internationally when we go to the K&J trade show in September. Right now it's only at specialty stores, and we're very happy with the sales so far. We didn't have a lot in our budget for FY2027 for Groovy Girls, but we're happy with where we are.

Doug Ruth: In the fall, Amazon will have basically the full offering for Groovy Girls?

Olivia Elliott: Correct.

Doug Ruth: I know in the past, part of the big success with Groovy Girls was the relationship with Target. Is that something you're thinking about?

Olivia Elliott: At this point in time, we are not talking about rolling out Groovy Girls into mass. That's possibly an opportunity for the future — we'd probably change the product a little bit so that we're not selling the same exact product into mass as we are into specialty.

Doug Ruth: What can you tell us about the tariffs? Are you expecting a tariff refund? Have you received one?

Olivia Elliott: We have applied for the tariff refunds. As of two weeks ago, we had received about $175,000 back, of which about $165,000 was actually tariffs and maybe $10,000 was interest. The amount we requested was about $5.5 million. We're hopeful — anything can happen — but we have received some and are hoping to receive what we requested.

Doug Ruth: What is the status of the Eden Valley warehouse lease?

Olivia Elliott: We extended that lease to be around the same time as the Compton facility. We're going to restart looking for a new warehouse with plans to move in the next two years, closer to the expiration of both of those leases.

Doug Ruth: How about the Stella doll — you had redesigned it. How has that been going?

Olivia Elliott: Stella's doing well. It's mostly in specialty stores, Amazon, and on our own website, and Stella sales are doing fine.

Doug Ruth: I noticed that the corporate headquarters shrank in size quite a bit. Could you offer some commentary on that?

Olivia Elliott: Our old headquarters, where we had been for almost 25 years, needed updating and the price was going up substantially. We decided to move not far down the road to a new facility with less space. It was a new build-out so everything's fresh and new, and we're all on one floor and all together, which we're enjoying.

Doug Ruth: What are you thinking about with the diaper bag business now?

Olivia Elliott: We're still working on diaper bags. With the tariffs, the worst impact was on the diaper bags. Target had taken the diaper bags direct source, and Walmart shrunk the space in half for what they were carrying. We're working right now on redeveloping and rethinking the diaper bags. We still have a little bit of placement — one bag at Walmart — and we're selling on Amazon out of our own warehouse.

Doug Ruth: The Manhattan Toy Minneapolis office lease is down to less than one year. Are you starting to think about what you might be doing with that facility?

Olivia Elliott: Yes. We're going to move out of that facility. It's way too big for what we need, and we're still figuring out what we want to do.

Doug Ruth: I'm also pleased that you've been able to increase the advertising budget. Can you talk about that?

Olivia Elliott: We've increased the advertising budget and added a few people on our marketing team to build out our photography, social media, and advertising, primarily on dot-coms and for our own website. We're certainly at the beginning of our marketing expansion efforts, but so far we're pleased.

Doug Ruth: The international sales are growing. Could you share what's working there?

Olivia Elliott: There are really two main efforts flowing through there. One is that since the Manhattan Toy acquisition, we've been working on consolidating the distributors for Manhattan Toy and Sassy. Manhattan Toy was going direct to retailers while Sassy was using distributors, and we've consolidated those sales into the Sassy distributor model, which has helped. We also changed distributors in Canada sometime around December, and that's been very successful for us.

Doug Ruth: What's happening with the LEGOLAND facility in Shanghai?

Olivia Elliott: We did ship to Shanghai LEGOLAND. They opened a little later than we expected, so sales weren't what we had hoped for that opening. We did ship to them, and actually that's probably contributing to part of the international sales increase as well.

Doug Ruth: Well, thank you for answering my questions, and congratulations to you and Claire and the board of directors.

Olivia Elliott: Thank you.

Operator: Our next question comes from the line of Anthony Lebiedzinski with Sidoti & Company.

Anthony Lebiedzinski: Good morning, and thanks for taking the question. Nice gross margin expansion. You mentioned that part of the reason for that was strategic pricing actions. Any way you can quantify the extent of that benefit and how do you see it going forward?

Olivia Elliott: We really don't quantify that. What I can explain is that probably the majority of it comes from the tariff situation — when we got the tariff hit, there's a delayed time period before you can raise prices with the retailer, since a lot of them have a 60 or 90-day window. We also waited at the beginning of the fiscal year to see where the tariffs would actually land, because we didn't want to go to the retailer and say prices are going up 150% before we knew where things would settle. The last of the price increases really didn't go through until sometime in the third quarter. What we're seeing in the fourth quarter is the benefit of having the entire quarter reflect retail price increases that are equal to or closer to covering the tariffs.

Operator: Our next question comes from the line of John Deysher with Pinnacle Value Fund.

John Deysher: Good morning. Is there anything on the horizon that might change your outlook for tariffs? I know the last time we spoke in February there was nothing imminent — I'm just curious with the fluid situation.

Olivia Elliott: I don't think so. We keep up with the news the same as you, and you really never know what's going to happen. Right now, it feels like it's stable.

John Deysher: When did you move from the old headquarters to the new, and are there any significant dollar savings from doing so?

Olivia Elliott: We moved at the end of April. There are really no significant dollar savings — they were going up on the rent at the old building, and the move allowed us to keep the rates pretty much close to what we had been paying before.

John Deysher: You've extended the Eden Valley lease to match when Compton matures in May 2028. When do you start discussions on potential replacements for Compton?

Olivia Elliott: Pretty much the end of the calendar year. Starting in late fall, maybe early winter, we will start looking at potential cities and identifying exactly where we want to move. Following that, we would start looking at specific sites. It takes about 18 months from identifying where we want to move — most likely it will have to be a build-out — and we wouldn't want to move everything at one time. We would probably start moving Eden Valley earlier and then move Compton a month or two behind that.

John Deysher: Do you have a short list of locations right now?

Olivia Elliott: We don't right now. When we last looked about 18 months ago, we had narrowed it down to Reno, Houston, and Memphis, and were probably heavily leaning towards Reno. At this point, I think we're going to add some more cities to the list and look at those again.

John Deysher: That'll start later this year or early calendar 2027.

Olivia Elliott: Yes.

Operator: Our next question comes from the line of Robert Johnson with Intertek Group.

Robert Johnson: Good morning. Just a top-level question — looking at the cash flow generation and the valuation of the company, is the dividend a sacrosanct issue for the company? Any commentary around dividend policy would be nice.

Olivia Elliott: We really don't have a dividend policy per se. The board considers it every single quarter, and we talk about it at that time.

Operator: Ladies and gentlemen, this concludes our question and answer session. I'll turn the floor back to Olivia Elliott for any final comments.

Olivia Elliott: Thank you. Thank you again, everyone, for joining today's call. We appreciate your support and look forward to providing additional updates as we move through our new fiscal year. If you have any additional questions, please don't hesitate to reach out. Thanks again.

Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.