Babies boost La.-based Crown Crafts in tight economy

New Orleans CityBusiness, Jun 16, 2008 by Jaime Guillet

For infant product manufacturer Crown Crafts Inc., 2007 developed into a seesaw year bearing the high of a new $12.4-million acquisition and lows associated with the troubled Asian toy industry.

Crown Crafts Inc., the nation's largest producer of infant and toddler bedding, bibs and bath items, is headquartered in Ascension Parish. It thrives by one determining factor: birth rates. U.S. births grew steadily between 2002 and 2006, dipping only incrementally in 2007. That factor helps Crown Crafts plow ahead in a retail economy that undoubtedly is strapped under the weight of high fuel and food prices.

"Anyone who says they are immune to the economy is stupid and we're not going to be stupid," said Randall Chestnut, Crown Crafts president and CEO. "We're not immune to the economy but to some degree we swim upstream."

The "biggest success" for the company in 2007, said Chestnut, was the acquisition of toddler-bedding Springs Global U.S. Inc., which "added about $25 million in top-line revenue to the company." Convertible cribs that convert into toddler beds account for half of all the cribs sold in the country, Chestnut said. With the addition of the toddler bedding line, Crown Crafts "leapfrogged us into the category leader" in that market, he said.

Wal-Mart, Toys R Us and Target Corp. made up 78 percent of Crown Crafts' gross sales in 2007 and its Disney product line, for which it signs a yearly licensing agreement, makes up more than 28 percent of its annual sales, according to Tulane University's A.B. Freeman School of Business' 2007 Burkenroad Report. That composition could be a cause for concern, said Peter Ricchiuti, founder and research director for Tulane's Burkenroad program.

"Three companies make up the bulk of sales," Ricchiuti said. "That always makes me apprehensive because if (the company) gets on the outs with one of them, it could be bad. Technically their customers are (shoppers) but really their customers are those three companies."

Outside of that, Ricchiuti said Crown Crafts "has very interesting stock" and the company isn't very well known, going public in 2002.

The company experienced a rough patch last year when toys from China were determined to have higher traces of lead. In August, it removed and destroyed half a million bibs following lead contamination reports.

"We got caught up in that and still had a very good year," said Chestnut.

Regardless of economic concerns, Chestnut said he is optimistic about the coming year. Earlier this month, the company signed a licensing agreement with Warner Bros. for the Baby Looney Tunes brand. Chestnut said he will also look into further acquisitions to complement Crown Crafts' juvenile-infant market.

"We're not looking to go outside the box," Chestnut said.