SUMR Brands, a global leader in premium infant and juvenile products, announced financial results for the second quarter ended June 27, 2020.
Net sales for the three months ended June 27, 2020 were $38.2 million compared with $46.4 million for the three months ended June 29, 2019. The Company’s results reflect the strategic restructuring of its international operations and negative impact of COVID-19 on revenue, primarily via store closures and supply chain issues for certain products, the latter of which lowered shipments during the quarter; such manufacturing constraints have largely been corrected, resulting in a positive outlook for the third quarter.
Gross profit for the second quarter of 2020 was $14.0 million versus $14.8 million in 2019, while gross margin rose to 36.7% in 2020 versus 32.0% last year. The gross margin percent increase reflected a favorable mix of higher margin product categories and additional tariff exclusions on certain products, partially offset by increased volume of lower margin direct import sales. The tariff exclusions resulted in a $1.8 million benefit to cost of goods sold in the fiscal 2020 second quarter, of which $1.7 million related to prior periods.
Selling expense was $3.7 million in the second quarter of 2020 versus $4.0 million in 2019, and selling expense as a percent of net sales was 9.8% in 2020 versus 8.7% last year. The increase year-over-year as a percent of sales was primarily due to higher cooperative advertising expenses, freight, and royalty costs.
General and administrative expenses (G&A) were $6.7 million in the second quarter of 2020 versus $8.5 million in the second quarter of 2019, declining to 17.6% of net sales from 18.4% last year. The year-over-year change reflects lower labor and other costs due to various streamlining actions taken by the Company over the past year. Interest expense was $1.1 million in the second quarter of 2020 versus $1.3 million in 2019.
The Company reported net income of $1.3 million, or $0.61 per share, in the second quarter of 2020 compared with a net loss of $0.2 million, or $(0.11) per share, in the prior-year period.
“It is with great pleasure that I announce SUMR Brands posted earnings of $1.3 million this quarter, or $0.61 per share, reflecting the many steps taken this past year to reduce costs, streamline our operations, increase cash flow, and improve overall performance,” said Stuart Noyes, Interim CEO. “While COVID-19 negatively impacted revenue growth – primarily through supply chain constraints and certain lower brick & mortar traffic – we saw G&A costs fall over 20% year-over-year, generated $9.6 million in cash from operations, and reduced debt to the lowest levels in recent history.
“Our results this quarter – in the middle of a global pandemic – reflect not only our strategic focus on right-sizing the business but, in tandem, the ongoing demand for the innovative and essential products we bring to market. Given that our supply chain constraints are largely behind us, I believe the Company is well positioned for a strong finish to fiscal 2020 and am proud of all we’ve accomplished in transforming SUMR Brands into a lean, customer-centric, profitable organization.”