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For the first quarter of fiscal 2025, Koss Corporation KOSS incurred a loss per share of 5 cents, widening from the 3 cents loss per share recorded in the same quarter of the previous year.
Net sales for the quarter were $3.2 million, a 5.1% decline from the $3.4 million achieved in the first quarter of fiscal 2024.
Koss Corporation faced a challenging quarter with a decrease in net sales, particularly affecting the domestic distribution and Education and Music segments. However, notable growth was achieved in its European markets and direct-to-consumer (DTC) channels, demonstrating strategic resilience in selected areas despite overall headwinds.
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The 5.1% year-over-year decline in sales was primarily due to lower demand from U.S. distributors and a notable reduction in orders from Education and Music customers. CEO Michael J. Koss acknowledged the timing of domestic orders as a contributing factor to the drop in U.S. distributor sales.
However, these challenges were partially offset by strong international sales, driven largely by a more-than 30% increase from Koss’ two largest European distributors. This improvement was augmented by direct-to-consumer sales, particularly on Amazon, where the company saw record-setting sales days, reflecting the success of its Porta Pro Wireless 2.0 launch. Management noted that a favorable customer and product mix contributed positively to the gross margin, with higher-margin products and DTC sales positively influencing profitability.
The cost of goods sold for the first quarter of fiscal 2025 was $2 million, reflecting a decrease from $2.3 million in the first quarter of fiscal 2024. This cost reduction aligns with the decline in sales but, importantly, allows for an improvement in gross margin.
The gross profit reached $1.2 million, up from $1.1 million in the previous year. Gross margin climbed from 31.6% to 36.6%, benefiting from a more favorable product mix, especially with the launch of higher-margin products like the Porta Pro Wireless 2.0.
Selling, general and administrative (SG&A) expenses rose to $1.8 million from $1.5 million in the same quarter last year, indicating a 17.8% increase. This rise suggests heightened spending, likely associated with product launch initiatives and DTC channel enhancements to drive sales growth, especially in digital sales avenues.
From a cost perspective, Koss encountered an inventory write-off during the quarter for some older, excess items. However, the company sought to mitigate this impact by capitalizing on freight costs associated with upcoming seasonal inventory. Additionally, Koss saw a minor rise in freight rates and ongoing supply chain congestion, issues that have lengthened lead times and are anticipated to continue into the next quarter.