Koss Stock Up 15% Despite Incurring Q3 Loss Amid Education Sector Headwinds
Shares of Koss Corporation KOSS have gained 14.7% since the company reported its earnings for the quarter ended March 31, 2025. This compares to the S&P 500 index's 4.5% growth over the same time frame. Over the past month, the stock has gained 14.7% compared with the S&P 500's 4.5% growth.
For the fiscal third quarter ended March 31, 2025, Koss incurred a net loss per share of 3 cents, which remained flat year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)The company reported net sales of $2.8 million, a 5.4% increase from $2.6 million in the year-ago quarter. Despite the improvement in revenues, the company incurred a net loss of $0.3 million, marginally wider than the net loss recorded in the third quarter of fiscal 2024.
Koss Corporation price-consensus-eps-surprise-chart | Koss Corporation Quote
Gross profit in the fiscal third quarter increased to $1.1 million from $0.8 million in the prior-year period, driven by a more favorable cost structure. Gross margin expansion during the first nine months of fiscal 2025 was notable, with improvement of over 600 basis points year over year. This margin gain was largely attributed to the normalization of shipping costs, as prior-year figures were negatively impacted by higher transit expenses. However, the benefit was partially offset by write-offs related to obsolete inventory.
Operating expenses also climbed, with selling, general and administrative (SG&A) expenses rising to $1.6 million in the quarter compared to $1.5 million in the prior year. Consequently, the operating loss narrowed slightly to $0.5 million from $0.6 million in the same period last year. However, interest income contributed positively, adding $0.2 million in the quarter, which helped trim the pre-tax loss to $0.3 million from $0.4 million.
Chairman and CEO Michael J. Koss highlighted geographic expansion and new products as the primary catalysts for the year-to-date growth. 'A substantial increase in sales to our distributors in Europe and Asia, mainly a result of the success of new product sales, was the primary driver of the improvement,' he stated. He also acknowledged that direct-to-consumer (DTC) sales supported the top-line results.
However, these gains were tempered by a significant contraction in sales to the education sector, which fell nearly 60% due to the postponement of a large project. Additionally, lower sales to domestic distributors weighed on overall performance.
Koss emphasized that margin expansion has been an encouraging development, pointing to relief from the prior year's elevated freight costs. At the same time, he noted that inventory management challenges, such as product obsolescence, have required adjustments that somewhat offset margin gains.
The rebound in international distributor sales was a key growth engine for the quarter, especially in Europe and Asia, where new product adoption appears to be gaining traction. On the other hand, softness in the education segment and domestic markets acted as drags. The educational sales decline was notably tied to a delayed project, suggesting that the impact may be temporary rather than indicative of a structural shift.
Gross margin improvement stemmed primarily from lower inbound freight and transit costs, which had inflated the cost of goods sold in prior periods. While some gains were surrendered due to obsolete inventory write-offs, the company was still able to report a more favorable margin profile compared to fiscal 2024.
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