CSS Industries, Inc. :CSS-US: Earnings Analysis: 2017 By the Numbers : June 9, 2017

CSS Industries, Inc. reports financial results for the year ended March 31, 2017.

We analyze the earnings along side the following peers of CSS Industries, Inc. – Deluxe Corporation, 3M Company, Wal-Mart Stores, Inc., CTI Industries Corporation, Shutterfly, Inc. and ACCO Brands Corporation (DLX-US, MMM-US, WMT-US, CTIB-US, SFLY-US and ACCO-US) that have also reported for this period.


  • Gross margins narrowed from 32.26% to 28.87% compared to the same period last year, operating (EBITDA) margins now 8.25% from 11.24%.
  • Year-on-year change in operating cash flow of -1.67% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating (EBIT) margins contributed to decline in earnings, despite some positive contribution from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017 2016 2015 2014 2013
Relevant Numbers (Annual)
Revenues 322.43 317.02 313.04 320.46 364.19
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 28.5 17.24 16.95 18.56 15.59
Earnings Growth (YOY) 65.37 1.66 -8.67 19.09 -3.95
Net Margin 8.84 5.44 5.42 5.79 4.28
EPS 3.13 1.87 1.8 1.99 1.59
Return on Equity 10.08 6.36 6.43 7.33 6.33
Return on Assets 8.64 5.52 5.62 6.37 5.41

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Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 28.87% to 32.26% for the same period last year, while operating margins (EBITDA margins) went from 8.25% to 11.24% over the same time frame.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

CSS-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 206.92 days from 209.31 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

CSS-US‘s change in operating cash flow of -1.67% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings fell, largely because of the narrowing in operating margins, which decreased from 8.62% to 5.62%. The decline in earnings probably would have been worse, were it not for some one-time items that improved pretax margins from 8.40% to 9.21%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

CSS Industries, Inc. engages in the design, manufacture, procurement, and sale of seasonal and all occasion social expression products, principally to mass market retailers in the United States and Canada. Its seasonal and occasion products include decorative ribbons and bows, boxed greeting cards, gift tags, gift wrap, gift bags, gift boxes, gift card holders, decorative tissue paper, decorations, classroom exchange valentines, decorative ribbons and bows, floral accessories, halloween masks, costumes, make-up and novelties, easter egg dyes and novelties, craft and educational products, stickers, memory books, stationery, journals, note cards, infant and wedding photo albums, scrapbooks and gift items. The company was founded in 1923 and is headquartered in Philadelphia, PA.

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