Release Date: June 26, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Culp Inc (CULP, Financial) successfully implemented a restructuring plan that resulted in $10 million to $11 million in consolidated annualized savings.
- The company achieved a year-over-year sales increase in its Mattress Fabrics business despite an industry-wide decline in overall mattress sales.
- Culp Inc (CULP) has a diversified manufacturing and sourcing platform that provides competitive advantages in a fluid global trade environment.
- The integration of Mattress Fabric and Upholstery Fabric divisions into a single unified business is expected to generate approximately $3 million in annualized savings.
- The company extended its credit facility with Wells Fargo for an additional three years, providing liquidity and financing flexibility to support ongoing initiatives.
Negative Points
- Culp Inc (CULP) reported a net loss of $2.1 million for the fourth quarter, although this was an improvement from the prior-year period.
- Sales in the Upholstery Fabrics segment declined by 8.9% in the fourth quarter due to continued demand deterioration in the home furnishings industry.
- The company faced significant pressure from recent tariff changes, particularly affecting its Upholstery Fabrics business.
- Culp Inc (CULP) is not providing specific financial guidance for fiscal 2026 due to macroeconomic uncertainty and fluid global trade conditions.
- The Residential Upholstery business continues to face challenges with low demand and is expected to experience ongoing sales pressure.
Q & A Highlights
Q: Could you talk about the current business cadence across Mattress, Residential Upholstery, and Commercial Upholstery and Fabric segments?
A: We are encouraged by the Mattress Fabrics business, having won market share in both fabric and covers. The hospitality side of our Upholstery business has a solid pipeline, although some projects were delayed due to tariffs. Residential Upholstery remains challenging due to low demand, despite good product placement.
Q: How have tariffs impacted end customer demand across your segments?
A: Tariffs have led to price increases being passed directly to consumers. However, consumer demand is more influenced by broader economic factors like inflation and interest rates. The furniture sector is also experiencing a seasonal slowdown, which we hope will improve in the fall.
Q: Regarding the $2.5 million pricing action, what revenue assumptions are included in those gains?
A: The $2.5 million gain is based on steady-state revenue assumptions, primarily from the Mattress Fabrics side. We are not forecasting additional revenue increases from these price adjustments.
Q: How will the various cost-saving initiatives impact the bottom line quarterly throughout fiscal '26?
A: The significant fixed cost reductions from the Mattress Fabrics restructuring will continue. New actions, including business integration and price adjustments, will phase in during Q2 and be fully effective by Q3 and Q4.
Q: Can you explain the change in approach to inventory markdowns and its impact?
A: We adjusted our markdown cadence to better align with actual pricing, resulting in a $1.7 million benefit for the quarter. This change allows us to manage inventory more effectively and maintain consistent performance.
Q: How aggressive will you be in paying down debt given the current macro environment?
A: We aim to pay down debt as quickly as possible while ensuring working capital needs are met. We have flexibility with our new three-year credit facility to manage debt strategically.
Q: What growth investments and market opportunities are you prioritizing in fiscal '26?
A: We are focusing on the Mattress Fabrics and hospitality segments, where we see potential for market share gains. Our Residential Upholstery business remains a priority, but we anticipate a lag in demand recovery.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
