Release Date: March 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Culp Inc (CULP, Financial) achieved a 58.3% sequential reduction in operating loss in the mattress fabric segment, indicating improved operational efficiency.
- The company completed its restructuring plan for the mattress fabric segment, which is expected to enhance profitability and streamline operations.
- Culp Inc (CULP) is gaining market share in both the mattress and hospitality contract fabric businesses, with new business opportunities and customer wins.
- The hospitality contract fabric business saw year-over-year and sequential sales increases, representing 40% of upholstery fabrics total sales for the quarter.
- Culp Inc (CULP) has a strong and flexible global supply chain, providing agility in navigating tariff impacts and offering supply chain optionality to customers.
Negative Points
- Culp Inc (CULP) reported a net loss of $4.1 million for the third quarter, reflecting ongoing challenges in the demand environment.
- Consolidated sales for the third quarter were down 13.5% compared to the prior year, due to weakness in the home furnishings and bedding industries.
- The company faced pressure from lower residential upholstery fabric sales, exacerbated by inventory adjustments from a large customer.
- Tariff and global trade uncertainties are causing delays and sales pressure, potentially impacting fourth-quarter sales.
- Culp Inc (CULP) anticipates continued industry sales pressure and macroeconomic headwinds, providing limited financial guidance for the near term.
Q & A Highlights
Q: Can you clarify the timeline for Culp Inc's return to profitability given current demand levels?
A: Robert Culp, President and CEO, confirmed that the company expects to return to profitability by early fiscal 2026, despite current demand challenges. The company is committed to achieving profitability regardless of demand levels and is making necessary adjustments to set a foundation for a sustainable profitable year.
Q: How is Culp Inc gaining market share in the mattress and hospitality segments?
A: Robert Culp, President and CEO, explained that the restructuring in the mattress fabrics segment has made the company more streamlined and efficient, contributing to market share gains. Thomas Bruno, EVP of Culp Home Fashions, added that they are seeing growth with existing customers and new projects, particularly with their quilting capabilities in Haiti. Mary Hunsberger, President of Culp Upholstery Fabrics, noted success in the hospitality segment with new partnerships and brand standards with major hotel conglomerates.
Q: What are the details of the additional $1 million in cost savings announced?
A: Robert Culp, President and CEO, stated that the additional $1 million in savings comes from personnel and professional fees. These savings will start annualizing in Q4 and continue into the next fiscal year. The company is also exploring further synergistic efficiency projects that could yield up to $2 million in additional savings.
Q: How is Culp Inc handling the impact of tariffs on its production?
A: Robert Culp, President and CEO, emphasized the company's focus on supply chain optionality to mitigate tariff impacts. Only about 30% of upholstery fabrics are tariff-impacted from China, and the company is relocating production to Southeast Asia. Mary Hunsberger, President of Culp Upholstery Fabrics, mentioned that price increases will be used to offset tariff costs. For mattress fabrics, the company can quickly shift production to tariff-free locations like Haiti.
Q: How does Culp Inc view industry consolidation, particularly in the mattress segment?
A: Thomas Bruno, EVP of Culp Home Fashions, sees industry consolidation as a net positive for Culp Inc. The company's large provider status and flexible platform are well-suited to serve larger suppliers in the mattress industry, presenting opportunities for growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
