Culp, Inc. (CULP, Financial) has revealed a strategic shift in its business structure by merging its two separate units, Culp Upholstery Fabrics and Culp Home Fashions, into one cohesive entity. This move aims to boost the company's operational agility and enhance responsiveness to market demands while reducing costs through streamlined processes.
As part of this transformation, Culp will close its leased upholstery fabrics facility in Burlington, North Carolina. The activities from this site will transition to a shared management model at the company-owned facility in Stokesdale, North Carolina, currently dedicated to mattress fabrics. This consolidation is expected to yield annual efficiency and cost savings of about $3 million, with further savings anticipated as the integration progresses.
This merger builds on the previous restructuring efforts initiated in May 2024, which targeted the mattress fabrics division. These actions have already resulted in annual savings between $10 million and $11 million. Key initiatives from the restructuring included the consolidation of sewn cover operations and outsourcing certain production aspects, alongside closing a manufacturing plant in Canada and relocating those processes to North Carolina. The sale of the Canadian facility is anticipated shortly, with proceeds intended to reduce outstanding debt, thus enhancing the company’s financial flexibility.
In leadership changes accompanying the integration, Mary Beth Hunsberger, formerly the President of Culp Upholstery Fabrics, steps into the role of Chief Operating Officer. Meanwhile, Tommy Bruno, previously the President of Culp Home Fashions, has taken on the position of Chief Commercial Officer. These appointments aim to drive Culp towards sustained growth and market adaptability.
CULP Key Business Developments
Release Date: March 06, 2025
- Net Sales: $52.3 million, down 13.5% compared with the prior year period.
- Operating Loss: $3.9 million, including $2.3 million in restructuring expenses.
- Adjusted Operating Loss: $1.6 million, improved from $2.6 million in the previous quarter.
- Net Loss: $4.1 million or $0.33 per diluted share, compared to $3.2 million or $0.26 per diluted share in the prior year period.
- Adjusted EBITDA: Near break-even at negative $123,000, improved from negative $1.3 million in the previous quarter.
- Mattress Fabric Segment Sales: $28.6 million, down 4.6% year-over-year.
- Upholstery Fabric Segment Sales: $23.6 million, down 22.3% year-over-year.
- Total Cash: $5.3 million with $5.4 million in outstanding debt.
- Free Cash Flow: Negative $10.1 million for the first nine months of the fiscal year.
- Capital Expenditures: $2.4 million for the first nine months, projected to be $3 to $3.5 million for the fiscal year.
- Liquidity: $28.5 million, including $5.3 million in cash and $23.2 million in borrowing availability.
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.
