Culp Reports Challenging Quarter, Citing Impact of Imports

Culp Inc. earnings boxCulp Inc. reported a 10.1% net sales decline, to $71.5 million, in the first quarter of fiscal 2019, compared with the prior-year quarter. The first quarter of fiscal 2019 ended July 29. The High Point, North Carolina-based textile major said ticking sales declined 23.6%, while upholstery was up 10.9%.

Pretax income was $1.9 million, compared with $6.7 million for the prior-year period. Excluding restructuring and related charges of approximately $2 million due to the closure of the company’s production facility in Anderson, South Carolina, pretax income was $4 million for the first quarter of fiscal 2019. Net income was $957,000, or $0.08 per diluted share, compared with net income of $5 million, or $0.40 per diluted share, in the prior-year period. These results include the $2 million in restructuring and related charges.

“As expected, our results for the first quarter reflect challenging bedding industry conditions resulting primarily from the significant increase of low-priced imported mattresses from China,” said Frank Saxon, Culp president and chief executive officer. “We estimate total mattress imports now represent approximately 20% of U.S. industry shipments. We are pleased that even with substantially lower sales of mattress fabrics from a year ago, we achieved an operating income margin in this business of close to 8%.”

Saxon added that Culp is optimistic that the U.S. bedding industry could benefit in the near term from relief from Chinese competition under U.S. trade laws. “If and when such action would occur, we believe it will favorably affect our business and the domestic mattress industry going forward,” he said.

Culp’s projection for the second quarter of fiscal 2019 is for overall sales to be down approximately 5%, compared with the same period last year. Pretax income is expected to be in the range of $3.6 million to $4.6 million, excluding any restructuring and related expenses and credits. The company’s performance for the second half of fiscal 2019 currently is expected to be more in line with the results achieved during the second half of the 2018 fiscal year, assuming bedding industry relief materializes under U.S. trade laws. 

“While we are experiencing considerable headwinds, we are optimistic that we will begin to see improvement in our quarterly results in the second half of the fiscal year,” Saxon said. “The incremental sales from RWP (Read Window Products, which Culp acquired at the end of fiscal 2018) in the upholstery fabrics business, and the expected contribution to our mattress fabrics sales from our investment in eLuxury, completed in the first quarter, will support our product-driven strategy.” Based in Evansville, Indiana, eLuxury is an e-commerce company offering bedding accessories and home goods directly to consumers.

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