Culp Sales Down in 3rd Quarter, Sells eLuxury

In April, textile supplier Culp Inc. reported results for its fiscal 2020 third quarter, which ended Feb. 2, and took a series of protective measures in response to the COVID-19 pandemic. Most notably, the High Point, North Carolina-based company sold its majority interest in e-commerce company eLuxury LLC (to the minority owner and founder Paul Saunders) to increase liquidity and focus on its core business during this unprecedented time. 

Other measures taken include obtaining higher borrowing limits and improved terms from its lender, implementing executive pay cuts, furloughing employees as necessary, suspending merit pay increases, suspending share repurchases and pursuing an aggressive reduction in expenditures. 

To assist in the pandemic response, the company repurposed some operations to manufacture critical products needed for health care and other essential industries.

Culp withdrew its fiscal guidance for the fourth quarter of fiscal 2020, which had included a slight increase in overall sales and pretax income of $1.9 million to $2.4 million, without providing an updated outlook. 

RESULTS

Culp 3rd-Quarter 2020

Net sales

$72 million

Net income

-$5.1 million

Mattress fabric sales

$33.1 million

Upholstery sales

$37.1 million

Chief Executive Officer Iv Culp said: “As the COVID-19 pandemic has spread across the world, Culp has been actively responding through our crisis management plan and adjusting our business operations accordingly. … We hope to bring furloughed associates back and fully restore salaries as soon as possible when this crisis lifts.”

Culp Inc.’s third-quarter fiscal 2020 sales were $72 million, down 6.8% compared with the third quarter of fiscal 2019. Ticking sales declined 7.4% to $33.1 million. 

“Our mattress fabrics sales were lower than anticipated for the third quarter of fiscal 2020, as we were pressured more than expected from holiday shutdowns and continued industry weakness for our legacy business customers,” said Sandy Brown, president of Culp’s mattress fabrics division. “Mattress covers have become an increasingly important part of our business and losing multiple productive weeks for our CLASS cover operations in Haiti and China caused a more significant impact when combined with softness in our legacy business. Also, the anti-dumping measures relating to low-priced mattress imports from China have not yet provided the relief expected for the domestic mattress industry.”

Upholstery sales were down 5.7% to $37.1 million. Home accessories sales, which include the divested eLuxury business, declined 11% to $3.9 million.  

Using generally accepted accounting principles, the company reported a loss of $5.1 million in the third quarter, compared with income of $4.3 million in the prior-year period. Income in the third quarter of 2020 was impacted by a series of charges, nonrecurring items and noncash impairments, including the closure of the company’s production facility in Anderson, South Carolina.

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