Fabric supplier Culp Inc. reported a 9.5% slide in net sales to $56.7 million for the first quarter ended July 30 compared to sales of $62.6 million in the prior-year quarter.
The company said sales were impacted by ongoing softness in both the mattress and upholstery segments.
Culp posted a net loss of $3.3 million compared with a $5.7 million loss in the first quarter of last year. The loss included a $517,000 restructuring and related charges associated with the discontinued production of cut-and-sew upholstery kits in Haiti. The move in Haiti is designed to reduce cost structure and avoid losses that would have otherwise been incurred, the company said, adding that its operations in Asia will continue to support customers.
Culp’s balance sheet includes $16.8 million in cash, no outstanding borrowings at the end of the quarter. The company’s liquidity was $42.3 million including the cash and $25.5 million available credit.
The company’s mattress fabrics segment held mostly steady with sales of $29.2 million in the quarter, a 0.5% dip compared with sales of $29.4 million in the first quarter last year. Culp attributed the results to continued contraction in the category in the first six months of this year, pointing out that its revenue had remained “relatively flat, indicating that CHF has made gains with customers in a difficult market environment.”
Sales in Culp’s upholstery fabrics segment tumbled 17.4% to $27.4 million compared with sales of $33.2 million in the same quarter last year, which the company said was buoyed by a sales lift following pandemic-related shutdowns in China.
The company said a bright spot in the quarter was demand for its hospitality and contract business where sales accounted for a third of the segment’s total sales.
“We are pleased to report better than expected improvement in our operating performance for the first quarter, as we are continuing our aggressive business transformation,” said Iv Culp, president and CEO. “As expected, our top-line performance was impacted by the difficult macro-economic environment that continues to pressure the industries we service. However, our operating performance improved despite this pressure on sales, driven by internal improvements in both businesses.”
He pointed to the company’s operating performance improved in the quarter, and pointed to increased market share from the mattress segment that achieved a 52% improvement in operation results over the first quarter of last year and highlighted the upholstery fabrics division’s operational efficiencies and cost reduction initiatives.
”Understanding that the furniture and bedding macro-environment remains challenged, we continue to manage the aspects of our business we can control, taking necessary steps to withstand current market conditions and position our business for renewed growth,” Culp said. “We believe this recovery will be led by our mattress fabrics segment, where our ongoing execution of a comprehensive business transformation plan is laying the foundation for steady, sequential improvement in this business. Although market conditions are pressuring the residential home furnishings industry, it is important to note that our upholstery fabrics business has maintained consistent profitability despite these market pressures, and demand remains solid in our growing hospitality business.”
Looking ahead, the company offered limited financial guidance for the second quarter saying volatility in the macro-environment continue to impact consumer spending and demand. Executives expect consolidated net sales for the second quarter in line with second quarter sales of fiscal 2023, driven by further improvement in the mattress fabrics segment, but offset by lower residential upholstery fabric sales. Culp foresees a loss from operations in the second quarter in the range of $2.2 million to $2.6 million, which would represent an improvement compared to an operating loss of $11.9 million in the second quarter last year.
“While the difficult industry environment affecting the mattress and residential home furnishings industries is expected to continue for some time, our market position is strong and improving, and we believe we are poised for a considerably better second half performance, with a return to operating profitability in fiscal 2024,” Culp said. “Regardless of the current demand backdrop, we expect continued progress in improving our operating results, especially in our mattress fabrics segment, but the speed of our recovery may be affected by overall industry trends. We are well positioned for the long term, and our strong leadership teams, innovative product offerings, creative designs, and resilient global manufacturing and sourcing platform will support us into the future, especially when the industry environment improves.”