Culp, Inc. reports Q3 EPS (33c) vs. (26c) last year

Reports Q3 revenue $52.3M vs. $60.4M last year. Commenting on CULP‘s third quarter performance, Iv Culp, CEO, said, “Despite continued macro industry weakness, we achieved further sequential improvement in our operating results for the quarter, driven largely by the positive effects of our mattress fabrics restructuring activity. We also continue to see increasing potential to grow our market share, particularly with new business opportunities for mattress fabrics and sewn mattress covers. We remain very confident in the future of our two business segments, especially considering the competitive advantages generated from a more streamlined cost structure with an agile manufacturing and sourcing platform and our market-leading design and innovation capabilities, ultimately supported by an eventual market recovery. Our mattress fabrics segment continued to reduce its operating loss, building on the prior quarter improvement, and we also achieved near break-even consolidated adjusted EBITDA for the quarter, even with lower sequential sales. We are pleased that our restructuring initiatives within the mattress fabrics segment are mostly finished. The team has worked hard to execute on our plans and they are beginning to generate the savings and efficiency improvements we anticipated. Additionally, we entered into an agreement for the sale of our Canadian mattress fabrics facility during the quarter, and we are working to close this transaction in the upcoming months. Assuming completion, we intend to use the cash proceeds to pay off outstanding borrowings and further bolster our liquidity. Our consolidated sales for the third quarter were down sequentially, largely due to ongoing weakness in the home furnishings industry and, as expected, specific pressure on residential upholstery fabric sales that was exacerbated by some unique inventory adjustments from a large customer. Sales were also pressured in both segments by fewer shipping days due to holiday closures and weather-related disruptions during the quarter. However, we noted stronger demand in our upholstery fabrics hospitality/contract business, with both year-over-year and sequential increases in sales for the third quarter. Despite the tough residential demand environment, we remain pleased with this segment’s continuing profitability, supported by our asset-light and flexible global platform. Looking ahead at the various and ongoing macro-economic headwinds, including increasing tariff uncertainty, as well as industry consolidation, we believe we are well positioned in both businesses with strong customer relationships and a variety of agile manufacturing and sourcing options. We are confident that our actions to optimize the cost platform in our mattress fabrics segment will enable us to return to profitability post-restructuring, even at currently depressed demand levels.”