Culp, Inc. (CULP) is a global provider of mattress fabrics for residential and commercial furniture. It operates through two segments — Mattress Fabrics and Upholstery Fabrics.
Let’s take a look at the company’s financial performance and what has changed in its key risk factors that investors should know.
Amid the COVID-19 pandemic, consumer focus on at-home experience and overall comfort resulted in robust growth in both of Culp’s business segments.
During Q4, Mattress Fabrics and Upholstery Fabrics recorded year-over-year growth of 84% and 50%, respectively. Net sales surged 67% year-over-year to $79.1 million. Culp registered net income of $1.4 million in Q4 against a net loss of $5.3 million a year ago. (See Culp stock chart on TipRanks)
Encouraged by the results from its product-driven strategy and strength in demand for home furnishing products, Culp sees a 20% year-over-year increase in net sales for Q1. It also expects a significant improvement in consolidated operating income in Q1 as compared to the previous period.
Now, let’s look at what has changed in the company’s key risk factors.
According to the new Tipranks Risk Factors tool, Culp’s two main risk categories are Production and Macro & Political, each contributing 24% of the total 21 risks identified. Since May, the company has changed two key risk factors.
Under the Macro & Political risk category, Culp acknowledges that economic and industry uncertainty could affect its top line as well as bottom line.
Purchase of furniture or bedding products is a discretionary decision for customers, thus demand for these products can be more easily impacted by broader economic trends. Factors such as economic downturns, higher unemployment rates, and uncertain health and economic prospects may affect the spending habits of consumers and demand for home furnishings.
While Culp witnessed higher product demand due to the COVID-19 pandemic, as consumers, being forced to stay indoors, focused more on home environment and furnishings, the company states that it cannot predict how long this trend will last.
Culp also acknowledges that the COVID-19 pandemic has disrupted global supply chains and induced volatility in the financial markets. At the beginning of the pandemic, Culp had to close its facilities in Canada and Haiti for several weeks. The present impact of the pandemic is continually evolving and may affect its financial position, operations, and cash flows.
The production risk factor’s sector average is at 21%, compared to Culp’s 24%. Shares are up 58% over the past year.
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