Culp, Inc. reports Q1 EPS (58c) vs. (27c) last year

Reports Q1 revenue $56.5M vs. $, consensus $56.7M last year. Iv Culp, CEO, said, “Our sales results for the first quarter reflected strong sequential improvement as compared to the fourth quarter of last fiscal year, with mattress fabrics sales up 9.0% and upholstery fabrics sales up 19.7%. While we continue to experience challenged macro industry conditions, our sequential sales growth was better than expected, and year-over-year consolidated sales were flat despite the overall industry weakness. Our upholstery fabrics segment also delivered a significant improvement in operating income, both year-over-year and sequentially, with 6.0% operating margins for the quarter. The strategic actions we have taken in this segment are working, as we have reduced our cost structure while maintaining and enhancing our ability to grow sales. However, as expected, operating performance for our mattress fabrics segment was pressured by manufacturing inefficiencies primarily related to our significant restructuring activity. While this negatively and disproportionately affected operating performance for the quarter, our use of cash was minimal, with our net cash position only $560,000 lower as compared to the end of fiscal 2024. We are pleased that both segments reduced inventory from the end of fiscal 2024 despite the strong sequential increase in sales. We are also encouraged by the progress of our restructuring initiatives. While mattress fabrics operating results are being pressured by these actions in the first half of the fiscal year, especially in the first quarter, we believe we are on schedule to deliver our targeted improvement outcomes, including a return to near break-even adjusted EBITDA in the second quarter and a return to positive consolidated adjusted operating income in the third quarter. The restructuring is a significant undertaking that impacts people, plant consolidations, equipment relocation, and process improvements, but with it, we are successfully lowering our cost structure despite weak demand. We are extremely thankful for our dedicated employees as they execute our plan to return to profitable operating results post-restructuring. Looking ahead, we are encouraged by (1) our solid and improving market positions in both businesses; (2) our consistently profitable upholstery fabrics business; (3) expected further improvement in our hospitality fabrics and Read Window businesses; and (4) the steady progress we are making to restructure our mattress fabrics business. We anticipate industry conditions may remain pressured during fiscal 2025, although we also believe there is some stabilizing of industry trends. We expect the strategic actions we are taking will position us for a return to profitability at current demand levels and further growth opportunities as market conditions improve.”