Culp, Inc. Reports Decline in Net Sales and Increased Losses in Q2 2024

Culp, Inc. reported its financial results for the three months ended July 28, 2024, revealing a slight decline in net sales and a significant increase in losses compared to the same period in the previous fiscal year. Net sales totaled $56.5 million, a decrease of 0.2% from $56.7 million in the prior year. The mattress fabrics segment experienced a 3.9% decline in sales, while the upholstery fabrics segment saw a 3.7% increase, reflecting improved demand in residential and hospitality sectors.

Gross profit for the quarter was $5.1 million, down 28.4% from $7.1 million in the prior year, primarily due to restructuring-related charges and lower sales volumes. The company reported a loss from operations of $6.9 million, compared to a loss of $3.1 million in the same period last year, marking an increase of 122.3%. The loss before income taxes also rose to $7.0 million from $2.6 million, a 165.8% increase. The net loss for the quarter was $7.3 million, up 117.3% from $3.3 million in the previous year.

Culp's restructuring initiatives, which include the consolidation of North American mattress fabrics operations and the closure of its Quebec manufacturing facility, contributed to a restructuring expense of $2.6 million for the quarter, a significant increase from $338,000 in the prior year. The company anticipates total restructuring charges of approximately $5.0 million for fiscal 2025.

As of July 28, 2024, total current assets decreased to $82.7 million from $88.1 million a year earlier, while total assets fell to $129.1 million from $142.9 million. Total current liabilities increased to $42.2 million, up from $38.3 million in the prior year. Shareholders' equity also declined to $69.1 million from $86.1 million.

Cash and cash equivalents at the end of the quarter were $13.5 million, an increase from $10.0 million at the end of the previous quarter, primarily due to $4.0 million in cash proceeds from borrowings on a line of credit related to operations in China. The company reported net cash used in operating activities of $206,000, a significant improvement from $4.4 million in the prior year.

Culp continues to face challenges from inflationary pressures and reduced consumer spending, particularly in the mattress and residential home furnishings sectors. The company has implemented a restructuring plan to align its operations with current market demands, with expectations of completing these initiatives by the end of the calendar year.