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Financial Performance - Consolidated net sales for the second quarter of fiscal 2026 decreased by 4.4% to $53.2 million compared to $55.7 million in the same period last year, with bedding sales increasing by 2.3% and upholstery sales decreasing by 12.3%[186]. - Gross profit for the second quarter of fiscal 2026 was $5.8 million, a decrease of 3.5% from $6.0 million in the prior year, while gross profit for the first half increased by 17.6% to $13.0 million[191]. - Loss before income taxes improved by 28.0% to $(4.1) million in the second quarter of fiscal 2026, compared to $(5.7) million in the same period last year, and $(3.0) million for the first half, an improvement of 76.7% from $(12.7) million[193]. - The company recorded a net loss of $(4.3) million for the second quarter of fiscal 2026, a 23.7% improvement from $(5.6) million in the same quarter last year[185]. Cash and Liquidity - Cash and cash equivalents increased to $10.7 million as of November 2, 2025, up from $5.6 million as of April 27, 2025, primarily due to net borrowings of $5.3 million[200]. - The company suspended its quarterly cash dividend to preserve capital and manage liquidity, with no dividend payments made during the first half of fiscal 2026[286]. - Cash totaled $10.7 million as of November 2, 2025, an increase of $5.1 million from $5.6 million as of April 27, 2025, primarily due to net borrowings and proceeds from property sales[279]. Sales and Market Trends - The company anticipates potential demand improvement in the bedding market driven by product replacement cycles, despite ongoing market headwinds[187]. - Upholstery sales faced challenges, with a year-over-year decline of 16.6% in the first half of fiscal 2026, reflecting broader market softness[186]. - The company anticipates continued sales pressure in the bedding market due to macroeconomic challenges but sees potential for improvement driven by product replacement cycles[209]. Segment Performance - Bedding net sales increased by 2.3% to $30.8 million in Q2 FY2026 compared to $30.0 million in Q2 FY2025[207]. - Upholstery net sales decreased by 12.3% to $22.4 million in Q2 FY2026 compared to $25.6 million in Q2 FY2025, with a 16.6% decline for the first half of FY2026[223]. - Gross profit for the bedding segment rose to $3.1 million, a 26.9% increase from $2.4 million in Q2 FY2025, with a gross profit margin improvement of 200 basis points to 10.1%[210]. - Upholstery gross profit fell to $3.6 million in Q2 FY2026, down 16.3% from $4.3 million in Q2 FY2025, with a gross margin decrease of 80 basis points to 16.1%[227]. Restructuring and Operational Changes - The restructuring initiatives completed in fiscal 2025 contributed to improved gross profit margins, with bedding gross profit increasing by 185.4% in the first half of fiscal 2026[191]. - The company expects to enhance its operating profile through additional restructuring and integration initiatives, including consolidating upholstery distribution and reducing facility footprint in China[195]. - The company is consolidating U.S. upholstery distribution operations to enhance profitability, with completion expected in FY2026[230]. - Restructuring expenses for the three months ended November 2, 2025, totaled $1.4 million, with significant contributions from employee termination benefits and facility consolidation costs[251]. Inventory and Receivables - As of November 2, 2025, accounts receivable for the bedding segment increased by 8.2% to $11.2 million compared to $10.4 million a year earlier, reflecting longer payment trends[213]. - Inventory for the bedding segment rose by 18.1% to $34.5 million as of November 2, 2025, driven by strategic sourcing and rising production costs[216]. - Accounts receivable decreased by $1.7 million, or 7.6%, to $20.6 million as of November 2, 2025, reflecting a 4.4% decline in net sales[288]. - Inventory increased by $4.8 million, or 10.7%, to $49.9 million as of November 2, 2025, due to strategic sourcing and rising costs[290]. Tax and Interest - The effective income tax rate for the first half of fiscal 2026 was adversely affected by the mix of earnings, resulting in an income tax expense of $1.6 million[196]. - The effective income tax rate for the six-month period ended November 2, 2025, was (53.2)%, significantly higher than (1.5)% for the same period in 2024[262]. - The company incurred a consolidated pre-tax loss of $(3.0) million in the first half of fiscal 2026, an improvement from a loss of $(12.7) million in the same period of fiscal 2025[269]. - Interest expense increased by 563.3% to $(199,000) for the three months ended November 2, 2025, compared to $(30,000) in the same period of fiscal 2025, due to increased borrowings[242]. Foreign Currency and Market Risks - The company is facing inflationary pressures that could adversely affect operating results, with rising costs for raw materials and tariffs impacting pricing structures[304]. - The company is exposed to market risk from changes in foreign currency values for subsidiaries in Canada, China, and Vietnam[314]. - A natural hedge is maintained by balancing assets and liabilities in local currencies of subsidiaries[314]. - A significant portion of the company's imports purchased outside the U.S. are denominated in U.S. dollars[314]. - A 10% change in exchange rates as of November 2, 2025, would not materially affect the company's results of operations or financial position[314].

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Financial Data and Key Metrics Changes - Consolidated net sales for Q2 were $53.2 million, a sequential improvement from $50.7 million in Q1, but a decline from $55.7 million in the prior year period [26] - Consolidated gross profit was $5.8 million, or 10.9% of sales, compared to $6 million, or 10.8% of sales in the prior year [26] - Adjusted consolidated gross profit was $6.7 million, or 12.6% of sales, compared to $6.8 million, or 12.1% of sales in the prior year [26] - SG&A expense was $8.7 million, reflecting a 7% improvement compared to the prior year [27] - Loss from operations was $3.5 million, an improvement from a loss of $5.4 million in the prior year [27] Business Line Data and Key Metrics Changes - Bedding segment sales for Q2 were $30.8 million, up approximately 10% sequentially and over 2% year-over-year [30] - Gross profit in the bedding segment was $3.1 million, or 10.1% of sales, a 200 basis points improvement from the prior year [31] - Upholstery segment sales for Q2 were $22.4 million, flat sequentially but down approximately 12% year-over-year [31] - Gross profit in the upholstery segment was $3.6 million, or 16.1% of sales, down from $4.3 million, or 16.9% of sales in the prior year [31] Market Data and Key Metrics Changes - The home furnishings industry continues to face significant challenges, with low consumer confidence and high levels of unsold homes impacting sales [7][8] - The bedding market shows signs of stabilization, with expectations for an increase in unit activity driven by historical product replacement cycles [19][20] - Upholstery sales were impacted by weak consumer sentiment and housing market conditions, particularly affecting lower and middle-income segments [21] Company Strategy and Development Direction - The company is focused on winning market share and adjusting its cost structure to achieve profitability in the current market cycle [8] - A comprehensive restructuring project has been completed, expected to yield approximately $11 million in annualized cost savings [14][18] - The integration of the bedding and upholstery divisions aims to create a unified Culp-branded business, enhancing operational efficiency [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging demand environment for home furnishings but expects steady consolidated sales performance in the third quarter [36] - The company anticipates improving gross profit and lower SG&A, leading to significant improvement in operating loss and near break-even to positive Adjusted EBITDA for Q3 [36] - Management remains cautious about the timing of market recovery but is positioning the company to capitalize on future demand increases [46][47] Other Important Information - The company has a net debt position of $7.6 million and continues to manage liquidity and capital expenditures aggressively [32][34] - Cash flow from operations was -$1.2 million for the first six months, an improvement from -$2.6 million in the prior year [33] Q&A Session Summary Question: What is the realization status of the $20 million cost savings? - Management indicated that significant savings are being realized, particularly from the Canada facility closure and recent price adjustments, with most benefits expected by Q4 [41][42][44] Question: What is the incremental margin on the next point of sales growth? - Management confirmed that there is built-up leverage to capitalize on any increase in sales, with fixed costs in place allowing for significant contribution margin from incremental sales [48][49] Question: What is the status of the new tariffs in Turkey and Haiti? - Management explained that recent tariff changes have created challenges, but the company is well-positioned to navigate these issues and expects to implement mitigation strategies within 60 days [50][51][53]

Financial Data and Key Metrics Changes - Consolidated net sales for Q2 were $53.2 million, a sequential improvement from $50.7 million in Q1, but a decline from $55.7 million in the prior year period [26] - Consolidated gross profit for the quarter was $5.8 million, or 10.9% of sales, compared to $6 million, or 10.8% of sales in the prior year [26] - SG&A expense for the quarter was $8.7 million, reflecting a 7% improvement compared to the prior year [27] - Loss from operations was $3.5 million, an improvement from a loss of $5.4 million in the prior year [27] - Adjusted EBITDA was negative $1 million, an improvement from negative $1.1 million in the prior year [28] Business Line Data and Key Metrics Changes - Bedding segment sales for Q2 were $30.8 million, up approximately 10% sequentially and over 2% year-over-year [30] - Gross profit in the bedding segment was $3.1 million, or 10.1% of sales, a 200 basis points improvement from the prior year [31] - Upholstery segment sales for Q2 were $22.4 million, flat sequentially but down approximately 12% year-over-year [31] - Gross profit in the upholstery segment was $3.6 million, or 16.1% of sales, down from $4.3 million, or 16.9% of sales in the prior year [31] Market Data and Key Metrics Changes - The home furnishings industry continues to face significant challenges, with low consumer confidence and high levels of unsold homes impacting sales [7][20] - The bedding market is showing signs of stabilization, with expectations for an increase in unit activity driven by historical product replacement cycles [19][20] - Upholstery business remains impacted by weak consumer sentiment and housing market conditions, particularly affecting lower and middle-income segments [21][22] Company Strategy and Development Direction - The company is focused on winning market share and adjusting its cost structure to achieve profitability in the current market cycle [8] - A comprehensive restructuring project has been completed, expected to yield approximately $11 million in annualized cost savings [14][18] - The integration of the bedding and upholstery divisions aims to create a unified Culp-branded business, enhancing operational efficiency [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging demand environment for home furnishings but expects steady consolidated sales performance in the near term [36] - The company anticipates continued improvement in operating loss and near break-even to positive Adjusted EBITDA for Q3 [36] - Management remains cautious about the timing of market recovery but is positioning the company to capitalize on future demand increases [45][46] Other Important Information - The company has a net debt position of $7.6 million and continues to manage liquidity and capital expenditures aggressively [32][34] - The company is owed approximately $4.7 million from the sale of its Canada facility, expected to be received in Q3 [36] Q&A Session Summary Question: What is the realization status of the cost savings? - Management indicated that significant savings are being realized, with most expected to be fully realized by Q4 [41][44] Question: What will be the incremental margin on the next point of sales growth? - Management confirmed that there is built-up leverage to capitalize on any increase in sales, with fixed costs in place to retain a significant portion of incremental dollars [47][48] Question: What is the status of the new tariffs in Turkey and Haiti? - Management explained that recent tariff changes have created challenges, but the company is well-positioned to navigate these issues [49][50]

Financial Data and Key Metrics Changes - Consolidated net sales for Q2 were $53.2 million, a sequential improvement from $50.7 million in Q1, but a decline from $55.7 million in the prior year period [25] - Consolidated gross profit for the quarter was $5.8 million, or 10.9% of sales, compared to $6 million, or 10.8% of sales in the prior year [25] - SG&A expense for the quarter was $8.7 million, reflecting a 7% improvement compared to the prior year [26] - Loss from operations was $3.5 million for the quarter, an improvement from a loss of $5.4 million in the prior year [26] Business Line Data and Key Metrics Changes - Bedding segment sales for Q2 were $30.8 million, up approximately 10% sequentially and over 2% year-over-year [29] - Gross profit in the bedding segment was $3.1 million, or 10.1% of sales, a 200 basis points improvement from the prior year [30] - Upholstery segment sales for Q2 were $22.4 million, flat sequentially but down approximately 12% year-over-year [30] - Gross profit in the upholstery segment was $3.6 million, or 16.1% of sales, down from $4.3 million, or 16.9% of sales in the prior year [30] Market Data and Key Metrics Changes - The home furnishings industry continues to face significant challenges, with low consumer confidence and high levels of unsold homes impacting sales [6][19] - The bedding market is showing signs of stabilization, with expectations for an increase in unit activity driven by historical product replacement cycles [18][19] - Upholstery business remains impacted by weak consumer sentiment and housing market conditions, particularly affecting lower and middle-income segments [20][21] Company Strategy and Development Direction - The company is focused on winning market share and adjusting its cost structure to achieve profitability in the current market cycle [7] - A comprehensive restructuring project has been completed, expected to yield approximately $11 million in annualized cost savings [12][17] - The integration of the bedding and upholstery divisions aims to create a unified Culp-branded business, enhancing operational efficiency [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging demand environment for home furnishings but remains optimistic about the potential for recovery [34] - The company expects steady consolidated sales performance in Q3 and throughout the remainder of fiscal 2026, with higher expectations for the bedding segment [34] - Management emphasizes the importance of maintaining liquidity and managing capital expenditures to prioritize free cash flow [36] Other Important Information - The company has a net debt position of $7.6 million as of the end of Q2, with total cash of $10.7 million [31] - Capital expenditures were only $218,000 for the year-to-date period, reflecting a strategic focus on maintenance projects [33] Q&A Session Summary Question: What is the status of cost savings realization? - Management indicated that significant cost savings are being realized, with the majority expected to be reflected in Q4 [38][40] Question: What is the expected contribution margin from incremental sales growth? - Management stated that there is substantial built-up leverage to capitalize on any increase in sales, with fixed costs in place to retain a significant portion of incremental dollars [42] Question: Can you provide details on the new tariffs? - Management explained that recent tariff changes from Turkey and Haiti have created challenges, but the company is well-positioned to navigate these issues [43][46]

Company Overview - Culp Inc is a major player in North America's mattress and upholstery fabrics market[6] - The company's fiscal year 2025 revenue was $213.2 million[7] - The bedding segment accounted for 53% of fiscal 2025 revenue, while the upholstery segment accounted for 47%[8] Liquidity and Financial Position - As of November 2, 2025, Culp had a total liquidity of $28.1 million, potentially increasing to $31.1 million with estimated proceeds from a Canadian real estate sale[16] - The company has U S Federal NOL carryforwards totaling approximately $88.1 million as of April 27, 2025[17] Restructuring and Cost Savings - Culp completed restructuring actions in fiscal year 2025 projected to yield $10 to $11 million in annualized cost savings and efficiency gains[21] - Additional integration actions in fiscal year 2026 are expected to generate approximately $8 million in total annualized additional benefits[32] - Total cost and efficiency actions are projected to save approximately $17.5 million annually, with pricing initiatives expected to add another $2.5 million, totaling approximately $20 million in combined savings and revenue gains[33] Market Conditions and Outlook - The company anticipates a potential recovery in the bedding market, with UBS forecasting 4% growth in 2026 and 8% growth in 2027[46] - Historical data suggests that bedding industry downturns since 1980 have never exceeded 4 years, followed by periods averaging 4% growth[54, 56]

Core Viewpoint - Culp, Inc. reported a quarterly loss of $0.3 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.18, marking a significant earnings surprise of -66.67% [1] Financial Performance - The company posted revenues of $53.2 million for the quarter ended October 2025, slightly surpassing the Zacks Consensus Estimate by 0.17%, but down from $55.67 million in the same quarter last year [2] - Over the last four quarters, Culp has exceeded consensus EPS estimates two times and topped revenue estimates only once [2] Stock Performance - Culp shares have declined approximately 34.2% year-to-date, contrasting with the S&P 500's gain of 16.3% [3] Future Outlook - The company's earnings outlook will be crucial for investors, particularly in light of recent earnings reports and future earnings expectations [4] - Current consensus EPS estimate for the upcoming quarter is -$0.07 on revenues of $54.01 million, and for the current fiscal year, it is -$0.52 on revenues of $213.09 million [7] Industry Context - The Textile - Home Furnishing industry, to which Culp belongs, is currently ranked in the top 8% of over 250 Zacks industries, indicating a favorable industry outlook [8]

Core Insights - Culp, Inc. reported financial results for its second fiscal quarter, highlighting ongoing challenges in the housing and home furnishings markets due to macroeconomic factors and tariffs [1][3][7]. Financial Highlights - Consolidated net sales were $53.2 million, a decrease of 4.4% from $55.7 million in the prior year, with bedding segment sales increasing by approximately 10% sequentially and over 2% year-over-year [10][28]. - Gross profit was $5.8 million, or 10.9% of sales, compared to $6.0 million, or 10.8% of sales in the prior year [10][28]. - The company reported a net loss of $4.3 million, or $(0.34) per diluted share, an improvement from a net loss of $5.6 million, or $(0.45) per diluted share in the prior year [10][21]. Business Segment Performance Bedding Segment - Sales in the bedding segment were $30.8 million, up approximately 10% sequentially and over 2% year-over-year [9][28]. - Gross profit in this segment was $3.1 million, or 10.1% of sales, a 27% improvement from the prior year [12][28]. Upholstery Segment - Sales in the upholstery segment were $22.4 million, flat sequentially but down approximately 12% year-over-year [19][28]. - Gross profit was $3.6 million, or 16.1% of sales, down from $4.3 million, or 16.9% of sales in the prior year [19][28]. Strategic Initiatives - The company is implementing aggressive cost structure adjustments and optimizing its platform to prepare for future growth without additional capacity or investment [3][4]. - Ongoing restructuring initiatives are expected to yield over $20 million in annualized cost savings by fiscal 2027 [4][11]. Market Conditions - The housing market's weakness and consumer uncertainty continue to pressure demand for home furnishings, particularly in the upholstery segment [6][11]. - Despite these challenges, the company anticipates steady sales performance in the bedding segment, with signs of market stabilization [5][11]. Financial Outlook - The company is providing limited forward guidance due to macroeconomic uncertainty and the fluid global trade environment [7]. - Expectations include improving gross profit and lower SG&A expenses, leading to a potential near break-even to positive adjusted EBITDA for the third quarter [11].

Financial Performance - Consolidated net sales for Q2 fiscal 2026 were $53.2 million, a sequential increase from $50.7 million in Q1 but a decline from $55.7 million in the prior-year period[4] - The net loss for the quarter was $(4.3) million, or $(0.34) per diluted share, an improvement from a net loss of $(5.6) million, or $(0.45) per diluted share in the prior-year period[4] - Net sales for the three months ended November 2, 2025, were $53,202, a decrease of 4.4% compared to $55,674 for the same period in 2024[20] - The net loss for the six months ended November 2, 2025, was $4,537, a significant improvement of 64.8% compared to a net loss of $12,905 for the same period in 2024[21] - Net sales for the six months ended November 2, 2025, were $103,893, a decrease of 7.4% compared to $112,211 for the same period in 2024[27] - The company reported a total net loss of $20,958 million for the trailing twelve months ended November 2, 2025[47] Profitability Metrics - Adjusted consolidated gross profit was $6.7 million, or 12.6% of sales, compared to $6.8 million, or 12.1% of sales in the prior-year period, driven by cost and efficiency gains[4] - Gross profit for the three months ended November 2, 2025, was $5,782, down 3.5% from $5,990 in the prior year, resulting in a gross margin of 10.9%[20] - Gross profit for the six months ended November 2, 2025, was $13,010, representing a 17.6% increase from $11,066 in the prior year[27] - The gross margin for the bedding segment improved significantly to 10.3% from 3.6% year-over-year, while the upholstery segment's gross margin decreased to 17.5% from 18.2%[27] - Adjusted EBITDA for the quarter ended January 26, 2025, was $(457) million, reflecting a significant decrease from $(200) million in the same quarter of the previous year[47] - Adjusted EBITDA as a percentage of net sales was (2.9)% for the trailing twelve months ended November 2, 2025, compared to (3.3)% for the previous year[48] Expenses and Cost Management - Selling, general and administrative (SG&A) expenses were $8.7 million, or 16.4% of sales, showing a 7% improvement from $9.4 million, or 16.8% of sales in the prior-year period[4] - Selling, general and administrative expenses decreased by 4.3% to $17,858 for the six months ended November 2, 2025, compared to $18,655 in the prior year[21] - The company expects to achieve over $20 million in annualized cost savings and enhancements by entering fiscal 2027 due to ongoing restructuring initiatives[5] - The company experienced a restructuring expense of $1,655 million for the quarter ended January 26, 2025, compared to a restructuring credit of $(50) million for the quarter ended January 28, 2024[47] Cash Flow and Liquidity - Cash flow from operations was negative $(1.2) million for the six months ended November 2, 2025, an improvement from negative $(2.6) million in the prior-year period[13] - As of November 2, 2025, the company maintained $10.7 million in cash and $18.3 million in outstanding debt under its credit facilities[13] - Cash and cash equivalents increased to $10,728 as of November 2, 2025, from $10,531 at the end of October 27, 2024[23] - The company reported a net (debt) cash position of $(7,554) as of November 2, 2025, compared to a net cash position of $6,457 a year earlier[30] - Adjusted free cash flow for the six months ended November 2, 2025, was $10, compared to $(3,423) for the same period in 2024[31] Segment Performance - The restructured bedding segment achieved sales of $30.8 million, up approximately 10% sequentially and over 2% year-over-year, with gross profit of $3.1 million, or 10.1% of sales, a 27% improvement from the prior year[13] - Upholstery segment sales were $22.4 million, flat sequentially but down approximately 12% year-over-year, with gross profit of $3.6 million, or 16.1% of sales, down from $4.3 million, or 16.9% of sales in the prior year[13] - Bedding segment net sales increased by 1.1% to $58,809, while upholstery segment net sales decreased by 16.6% to $45,084[27] Debt and Interest - Total debt increased to $(18,282) as of November 2, 2025, from $(4,074) a year earlier, indicating a significant rise in borrowing[30] - Interest expense surged by 563.3% to $199 for the three months ended November 2, 2025, compared to $30 in the same period of 2024[20] - Interest income, net, was $(338) million for the six months ended November 2, 2025, compared to $(449) million for the same period in the previous year[47] Restructuring and Operational Changes - The company reported a restructuring credit of $3,010 for the six months ended November 2, 2025, compared to an expense of $4,662 in the same period of 2024[21] - The restructuring related charge for the six months ended November 2, 2025, was $(931), reflecting ongoing efforts to consolidate operations[27] - The restructuring credit for the six months ended November 2, 2025, included a gain from the sale of a manufacturing facility totaling $4.0 million[41] Foreign Currency and Other Losses - The company reported a foreign currency exchange loss of $136 million for the trailing twelve months ended November 2, 2025[47] - The company modified its presentation of adjusted EBITDA to exclude non-cash foreign currency exchange gains/losses starting from the quarter ended November 2, 2025, to enhance investor insight into operational performance[47]