CULP Posts Narrower-Than-Expected Q4 Loss, Lags Sales Estimates

Core Insights - Culp, Inc. reported a narrower adjusted loss of 39 cents per share in the fiscal fourth quarter, compared to a consensus estimate of a loss of 44 cents per share and an adjusted loss of 38 cents per share in the prior-year quarter [1][21] - Net sales for the quarter were $49.5 million, slightly missing the consensus estimate of $49.8 million by 0.5% and declining 19.4% from the same quarter last year [1][21] Financial Performance - The gross margin decreased by 70 basis points year over year to 10.5%, while selling, general, and administrative expenses as a percentage of net sales increased by 100 basis points to 18.7% [3] - Total operating loss was $4.2 million, compared to $4 million in the prior-year quarter, with the operating loss as a percentage of net sales widening to 8.6% from 6.6% [3] - In fiscal 2024, Culp's net sales declined 4.1% year over year to $225.3 million, with an adjusted loss per share of $1.11, which was narrower than the adjusted loss of $2.57 per share reported in fiscal 2023 [19] Segment Performance - Mattress Fabrics segment sales totaled $25.8 million, down 16.1% year over year, impacted by weakness in the domestic mattress industry due to macroeconomic challenges [4] - Upholstery Fabrics segment sales amounted to $23.8 million, down 22.6% year over year, due to a decline in residential home furnishing sales and the timing of the Chinese New Year holiday [6] - The Upholstery Fabrics segment registered an operating profit of $1 million, down 39.5% from $1.6 million in the prior-year period, with an operating margin decrease of 110 basis points to 4.1% [7] Cash Flow and Liquidity - As of April 28, 2024, Culp had cash and cash equivalents of $10 million, down from $21 million at the end of fiscal 2023, with total liquidity of $32.5 million [9] - The company reported net cash used in operating activities of $8.2 million, compared to net cash provided by operating activities of $7.8 million in the same period last year, resulting in a negative free cash flow of $10.8 million [10] Future Outlook - For the first quarter of fiscal 2025, Culp expects total net sales to be moderately higher sequentially, despite ongoing macro demand challenges [11] - The company plans to focus on restructuring, particularly in its mattress fabrics segment, aiming for more efficient and profitable growth with a lower level of fixed costs [22]