Culp(US:CULP)2025-12-11 15:00Financial 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]