CULP

Image source: The Motley Fool. Thursday, Sept. 10, 2026 at 9:00 a.m. ET President and Chief Executive Officer - Iv Culp Chief Financial Officer - Ken Bowling Chief Operating Officer - Mary Beth Hunsberger Operator: Good day, and welcome to the Culp Inc. First Quarter Fiscal 2027 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Theresa Moore with FINN Partners. Please go ahead. Teresa Moore: Good morning, and welcome to the Culp conference call to review the company's results for the first quarter of its fiscal 2027 year. As we start, let me state that this morning's call will contain forward-looking statements about the business, financial condition, and prospects of the company. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results, or otherwise are not statements of historical fact. The actual performance of the company could differ material from that indicated by the forward-looking statements because of various risks and uncertainties. These risks and uncertainties are described in our regular SEC filings, including the company's most recent filing on Form 10-K. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results. You are cautioned to not place undue reliance on forward-looking statements made today, and each such statement speaks only as of today. We undertake no obligation to update or to revise forward-looking statements. In addition, during this call, the company will be discussing non-GAAP financial measurements. A reconciliation of these non-GAAP financial measurements to the most directly comparable GAAP financial measurements is included in the tables to the press release, included as an exhibit to the company's 8-K filed yesterday and posted on the company's website at [www.culp.com](https://www.culp.com). An investor relations presentation is also available on the company's website as a part of the webcast of today's call. I'll now turn the call over to Iv Culp, President and Chief Executive Officer of Culp. Please go ahead, sir. Iv Culp: Thank you, Theresa, and good morning, and thank you to everyone for joining us today and for your interest in our company. With me on the call are Ken Bowling, our Chief Financial Officer, and Mary Beth Hunsberger, our Chief Operating Officer. I will begin the call with some detailed comments. As mentioned in the introduction, we have posted a slide presentation to our website that provides supplemental information for today's discussion. That slide presentation is entitled First Quarter FY 2027 Supplemental Information. Ken will then review the financial results for the quarter. After that, I'll briefly review our business outlook, and we will take some questions. We view our first quarter performance as indicative of what Culp can achieve on both the top and bottom lines, even in challenging operating environments such as those that continue across the home furnishings industry and the markets we serve. As we stated in our release, our ability to increase overall sales and profitability year-over-year during a quarter with one less selling week and in persistently difficult industry conditions provides validation to us that our optimized platform and strategies are succeeding. We have developed valuable resiliency, and we have positioned Culp for success across a broad range of demand scenarios. I am extremely proud of all of our associates and our leadership team for guiding us through a major restructuring and now a re-energizing of the business. We have successfully executed on many difficult decisions over the last two years in the midst of a trough market, and we are now seeing some solid recovery. Our innovative products are on point. Our supply chain is balanced, and our dedicated employees are second to none. While we are excited to forge ahead, we are particularly bullish on our prospects as and when business conditions return to greater normalcy. During the quarter, we increased gross profit by nearly 17% and generated positive adjusted EBITDA, even excluding the benefit of approximately $7 million in IEEPA tariff recoveries recognized during the quarter. This successful improvement is displayed graphically on pages 8 and 9 of the supplemental presentation. Again, these results reflect the cumulative impact of the transformation initiatives we undertook approximately two years ago when we began a comprehensive restructuring of our bedding business and then integrated our formerly separate bedding and upholstery operations into a unified platform. Along the way, we closed and consolidated facilities, exited certain markets, expanded into others, implemented numerous cost reduction initiatives, and we fundamentally re-examined how we operate and go to market. Those efforts required tremendous execution, all while maintaining the high service levels our customers expect. While we recognize there is still work to do, and our results are not yet what we ultimately expect to achieve in a more favorable operating environment, we are encouraged by the progress reflected in our performance and truly grateful for the commitment of our global team in making this transformation successful. A summary of all these restructuring actions is covered on pages 5 through 7 of the supplemental deck. I would like to spend a moment discussing the tariff recoveries recognized during this quarter. We were pleased to realize these recoveries, particularly given the significant impact those tariffs had on prior year's results. As Ken will discuss in more detail, we elected to deploy the full amount of these recoveries to further strengthen our balance sheet. Combined with our ongoing success in lowering and managing our inventory levels, this contributed to a significant improvement in our financial position. We ended the quarter approximately $3 million in net debt, roughly a 70% reduction from our position at the end of fiscal 2026. Looking ahead, we remain focused on disciplined working capital management and continued debt reduction, with the goal of returning to a net cash position this fiscal year. Our ability to achieve this level of progress on the balance sheet while simultaneously delivering year-over-year growth in revenue and profitability in challenging market conditions is further testament to the effectiveness of our strategic initiatives and the strong execution of our team. Additional information regarding our balance sheet and capital structure can be found on page 10 of the supplemental presentation. Our bedding business was a major contributor to the success this quarter, growing sales by more than 13%, despite continued weakness in overall industry demand and the impact of one fewer shipping week compared to the prior year period. Based on the market data available to us, we believe our growth materially outpaced the broader industry trend from both a unit and dollar volume perspective. When compared with industry shipment data published by the International Sleep Products Association, which is included on page 20 and 21 of our presentation, our bedding top line is particularly compelling. As we look ahead, there continues to be considerable discussion across the industry about the timing and magnitude of a recovery in bedding demand following the last several years of depressed conditions. ISPA's latest forecast continues to point to modest shipment growth beginning in calendar year 2027, and we generally share the view that the industry is at or near the point where a more normalized replacement cycle could begin to emerge. Mattress replacement activity in the U.S. has remained below historical levels for an extended period, and that's shown on page 22 of our supplemental deck. We believe that dynamic suggests there may be some pent-up demand that drives market improvement over time. However, I will note that a meaningful acceleration in unit demand will likely require stronger consumer confidence and a corresponding increase in discretionary spending to drive traffic into mattress retail stores. Against this challenging backdrop, we are particularly encouraged by the performance of our bedding business and its double-digit sales growth over the last two quarters. We believe this reflects our strategic investments over the past several years to strengthen our U.S. manufacturing platform while also expanding the flexibility and scale of our nearshore and offshore production capabilities. This diversified global manufacturing strategy, balanced over five geographies, continues to resonate with customers as they navigate an evolving trade and tariff landscape and look for dependable sourcing solutions. We believe our broad range of manufacturing options, combined with the certainty they provide, has differentiated us in the market and positioned us for more growth as demand ultimately improves and that replacement cycle gains momentum. From a product perspective, our sewn mattress cover category remains an important growth driver during the quarter and serves as a strong example of how our product development efforts and diversified manufacturing are working together to create value. As we have expanded beyond traditional knitted fabrics, we have simultaneously invested in the infrastructure and expertise necessary to efficiently produce other products, such as quilted sewn covers, through our nearshore and offshore platforms. This combination has helped shield us from some of the macro unit erosion and created an attractive solution for our sewn cover customers seeking both innovation and supply chain flexibility. It has also enabled us to deepen a number of strategic customer relationships and gain share with key accounts. Innovation also remains a core component of our long-term growth strategy. Performance fabrics have been a significant driver of growth within our bedding business for many years, and we continue to invest in developing differentiated products that address evolving consumer preferences. During the quarter, we completed testing on several promising new cooling technologies that we expect to incorporate into our product line in the near term. We look forward to introducing these new developments later this year and anticipate strong customer interest as the market continues to emphasize products that combine comfort, performance, and temperature management benefits. For additional context, we have included a timeline highlighting our key product innovation milestones over many years on page 17 of the supplemental presentation. Overall, we remain encouraged by the trajectory of our bedding business and the progress we have made since implementing our restructuring initiatives. We believe the business is well positioned to benefit from an eventual improvement in macroeconomic conditions and a normalization of industry demand trends. Importantly, our current manufacturing footprint provides meaningful capacity for growth, and we believe we can support higher unit volumes with relatively modest incremental costs. As a result, we expect future revenue growth to translate into enhanced operating leverage and improved profitability. Turning to our upholstery business. We were encouraged by our performance during the quarter. Sales were largely comparable to the prior year period, despite a shorter selling period and continued softness within residential furniture, which remains the largest end market for our upholstery business. Equally important, we were able to maintain relatively stable gross profit margins despite the challenging demand environment. We believe this reflects the benefits of the actions we took last year to streamline our cost structure and integrate our operations, which have enhanced the consistency of our upholstery business in a manner similar to bedding. In the residential channel, we are pleased with our placement rates, but we believe a sustained recovery there will depend on broader improvement in macroeconomic conditions. Trends in housing activity and mortgage rates remain particularly important variables, given their influence on consumer confidence and discretionary spending on home-related purchases like furniture. We have included some macro trend data that we believe impacts our upholstery business in the posted presentations on pages 23 through 27. From a diversification perspective, we continue to invest in expanding our customer relationships in Asia and other international markets. While these regions currently represent a relatively modest portion of our upholstery business, we believe they offer attractive long-term opportunities. Our established manufacturing platform in China, combined with our operational capabilities in Vietnam and our global sourcing network, provides us with the flexibility to serve customers across multiple geographies. Over time, we believe these capabilities can help diversify our upholstery revenue and create additional growth opportunities. We were also pleased to see improving conditions in our hospitality and commercial upholstery fabric markets during the quarter, with both verticals delivering year-over-year growth. We believe these areas present attractive opportunities as we move through the year, especially as travel activity, hospitality spending, and commercial project development continue to normalize. An important aspect of these markets is that many customers operate under established brand and performance standards that suppliers must meet to qualify. Those qualification requirements can create meaningful competitive advantages for Culp and support longer-term customer relationships. As a result, we remain focused on supplying both fabric and window treatment products to these end markets. Product innovation is also a key long-term growth factor for our upholstery strategy. Performance fabrics continue to be an essential component of any comprehensive upholstery line, and we are committed to staying ahead of emerging trends and technology in this category. In connection with Project Blaze and the integration of our formerly separate divisions into a unified Culp-branded platform, one of our objectives has been to more efficiently and effectively leverage the brand equity we have built through decades of product innovation, quality, and customer service. Our LiveSmart technology used in upholstery fabric is a good example of how we have successfully created brand recognition with customers through differentiated performance benefits. Building on that success, we are currently developing a broader family of branded performance products designed to strengthen customer and consumer awareness and loyalty across our upholstery and bedding businesses. While we are not yet ready to share all the details, we believe these initiatives represent a meaningful opportunity to further differentiate and streamline our product portfolio, enhance the value of the Culp brand, and drive long-term growth. We look forward to providing additional updates as these programs progress. As a final comment on our overall business, we are optimistic about our momentum entering the second quarter and believe our lower cost structure and global footprint position us for continued success in this low-demand environment while supporting the acceleration and profitability as conditions improve. In addition, we believe our pricing is currently aligned with the tariff environment, and we are confident in our commercial growth strategies under the leadership of our consolidated Chief Commercial Officer, Tommy Bruno. However, the trade landscape remains dynamic and can change quickly. As a result, we expect tariff-related trade policy to remain an important market consideration and a potential source of disruption going forward. Before I turn the call over to Ken, I want to update you on our succession plans for his Chief Financial Officer role. As we announced back in January, Ken has been planning to retire from the CFO role, but kindly offered to stay with us during 2026 to facilitate an effective transition of his responsibilities to a successor we may identify. I want to again extend our gratitude to Ken for all he has achieved throughout his almost 30 years with Culp, and for both his leadership and loyalty throughout his tenure. Ken leaves some big shoes to fill, and we're grateful he has agreed to stay with Culp through December to help with the smooth transition to his successor, who I'm excited to announce is Mary Beth Hunsberger, who is with us on the call today. Many of you will recall that when we were digesting Ken's decision to retire earlier this year, we began to focus on our Chief Financial Officer role in the context of our Project Blaze integration initiative and its emphasis on change across our company intended to drive efficiencies where practical. Through that lens, we established a plan for Mary Beth to begin working closely with Ken with the goal of immediately taking a more active role in some of the operational and FP&A functions of the CFO role. Based on the success of that collaboration, as well as Mary Beth's acumen and invaluable knowledge of our business, we're excited to take the next step of appointing Mary Beth to succeed Ken as our Chief Financial Officer, effective September 14, 2026. Mary Beth will also retain the operational oversight responsibilities of her current role with us. Mary Beth joined us at Culp several years ago as president of what was then our Culp Upholstery division and subsequently moved into the Chief Operating Officer role in May 2025. Before Culp, she spent substantial time in financial leadership roles, including several years with Tempur Sealy, a key customer of ours, now known as Somnigroup, and a variety of accounting and executive roles, including CFO, COO, and president of multinational furniture companies. We are very excited to have Mary Beth take on this financial leadership role and also continue to drive operational excellence across our global platform. We believe it is a natural fit for her skill set and experience, and she will help drive even greater connectivity amongst our executive team. Again, we're extremely grateful to Ken for agreeing to serve in the CFO role through this official transition and to stay on in a consulting capacity through the end of the calendar year. Lastly, as a final note to our celebration of all these moves, I would like to wish Ken a happy birthday. With that, I'll turn the call over to Ken. Ken Bowling: Thanks for the kind words, Ev. I appreciate that, and thank you for your leadership and support. On a personal note, this is my 78th earnings call spanning almost 20 years as Culp CFO. It has certainly been an honor and a privilege to serve as CFO during that time. Admittedly, it has been an eventful ride with good and rewarding times, but also times when we had to overcome some significant headwinds. Looking ahead, I have never been more confident in Culp's future, and I'm excited for Mary Beth as she takes on the CFO role. I know she will do a great job, and I'm totally committed to supporting her and the full executive team in this transition. Now on to the financial highlights for the first quarter. Net sales for the first quarter, which as Ev mentioned, included one last week this time around, were $54 million, compared to $50.7 million in the prior year period. The increase was driven primarily by the double-digit sales growth in our bedding segment. Gross profit for the quarter was $15.4 million, or 28.5% of sales, compared to prior year period gross profit of $7.2 million, or 14.3% of sales. A key driver in the improvement were the one-time benefits from the IEEPA tariff expense recoveries, but the refunds were certainly not the whole story. Higher sales and the cost and efficiency benefits flowing from our recently completed restructuring and integration actions were also significant contributing factors. Excluding the tariff recoveries, gross profit for the first quarter was $8.4 million, or 15.6% of sales, which is an approximately 17% increase over the prior year period. SG&A expenses for the first quarter were favorably down to $8.7 million, or 16.1% of sales, compared to $9.1 million or 18% of sales in the prior year period, reflecting the benefits of our restructuring actions. Operating income for the quarter was $6.7 million, or 12.4% of sales, compared with operating income of $1.6 million or 3.2% of sales in the prior year period, with tariff recoveries, higher sales, and better operating leverage from lower costs and enhanced efficiencies driving the improvement. Excluding tariff recoveries, non-GAAP operating loss for the quarter was $271,000, a significant improvement from a non-GAAP operating loss of $1.9 million in the prior year period. Net income for the first quarter was $6 million or $0.47 per diluted share, compared with a net loss of $231,000 or negative $0.02 per diluted share in the prior year period. EBITDA adjusted for the impacts of stock-based compensation, non-cash foreign exchange charges, certain insurance and legal recovery proceeds, and the benefit of the tariff expense recovery, was $566,000 for the first quarter, compared to a negative $938,000 in the prior year period. This year-over-year increase reflects our improved operating performance during the quarter, driven mostly from continuing momentum in our bedding segment. Our effective income tax rate for the first quarter was 12.7%, compared with 120.3% for the same period a year ago, and was impacted by our mix of earnings between the U.S., which benefited from the tariff expense recovery, and our foreign subsidiaries. Notably, last year's 120% tax rate was due to a significantly lower, as compared to this fiscal year, consolidated pre-tax income of $1.1 million generated from the sale of our Canadian facility, partially offset by a U.S. pre-tax loss derived in large part from our restructuring actions. Importantly, as of the end of last fiscal year, we had approximately $95 million in U.S. federal net operating loss carryforwards with related future income tax benefits of approximately $20 million. Turning to our reporting segments. For the bedding segment, sales for the first quarter were $31.8 million, up 13.2% compared with last year's first quarter sales of $28 million, despite having one less week of selling activity this time around. As I spoke to earlier, our bedding markets continue to be pressured by low industry demand and challenges from consumer spending and housing market trends. We were pleased to be able to continue our trend of winning share in key target areas and achieve this level of top-line growth in our bedding business. Our restructured bedding manufacturing platform drove gross profit of $4.3 million, or 13.6% of sales, which is a significant improvement from the prior year period's gross profit of $2.9 million, or 10.5% of sales. This increase was primarily driven by higher sales and efficiency gains. Notably, the bedding segment gross profit improvement does not factor in the benefit of any tariff expense recoveries allocated to this segment. For the upholstery segment, sales for the first quarter were $22.2 million, down slightly from the $22.6 million in the prior year period. But when you consider the shorter quarter and selling period this time around, upholstery sales were generally comparable year-over-year. Our upholstery markets continue to be pressured by softness in home furnishings industry and corresponding weakness in the residential upholstery channel. Gross profit in the upholstery segment was $4.1 million, or 18.6% of sales, compared with gross profit of $4.3 million, or 18.9% of sales in the prior year period. On a positive note, the slight decline was driven largely by comparable sales, and we are encouraged to see fairly consistent upholstery margins despite the industry softness. Let me turn to the balance sheet. We reported $10.2 million total cash and $13.3 million in outstanding debt as of the end of the first quarter, which equates to a net debt position of $3.1 million. This is roughly a 70% reduction in net debt compared to $10.9 million as of the end of last fiscal year, and was driven primarily by our decision to utilize the full amount of tariff recoveries received during the quarter to reduce our U.S. debt, along with the success of our efforts to reduce inventory levels in recent periods. We are extremely encouraged by our progress in strengthening our balance sheet in recent periods, and I would like to thank the team for all the great work done in this effort. As we will touch on more in a moment, we plan to continue to prioritize debt reduction and are focused on potentially eliminating all debt entirely other than the amount of borrowings to take advantage of opportunities at preferred rates in China and to maintain flexibility in managing our worldwide cash position amongst volatile macro trends. Our liquidity breakdown and other supporting information are covered on page 10 in our investor presentation. Cash flow from operations increased to $8.1 million for the first quarter from cash using operations of $695,000 in the prior year period, with the improvement primarily driven by the tariff expense recovery, operating cost efficiencies, as well as favorable working capital trends. Free cash flow increased to $7.8 million for the first quarter compared to negative free cash flow of $874,000 in the prior year period. Adjusted for capital expenditures and other items, free cash flow increased to $8 million for the first quarter from $311,000 in the prior year period. For some time now, generating free cash flow has been among our highest priorities, along with reducing debt and a key focus throughout all areas of our company, and we are pleased to see the substantial progress in this area. Capital expenditures were $314,000 for the first quarter, up slightly from $179,000 in the prior year period, as we continue to closely manage capital spending on projects targeting operating efficiency gains. We expect capital spending for fiscal 2027 to be in the $2.5 million range as we continue to spend only as necessary. Our liquidity as of the end of the first quarter was $29.4 million, consisting of $10.2 million in cash and $19.2 million in borrowing availability under our U.S. and China credit facilities. Additionally, with respect to liquidity, I note that we own our U.S. manufacturing and distribution hub in Stokesdale, North Carolina, and the net book value for the land, building, and building improvements comprising that asset as of the end of the first quarter was approximately $12 million, with an estimated market value of around $40 million. Our net book value per share as of August 2nd, 2026 was $4.26, and our tangible book value per share as of August 2nd, 2026 was $4.24. Finally, before I turn the call over to Ib one last time to discuss our updated outlook, I would like to extend a sincere thank you to all my friends and colleagues at Culp and adjacent to Culp, both past and present over the last almost 30 years. It has been a true pleasure to work with such a wonderful group of people and to serve such a great organization. I will miss you all in my retirement, but Culp will be in great hands going forward with Mary Beth. With that, turn it back over to Ib. Iv Culp: Thank you, Ken. We certainly wish you all the best, and you will truly be missed. As we indicate in our press release, due to the macroeconomic uncertainty, fluid global trade environment, and related matters we continue to see, we are providing only limited forward guidance at this time. Please note that our guidance is based on information available as of today and reflects certain assumptions regarding our business. We do expect to see consistent sequential sales volumes in the second quarter, with some growth over the prior year period, and to continue to outpace bedding industry revenue trends in what we anticipate to remain a pressured demand environment for home furnishings. We also expect the operational benefits of our recent integration and platform optimization initiatives, along with our recent pricing and strategic actions, to drive break-even operating income for the second quarter, which would be a significant improvement from the comparable year period in what remains tough operating conditions. We also expect accelerating adjusted EBITDA results for the second quarter. As Ken indicated, we will continue to prioritize debt reduction and free cash flow generation and expect to continue improving our net debt position throughout the second quarter while maintaining some strategic borrowings under our China credit facilities to both maintain flexibility and leverage preferred interest rates. With that, we will now take your questions. Operator: We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then two. Our first question comes from Linda Bolton Weiser with Water Tower Research. Please go ahead. Linda Bolton Weiser: Yes, hello. Thank you. Well, congratulations to Ken on a long and terrific career, and best of luck to you in your retirement. Congratulations to Mary Beth on her new role. Happy birthday, Ken, as well. Ken Bowling: Oh, thank you. I appreciate that. Thank you very much. Linda Bolton Weiser: Actually, maybe I could start out with just a question for Mary Beth, because I know that she spearheaded the integration of your two segments and all of the restructuring that was done. Maybe she could comment on if there is any substantial action still to go here in FY 2027, or if pretty much all the substantial actions were completed in FY 2026. Then maybe her view on how the restructuring has contributed to the competitiveness of the company. Thanks. Mary Beth Hunsberger: Hey, Linda. Great question. Thank you for those, and happy birthday to Ken. Got to throw that in there one more time. Yes, I have definitely been working hard along with our teams on the restructuring the last year or two, and while the physical initiatives are much completed, there is plenty of opportunity for continuing to harmonize processes, procedures, really fine-tuning and honing in on some of our efficiencies. So yes, while the bulk of the financial and physical changes are done, there are still improvements to be made, and we will continue to work on those. I would say the Project Blaze initiative, as we called it internally, it really has helped us become very nimble. I would say between myself and our Chief Commercial Officer, Tommy Bruno, we have a really tight connection between our sales and operations teams, and that really allows us to meet our customers' needs very nimbly. I'm really pleased about that. Iv Culp: Linda, if I could just tack on to Mary Beth's comments. I think a really good question you asked her, and I'm so encouraged by her answer and just how we think about the business. Her taking the step of having oversight as the CFO and then also maintain oversight of operations is really a natural fit, and all the things she's talking about are so encouraging to us because we can drive it from the top through the operations and support the commercial strategy. It really has streamlined our business, and we just have a lot of While she's right, the platform restructuring's finished, there's so much left for us to do. That was a good question and good feedback. Linda Bolton Weiser: Great. Thank you. Also, in terms of your commentary on each of the businesses, I guess that it was interesting to hear about some cooling innovation, some technology or something coming in bedding. So that sounds kind of exciting. Can you give a little more information on that? Can you give the timing, the rough timing of when we might see new products in that area? Iv Culp: Certainly. I'm happy to take that one. As we've been through the tough demand cycle that we harp on so frequently and that the industry continues to talk about, the way we're finding opportunities to grow our business is through some innovation and not being so focused on volume, low-end units, thinking about performance and functions of fabrics and end uses that will drive consumer interest. In bedding, for a long time, the story's been cooling, and temperature management is just important to a good night's sleep, and we see that across the industry. We've always done it, and it's part of our mix, but I think we have some new technologies with some key players that are going to really drive some success. We're not ready to launch it, but it's this calendar year, Linda. So fall towards winter, towards an early launch for the mattress line in the new year. It is around the corner, and we will be excited to share more about that as we know it. Just the backdrop of that question is performance features are table stakes for fabrics these days, whether it is bedding or upholstery. So we are constantly looking for innovative stories that will help drive market growth. Linda Bolton Weiser: Great. Thank you. Just in terms of your top-line performance in the quarter, really, it was quite impressive in both segments. I think with bedding, we kind of understand that it is maybe a little closer to the macro recovery cycle. But I am curious, in upholstery, it was sort of flattish, I guess you said, adjusting for the weak issue, the one last week. How sustainable do you think that is in upholstery? Do you think that can continue to be flat to up or is it still going to be kind of choppy on the upholstery side? Iv Culp: Well, you had a good question there. You are thinking about the businesses in the right way. We look at them slightly different on the macro trend side. I know your question is mostly about upholstery, but I will just say for bedding, when you say the macro recovery is closer, I will clean that up just a little bit and say the trends are not supportive of the business. The macro trends are not helping. But people want to sleep better, and they want to feel better when they wake up. So there is a more natural replacement cycle that we believe is active in that segment. It has been a long time, that replacement cycle is due. So while the macro trends aren't helping, I think there is some replacement trend, and I think our position in that space is strong. I think we have good strategies, and we are winning share in that segment. So that is what is supporting our growth. On the upholstery side, it is a much more fragmented market. It is a big space. Furniture can be more deferrable, in my view, than mattress. So consumer confidence trends and housing starts and any kind of housing data is going to hold back furniture in our view. But again, we are doing the right things. We are innovating the right performance products. We are trying to sell the top players in the business. Our placement rate is strong. So I feel good about residential to be relatively consistent. The other kind of secret weapon we have within upholstery is a really good hospitality and commercial fabric business. So we are not tied only to residential. We can also do things across that space, and we just design for both industries and believe it gives us some hedge. One can support the other. I feel consistent about upholstery. I am looking for better growth in bedding, but I feel consistent about our upholstery trends as well. That is generally positive. Linda Bolton Weiser: Yeah. Thank you. Very helpful. Just moving to margins a little bit. Your gross margin in the quarter was up both year-over-year and sequentially, excluding the tariff refund. So really nice gross margin. How should we think about the sustainability of that gross margin going forward in each of the two businesses? Iv Culp: Linda, thank you for the question. I am going to pivot that one to Mary Beth Hunsberger also to answer that. Mary Beth Hunsberger: Yeah. Good question, Linda. I am so proud of our improvements on gross margin, particularly on the bedding side, and they are largely the result of the initiatives we have discussed at length over the last few calls. Those are very sustainable, and as we mentioned in your first question, we continue to work on synergies, efficiencies. We continue to work on machine efficiency, off-quality results, all sorts of metrics that we are measuring to continue to expand that margin into the future, particularly on the bedding. So we are feeling very strong, and we know that is a really important part of our return to a greater profitability level. Linda Bolton Weiser: Okay, great. Your cash flow was very strong in the quarter, again, even excluding the tariff refund aspect of it. Your inventory was down both sequentially, I think, and year over year. What is the outlook for kind of just general working capital performance going forward and inventory in particular and how that contributes to cash flow performance? Ken Bowling: Yeah. Hey, Linda, this is Ken. You are right. First quarter was very strong. The team did a great job on inventory reduction. We had a little bit of offset on some lower AP, but all in all, great reduction there. Going forward, we are going to, as Ib said in our prepared remarks, we are going to keep laser focused on working capital, AR/AP inventory and try to generate as much cash flow as we can, keeping that in check. Another thing, we have talked about CapEx spending, controlling that. The main focus, as Ib said, we are going to do everything we can to get our net debt down, to continue to get it to as close or maybe to a net cash positive later on in the year. That is going to be our total focus. Every area is under scrutiny, operations, working capital, to get to that goal of getting to an ultimate net cash positive position. Linda Bolton Weiser: Okay. I think you commented on keeping some of your Chinese debt because of the attractive interest rates. Is that debt we are seeing at the end of the first quarter, is that all of the Chinese debt, or is there still a little bit of domestic that you still might pay down in future quarters? Ken Bowling: No, we were able to pay down all of our U.S. debt in the first quarter, which was at a higher interest rate. As we said, we are maintaining a certain level of China debt just to giving us the flexibility. The interest rate is extremely low, and we have several banks in China that we work with, and that gives us that flexibility to renew the agreement as needed and just be able to protect the bank line in the U.S. But no, the $13.3 million is all China. Iv Culp: Linda, I have been really proud of Ken's management of our financial stability and maintaining that China debt. While we do not need it, and probably will not need it as we look ahead, it just feels smart to us to keep it in the macro volatility in the world. We have some global cash flow needs as we transition from our different operating geographies, and to have a very low interest rate borrowings that actually have positive arbitrage for us just seems smart. So our focus is going to be on net cash. Out of debt will not be as important to us because we want that strategic debt. But net cash position should be the metric we will be driving at. Linda Bolton Weiser: Thanks. That makes sense. Then finally, I guess, just kind of thinking out a little bit, assuming we get some recovery in sort of the housing and other macro related factors, and you have your new cost structure, lower cost structure, you are going to get some very good leverage, good earnings, a really much better even cash flow in future years. Have you thought about how you might put to use that free cash flow that you might see in the out years? Are your thoughts towards share repurchase or maybe reinstating a dividend? Maybe you could give us your thoughts on that. Iv Culp: Yeah, that is a good question, Linda. We think about it all the time, and I cannot wait to have that decision to make. Because if you look at our history of our company, over many years, we have done all those things. We have purchased stock when it makes sense. We have had dividends for periods of time. We have looked at strategic ways to grow the business. All those would be in scope for us at the right time. But not to sound like a basketball coach or something, we are just keeping our head on the next game, and we want to just get out of this any net debt position. Our number one goal is to get to net cash, and when we have a better situation to think about the things you mentioned, all of them will be on the table. I am just not ready to get there yet, but it is in the back of our heads for sure. Linda Bolton Weiser: Okay, that makes sense. Well, that is all the questions I had. Thank you very much for letting me ask all those questions. Thanks. Iv Culp: Thank you, Linda. Appreciate you. Operator: Our next question comes from Anthony Lebiedzinski with Sidoti & Company. Please go ahead. Anthony Lebiedzinski: Good morning. Thank you for taking the questions. Certainly great to see the improved top and bottom line results. Let me echo Linda's comments with the best wishes to you, Ken and Mary Beth, and happy birthday as well to you, Ken, also. Ken Bowling: Thank you, Anthony. I appreciate that. Anthony Lebiedzinski: Sure enough. All right. I do realize that there was one less week of revenue, so there was a little bit of noise in the quarter, I guess. Can you just talk about pricing and unit volumes in both segments and how they impacted the reported revenue? Iv Culp: Yeah, Anthony, good question. I think Mary Beth will be the best one to talk about that a little bit, but you're hitting on the two main things. For us to get the improving GP is coming from the operational improvements and from very strategic pricing. We've said for a long time, we needed to get pricing to match the cost level. That sounds funny, and it sounds obvious, and why wouldn't you do that? But with the volatility that's been in the market over tariffs and the trade landscape, and just how much pressure, almost in a haphazard manner, was coming at us every day, it took us a minute to get the pricing normalized. Now I feel like, I do not know if we can put a percentage to it, Mary Beth, if it is how much is operational improvement, how much is pricing, but both have mattered extensively to the recovery. Mary Beth Hunsberger: For sure. As we think about top line, especially in bedding. I can assure you that a 13% increase over prior year is not all price. There is a definite unit component to that. We have seen expansion of a number of programs that we service, and it is a blend of both. Do not have exact figures off the cuff here, but, what we are pleased to know is that while, yes, we have right-sized our price, a lot of our quarterly performance was unit-driven as well. Iv Culp: We did note, Anthony, in the prepared remarks, no one should sleep on the fact, no pun intended, that our mattress cover business is really a nice add to our bedding segment. Covers, while may not be as many units as a pure knit fabric, come with generally a higher price than a standard knit, and we are really doing well with a lot of nice cover placements. That has given us some shield to the macro trend as well. Anthony Lebiedzinski: Mm-hmm. That's very helpful color. Just wondering if you've picked up some meaningful new customers, or is the growth more or less coming from existing customers? How do I think about that? Iv Culp: Well, Anthony, if you think about the bedding segment, it's pretty consolidated and maybe getting more so. There aren't a lot of customers that we don't know of that we can go win new business. But for sure, it's winning better placements with those winning customers or a new part of their business. So I would say it's new products with existing customers, would be the best way I would speak to it. We sort of know the market upwards and backwards, and there's nothing really new that we need to go chase. Anthony Lebiedzinski: Right. Iv Culp: We'd just like to have more share with the biggest players. That's kind of how we have to think about it. Anthony Lebiedzinski: That makes sense, okay. Just looking at your slide deck, slide 16, you talk about the upholstery business. You're targeting performance products to be about 40% of total, and you're targeting hospitality to be about 30% of total. So where are you now in terms of that penetration for both of those metrics and, what's the timeframe as to when you think you can get to those numbers? Iv Culp: Anthony, I would say those are sort of minimum thresholds for us. The first part, the 40% of performance products, and I mentioned, and maybe it was talking with Linda, or maybe it was in prepared remarks, performance fabrics are table stakes, and that is just part of the business. I would say we have already met the threshold there and would expect performance features and upholstery to be even more share than that. On the hospitality contract side, we are over that threshold. Anthony Lebiedzinski: Okay. Iv Culp: If residential were to get better, the percentages would work itself differently, but today we are striding even higher than that target in hospitality contract view. We are beating both those metrics today. Anthony Lebiedzinski: That is great to hear. Lastly from me, do you expect to get any additional tariff refunds, or do you think this is it for now? Iv Culp: Anthony, we have received what we thought we were due. There's more litigation on some of the recent round of tariffs. To me, that's a little bit of noise. I've already stated that I think we have our pricing in line with current costs, and that includes current tariffs. We don't have any active litigation or any significant focus, but call me tomorrow and the answer might be different. We just wait to see the rules of the game, and I think we're playing the game better than we have in a long time. We're encouraged about that. Anthony Lebiedzinski: Understood. Well, thank you very much and best of luck. Iv Culp: Thank you, Anthony. Operator: This concludes our question and answer session. I would like to turn the conference back over to Iv Culp for any closing remarks. Iv Culp: Thank you, Bailey. Again, thank you to everyone for your participation and your interest in Culp. We look forward to updating you on our progress next quarter. Have a great day. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Before you buy stock in Culp, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Culp wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $410,024!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,372,815!* Now, it’s worth noting Stock Advisor’s total average return is 950% — a market-crushing outperformance compared to 211% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of September 10, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Culp (CULP) Q1 2027 Earnings Call Transcript was originally published by The Motley Fool

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management attributes the year-over-year increase in sales and profitability to the successful execution of 'Project Blaze,' which integrated bedding and upholstery operations into a unified platform. The bedding segment's 13.2% growth was driven by strategic market share gains and a diversified global manufacturing strategy that resonates with customers navigating trade and tariff volatility. Performance in the sewn mattress cover category acted as a hedge against macro unit erosion, leveraging nearshore and offshore capabilities to meet demand for supply chain flexibility. Upholstery results remained stable despite residential softness, supported by a streamlined cost structure and growth in the hospitality and commercial verticals. The company successfully normalized its pricing structure to align with the current tariff environment, overcoming previous challenges where costs outpaced price adjustments. Management views the current performance as validation of a more resilient, lower-cost operating model capable of generating positive adjusted EBITDA even in a low-demand environment. Second quarter guidance assumes consistent sequential sales volumes with year-over-year growth, targeting break-even operating income and accelerating adjusted EBITDA. The company expects to return to a net cash position within the fiscal year by prioritizing disciplined working capital management and further debt reduction. Management anticipates a normalized mattress replacement cycle could begin to emerge by calendar year 2027, though meaningful acceleration depends on improved consumer confidence. Future revenue growth is expected to drive significant operating leverage as the current manufacturing footprint has ample capacity to support higher volumes with modest incremental costs. Strategic focus remains on product innovation, specifically new cooling technologies in bedding and a broader family of branded performance products in upholstery to be launched later this year. Recognized approximately $7 million in IEEPA tariff recoveries during the quarter, which were fully deployed to strengthen the balance sheet and reduce net debt by 70%. Announced a leadership transition with Mary Beth Hunsberger succeeding Ken Bowling as CFO, while maintaining her operational oversight to ensure connectivity between finance and operations. The company maintains strategic borrowings in China to take advantage of preferred interest rates and maintain global cash flexibility despite having eliminated all U.S. debt. Management flagged the dynamic trade landscape and tariff-related policies as ongoing potential sources of market disruption. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management confirmed that while physical restructuring is complete, there is significant remaining opportunity to harmonize processes and fine-tune efficiencies. The integration has created a tighter connection between sales and operations, allowing the company to be more nimble in meeting customer needs. Growth was a blend of right-sized pricing and unit volume expansion, specifically through new programs with existing major customers. The mattress cover business provides a shield against macro trends because covers generally carry a higher price point than standard knit fabrics. The company is currently exceeding its internal targets for hospitality and performance products, which helps offset the more deferrable nature of residential furniture. Management views the hospitality and commercial sectors as a 'secret weapon' that provides a hedge against residential housing volatility. The immediate priority is reaching a net cash position; however, management noted a historical willingness to use dividends and buybacks once financial stability is fully restored. Strategic debt in China will be maintained due to positive arbitrage and low interest rates, even as the company moves toward a net cash metric.

This article first appeared on GuruFocus. Net Sales: $54 million in Q1 FY2027, up from $50.7 million in the prior year period, despite one fewer selling week. Gross Profit: $15.4 million, or 28.5% of sales, versus $7.2 million, or 14.3% of sales, in the prior year period. Gross Profit (Excluding Tariff Recoveries): $8.4 million, or 15.6% of sales, an approximately 17% increase over the prior year period. SG&A Expenses: $8.7 million, or 16.1% of sales, down from $9.1 million, or 18% of sales, in the prior year period. Operating Income: $6.7 million, or 12.4% of sales, versus $1.6 million, or 3.2% of sales, in the prior year period. Non-GAAP Operating Loss (Excluding Tariff Recoveries): $271,000, improved from a non-GAAP operating loss of $1.9 million in the prior year period. Net Income: $6 million, or $0.47 per diluted share, versus a net loss of $231,000, or negative $0.02 per diluted share, in the prior year period. Adjusted EBITDA: $566,000 versus negative $938,000 in the prior year period. Effective Income Tax Rate: 12.7% versus 120.3% in the prior year period. Bedding Segment Sales: $31.8 million, up 13.2% from $28 million in the prior year period. Bedding Segment Gross Profit: $4.3 million, or 13.6% of sales, versus $2.9 million, or 10.5% of sales, in the prior year period. Upholstery Segment Sales: $22.2 million, down slightly from $22.6 million in the prior year period. Upholstery Segment Gross Profit: $4.1 million, or 18.6% of sales, versus $4.3 million, or 18.9% of sales, in the prior year period. Cash and Debt: $10.2 million in total cash and $13.3 million in outstanding debt, equating to a net debt position of $3.1 million. Net Debt Reduction: Roughly 70% reduction from $10.9 million at the end of the last fiscal year. Cash Flow from Operations: $8.1 million versus cash used in operations of $695,000 in the prior year period. Free Cash Flow: $7.8 million versus negative free cash flow of $874,000 in the prior year period. Adjusted Free Cash Flow: $8 million versus $311,000 in the prior year period. Capital Expenditures: $314,000 versus $179,000 in the prior year period; FY2027 capital spending expected in the $2.5 million range. Liquidity: $29.4 million, consisting of $10.2 million in cash and $19.2 million in borrowing availability. Net Book Value Per Share: $4.26 as of August 2, 2026. Tangible Book Value Per Share: $4.24 as of August 2, 2026. US Federal NOL Carryforwards: Approximately $95 million with related future income tax benefits of approximately $20 million. Tariff Recoveries: Approximately $7 million in IEPA tariff recoveries recognized during the quarter. Warning! GuruFocus has detected 5 Warning Signs with CULP. Is CULP fairly valued? Test your thesis with our free DCF calculator. Release Date: September 10, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Net sales increased 6.5% year-over-year to $54 million, driven by double-digit growth in the bedding segment. Gross profit surged 114% to $15.4 million, with gross margin expanding to 28.5% from 14.3%. Bedding segment sales grew 13.2% year-over-year, significantly outpacing industry trends. Net debt reduced by approximately 70% to $3.1 million, with a goal to achieve a net cash position this fiscal year. Operating cash flow improved to $8.1 million from negative $0.7 million, and free cash flow turned positive at $7.8 million. Upholstery segment sales declined slightly to $22.2 million from $22.6 million, impacted by soft residential furniture demand. The company provided only limited forward guidance due to macroeconomic uncertainty and global trade environment. Tariff-related trade policy remains a potential source of disruption, with no additional tariff refunds expected. The home furnishings industry continues to face challenging demand conditions, pressuring overall sales. Despite improvements, the company still reported a non-GAAP operating loss of $271,000 for the quarter. Q: Linda Weiser of Water Tower Research asked Mary Beth Hunsberger whether any substantial restructuring actions remain for FY27, or if the bulk was completed in FY26, and how the restructuring has contributed to the company's competitiveness. A: Mary Beth Hunsberger, President of Culp Upholstery Fabrics, said the bulk of the financial and physical changes are done, but there is still opportunity to harmonize processes and fine-tune efficiencies. She noted the "Project Blaze" initiatives have made the company very nimble, with a tight connection between sales and operations teams allowing them to meet customer needs quickly. Q: Linda Weiser asked for more detail on the new cooling technology innovation in bedding and the rough timing for when new products might launch. A: CEO Robert Culp explained that with the tough demand cycle, Culp is finding growth through innovation focused on performance and function rather than low-end volume. He said the company has new cooling technologies with key players that it is not ready to launch yet, but expects it this calendar year fall toward winter, ahead of an early launch for a mattress line in the new year. Q: Linda Weiser asked how sustainable the upholstery segment's roughly flat sales performance is, and whether it can continue flat to up or will remain choppy. A: Robert Culp said the upholstery market is more fragmented and furniture purchases are more deferrable than mattresses, so consumer confidence and housing data will hold back furniture. However, he feels good about residential being relatively consistent, citing strong placement rates, innovation, and a hospitality and commercial fabric business that acts as a hedge. He said he feels consistent about upholstery trends and is looking for better growth in bedding. Q: Linda Weiser asked about the sustainability of the improved gross margin, which was up year over year and sequentially excluding the tariff refund, in each of the two businesses. A: Mary Beth Hunsberger said she is proud of the gross margin improvements, particularly in bedding, which are largely the result of the restructuring initiatives discussed over prior calls. She said those gains are very sustainable and the company continues to work on synergies, machine efficiency, and off-quality results to further expand margins, especially in bedding. Q: Linda Weiser asked about the outlook for working capital performance going forward, particularly inventory, and how it contributes to cash flow. A: CFO Kenneth Bowling said the first quarter was very strong, with the team doing a great job on inventory reduction, partly offset by lower accounts payable. Going forward, the company will stay laser-focused on working capital AR, AP, and inventory and control capital expenditures, with the main goal of reducing net debt and potentially reaching a net cash positive position later in the year. Q: Linda Weiser asked whether the debt at the end of the first quarter is all Chinese debt or if some domestic debt remains to be paid down. A: Kenneth Bowling confirmed the company paid down all of its US debt in the first quarter, which carried a higher interest rate. The $13.3 million outstanding is all China debt, which the company maintains for flexibility given extremely low interest rates and relationships with several Chinese banks. Robert Culp added that the focus will be on a net cash position rather than being completely out of debt. Q: Linda Weiser asked how the company might deploy future free cash flow in the out years, such as through share repurchase or reinstating a dividend. A: Robert Culp said the company thinks about this often and all options stock repurchases, dividends, and strategic growth would be in scope at the right time. However, the number one goal now is to get to a net cash position, and once the company is in a better situation, all of those options will be on the table. Q: Anthony Lebiedzinski of Sidoti & Company asked about pricing and unit volumes in both segments and how they impacted reported revenue, given the one less week of revenue. A: Robert Culp said the improving gross profit comes from operational improvements and strategic pricing, noting it took time to normalize pricing amid tariff and trade volatility. Mary Beth Hunsberger added that the 13% bedding increase was not all price there was a definite unit component, with expansion of programs serviced, so the performance was a blend of both price and units. Q: Anthony Lebiedzinski asked whether the growth is coming from meaningful new customers or more from existing customers. A: Robert Culp said the bedding segment is fairly consolidated, so there are not many unknown customers to win. Growth is coming from winning better placements with existing winning customers or new parts of their business essentially new products with existing customers, as the company knows the market well and wants more share with the biggest players. Q: Anthony Lebiedzinski asked where the upholstery business currently stands on its targets of performance products at about 40% of total and hospitality at about 30% of total, and the timeframe to reach those numbers. A: Robert Culp said those are minimum thresholds. On performance products, he said the company has already met the 40% threshold and expects performance features to be even more prevalent. On the hospitality contract side, the company is over that threshold today, though percentages would shift if residential improved. He said Culp is beating both metrics today. Q: Anthony Lebiedzinski asked whether the company expects any additional tariff refunds or if the recent recoveries are it for now. A: Robert Culp said the company has received what it thought it was due, and while there is more litigation on recent tariffs, he considers that noise. He said pricing is in line with current costs, including current tariffs, and the company has no active litigation or significant focus on further refunds, though the situation could change. Q: Linda Weiser asked Mary Beth Hunsberger to comment on how the restructuring has contributed to the company's competitiveness and whether substantial actions remain. A: Mary Beth Hunsberger said the "Project Blaze" initiatives have helped the company become very nimble, with a tight connection between sales and operations under Chief Commercial Officer Tommy Bruno. Robert Culp added that having Mary Beth oversee both the CFO role and operations is a natural fit that streamlines the business and supports the commercial strategy, with much work still left to do beyond the completed platform restructuring. QFor the complete transcript of the earnings call, please refer to the full earnings call transcript.

Culp, Inc. (CULP) came out with quarterly earnings of $0.47 per share, beating the Zacks Consensus Estimate of $0.44 per share. This compares to a loss of $0.02 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +6.82%. A quarter ago, it was expected that this company would post a loss of $0.11 per share when it actually produced a loss of $0.17, delivering a surprise of -54.55%. Over the last four quarters, the company has surpassed consensus EPS estimates just once. Culp, which belongs to the Zacks Textile - Home Furnishing industry, posted revenues of $53.97 million for the quarter ended July 2026, surpassing the Zacks Consensus Estimate by 1.45%. This compares to year-ago revenues of $50.69 million. The company has topped consensus revenue estimates three times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Culp shares have lost about 3.9% since the beginning of the year versus the S&P 500's gain of 12.1%. While Culp has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Culp was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is -$0.02 on $55.6 million in revenues for the coming quarter and $0.34 on $214.14 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Textile - Home Furnishing is currently in the top 29% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. MillerKnoll (MLKN), another stock in the broader Zacks Consumer Discretionary sector, has yet to report results for the quarter ended August 2026. The results are expected to be released on September 22. This furniture maker is expected to post quarterly earnings of $0.35 per share in its upcoming report, which represents a year-over-year change of -22.2%. The consensus EPS estimate for the quarter has been revised 10.5% lower over the last 30 days to the current level. MillerKnoll's revenues are expected to be $942.7 million, down 1.4% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Culp, Inc. (CULP) : Free Stock Analysis Report MillerKnoll, Inc. (MLKN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Plan Execution Drives Above-Market Sales Growth and Improved Profitability Significantly Enhanced Balance Sheet from Over 70% Net Debt Reduction HIGH POINT, N.C., September 09, 2026--(BUSINESS WIRE)--Culp, Inc. (NASDAQ: CULP), a leading provider of fabrics for bedding and upholstery fabrics for residential, commercial, and hospitality furniture and other applications, today reported financial and operating results for its first fiscal quarter ended August 2, 2026. Fiscal 2027 First Quarter Financial Highlights Year-over-year sales growth of 6.5%, while also overcoming one less selling week in the quarter, with consolidated net sales of $54.0 million compared to $50.7 million in the prior-year period and double-digit sales growth of 13.2% in the bedding segment. Consolidated gross profit was $15.4 million, or 28.5% of sales, compared with $7.2 million, or 14.3% of sales, in the prior-year period. Excluding the impact of IEEPA tariff recoveries in the quarter associated with previously incurred costs, adjusted gross profit was $8.4 million, or 15.6% of sales, an approximately 17% increase from the prior-year period driven primarily by higher sales and operational improvements (see reconciliation table on page 10). Operating income of $6.7 million, or 12.4% of sales, compared to the prior year period’s operating income of $1.6 million, or 3.2% of sales. Excluding the impacts of the above-referenced tariff-related recoveries, adjusted operating loss was $271 thousand compared to the prior-year period’s adjusted operating loss of $1.9 million (see reconciliation table on page 10). Net income of $6.0 million, or $.47 per diluted share, compared to a net loss of $231 thousand, or $(.02) per diluted share, in the prior-year period. An over 70% reduction in net debt, to $3.1 million, compared to net debt at 2026 fiscal year end of $10.9 million (see reconciliation table on page 9), with the Company maintaining $10.2 million in total cash, $13.3 million in total debt, and total liquidity of $29.4 million at first quarter end. Cash flow from operations increased to $8.1 million compared to cash used in operations of ($695) thousand in the prior year period, and free cash flow increased to $7.8 million from negative $(874) thousand in the prior-year period. Adjusted for capital expenditures of $314 thousand and other items, free cash flow increased to $8.0 million from $311 thousand in the prior year period (see reconciliation table on page 9). Management Commentary Iv Culp, President and Chief Executive Officer, commented, "We are pleased with our first quarter results, namely our ability to increase sales and margins and to exceed our profitability expectations irrespective of the one-time tariff recoveries. We look at our first quarter results as more proof-of-concept that all of our work to integrate, restructure and optimize our platform is generating growth and profitability even in challenging conditions like those we continue to see across home furnishings. This is a clear testament to the CULP team’s successful execution of our strategic plans over the last two years. "Our bedding business grew its topline by over 13% in a low-unit market environment and with one less shipping week this quarter compared to last year. We believe our bedding sales trend is significantly exceeding industry norms and provides a good indication that our commercial strategies should provide continued revenue growth, especially once we see the industry replacement cycle that many believe is overdue. Our enhanced U.S. operations combined with flexible nearshore and offshore options are elevating our already strong customer relationships and driving our success in this business. "We are also encouraged to see sales in our upholstery business nearly comp the prior-year quarter despite a shorter selling period, and we are pleased with placement rates within our largest upholstery end market, residential furniture. In addition, we saw growth on the hospitality and contract side of our upholstery business and are excited about the potential to further grow those verticals. "Our emphasis on the balance sheet and cash flow management was well reflected in our first quarter results. Through the success of our inventory reduction initiatives and management systems, together with our use of the tariff-proceeds received during the quarter, we reduced net debt down to $3 million from $11 million at the end of last fiscal year, and we are focused on moving to a net cash position. "Overall, we are optimistic about the momentum we see across our business entering the second quarter and believe our lower cost structure and global footprint position us for continued success in this low-demand environment and accelerating profitability as conditions improve." Financial Outlook Due to macro-economic uncertainty and the fluid global trade and tariff environment, the Company is providing only limited forward guidance at this time, with such guidance based on information available at the time of this press release and reflecting certain assumptions by management regarding the Company’s business, market and industry conditions. The Company expects consistent sequential sales volumes in the second quarter, with some growth over the prior-year quarter, and to continue to outpace bedding industry revenue trends in what it anticipates to remain a pressured demand environment for home furnishings. The Company expects the operational benefits of its recent integration and platform optimization initiatives, along with recent pricing and strategic actions, to drive break-even operating income for the second quarter, which would be a significant improvement from the comparable prior-year period in what remains a challenging market environment. The Company also expects accelerating adjusted EBITDA results for the second quarter. The Company will continue to prioritize debt reduction and free cash flow generation, and expects to continue improving its net debt position throughout the second quarter while maintaining some strategic borrowings under its China credit facilities to both maintain flexibility and leverage preferred interest rates. Fiscal 2027 First Quarter Business Segment Highlights Bedding Sales in this segment were $31.8 million for the first quarter, up 13.2% compared with the prior-year period despite there being one less week in the first quarter. Gross profit (excluding the impact of the tariff-related recoveries) in the bedding segment was $4.3 million, or 13.6% of sales, a significant improvement from the prior-year period’s gross profit of $2.9 million, or 10.5% of sales, driven primarily by higher revenue and enhanced operating efficiencies. Upholstery Sales in this segment were $22.2 million for the first quarter, generally flat to prior-year period sales of $22.7 million despite the shorter selling period. Gross profit (excluding the impact of the tariff-related recoveries) was $4.1 million, or 18.6% of sales, compared to $4.3 million, or 18.9% of sales, in the prior-year period, reflecting consistent operating margins. Conference Call Culp, Inc. will hold a conference call to discuss financial results for the first quarter of its fiscal year 2027 on Thursday, September 10, 2026, at 9:00 a.m. Eastern Time. A live webcast of this call can be accessed on the "Upcoming Events" section on the "Investor Relations" page of the Company’s website, www.culp.com. A replay of the webcast will be available for 30 days under the "Past Events" section on the "Investor Relations" page of the Company’s website. About the Company Culp, Inc. is one of the largest marketers of mattress fabrics for bedding and upholstery fabrics for residential, commercial, and hospitality furniture and other applications in North America. The Company markets a variety of fabrics to its global customer base of leading bedding and furniture companies, including fabrics produced at Culp’s manufacturing facilities and fabrics sourced through other suppliers. Culp has manufacturing and sourcing capabilities located in the United States, China, Haiti, Turkey, and Vietnam. Forward Looking Statements This release contains "forward-looking statements" within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Such statements are inherently subject to risks and uncertainties that may cause actual events and results to differ materially from such statements. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often but not always characterized by qualifying words such as "expect," "believe," "will," "may," "should," "could," "potential," "continue," "target," "predict," "seek," "anticipate," "estimate," "intend," "plan," "project," and their derivatives, and include but are not limited to statements about expectations, projections, or trends for our future operations, expectations with respect to tariffs, strategic initiatives and plans, restructuring and integration actions, production levels, new product launches, sales, profit margins, profitability, operating (loss) income, capital expenditures, working capital levels, cost savings (including, without limitation, anticipated cost savings from restructuring and integration actions), income taxes, SG&A or other expenses, pre-tax (loss) income, earnings, cash flow, and other performance or liquidity measures, as well as any statements regarding dividends, share repurchases, liquidity, use of cash and cash requirements, ending cash balances and cash positions, borrowing capacity, investments, potential acquisitions, cash and non-cash restructuring and restructuring-related charges, expenses, and/or credits, net proceeds from restructuring related asset dispositions, future economic or industry trends, public health epidemics, or other future developments. There can be no assurance that we will realize these expectations or meet our guidance, or that these beliefs will prove correct. Factors that could influence the matters discussed in such statements include the level of housing starts and sales of existing homes, demand for home furnishings products, consumer confidence, trends in disposable income, and general economic conditions. Decreases in these economic indicators could have a negative effect on our business and prospects. Likewise, increases in interest rates, particularly home mortgage rates, and increases in consumer debt or the general rate of inflation, could affect us adversely. Changes in consumer tastes or preferences toward products not produced by us could erode demand for our products. Changes in tariffs or trade policy, including changes in U.S. trade enforcement priorities, or changes in the value of the U.S. dollar versus other currencies, could affect our financial results because a significant portion of our operations are located outside the United States. Relatedly, litigation is ongoing as to whether businesses that paid tariffs that were invalidated by the U.S. Supreme Court in February 2026 may receive or retain refunds for those tariffs, which could be significant. Also, economic or political instability in international areas could affect our operations or sources of goods in those areas, as well as demand for our products in international markets. The future performance of our business depends in part on our success in conducting and finalizing acquisition negotiations and integrating acquired businesses into our existing operations. The impact of public health emergencies or epidemics on employees, customers, suppliers, and the global economy could also adversely affect our operations and financial performance. In addition, the impact of potential asset impairments, including impairments of property, plant, and equipment, inventory, or intangible assets, as well as the impact of valuation allowances applied against our net deferred income tax assets, could affect our financial results. Increases in freight costs, labor costs, and raw material prices, including increases in market prices for petrochemical products, can also significantly affect the prices we pay for shipping, labor, and raw materials, respectively, and in turn, increase our operating costs and decrease our profitability. Also, our success in diversifying our supply chain with reliable partners to effectively service our global platform could affect our operations and adversely affect our financial results. Finally, the future performance of our business also depends on our ability to successfully restructure our bedding operations, integrate our bedding and upholstery segments and realize the expected benefits of that integration effort, which may not meet our expectations. Further information about these factors, as well as other factors that could affect our future operations or financial results and the matters discussed in forward-looking statements, is included in Item 1A "Risk Factors" in our most recent Form 10-K report filed with the Securities and Exchange Commission. Many of these factors are macroeconomic in nature and are, therefore, beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from those described in this release as anticipated, believed, estimated, expected, intended, planned or projected. The forward-looking statements included in this release are made only as of the date of this release. Unless required by United States federal securities laws, we neither intend nor assume any obligation to update these forward-looking statements for any reason after the date of this release to conform these statements to actual results or to changes in our expectations. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations or financial results. View source version on businesswire.com: https://www.businesswire.com/news/home/20260909368242/en/ Contacts Investor Relations Contact Ken Bowling, Executive Vice President, Chief Financial Officer, and Treasurer:(336) [email protected]

Culp, Inc. CULP used its fourth-quarter earnings call to argue that two years of restructuring are beginning to show up in the numbers. Management’s central message was not that the turnaround is finished, but that revenue momentum, lower costs and a leaner platform have started to improve operating leverage. That matters because the company is heading into fiscal 2027 with limited formal guidance, a still-weak home furnishings market and a balance sheet that it is trying to stabilize. The call focused on what Culp believes it can control: mix, pricing, efficiency, inventory and debt reduction. President and CEO Iv Culp said the fourth quarter showed building momentum as the company exited fiscal 2026. He pointed to sequential gains in sales, gross profit, operating results and the bottom line as evidence that restructuring and integration efforts are starting to translate into better performance. Revenues rose 5.8% year over year to $51.6 million, exceeding the Zacks Consensus Estimate of $50.1 million by 3%. The company posted a net loss of $2.2 million or 17 cents, missing the consensus mark by 54.6%. Culp, Inc. price-consensus-eps-surprise-chart | Culp, Inc. Quote Management also kept the tone measured. Iv Culp said there is still meaningful ground to cover before the company reaches the profitability level it expects, even as he described fiscal 2027 as a potential turning point. Bedding was the clearest source of momentum on the call. Fourth-quarter bedding sales rose 12.5% year over year to $30.5 million, and management said share gains, new product innovation and stronger sewn mattress cover execution drove the improvement. Iv Culp spent considerable time describing sewn covers as a way to raise the company’s value per mattress unit. He said broader cover offerings and improved offshore and nearshore manufacturing execution are helping Culp deepen relationships with targeted customers. Gross profit in bedding climbed 38% sequentially from the third quarter, although margin remained below the prior-year level. Management attributed the quarter-over-quarter gain to higher sales and improved operating efficiency, while noting that year-over-year comparisons were distorted by last year’s inventory valuation policy change. Upholstery remained the more pressured business. Fourth-quarter sales declined 2.5% year over year to $21.1 million, with management attributing the softer demand backdrop to trends in housing activity, consumer spending, and travel and leisure, which are affecting residential and hospitality furniture. Even so, executives emphasized the importance of sequential progress. Iv Culp said the business posted quarter-to-quarter revenue growth and margin improvement, helped by lower fixed costs and the continued integration of domestic upholstery operations into the bedding footprint in North Carolina. Management also highlighted a reduced facility footprint in China and added capabilities in Vietnam, including a new showroom. The message was that upholstery remains demand-constrained but is structurally better positioned to recover more profitably when furniture markets improve. Chief financial officer Kenneth Bowling made inventory and debt central to the call. Inventory ended the quarter at $47.5 million, down about $5 million from the third quarter, which management framed as evidence that tighter controls are beginning to free up cash. Liquidity at year-end stood at $24.2 million, including $8.3 million in cash, while outstanding debt totaled $19.1 million. Net debt was about $10.9 million, and Bowling said the borrowings were primarily used to fund working capital and restructuring actions. The biggest near-term swing factor was the roughly $7 million of IEEPA tariff refunds received in the first quarter of fiscal 2027. Management said that cash should cut net debt to about $5 million at first-quarter end, improve liquidity and help offset elevated tariff-related costs absorbed in fiscal 2026. Formal guidance was narrow, but the direction of travel was clearer. Management said first-quarter fiscal 2027 sales should improve moderately both sequentially and from the prior-year period, even as home furnishings demand remains challenged. Culp also said cost and efficiency gains from restructuring should produce breakeven to positive adjusted EBITDA in the first quarter without any benefit from the tariff refunds. With the refunds included, management expects profitability to improve further. In Q&A, a Water Tower Research analyst pressed management on product mix, margins and cost savings. Iv Culp responded that bedding should continue to outgrow upholstery in the near term, bedding margins should improve in fiscal 2027 and the company still has room for additional cost or pricing actions if demand does not recover as hoped. The call ended with management emphasizing discipline over optimism. Iv Culp repeatedly returned to the need to manage what it can control: costs, pricing, inventory, supply chain flexibility and debt. That tone was reinforced in Q&A when Bowling said the company will prioritize paying down higher-cost U.S. debt first while potentially keeping some low-cost China borrowings in place for strategic flexibility. The overall posture takeaways from the call were that Culp sees the platform reset as largely complete but still needs a steadier demand backdrop and continued execution to convert those structural changes into sustained profitability. CULP carries a Zacks Rank #3 (Hold), along with Value, Growth and Momentum Scores of D each and a VGM Score of F. Under the Zacks framework, the rank is the primary signal, while Style Scores are meant to refine stock selection, with A and B grades indicating stronger characteristics and D or F indicating weaker near-term appeal. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. A Zacks Rank #3 does not carry the same favorable implication as a Zacks Rank #1 or 2 (Buy), and weak Style Scores further temper the setup. The Zacks view can also change after earnings, as analyst estimate revisions are updated, so the current rank and scores should be viewed as a snapshot rather than a fixed verdict. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Culp, Inc. (CULP) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Release Date: July 02, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Culp Inc (NASDAQ:CULP) achieved overall sales growth for the fourth quarter, both sequentially and year-over-year, despite a challenging macro environment. The company delivered sequential improvement in gross profit, operating results, and the bottom line. Culp Inc (NASDAQ:CULP) expects more than $20 million in annualized savings and efficiencies from restructuring and integration initiatives. The bedding segment showed strong performance with double-digit sales growth and a 40% improvement in gross profit compared to the third quarter. Culp Inc (NASDAQ:CULP) received approximately $7 million in IEPA tariff refunds, which will significantly reduce debt levels and improve liquidity. The upholstery segment continues to face challenging demand conditions due to macroeconomic pressures, including housing market and consumer spending trends. Culp Inc (NASDAQ:CULP) reported a net loss of $2.2 million for the fourth quarter, although this was an improvement from the previous quarter. The company's gross profit margin declined year-over-year due to changes in inventory valuation policy. The upholstery segment experienced a decline in sales for the full year, down from $99.3 million to $86.9 million. Culp Inc (NASDAQ:CULP) continues to face uncertainties from geopolitical conflicts, tariffs, and inflation, impacting customer and consumer behavior. Warning! GuruFocus has detected 5 Warning Signs with CULP. Is CULP fairly valued? Test your thesis with our free DCF calculator. Q: Can you provide insights into the revenue mix shift towards betting and the expected trends for fiscal 2027? A: Yves Culp, President and CEO, explained that they anticipate a moderate consolidated revenue increase for the first quarter, both sequentially and year-over-year. The betting segment is expected to show more short-term upside due to a stronger competitive position and less impact from macroeconomic pressures compared to upholstery, which is more affected by housing market pressures. Q: What are the differences in gross profit margins between the betting and upholstery segments, and what are the expectations for fiscal 2027? A: Yves Culp noted that while upholstery gross margins have been strong, betting margins are improving but not yet at the desired level. The company expects betting margins to increase in fiscal 2027, although they may not reach upholstery levels due to different business models and operational structures. Q: How are the cost savings and pricing actions expected to impact fiscal 2027? A: Yves Culp mentioned that the company anticipates more than $20 million in annualized savings from cost reductions, restructuring actions, SG&A work, and pricing actions. They plan to continue these efforts, with any revenue growth dropping to the bottom line at an increased pace. Q: How will the tariff refunds impact interest expenses and debt reduction? A: Kenneth Bowling, CFO, stated that the company will focus on reducing higher interest expenses in the U.S. first. They have strategically borrowed in China at low rates to maintain flexibility, but the primary focus will be on reducing U.S. debt to lower interest expenses. Q: What is the outlook for the first quarter of fiscal 2027 in terms of sales and profitability? A: The company expects consolidated sales to moderately improve both sequentially and year-over-year despite a challenging demand environment. They anticipate the benefits of restructuring and integration initiatives to drive improved gross profit and lower SG&A expenses, aiming for break-even adjusted EBITDA for the first quarter, excluding the impact of tariff refunds. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved sequential and year-over-year sales growth despite a difficult macro environment, driven by market share gains and product innovation. Completed a two-year restructuring program aimed at integrating bedding and upholstery segments to create a more agile, lower-cost operating platform. Bedding segment performance was bolstered by a strategic shift toward sewn mattress covers, which provide higher value-add and revenue per unit compared to traditional fabrics. Upholstery segment faced steeper headwinds due to its high sensitivity to housing activity and discretionary travel spending, though it maintained sequential margin improvement. Management attributes the current bedding market downturn to a prolonged sub-normal replacement cycle, suggesting significant pent-up demand for future stabilization. The company has transitioned to a hybrid supply chain model across the U.S., China, Turkey, Vietnam, and Haiti to better navigate global tariff volatility. Implemented new pricing actions across both segments to counteract rising raw material costs linked to petrochemical and supply chain pressures. Expects fiscal 2027 to be a 'turning of the corner' as restructuring initiatives are projected to deliver over $20 million in annualized savings and efficiencies. Anticipates first-quarter fiscal 2027 consolidated sales to improve moderately both sequentially and year-over-year despite ongoing demand uncertainty. Guidance for the first quarter of fiscal 2027 targets break-even to positive adjusted EBITDA, excluding the impact of one-time tariff refunds. Capital expenditures for fiscal 2027 are projected between $2 million and $2.5 million, focusing on maintenance and high-payback strategic projects. Management remains prepared to implement further model adjustments or cost reductions if market conditions fail to support organic revenue growth. Received approximately $7 million in IEPA tariff refunds in Q1 fiscal 2027, which will be used to significantly reduce high-interest U.S. debt. Year-over-year gross profit comparisons were negatively impacted by a $1.7 million benefit in the prior year's fourth quarter related to an inventory valuation policy change. Successfully reduced total inventory by $5 million during the quarter as part of a broader initiative to improve working capital efficiency. Strategic decision to maintain low-rate borrowings in China despite excess liquidity to preserve operational flexibility during geopolitical and trade uncertainty. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management expects bedding to show more immediate upside than upholstery because it is less sensitive to current housing market pressures. Both segments are expected to grow, but bedding's competitive position is currently viewed as stronger due to recent innovation and share gains. Upholstery maintains higher margins due to its asset-light model, while bedding involves significant domestic and nearshore manufacturing assets. Bedding margins are expected to increase in fiscal 2027 as the business moves past the 'noise' of recent platform reorganizations and inventory adjustments. The $7 million tariff refund will be prioritized toward paying down U.S. debt, which carries higher interest rates than foreign credit lines. Management intends to keep some low-cost debt in China strategically to maintain liquidity for the Asian platform while reducing net debt to approximately $5 million.