Culp (CULP) investor relations material

Executive summary

• Net sales for Q1 FY26 were $50.7 million, down 10.3% year-over-year, with bedding sales flat and upholstery sales down 20.4%, impacted by market softness and tariffs.

• Gross profit rose to $7.2 million (14.3% of sales), a 42.4% increase year-over-year, driven by cost reductions, restructuring, and efficiency gains.

• Operating income reached $1.6 million, reversing a prior-year loss, and net loss narrowed to $231K ($0.02/share) from $7.3M ($0.58/share).

• Major restructuring and integration initiatives, including Project Blaze and facility consolidations, are expected to yield $6 million in annualized cost and efficiency gains in FY26, in addition to $10–11 million from prior actions.

• Company operates globally with facilities in the US, China, Haiti, Vietnam, and Turkey, and completed significant workforce reductions and operational consolidations.

Financial highlights

• Fiscal 2025 revenue was $213.2 million, with Q1 FY26 net sales at $50.7 million.

• Gross margin improved by 530 basis points to 14.3% year-over-year; operating margin was 3.2%, up from -12.1%.

• Adjusted operating loss was $1.9 million, improved from $4.1 million loss year-over-year; adjusted EBITDA was negative $1.1 million, better than negative $2.7 million.

• Free cash flow was $311K positive for the quarter; capital expenditures were $179K, down from $501K year-over-year.

• Liquidity at quarter-end was $28.7 million, including $11.1 million cash and $17.6 million credit availability.

Outlook and guidance

• Sequential sales and margin growth are expected throughout FY26, with adjusted EBITDA projected near breakeven or slightly positive in Q2 and further improvement through the year.

• Industry forecasts suggest mattress demand is near bottom, with 4% growth expected in 2026 and 8% in 2027.

• Guidance assumes no further major tariff or trade disruptions; price increases to offset tariffs began phasing in during Q2 FY26.