Culp (CULP) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 FY2025 were $56.5 million, flat year-over-year but up 14.2% sequentially; mattress fabrics sales fell 3.9% year-over-year but rose 9% sequentially, while upholstery fabrics sales increased 3.7% year-over-year and 19.7% sequentially, driven by improved demand in residential and hospitality/commercial markets.

• Net loss was $(7.3) million ($0.58 per diluted share), compared to $(3.3) million ($0.27 per share) a year ago, primarily due to restructuring charges and manufacturing inefficiencies in mattress fabrics.

• Major restructuring initiatives are underway, including consolidation of mattress fabrics operations, closure of the Quebec facility, and cost reductions in Haiti and China, with expected annualized savings of $10–$11 million and most benefits to be realized in the second half of fiscal 2025.

• Upholstery fabrics segment showed improved profitability, with operating income up 28.9% year-over-year and operating margin rising to 6% from 4.8% year-over-year.

• Hospitality and commercial upholstery fabrics now represent 33% of upholstery segment sales, supported by strong new product launches and expanded window treatment capacity.

Financial highlights

• Gross profit for Q1 FY2025 was $5.1 million (9.0% of sales), down from $7.1 million (12.5%) year-over-year.

• Loss from operations was $6.9 million, including $2.7 million in restructuring charges; adjusted loss from operations was $4.1 million.

• Adjusted EBITDA for the trailing twelve months improved to negative $5.7 million from negative $16.7 million year-over-year.

• Cash and cash equivalents at quarter-end were $13.5 million, with $4 million in China credit line borrowings.

• Free cash flow for the quarter was negative $550,000, a significant improvement from negative $4.2 million a year ago.

Outlook and guidance

• Q2 consolidated net sales expected to be comparable to Q1, with near break-even adjusted EBITDA (excluding restructuring charges) anticipated in Q2 and positive adjusted operating income expected in Q3.

• Most restructuring benefits projected for the second half of fiscal 2025; cash at year-end expected to exceed $10 million, assuming real estate sales.

• Macro demand expected to remain challenged, but the company expects to outperform market recovery due to new placements and restructuring.