Culp Announces Second Quarter Fiscal 2026 Results

Company Continues to Optimize Global Platform and Enhance Cost Structure

Restructured Bedding Business Poised for Continued Improvement as Market Conditions Stabilize

Culp, Inc. (NYSE: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 second fiscal quarter ended November 2, 2025.

Fiscal 2026 Second Quarter Financial Highlights

• Consolidated net sales of $53.2 million, a sequential improvement from first quarter net sales of $50.7 million (which included an extra week) and decline from prior-year period net sales of $55.7 million, with bedding segment sales up both sequentially and year-over-year.
• Consolidated gross profit of $5.8 million, or 10.9% of sales, compared to prior-year period gross profit of $6.0 million, or 10.8% of sales.
  • Excluding restructuring and related expenses, adjusted consolidated gross profit of $6.7 million, or 12.6% of sales, compared to prior-year period adjusted gross profit of $6.8 million, or 12.1% of sales, with the percentage of sales improvement driven primarily by cost and efficiency gains from restructuring initiatives in the bedding segment (see reconciliation table on page 11).
• Selling, general and administrative (SG&A) expense of $8.7 million, or 16.4% of sales, an approximately 7% improvement compared with SG&A expense of $9.4 million, or 16.8% of sales, in the prior-year period.
• Loss from operations of $(3.5) million, compared to prior-year period loss from operations of $(5.4) million.
  • Excluding restructuring and related expenses, adjusted operating loss of $(2.0) million, compared to prior-year period adjusted operating loss of $(2.6) million (see reconciliation table on page 11).
• Net loss of $(4.3) million, or $(.34) per diluted share, compared to a net loss of $(5.6) million, or $(.45) per diluted share, in the prior-year period.
  • Excluding the impacts of restructuring and related expenses, stock-based compensation and non-cash foreign exchange impacts, adjusted EBITDA of negative $(1.0) million, an improvement on lower sales compared to negative $(1.1) million in the prior-year period (see reconciliation table on page 13).

Executive Commentary

Iv Culp, President and Chief Executive Officer, commented, "We continue to make aggressive adjustments to our cost structure in this challenging macro demand environment that seems to be acutely affecting housing affordability and, therefore, furniture and mattress purchases. Through our platform optimization, we are also positioning CULP to grow, without the need for additional capacity or investment, when conditions in the home furnishings market ultimately improve. The consolidations of our U.S. distribution and window treatment operations are on track for completion by calendar year-end. Moreover, price adjustments to mitigate baseline tariffs are successfully in place and we are initiating additional surcharges along with strategic purchasing decisions in response to new tariffs on imports from Haiti, Turkey and elsewhere during the quarter. We have long stated that tariffs are manageable for us with our global footprint, but reacting at the pace of government implementation has been challenging.

"Additionally, we are moving forward with incremental measures including the reduction of our facility footprint in China that should be completed in the third quarter, and we are identifying further cost reductions through our integration project Blaze within SG&A and other expenses. All told, beginning with the bedding restructuring in fiscal 2025 and continuing through the completion of other ongoing initiatives, we expect to enter fiscal 2027 with the benefit of over $20 million in annualized cost savings and enhancements.

"Our restructured bedding platform has already been extremely impactful, with gross profitability in that business almost tripling year-over-year in the first half of fiscal 2026 and driving over 20% improvement in our consolidated operating results for the quarter despite added cost and complexity from the global trade and tariff situation. Our bedding sales during the quarter increased both sequentially and year-over-year, and we saw encouraging trends within our knit fabric and sewn cover product lines as we continued to win market share in key customer segments. Looking ahead in this business, we anticipate market conditions to remain soft in the near term, but there are some indications that the bedding market is stabilizing. We expect to deliver steady sales performance driven by our growing market position, and we remain well prepared for any eventual uptick in unit activity driven by historical product replacement cycles.

"Conditions in the upholstery market continue to be unsettled, with consumer uncertainty, a weak housing market and tariff volatility still pressuring demand. Despite the difficult environment, we were able to maintain solid gross margins in upholstery and relatively stable sales within our U.S. customer base during the quarter, offset by more challenged revenue conditions within China and other markets. We expect our integration actions and China footprint reduction in the back half of this year to further improve profitability in this business and, much like our restructured bedding business, position it to accelerate when market conditions cycle favorably."

Culp concluded, "We are in the homestretch of a comprehensive, multi-phased transformation of our business designed to generate sustained profitability across industry cycles, and we are committed to making more changes within our business as necessary to adjust to market demand. Thanks to our team's commitment and dedication, we will finish the fiscal year with a fully optimized global platform for bedding and upholstery products that is unique to the home furnishings industry and that we believe will create significant long-term value for shareholders. We will continue to leverage our scale and strengths in product development, supply chain and customer service to gain market share, and our highest priorities remain returning CULP to profitability and effectively managing debt."

Financial Outlook

Due to macroeconomic uncertainty and the fluid global trade and tariff environment, the Company is providing only limited forward guidance. The Company's expectations are based on information available at the time of this press release and reflect certain assumptions by management regarding the Company's business and industry trends, the projected impact of restructuring and integration initiatives, and ongoing market headwinds. The Company's expectations also assume no further meaningful impacts from tariffs and trade negotiations.

• The Company expects steady consolidated sales performance throughout the remainder of fiscal 2026, with higher expectations for the bedding segment, given what is anticipated to remain a challenged demand environment for home furnishings.
• The Company expects the cost and efficiency benefits of its continuing restructuring and division integration initiatives, along with recent pricing action, to drive improving gross profit and lower SG&A, resulting in continued significant improvement in operating loss and near break-even to positive adjusted EBITDA for the third quarter.
• While the Company intends to continue utilizing borrowings as necessary under its domestic and foreign credit facilities during fiscal 2026 to fund working capital needs and growth, as well as integration and efficiency initiatives, it will continue to aggressively manage liquidity and capital expenditures and prioritize free cash flow. Additionally, the $4.7 million balance due from the sale of the Company's facility in Canada is scheduled to be paid during the fourth quarter and the Company currently anticipates that those funds may be received earlier than contractually required.

Fiscal 2026 Second Quarter Business Segment Highlights

Following the integration of the Company's two formerly separate divisions, Culp Home Fashions and Culp Upholstery Fabrics, the Company now refers to its mattress fabric and upholstery fabric businesses as its Bedding and Upholstery segments, respectively. Moreover, the Company now manages SG&A expenses on a consolidated basis following the division integration and, as a result, no longer reports operating performance at the segment level.

Bedding

• Sales in this segment were $30.8 million for the second quarter, up approximately 10% sequentially and over 2% year-over-year.
• The restructured cost platform in this segment drove gross profit of $3.1 million, or 10.1% of sales, a 27% improvement from the prior year period's gross profit of $2.4 million, or 8.1% of sales.

Upholstery

• Sales in this segment were $22.4 million for the second quarter, sequentially flat with the first quarter and down approximately 12% year-over-year. The decline stemmed from continuing softness across the global home furnishings market driven by consumer uncertainty and a weak housing market, as well as additional pressure on demand from tariffs.
• Gross profit was $3.6 million, or 16.1% of sales, down from $4.3 million, or 16.9% of sales, in the prior year period and driven primarily by lower comparable sales.

Balance Sheet, Cash Flow, and Liquidity

• As of November 2, 2025, the Company maintained $10.7 million in total cash and $18.3 million in outstanding debt under its credit facilities. The outstanding debt was primarily incurred to fund worldwide working capital and restructuring activities, as well as to take advantage of availability and borrowing opportunities at current preferred rates in China.
• As of November 2, 2025, the Company maintained approximately $28.1 million in liquidity consisting of $10.7 million in cash and $17.4 million in borrowing availability under its domestic credit facility.
• Cash flow from operations was negative $(1.2) million for the six months ended November 2, 2025, and primarily driven by operating losses, which compares favorably to negative $(2.6) million in the prior-year period. Adjusted for capital expenditures, proceeds from the sale of property, plant and equipment, notes receivable and other items, free cash flow was generally at break-even (see reconciliation table on page 10), down favorably from negative $(3.4) million in the prior-year period.
• Capital expenditures for the first quarter were $218 thousand, down from $1.6 million in the prior year period, as the Company continues to focus on maintenance projects and strategic initiatives with quick payback.

Conference Call

Culp, Inc. will hold a conference call to discuss financial results for the second quarter of its fiscal year 2026 on Thursday, December 11, 2025, 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 and 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, 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. 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 epidemics on employees, customers, suppliers, and the global economy, such as the coronavirus pandemic, 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 and return the segment to profitability as well as successfully 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 and Form 10-Q reports 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 report. 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.