Culp (NYSE:CULP) reported sequential and year-over-year sales growth in its fiscal fourth quarter, with management saying restructuring efforts, bedding segment momentum and recent tariff refunds are expected to improve liquidity and operating leverage heading into fiscal 2027.
On the company’s fourth-quarter fiscal 2026 earnings call, President and Chief Executive Officer Iv Culp said the quarter showed “momentum we are building in key areas of our business” despite continued weakness in the bedding and upholstery markets. He said the company delivered overall sales growth both sequentially and compared with the prior-year period, along with sequential improvement in gross profit, operating results and net loss.
Fourth-Quarter Sales Improve, Loss Narrows Sequentially
Chief Financial Officer Ken Bowling said fourth-quarter net sales were $51.6 million, up 7.6% from the third quarter and up roughly 6% from the prior-year quarter. Gross profit was $6.8 million, or 13.2% of sales, up 210 basis points sequentially and almost 30% higher than the third quarter. Gross profit declined from $7.7 million, or 15.7% of sales, in the prior-year period.
Bowling said the sequential gross profit improvement reflected higher sales, efficiency gains and cost reductions from restructuring and integration initiatives. The year-over-year decline, he said, was primarily due to a $1.7 million benefit in the prior-year fourth quarter related to a policy change in how the company values and reserves aged inventory.
Culp reported a fourth-quarter loss from operations of $1.6 million, compared with a loss of $3.7 million in the third quarter and a loss of $2.2 million in the prior-year quarter. The company’s non-GAAP operating loss was $1.5 million, an improvement of more than 50% from the third quarter.
Net loss for the quarter was $2.2 million, or $0.18 per diluted share, compared with a net loss of $3.4 million, or $0.27 per diluted share, in the third quarter and a net loss of $2.1 million, or $0.17 per diluted share, in the prior-year period. Adjusted EBITDA was negative $560,000, compared with negative $2.2 million in the third quarter and positive $511,000 a year earlier.
Bedding Segment Drives Growth
Management pointed to bedding as the company’s larger segment and the main contributor to fourth-quarter progress. Bowling said bedding sales were $30.5 million, up 12.5% from the prior-year quarter. For the full fiscal year, bedding sales were $116.6 million, up 2.4% from the prior year.
Bedding gross profit was $2.7 million, or 8.9% of sales, up 38% sequentially but down from $3.1 million, or 11.3% of sales, a year earlier. For the full fiscal year, bedding gross profit rose almost 35% to $10.7 million, or 9.2% of sales.
Iv Culp said the bedding business benefited from share gains with major targeted customers and product innovation, especially in sewn mattress covers. He said expanding sewn cover offerings allows the company to increase its revenue opportunity per mattress unit beyond knitted fabrics.
“The more functionality we can provide our customers, the more we can drive higher revenue for Culp, which is an important part of our growth strategy,” he said.
Asked during the call about revenue mix, Iv Culp said bedding appeared to have “a little more upside short-term than upholstery” because of the company’s current competitive position and because the bedding market is “slightly less impacted” by macroeconomic pressures than upholstery. He said the company expects growth in both segments, with higher growth in bedding in the near term.
Upholstery Remains Pressured by Housing and Consumer Spending
Culp’s upholstery fabrics segment continued to face a difficult demand environment. Bowling said fourth-quarter upholstery sales were $21.1 million, down 2.5% from the prior-year period. Full-year upholstery sales were $86.9 million, down from $99.3 million in the prior fiscal year.
Fourth-quarter upholstery gross profit was $4.1 million, or 19.5% of sales, up approximately 23% sequentially but down from $4.7 million, or 21.7% of sales, a year earlier. For the full year, upholstery gross profit was $15.4 million, or 17.7% of sales, compared with $18.8 million, or 18.9% of sales, in the prior fiscal year.
Iv Culp said residential furniture markets are closely tied to home buying and consumer spending, while hospitality furniture demand depends heavily on discretionary travel and leisure spending. He also cited geopolitical uncertainty, petrochemical price impacts, tariffs and inflation as factors contributing to customer and consumer caution.
Despite those pressures, he said Culp completed the relocation and integration of its U.S. upholstery operations into its owned North Carolina manufacturing site that also houses domestic bedding operations. He added that the company reduced its China upholstery facility footprint, enhanced its outsourcing model and added capabilities in Vietnam, including a new showroom.
Full-Year Loss Narrows as Restructuring Benefits Take Hold
For fiscal 2026, Culp reported net sales of $203.5 million, down 4.6% from $213.2 million in the prior fiscal year. The full-year loss from operations was $7.2 million, compared with a loss from operations of $18.4 million in the prior year. Non-GAAP operating loss was $8.6 million, compared with $9 million in the prior fiscal year.
Net loss for the year was $10.2 million, or $0.81 per diluted share, an approximately 47% improvement from a net loss of $19.1 million, or $1.53 per diluted share, in the prior year. Adjusted EBITDA for the full fiscal year was negative $4.7 million, compared with negative $3.7 million in the prior fiscal year.
Iv Culp said restructuring, integration and related actions are expected to translate into more than $20 million of annualized savings, efficiencies and other benefits. During the Q&A portion of the call, he said those benefits include cost savings, restructuring actions, SG&A work and pricing actions. He also said the company may take additional action if revenue growth does not materialize.
Inventory Falls, Tariff Refunds Expected to Reduce Debt
Bowling said total inventory at fiscal year-end was $47.5 million, down from $52.2 million at the end of the third quarter and $49.3 million at the end of the prior-year fourth quarter. He said the company remains focused on converting inventory into cash.
Culp ended the fiscal year with $8.3 million in cash and $19.1 million in outstanding debt, for net debt of $10.8 million. Liquidity totaled approximately $24.2 million, including cash and $15.9 million of borrowing availability under credit facilities.
Management said the company received approximately $7 million in IEEPA tariff refunds in the first quarter of fiscal 2027 following recent court rulings. Bowling said the refunds are expected to significantly reduce outstanding debt and could lower net debt to as low as approximately $5 million at the end of the first quarter, subject to working capital needs. In response to an analyst question, Bowling said the company plans to focus first on higher-interest U.S. debt, which should reduce interest expense going forward.
For the first quarter of fiscal 2027, Iv Culp said the company expects consolidated sales to improve moderately both sequentially and year-over-year, despite a difficult home furnishings demand environment. He also said restructuring and integration benefits are expected to improve gross profit, lower SG&A expenses and result in breakeven to positive adjusted EBITDA for the quarter, excluding the tariff refunds.
About Culp (NYSE:CULP)
Culp, Inc, headquartered in High Point, North Carolina, is a leading producer of specialty fabrics for the home furnishings industry. Founded in 1972 by Bill Culp, the company has grown into a publicly traded enterprise that supplies upholstery and mattress fabrics to manufacturers and retailers across North America and abroad. Culp’s fabric offerings are designed to meet the aesthetic and performance requirements of residential furniture, contract seating, and hospitality applications.
The company operates through two primary segments.
