Culp (NYSE:CULP) executives told investors the company’s third quarter fiscal 2026 results were pressured by a prolonged demand slowdown across home furnishings, while management emphasized that a multi-quarter restructuring and integration effort is now largely complete and positioned to benefit margins when volumes recover.
On the company’s earnings call, President and CEO Iv Culp said the quarter’s performance was “candidly frustrating,” citing low industry demand that limited the company’s ability to leverage cost and efficiency improvements made over the last 18 months. He also pointed to severe weather in the Southeast that disrupted shipping from the company’s Stokesdale, North Carolina facility during the final week of the quarter, calling it a meaningful one-time impact, particularly for Bedding revenue.
Quarterly results reflect weak demand and weather disruption
The company posted a loss from operations of $3.7 million, compared with a $3.9 million operating loss in the prior-year quarter. Excluding restructuring and related expenses, adjusted loss from operations was $3.1 million, compared with an adjusted operating loss of $1.6 million a year earlier.
Net loss for the quarter was $3.4 million, or $0.27 per diluted share, which Bowling described as a sequential improvement of about 20% from the second quarter. The prior-year quarter’s net loss was $4.1 million, or $0.33 per diluted share.
Adjusted EBITDA, excluding restructuring and related expenses and other non-cash charges and factoring in approximately $1.0 million of net proceeds from a legal settlement, was negative $2.2 million, compared with negative $457,000 in the prior-year quarter, the company said.
Segment performance: Bedding steadier; Upholstery softer
In the Bedding segment, sales were $27.3 million, down about 5% year-over-year. Bowling said the decrease reflected lower housing and discretionary spending trends, tariff-driven pressure on demand, and late-January severe weather. Bedding segment gross profit was $2.0 million, or 7.2% of sales, down from $2.7 million, or 9.6% of sales, in the prior year, driven largely by excess-inventory adjustments tied to restructuring and integration initiatives. Bowling added that improved selling margins partially offset the impact.
In the Upholstery segment, sales were $20.7 million, down about 12% from the prior year. Segment gross profit was $3.4 million, or 16.3% of sales, down from $4.2 million, or 17.9% of sales, with Bowling citing lower comparable sales and unfavorable foreign exchange impacts related to China.
Management offered more qualitative commentary on end markets. Iv Culp said Bedding was on pace to match prior-year sales until multiple storms disrupted the final week of shipments, and he said the company expects the momentum observed earlier in the quarter to resume in the fourth quarter. In Upholstery, he said sales traction was “more elusive,” citing muted residential furniture purchases, heightened tariff sensitivity tied to a largely offshore supply chain, and project delays in commercial and hospitality channels. Still, he characterized project delays as temporary and highlighted double-digit growth in “Upholstery kit” products as a bright spot during the quarter.
Restructuring “capstone” reached; cost savings cited
Iv Culp said the third quarter marked the “capstone” of an operating platform restructuring and a broader integration effort—referred to internally as Project Blaze—that combined the company’s former Mattress and Upholstery divisions into a unified Culp-branded organization.
During the quarter, the company completed several initiatives, including consolidating U.S. distribution operations into its Stokesdale facility under a single management team, reducing fixed costs in its Read Window business through a relocation from a leased Tennessee facility to Stokesdale and increased outsourcing, and streamlining China operations through facility and headcount reductions.
Management said the restructuring actions generated more than $20 million in annualized cost savings and enhancements, with additional benefits expected to begin showing up in the fourth quarter and fiscal 2027. Iv Culp also said the company estimates that, on its revamped lower-cost platform, revenue increases flow to the bottom line at an approximate 25% rate, though he stressed the near-term goal remains returning to profitability under current market conditions.
Bowling also discussed inventory, acknowledging markdowns taken during the quarter that affected profitability. Management said excess inventory built during facility consolidations—particularly when exiting Canada and transitioning supply strategies—contributed to the issue, and executives said they have plans to work through it over the next two quarters and improve inventory management going forward.
Tariffs, potential refunds, and sourcing flexibility
Iv Culp devoted significant time to trade policy. He said volatility in tariffs and trade policy has highlighted the value of the company’s global sourcing platform, which includes domestic production in the U.S., a nearshore option in Haiti/Dominican Republic, and offshore options including Vietnam, Turkey, and China.
From a cost standpoint, he said current go-forward tariff rates applicable to the business are “manageable” and in some cases improved versus prior periods. He added that pricing adjustments and surcharges implemented in recent periods are expected to offset tariff costs on a cost-neutral basis over the near to medium term, absent unexpected changes.
The company is also pursuing potential refunds tied to tariffs paid under IEEPA. Iv Culp said Culp has paid over $15 million in total baseline duties and tariffs over the last 14 months, including an estimated $6 million to $7 million in IEEPA tariffs. He said the company has filed protests related to reliquidated entries and also filed a lawsuit with the Court of International Trade, and that any refunds received would be significant and help offset prior-period losses tied to tariff timing lags.
Separately, he said the company anticipates refunds of baseline duties paid on Haiti-produced sewn covers during a period before the reinstatement of the Haiti HOPE/HELP trade program, which provides duty-free treatment. In the Q&A, management indicated those Haiti-related duty refunds were “approved and in process” and expected to be a fourth quarter cash item, while timing on IEEPA refunds remains uncertain.
Balance sheet and outlook: limited guidance, sequential sales growth expected
On liquidity, Bowling reported $9.7 million in cash and $18.5 million in outstanding debt at quarter-end, resulting in net debt of $8.8 million. Cash flow from operations was negative $2.3 million for the first nine months of fiscal 2026, compared with negative $9.4 million in the prior-year period. Free cash flow was negative $1.0 million for the first nine months, compared with negative $10.1 million a year ago, the company said.
Capital expenditures were $442,000 for the first nine months, down from $2.4 million in the prior-year period. Bowling said the company expects fiscal 2026 capital spending of $600,000 to $700,000. Total liquidity at quarter-end was $27.7 million, consisting of cash and borrowing availability, according to management.
Looking ahead, Iv Culp said the company is providing limited financial guidance due to macroeconomic conditions and tariff uncertainty. However, management expects sequential consolidated sales growth in the fourth quarter of fiscal 2026 and said it anticipates solid performance in Bedding. The company also expects pricing to balance tariff pressure in the fourth quarter and said restructuring and integration benefits should drive improving gross profit and lower SG&A in the fourth quarter and beyond.
Management also noted that a $4.8 million balance sheet item due from the sale of the company’s former facility in Canada is scheduled to be paid during the fourth quarter.
On leadership, Iv Culp reiterated that CFO Ken Bowling plans to retire, but will remain with the company through 2026 to support a transition. Iv Culp said the company plans for Chief Operating Officer Mary Beth Hunsberger to begin working closely with Bowling during calendar 2026, with the goal of taking on certain operational aspects of the CFO role, including the FP&A process for the fiscal 2027 operating plan.
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.
