Culp Announces Third Quarter Fiscal 2026 Results

Completion of Comprehensive Integration and Restructuring Initiatives Lays Foundation for Profitable Growth

Balanced Global Platform Enhances Competitive Position in Fluid Tariff Environment

Culp, Inc. (NASDAQ: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 third fiscal quarter ended February 1, 2026.

Iv Culp, President and Chief Executive Officer, commented, "Market softness remains the headline across the home furnishings industry, and the impacts of that dynamic were evident in our results for the quarter. We're confident that the economic cycle for bedding and furniture will eventually turn within our core markets, and we have seen some green shoots on the bedding side recently, but key catalysts in housing affordability and discretionary consumer spending still need to level up for the needle to move meaningfully. Our team has effectively used this low demand period to further reset our platform, refine our go-to-market strategies, and position CULP to scale quickly and profitably, without adding capacity or cost, as volume stabilizes.

"Despite the challenging industry conditions, including multiple Southeast snowstorms that caused us to lose the final week of shipping at our largest facility during the quarter, we continue to win programs with major customers and increase our share of the available business. Prior to the lost week from weather in January, we were on pace for a neutral year-over-year performance in bedding revenue, which is notable in this current market trough. We were pleased to see growth in our sewn mattress cover and upholstery kit product categories during the quarter, both of which are key growth areas that carry higher sales dollars and solid margin.

"Customers continue leaning into our flexible supply chain offering reliable capacity and strategic tariff mitigation even before the most recent tariff developments. We believe our global footprint, anchored with robust U.S. capabilities, provides customers the most balanced solution in the market and enables us to support them regardless of whether they prefer to source domestically, nearshore or offshore. Regarding our own tariff costs, we are covered with our pricing relative to current rates after several periods absorbing the profitability impacts created by tariff volatility and the resulting lag between effective dates and price action. We are also encouraged by what appears to be an increasing prospect of reimbursement for the estimated six to seven million dollars we've paid toward IEEPA tariffs. If we ultimately receive those funds, and we understand the uncertainty there, it would be significant and offset some of our previous period losses."

Culp concluded, "Our team completed several key projects during the quarter, including the integration of both our U.S. distribution operations and window treatment business and the consolidation of our footprint in China. With these actions and the restructuring of our bedding business now behind us other than some related inventory build-up that we are working through, we move toward the end of our year with a streamlined platform and management team, neutralized pricing and tariff rates, and disciplined manufacturing operations. We believe CULP is ready to run and generate significant value for shareholders as the macro and trade environment cycles favorably, with any resulting volume increase expected to benefit our bottom line at enhanced levels given the lower fixed costs and added efficiencies in our platform. In the meantime, we remain committed to maintaining a disciplined approach to cash management, our balance sheet and fixed costs."

Fiscal 2026 Third Quarter Financial Highlights

• Consolidated net sales of $48.0 million, a decline from prior-year period net sales of $52.3 million driven by continued industry-wide demand challenges along with reduced shipping days from severe weather conditions at quarter end.
• Consolidated gross profit of $5.3 million, or 11.1% of sales, compared to prior-year period gross profit of $6.4 million, or 12.1% of sales, with the decline driven by lower comparable sales and adjustments related to excess inventory stemming from the Company's restructuring and integration initiatives.
• Loss from operations of $(3.7) million, compared to prior-year period loss from operations of $(3.9) million.
  • Excluding restructuring and related expenses, adjusted operating loss of $(3.1) million, compared to prior-year period adjusted operating loss of $(1.6) million (see reconciliation table on page 10).
• Net loss of $(3.4) million, or $(.27) per diluted share, a sequential improvement of approximately 20% from the prior quarter and a year-over-year improvement of 17% compared to the prior-year period's net loss of $(4.1) million, or $(.33) per diluted share.
  • Excluding the impacts of restructuring and related expenses, stock-based compensation, and non-cash foreign exchange, as well as proceeds from a legal settlement, adjusted EBITDA of negative $(2.2) million, compared to negative $(457) thousand in the prior-year period (see reconciliation table on page 12).

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, ongoing market headwinds, the projected impacts of economic or political instability in the Middle East, and current tariff rates applicable to U.S. imports.

• The Company expects sequential consolidated sales growth for the fourth quarter of fiscal 2026, with solid expectations for the bedding segment despite what is anticipated to remain a challenged demand environment for home furnishings.
• The Company expects its recent pricing action to balance tariff pressure and for the cost and efficiency benefits of its completed restructuring and integration initiatives to drive improving gross profit and lower SG&A for the fourth quarter and beyond. The Company is not providing more specific operating guidance at this time due to the uncertainty around the potential tariff refunds and, if received, the meaningful impacts on its operating results and prior quarter losses.
• 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, it will continue to aggressively manage liquidity and capital expenditures and prioritize free cash flow. Additionally, the $4.8 million balance due from the sale of the Company's facility in Canada is scheduled to be paid during the fourth quarter.

Business Segment Highlights

Bedding

• Sales in this segment were $27.3 million for the third quarter, down approximately 5% year-over-year due to continuing market softness driven by a lost week of sales in the U.S. from severe weather at quarter end, consumer uncertainty, a weak housing market, as well as continuing uncertainty from tariffs.
• Gross profit in this segment was $2.0 million, or 7.2% of sales, a decline from the prior-year period's gross profit of $2.7 million, or 9.6% of sales, and driven primarily by adjustments related to excess inventory stemming from the Company's restructuring and integration initiatives, which were partially offset by improved selling margins during the quarter.

Upholstery

• Sales in this segment were $20.7 million for the third quarter, down approximately 12% year-over-year, with the decline primarily driven by lower commercial and hospitality sales due to generally the same factors impacting bedding sales.
• Gross profit was $3.4 million, or 16.3% of sales, down from $4.2 million, or 17.9% of sales, in the prior-year period and driven primarily by lower comparable sales and unfavorable foreign exchange impacts related to the Company's China operations.

Balance Sheet, Cash Flow, and Liquidity

• As of February 1, 2026, the Company maintained $9.7 million in total cash and $18.5 million in outstanding debt under its credit facilities. The outstanding debt was primarily incurred to fund worldwide working capital and integration activities, as well as to take advantage of availability and borrowing opportunities at current preferred rates in China.
• As of February 1, 2026, the Company maintained approximately $27.7 million in liquidity consisting of $9.7 million in cash and $18.0 million in borrowing availability under its credit facilities.
• Cash flow from operations and free cash flow were negative $(2.3) million and negative $(2.7) million, respectively, for the nine months ended February 1, 2026, and primarily driven by operating losses, which compare favorably to negative $(9.4) million and negative $(11.9) 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 negative $(1.0) million, down favorably from negative $(10.1) million in the prior-year period (see reconciliation table on page 9).
• Capital expenditures for the nine months ended February 1, 2026, were $442 thousand, down from $2.4 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 third quarter of its fiscal year 2026 on Thursday, March 12, 2026, 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, expectations with respect to tariff refunds, 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. Relatedly, litigation is ongoing as to whether businesses that paid tariffs that were invalidated by the U.S. Supreme Court in February 2026 may receive refunds for those tariffs, and it is uncertain whether or when the Company may receive any such refunds, which could be significant. 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.