Culp (CULP) investor relations material

Executive summary

• Q2 FY26 consolidated net sales were $53.2M, up sequentially but down 4.4% year-over-year, with bedding sales increasing and upholstery sales declining.

• Significant restructuring and cost optimization initiatives are expected to yield over $20M in annualized savings by FY27.

• Bedding segment demonstrated sequential and year-over-year sales growth, while upholstery faced continued market softness and tariff impacts.

• Revenue and gross profit have stabilized post-restructuring, with improved operating performance and narrowed net losses.

• Operates two leading businesses in mattress and upholstery fabrics, serving global customers with manufacturing in the U.S., China, Haiti, Vietnam, and sourcing from Turkey.

Financial highlights

• Gross profit for Q2 was $5.8M (10.9% of sales); adjusted gross profit was $6.7M (12.6% of sales), up from 12.1% last year.

• SG&A expense improved by 7% year-over-year to $8.7M (16.4% of sales).

• Adjusted operating loss was $2M, improved from $2.6M loss last year; net loss for Q2 was $(4.3)M, a 23.7% improvement.

• Adjusted EBITDA was negative $1M, a slight improvement from negative $1.1M last year.

• Cash and cash equivalents increased to $10.7M, with total liquidity of $28.1M.

Outlook and guidance

• Steady consolidated sales are expected for the remainder of FY26, with higher expectations for the bedding segment.

• Cost and efficiency gains from restructuring and integration, plus pricing actions, are expected to drive improved gross profit and lower SG&A, with near break-even to positive adjusted EBITDA in Q3.

• Management anticipates continued bedding market stabilization and potential demand improvement from replacement cycles.

• Focus remains on generating free cash flow, reducing debt, and tightly managing capital expenditures.

• Industry forecasts call for 4% growth in 2026 and 8% in 2027 for mattress sales.