CULP - Earnings call 2 2024

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Operator

Good day, and welcome to the Culp, Inc.

Second Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Dru Anderson. Please go ahead.

Dru Anderson

you. Thank welcome for conference fiscal the and the to XXXX. the results company's second to morning, call Culp review Good quarter of

will of the As this the me let company. financial contain call business, prospects we about forward-looking and state condition statements start, morning's that

or risks historical the and regular could XX-K These are events fact. filings, performance the recent that company The forward-looking materially about uncertainties statements statements described by are from including XX-Q. most otherwise various statements are of indicated projections, expectations and uncertainties. actual or Forward-looking beliefs because not company's differ that or and Form include future results statements of Form risks in SEC filings our on of the

not currently our that about do Additional results. presently and know consider be affect also risks we and business may operations immaterial financial or that to uncertainties we

to You update today, statement each such made are reliance undertake cautioned obligation statements as We not on forward-looking forward-looking statements. and to today. revise no only place speaks undue of or to

the Please release this of call, Iv company's reconciliation discussing to financial to measurement exhibit be non-GAAP the GAAP the ahead, Culp, At company's included IV. will website President this press and directly company Chief A financial is an in at during go measurements the X-K over posted and the to Officer comparable culp.com. the turn non-GAAP time, measurements. yesterday filed on most included financial these Col. of as call the I Executive addition, to tables In will

Robert Culp

with and to would quarterly joining good investors. us you, the you I analysts thank call to everyone and for Dru, Thank conference welcome like morning, and today.

our and as Financial Chumbley, well of and business comments, call ahead. for then both will with Seric take for review will a upholstery businesses Bowling, questions. financial that, Mattress and some and Ken the quarter priorities call I'll key 'XX, our of as Officer; of review the of detailed After business. Tommy and quarter, me on look our our are as the Bruno, fiscal we will I points the for Ken then President topics the briefly Joining we begin Boyd the fabrics quarter business; for including President third Chief discussion your outlook results

So will state I'd comments like of open update we within to both is the of themes discuss these the illustrate critical actions discuss to in overall current further with expand business overriding on bedding and general our are a furniture I undertaking and where I and Culp will some businesses, industries. some headed.

pleased year-over-year First, for we and in ongoing both we businesses. our are service. outperforming we results in both the performance are the demand the general market and to Despite operating X consolidated challenging are industry quarter. report as These believe sales satisfying within and we industries environment sequential softness improvement conditions

[indiscernible] XX.X% effectiveness Secondly, of face to be position and growth CHF domestic slowness of year-over-year mattress comprehensive mattress improvement operating year-over-year leadership. of business, transformation continue XX% market sales we units in progress within represents industry. we our and pleased in strong gaining the are fabrics to evidence be our the excited the the of about loss CHS and our

hospitality demand its capital appropriate and capital efficiency. especially including continuing financial diligent balance making prudent we're support on our the in of the ensuring and investments, strategic recovery conditions industry, residential to fabrics profitability remained working also management, while further growing mattress although enhance fabric level continues are business in upholstery focus sheet business. a strong Third, maintaining segment an to our these pressuring solid finally, despite And market also home furnacing and our pressures, our

improvement sales consolidated and improvement, in was detail residential our and industry the year-over-year. for expectations performance within results. remains line QX furniture more quarter providing with as soft solid second both a and new demand sequentially bedding. This well is and the sequential operating primarily outcome Again, and year-over-year XX.X% improvement strong driven some SKU with was sequentially business, on as repricing So in sales The our during year-over-year fabric and growth a cover our placements mattress by the of period a underperforming and SKUs. fabrics as rationalization X.X%

remerchandise new reports, we resulted higher selling raw in costs. discussed this, have and we with operational SKUs material line As received we in overall. with average along prices placements previous are current pricing the And in has

only to down compared While the performing through unit prices, of not XXXX considerably CHF's revenue have domestic grown also selling made contraction was higher with slightly the a first are the the experienced the volume environment. we because believe we by industry customers has X our to that average significant unit better calendar the compared year, in as prior difficult months year. but gains because of market demonstrates we This mattress

CHF's its to first a growing in also position. improvement sequentially a continue prior achieved results the market the to to period expect as operating We improvement year CHF XX% trend compared as of compared quarter. and this XX%

our back efficiencies cost we reduction material focus locations. initiatives sales, the losses pricing on our management, with were While inventory for across ongoing and profitability, pleased of to quarter better are not by higher driven our reductions yet The operational and margin CHF balanced trajectory. and

home softness due consumer shifting within business as our in of to contract income to due as sales upholstery quarter period fabric the with business. continued year operating compared along improved inventory the better lower as trends. opposed cost were and spending hospitality significantly fiscal the in to prior industry second solid But to demand our the residential other we and savings For expected, efficiencies, ongoing operational furnacing management, segment, fabrics last report fixed year.

necessary and our business While renewed market bedding that conditions to remains and the the managing withstand of aspects environment furniture for position we steps challenged, we we taking understand are can business control, growth. our current

are both mattress detailed fabrics and paying in made adjustments profile we our have As benefits in cost quarters, the sew changes cut upholstery off. to earlier and from those platform and

on also our across our lowering We therefore, fabric managing costs. focused overall efficiencies operational are platforms,

it's plan Beyond of going execution a Mattress end fiscal continuing year. current the Regardless in on by expand segment, momentarily, return by punctuated comprehensive a we demand plan initiatives sequential where environment continue, the better believe to but evident, I'm and to expected of growing, we progress, factoring we sequential are is year-over-year tailwinds more considerably this. recovery expect our internally Fabrics manage this industry our in of pace not the see of operating while we've and for QX, our EBITDA 'XX, a our improvement macro including and will is third could half to gains. undertaken accomplish is industry strong eventually transformation accelerated our growth. are transformation of making some quarter to foundation we we are laying operating backdrop, our fiscal our return steady fabrics position be the the reflects when and market improvement be and operating positive do challenging expecting to profitability the year-over-year to adjusted and strong industry and business. And this we continue, second to Essentially, a mattress consolidated

leadership [ I'll under our resilient teams global Bruno. our Division mattress support with Fashions the prepared designs, us innovative strong and fabrics into little creative now offerings, platform, Cold business Tommy of ], Pom sourcing manufacturing well a President, hallmarks management. product will segment the These transformation more and the are focused future. of financial leadership within expand our business on ongoing We

chain processes, As plan sales, supply including business, we've marketing detailed transformation structure. facet operational quality, in our before, every and and long-term management engagement improvement optimization, on focuses organizational of the employee

remerchandise dedicated remains underperforming CHF the capabilities Vietnam. platform Canada, and best sales sourcing adjustment previous As Tommy proper United our opportunity and CHS mentioned after sequential earlier, strategies short-term or X North is sew our execution global SKUs our continue replace strengthen our Turkey, we excellence. believe robust we and to We the to of assortment. Even partner focus Haiti, grow our segmentation performance. product improvement manufacturing our with to cost-saving and a as States, revenue as on in cut and our well are to year-over-year working featuring China to to operational and optimize and management countries, Carolina domestic capabilities, team selection,

the mattress with product fiscal for innovation, our sustainable their sewn mattress improvement experience we platform Combining with as and design progress our to making continues unit are in value in 'XX, providing domestic this and expertise they the significant fabric business. and need are cover for slowness. customers We even agility excellent industry

and SKUs and for are we and through more industry this permanent, While SKU improving also some know it's efficient contraction performance our new period, operations. rationalization incumbent mattress repriced not placements, may we remain

improvement environment, Our CHF progress dependent and this significant year is beyond. the to see fully with on we recovery industry and sustainable not in CHF in steady, expect

proactively strategic servicing chain with design believe Boy Consistently, the in of platform have global operational we fabrics, supply customers been customers excellence, our are of upholstery led minute platform. flexible leadership continued product a focus I has Chemin a and better has team growing strong a and business. our with reduce our midst effective challenging tumultuous with for with actions efficiencies while to is also cost taking global President, profitability in effectively combined this on our and to structure conditions way. best-in-class Turning CUF supporting its CUF cope the profitability pleased times. through the Division abnormal managed and

in costs a better platforms, with performance for and CUF's hospitality cut-and-sew exchange from and significantly segment inventory favorable had rate operating prior associated the of more costs lower result also operations of quarter. CUF resulting as lower quarter CUF quarter, XX% contract second a sales This for China. and improved management, foreign fixed sequentially both year-over-year business of restructuring sales accounted solid freight another

hallmark business pressure Vietnam global our stable look of portion its provide is adjusting we more base. does than our strategy a for as as Customer options remain remains percentage committed business our strength service and for diversified this risk higher hospitality in a chain segment. to contract we Also, and it as critical a overall platform to While to of CUF to coal this reflect China, supply a product sales, the within the diversification ongoing other and residential well importance due supply upholstery strategy of management countries. platform multiple is new improved our for providing fabrics normal

popular our and portfolio tough our remains our fabrics Culp positioned upholstery environment technologies. strong product is we offerings, product continue, this performance to While likely and other well of know products global LiveSmart new including platform innovative with

believe half have retail also manufacture and newly normal, written residential back fiscal in of 'XX. will demand the bottom seeing support in increases largely are inventories second to we which seen are we furniture as and orders, We the fabric

remainder 'XX, fabric contract hospitality platform. a with business business, fabric We including also the expect of segment read the benefit a and better to will solid cut coal our management, continue window upholstery fiscal and through rationalized inventory so

prudent ended of cash on in cash strategic borrowing and I focus management, constant our liquidity for million including its level facility. highlight working domestic and management borrowings, a to our quarter no of total financial under liquidity cash, like with of positions. I'd and the in effectively $XX.X sheet balance pleased effort very continued a maintaining consisting ensuring lastly, We the in and So million with cash strong managing we total our team capital. credit had outstanding and availability am $XX.X

inventory for profitable We continuing this support turn further to outlook of sales manage segment for carefully are the the improve and then within future who our and will now business, I'll against efficiencies. current we operating financial results review are review over our third quarter in year. and demand mattress I'll the fiscal strategically quarter, Ken, levels, fabrics call especially investing the growth the to to

Kenneth Bowling

Thanks, Iv.

for financial year reported for year million, loss were a the compared per share prior for the $XX.X restructuring-related operations for X.X% also period. expenses Net loss $X.XX with Here previous of loss diluted other results. million was $X.X compared the to up inventory the the quarter company period. for second the $X.X $XX.X from prior compared a favorably year loss with compares $XX.X per $X.XX for and operations the $X.X operations of consolidated with share the period, included related million of Starting from million quarter. or certain the highlights loss with which million period. second million operations impairment from quarter. are charges sales net of The quarter $X.X second quarter prior or with million the during for million loss diluted and the a Net The $X.X

with upholstery to fabric management, segment, compared segments mattress by Our for positively in increased period the expense for fabrics in quarter year-over-year overall higher of year a performance in lower by in China. favorable sampling operating performance This associated the the was upholstery number fees SG&A factors. improvement and as residential segment and better expense efficiencies consulting partially a FIC-cost savings and sales second operations factors, higher product offset compensation increased the new other higher and operating pricing both including fabric the better improved was prior due expense, to rate sales driven rollouts, more by foreign margins primarily exchange and among and affected inventory professional operating

year negative of income a Importantly, fiscal for to period. and demand EBITDA as breakeven $XXX,XXX this conditions believe adjusted year business improve the year for negative to increased as we'll prior XX% with same second Adjusted from the negative a with for the products regard quarter rate to period The get effective expense, significant the we ago. period SG&A EBITDA rise, leverage was a of negative compared at the $X.X close was million our XX.X% tax for that sales. for compared

was tax of our the and an loss subsidiaries Our the for quarter foreign this current we assumptions, by China in Canada expect company's between higher generated cash impacted year. operating while approximately taxed compared million with rates to income payments the earnings for effective was rate and tax fiscal income the Based as of U.S. $X.X U.S. U.S., that on mix income at

current income factors affected estimated are over projections for year. 'XX management's variety cash the course and of our be tax can Importantly, by the fiscal payments a of only

our let's segments. Now at business a look take X

underperforming quarter second sales This compared up resulted priced driven prices. cover For in to increase sewn the by average unit SKUs new to compared extent, price current to current sales some rationalization in per to mattress higher quarter. SKUs and costs has million, XX.X% in year's a in SKU lesser second $XX.X this placements the last and mostly segment, to and reflect In fabric with was that the fabrics reflect are were each of costs. repricing historical selling line case,

and rollouts. by pressured domestic $XXX,XXX, compared we a XX% operating mattress we're through the product believe with energy million gains loss the While for Operating which outperforming customers and loss margins factors These $X offset better was operating included year the a losses softness, million loss an industry closeout to relating certain charges S&A improvement operating balanced period. This in higher sales, driven price higher trends of remains inventory from $X to ongoing quarter was during in management, inventory in reduction ago, impairment new by by demand the and improvement making our substantial partially sales. efficiencies. expense inventory were

for million, the quarter upholstery fabric for residential industry. the prior the sales over were $XX.X affected for our softness Sales XX.X% furnishings For by business home segment, ongoing period. second quarter down in fabric residential the were the year

income year the performance early to compared were partially the quarter better SG&A with costs more cuts lower period. favorable for of However, segment's year, this quarter improvement upholstery for offset factors demand in These contract resulting remains sales. business in affected Operating second for residential and approximately fiscal second a quarter was the of quarter China. fabric higher-than-normal from solid during last Operating management, markdowns. prior periods, lower of the expense of was segment's a during Operating million margin inventory our lower included significantly the and platforms foreign associated total the positively the by XX% the sales this business in compared million exchange again, X.X%, restructuring higher significant up fixed second inventory operations with $XXX,XXX was for hospitalized with accounted freight sales rate costs second by $X.X which fabric $X second in during the period. quarter, approximately

We sheet. of the outstanding million at I'll turn to end no second $XX.X reported and debt cash total balance the quarter. Now the

fiscal free a For X and respectively. the and million, were cash year, months $X.X first flow negative flow of this cash from million operations negative $X.X

this expenditures, investments share activity $XX.X expected, total end fiscal There repurchase I'll the mostly and in capital flow any Capital position X As million from this this months planned future working the for cash discuss preserving from expenditures were of available repurchase had flow to and the we minimal did projected to respect that, the year, not as capital support be loss the and of to and maintenance outlook $X fiscal fiscal current our first improving focused quarter by repurchase business. projects on current fabrics Based approximately of fiscal expenditure growth plan. under remain in facility. our $X.X for is payback then to affected the center to in free was CapEx and operations mattress consisting credit range on any quarter on we of turn depreciation expectations, general million. as operating quarter, and the year during to year for expect quarter. be efficiency to availability transformation impact opportunities. liquidity With cash for related $X $X take changes this $X over were program. We during $XX.X in do period on mostly being fiscal capital quality in third of during the third your to is million, of The million the we'll and million. million call year $XX.X the focused not quick expected the current domestic on questions. expectations, Iv will our fabrics mattress the Based year second second this asset-based of and quarter, the million With liquidity, leaving shares cash during company million under

Robert Culp

quarter third of the financial Due environment, fiscal for macro are 'XX. we in Thank you, Ken. the uncertainty the guidance to providing only

to quarter the of fiscal of 'XX face headwinds. and demand ongoing the in even third be net to the We as moderately fiscal compared sequentially expect the sales third quarter 'XX, higher to comparable quarter second consolidated of for

for will operating sequentially second to expect return a from the poised quarter for fiscal results period. This improvement we considerably million, for the comment 'XX. a loss by are a year. third million year I is Again, We performance significant consolidated the of the improved range compared end consolidated quarter the profitability million loss $X.X second that fiscal operating a $X.X believe the to operating to we of prior half better with $X.X of and

sheet, in maintaining Finally, we on management with will ensuring of continue working capital. our a always goal balance to balance to strategic laser-focused financial be with balanced strong regard a the especially

about and operator, future, the With questions. our that, are financial Culp's is optimistic know we We can stability to paramount some success. take we

Operator

now begin [Operator the The Bugatch will comes We Tove Instructions] question session. with from Research. question-and-answer first Water Budd today

Beryl Bugatch

in your you at give see that the confidence see their what very they're some of industry. and Obviously, color more in bottoming Can customers forward upholstery residential little that different. of to that. are from may think you're we bottoms the parts improvement bit areas? terms to these quarter. and mattresses a you're on us Congratulations in hearing heartening what seeing the on going starting you mentioned It's Iv, you in slightly be

Robert Culp

that just our you course We we that? I'll Tommy and primarily aren't we believe in stronger, orders see we're really for saying let residential the comment to we getting if manufacturers that's back more and too Boyd, normal I to pick to and to bottom and think, and out, more due specifically we've Boyd more is fabric level. the add incoming Budd. tailwinds. with do we upholstery corrected it's both is the of inventory grow Sure, would we ordering able made us, he inventories sales. say seem have flushed home normal up. still any retailers seen sales And furnishings have But comment wants. and script a industry in the to recognize But

Boyd Chumbley

I exactly right. Yes, that's think

and are a quarter, in of at as beginning quarter. both in We is terms the the of orders. result inventory we the of that partly in the -- really I again, you think see much during depleted throughout pickup And manufacturers some quarter of pipeline retailers. incoming at did, now furniture our say, being the and inventory the

coming And the are benefit now so orders through fabric quarters. to seeing in of we us retail

think it's standpoint, market time. period see to think the soft to retail of for But be that, probably think I factors. I and business with from that those So a from we our certainly, to will a will due have I perspective, likely seen some continue sales better continue

Beryl Bugatch

position a new them and fact as as inventory and really much demand, into the it? guess, hampering new placements. I over prevented that down fair Is their what think that customers was a was it's adding from it's not fundamental it sales about -- manufacturers the So to not really inventory but that extending products way really, is over

Boyd Chumbley

our the I that our offering gains customer do do opportunity I and reliably think are -- to broad for with that think is products and ability that we base Budd. fair, product supply. with have our innovative we

the also I quarters. So benefit in coming us things think in those will the

it's -- think coming a I So couple factors of into are those play.

Robert Culp

I happen I [indiscernible] going from ahead and with of and said aren't we us to as our And clear, businesses. is to hearing customers. we're we're both going kind making our better business the in to factoring going getting improve short improvement aren't -- term you're it gains here look industry for We're because operationally, improvement. that's we think in we keep

at will on we're job, in rely make growing only we're for going to steady going not not point. our improvement just sequential we're market because share. better come a to but macro do now, to our That also tailwinds. going some So But operationally

Beryl Bugatch

to and more some in fabrics things medicine to changes many take a obviously, and the You've couple in have to made do you previous you had inventory do get quarter quarters. CUF of upholstery in sourcing that? your And in

improve the actually there? that So you confidence are margins there any you that initiatives give can

Boyd Chumbley

I there have that already on our in the platform. to basis, called that we we some that and did have all done in that will things demand of with couple and global our did with restructure our ongoing did Asia QX are -- align a an consolidation out the now where and performance current platform assist think, of Budd, you've certainly cut-and-sew

have And think done. we things one of that the that's key I so

we we've we looking key expand continuing I think to of as and keep our supply than other is one platform a some in other that also we're now right China, got the that will expanding and and very made invested countries -- develop paths couple to locations. at we great progress We've in other other within have in platforms that on of locations global heavily Vietnam. involved

of So the things think our seeing objective that's I this we're of second one our key is year. half over

Beryl Bugatch

been And also main getting desire topic importantly, because margin time Tommy, a mattress double-digit operating basis. fabrics seeing double-digit What's your how margin are has to to frame basis to you get back margin. that? operating a to operating profitable a a the back double-digit on

Tommy Bruno

in We basis. ongoing to like I an market the share taking on prepared correct mentioned margins continue focus, at his comments on

our an for our extremely and to large look our is all at We improvements efficiency rationalization facets profitability we're and operation. across undergoing assortment initiative SKU continue that of operational improved and looking at

believe this layer we later in to be I fiscal continue sequentially, we'll early think to start things double-digit back in year, those As XXXX. in profitability year

Robert Culp

margin. talking You're gross

Tommy Bruno

Gross Yes, sir. margin.

Robert Culp

normal current quarter. the But I to back for making for us saying to keep going in is that. a think operating the we income our return the fourth target. double-digit in That's depressed have business steady not That's to market what say sequential always we're not to going to CHF And we -- environment. get And we're improvements consolidated operating we're profitability. profitability

operating into way when. just but of normal tailwinds will springboard. we every at to goal some hard and with just line, knowing back And those takes the stop 'XX look -- time back moving time. exactly FY had it a our get need and all come. we'll to know We historical go we -- will margins losses we'll We'll at So springboard the

So I that helps hope understand that.

Operator

next with Lebiedzinski comes The Sidoti. from Anthony question

Anthony Lebiedzinski

just in balance So first, difficult we operating a sheet great environment. this continued maintaining job a strong

how of in first at far here overall as first, as So ASPs being what And as And CHF. increase? that increases about that you to on maintain drove number ASP guys ASPs? of maybe is the can much these question confidence able put is sort your you you far talked -- the level as a my sales higher guess terms I

Boyd Chumbley

of general, of driving mix X And is then a -- mix that Anthony, our in based types we're fabrics. higher-end are where programs it's Yes, our the on market. product ASP combination of programs ASP. One getting and the in covers driving that mix things higher-end the is

Robert Culp

we is say are units the everywhere. units down down. but our do -- units for of industry our sales the on We really reported team we and almost are Anthony, majority All better priced didn't think we're lot And a the mean, we -- of prices, products, margins, better are correcting. down, outperforming new -- I time, properly. a slightly things we're period units, of gain Tommy it his are

optimism, if look that that. be. we're That's even seeing more we're So you eventually growing will they That's why at it encouraged. it units really why We're drives way. our sales without where we expect

Anthony Lebiedzinski

far what the initiatives are been in transformation do? of And of as the game, whole then to baseball at if we process? as CHF. inning taking And we were this that's I a some guess a in place guess kind process what are I as left far as

Robert Culp

Yes, Anthony.

some innings. continuing say on changing we're operational would still still some things the within drive made to within I efficiencies So product restructuring our middle We're we work continuing of in productivity work We're team. our assortment after to our changes still leadership through SKUs. to on all

say I innings. would still in in So the general, middle we're

that improvement on our going way results that I show generally X-year I steady over just back think and we're time. process, through comfortable feel transformation a historical to process to it's

Anthony Lebiedzinski

bit up some about then how higher far should going business share about SG&A forward? little And investments. as as that with us the a because being SG&A, you know of Can talked details guys think on I you we more

Kenneth Bowling

Yes, Anthony, this is Ken.

the We're up, the to sampling. we've business. to some restructuring relating We're We've factors to in people as SG&A customers on the are our we've to had supporting right it's said, seats. think and due back -- shows. that the putting things I again but really getting is right road traveling

lot more a levels with with With the up, being sampling business are new -- new programs. the we

So all in. factor those

are you sides We've lift are. think that rise, feel SG&A I and leverage. where just the think see get going got with We positive We at very sales SG&A, forward to But our get point on investment, an feel we look well overall, get we going this leverage. we we'll we shape when good about like we is fence. feel start that positive and to that the where we're at we're currently both as in that good positioned. forward of

Operator

back our for the question-and-answer concludes over any would Culp This Mr. to session. closing I conference to like remarks. turn

Robert Culp

operator. forward And you again, quarter. everyone Culp, we your you thank Have updating to to next participation in great progress interest look you, certainly for your a our on Thank and and day.

Operator

now presentation. Thank for conference today's concluded. The has attending you

disconnect. You may now

Culp (CULP) 5 Dec 232024 Q2 Earnings call transcript