High Point, North Carolina-based fabric supplier Culp Inc. said sales for its second fiscal quarter, which ended Oct. 27, fell 5.2% to $55.7 million and its net loss more than doubled amid continued weak demand for its upholstery and mattress fabrics.
The net loss of $5.64 million or 45 cents per share included more than $2 million in one-time restructuring costs — a restructuring the company said is already delivering financial benefits and will position it for profitable growth once demand returns to a more normal pattern.
The company noted, for example, that mattress fabric sales of $30.1 million were 7.1% higher than the first fiscal quarter and said the business unit’s operating loss was slashed by more than 70%.
“We were pleased with the sequential improvement in sales and operating performance from our mattress fabric segment,” said Iv Culp, president and CEO. He said the sales bump was driven by higher order levels, “which we believe are indicative of our growing market position.”
The bulk of the restructuring program involves the mattress fabrics segment, and Culp said the lower operating loss reflects the “solid progress” of that program.
The restructuring includes the shutdown of its mattress fabrics plant in Canada and the consolidation of two cut-and-sew factories in Haiti into a single facility. Knitting and finishing operations that were in Canada are being moved to its Stokesdale, N.C., factory, while production of damask fabrics is being outsourced.
“Mattress fabrics Is our growth engine,” said Culp. “This will position us to grow the business once demand picks up again. And we won’t need to add a lot of costs in order to grow.”
He said the company expects to generate $10 million to $11 million in annualized savings and operating improvements once the restructuring is completed by the end of its fiscal year in late April.
In the most recent quarter, which ended Oct. 27, upholstery fabric sales totaled $25.6 million, down 6.4% from the same quarter last year. The segment recorded an operating profit of $615,000, down from $1.4 million in the prior year period.
For the six months ended Oct. 27, companywide sales were $112.2 million, down 2.8% from the first half of the previous fiscal year.
The six-month net loss totaled $12.09 million or $1.03 per share. That compares with a loss of $5.77 million or 47 cents per share in the first half of the last fiscal year. The most recent loss included $4.66 million in one-time restructuring costs.
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