CULP INC (NYSE:CULP) Reports Mixed Q1 Fiscal 2026 Results with Narrowed Loss but Revenue Miss

CULP INC (NYSE:CULP) reported mixed first-quarter fiscal 2026 results that showed significant operational improvements amid persistent market headwinds, though both revenue and earnings fell short of analyst expectations. The fabric manufacturer's stock declined approximately 4.3% in after-hours trading following the announcement, indicating investor disappointment despite notable progress in profitability metrics.

Earnings Performance Versus Estimates

The company reported first-quarter revenue of $50.7 million, which fell short of analyst expectations of $58.65 million. This represents a 10.3% decline from the prior-year period's $56.5 million, though the quarter included an extra week that somewhat offset the decrease.

On the earnings front, Culp reported a net loss of $231,000, or $(0.02) per diluted share, significantly outperforming the analyst estimate of a $(0.12) per share loss. This also marks a substantial improvement from the prior-year period's net loss of $(7.3) million, or $(0.58) per diluted share.

Key financial highlights from the quarter include:

• Consolidated gross profit of $7.2 million (14.3% of sales) versus $5.1 million (9.0% of sales) in prior-year period
• Operating income of $1.6 million compared to an operating loss of $(6.9) million last year
• Adjusted EBITDA of negative $(1.1) million, improved from negative $(2.7) million last year

Operational Improvements and Challenges

The company's restructuring initiatives, completed last year, drove a 530 basis point improvement in gross margin despite the challenging market environment. Management highlighted continued softness across the home furnishings industry and tariff-related disruptions, particularly a five-week pause in residential upholstery shipments from China, as significant headwinds affecting top-line performance.

President and CEO Iv Culp stated: "Despite the continued low-demand environment across the home furnishings industry and tariff volatility, our improving operating performance further confirms the effectiveness of the restructuring initiatives we completed last year. Thanks to the hard work of our team, we made substantial, double-digit improvement at both the gross profit and operating levels during the quarter."

Segment Performance

The company's bedding segment showed resilience with sales of $28.0 million, essentially flat compared to the prior-year period, while gross profit improved dramatically to $2.9 million (10.5% of sales) from a negative $(326) thousand in the prior year.

The upholstery segment faced greater challenges, with sales declining approximately 20% to $22.6 million due to market softness and tariff-related issues. Gross profit in this segment decreased to $4.3 million (18.9% of sales) from $5.5 million (19.4% of sales) in the prior-year period.

Balance Sheet and Liquidity

The company maintained a solid liquidity position with $28.7 million available, consisting of $11.1 million in cash and $17.6 million in borrowing availability. Total debt stood at $18.1 million as of August 3, 2025, primarily used to fund worldwide working capital needs.

Outlook and Analyst Expectations

Management provided limited forward guidance due to macroeconomic uncertainty and the fluid global trade environment. The company expects sequential sales growth throughout the year and anticipates that cost and efficiency benefits from ongoing initiatives should drive adjusted EBITDA results to near breakeven or slightly positive for the second quarter.

This outlook appears conservative compared to analyst expectations for the second quarter, which include:

• Revenue estimate of $55.39 million
• EPS estimate of $(0.09)

For the full fiscal year 2026, analysts project revenue of $218.38 million and EPS of $0.01.

Market Reaction and Analysis

The after-hours stock decline suggests investors focused more on the revenue miss than the earnings beat and operational improvements. The market appears concerned about the company's ability to grow revenue in the current challenging environment, despite clear progress on cost structure and profitability.

The company's strategic initiatives, including facility consolidations and price increases, are expected to generate approximately $6 million in annual cost savings once fully implemented. These measures, combined with the company's diversified global manufacturing footprint, position Culp to potentially exceed expectations if market conditions improve.

For more detailed earnings information and analyst estimates, readers can review the company's earnings data.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research and consult with a qualified financial advisor before making investment decisions.