Culp sales up 17% but profits dip on higher costs, pricing pressures

Larry Thomas -- Furniture Today, March 1, 2012

HIGH POINT — Fabric supplier Culp Inc. said sales jumped 17% in the third fiscal quarter, but profits were depressed by higher raw materials costs and pricing pressures.

The company, which produces mattress ticking and upholstery fabric, said ticking sales were 24% ahead of the comparable quarter a year earlier, while upholstery fabric sales were up 8.7%.

Companywide, sales totaled $60.5 million in the quarter ended Jan. 29. That's up from $51.7 million in the quarter ended Jan. 30, 2011.

Net income was $1.8 million or 14 cents per share, down 25.7% from $2.43 million or 18 cents per share in last year's third fiscal quarter.

"We are very pleased with the continued momentum in our sales for the third quarter of fiscal 2012. This positive trend reflects both improved industry demand and the success of our sales and marketing initiatives, along with the benefits of our innovative designs and lean global manufacturing platform," said Frank Saxon, CEO. "Both of our businesses had a strong sales performance in what is typically a slower quarterly period due to scheduled holiday plant shutdowns."

In addition to raw materials costs and pricing pressure, Saxon said margins in Culp's upholstery fabric business were squeezed by a stronger Chinese currency during the quarter.

Of the $25.7 million in upholstery fabric sales during the quarter, some $22.6 million came from fabrics produced in China.

"We are encouraged by the continued growth in sales in our upholstery fabrics business in spite of the continued weakness in the U.S. housing market and the uncertain global economic situation," said Saxon. "We were especially pleased with the year over year sales improvement from our U.S. operation with increased demand for both velvets and woven texture fabrics."

The company said mattress ticking sales are being driven by increased demand for better-quality products used on upper-end mattresses.

"Demand for mattress fabrics was better than expected and the results clearly demonstrate our ability to respond to customers with expanded production capacity and a flexible manufacturing platform," said Iv Culp, president of the Culp's mattress fabrics division.

For the nine months ended Jan. 31, companywide sales totaled $178.7 million, up 14.2% from $156.4 million in the first nine months of the previous fiscal year.

Nine-month net income totaled $9.87 million or 76 cents per share. That's down 3% from $10.2 million or 77 cents per share in the comparable nine-month period.

Saxon said he expects mattress ticking sales to increase 8% to 13% in the fourth fiscal quarter, and projected a sales increase of 7% to 12% for upholstery fabrics.