From Home Furnishing Business
Culp Lowers 4Q Expectations
Upholstery fabric and mattress ticking supplier Culp, Inc. (NYSE: CFI) has lowered its fourth quarter pre-tax income estimates by $1 million to $1.6 million.
The company said it expects pre-tax income to be between $4 million and $4.3 million for the fourth quarter. The projection is less than the company's previously announced expectation of between $5 million and $5.9 million in pre-tax income for the quarter.
Overall sales for the quarter are expected to be up about 5 percent, with mattress fabrics sales up about 7 percent and upholstery fabrics sales up about 3 percent. These sales results are in line with previously announced expectations.
“While our overall sales for the fourth quarter were in line with our projected range, our operating profit and margins were affected by several factors, most of which related to the mattress fabrics division," said Frank Saxon, president and CEO. "The adverse weather conditions experienced in many parts of the country this winter affected our mattress fabrics locations with at least a week of lost production. The strain from these weather events forced some extraordinary operational measures to meet the ongoing sales demand. During the quarter, we also had higher than expected demand for our premium decorative knitted mattress fabrics, which created additional pressures on our production throughput and operating efficiencies. In order to meet the growing demand and to address efficiency challenges, we are increasing knitted fabric production at both our U.S. and Canadian facilities. In addition, we are expanding our Stokesdale, N.C., building in order to increase and enhance our finishing capabilities and improve our production flow. This capacity expansion is expected to be completed by the end of November 2014. We also experienced continued growth in demand for new mattress covers, with major placements from key customers.
"While our margins in this business showed significant improvement compared with the fiscal third quarter, we experienced short-term production challenges due to absorbing new product placements," he said. "Overall, we are pleased with the demand trends in our mattress fabrics business as we continue to outpace the industry, and believe we are taking the necessary steps to address our recent production-related issues."
Saxon said the company's upholstery fabrics division was impacted by a couple of factors.
“We experienced very strong shipments in the third quarter, with a 20 percent year over year sales increase, as our customers anticipated the Chinese New Year holiday shutdown," he said. "As a result, we had a much slower than expected start to the fourth quarter. Adverse weather conditions in the U.S. also affected our operating results early in the quarter because of weak customer demand. During the quarter, we also experienced lower than anticipated sales for our Culp Europe operation, which contributed to the division’s lower gross profit. However, we are encouraged that our sales demand and operating margins, except for Culp Europe, returned to normal levels later in the fourth quarter."
The company expects to report financial and operating results for the fourth quarter and fiscal 2014 in mid-June 2014.