Culp Inc. reported earnings that beat expectations with small margin despite decline in mattress fabric sales as lower-priced Chinese imports disrupted the domestic business.
Net income fell 26.2 percent in the second quarter to $2.9 million, or 23 cents per share, in comparison to $4.0 million in the second quarter of 2018. The earnings of the mattress company were 2 cents higher than analyst estimates polled by Yahoo Finance.
Excluding a one-time net benefit of approximately $543,000 in restructuring and related charges and credits and other non-recurring items mostly due to the closure of the company’s production facility at Anderson, South Carolina, pre-tax income for the second quarter was $3.7 million.
The High Point-based company reported a 4.6 percent drop in revenues despite a 13.6 percent decline in mattress fabric sales. It offset the weak fabric sales with 9.1 percent growth in upholstery fabric sales.
In the previous earning announcement, Culp projects its sales to decrease by 5 percent in the second-quarter of its fiscal year. The company projects that sales will decrease by 7 percent in the next quarter compared to the third quarter last year.
Frank Saxon, president and chief executive officer of Culp, Inc., attributed the sales decline to increasing competition from Chinese importers.
“As expected, our results for the second quarter reflect the ongoing challenges facing the bedding industry, related to the significant increase of low-priced imported mattresses from China,” Saxon said.
However, Saxon was optimistic that the company would begin to see improvement in our quarterly results during the fourth quarter of the fiscal year.
“We believe the recent petition approved under U.S. trade laws to address this situation will ultimately be favorable for the domestic mattress industry,” Saxon commented.
Culp’s shares dropped 5.67 percent on Thursday, closing at $20.78. Its shares remained relatively constant in the after-hours trading after the earning announcement was published.
The filings can be found here.
