Producer Culp Turning Corner

High Point, N.C. — Steering toward a turnaround in a sweeping overhaul of operations after years of being pounded by the rising tide of low-cost off-shore imports, fabric producer Culp parlayed stronger margins, lower costs and big gains in its core upholstery business into a small, but nonetheless dramatic, fourth-quarter operating profit of $1.1 million, climbing back from a year-before loss of $3.7 million.

Still weighed down by $3.7 million in restructuring costs to pay for the turnaround, Culp generated a sharply narrowed net loss of $1.5 million, down more than 80% from a year-before deficit of $7.7 million.

Starting to stabilize somewhat after a string of daunting double-digit losses, sales were off a more modest 4.7%, to $70.7 million from $74.2 million.

Driving much of the big improvement was a profit rebound in Culp's core upholstery fabrics business, which generated an operating profit of $1.1 million, reversing a $2.0 million loss in last year's closing quarter. Hacking away at costs while rebuilding upholstery margins, the business threw off a small profit during the fourth quarter despite a modest decline in sales, down 1.2% to $46.6 million from $47.2 million last year.

The smaller mattress ticking business remained solidly profitable, if not as much so as last year, throwing off an operating profit of $2.0 million, down 8.6% from $2.2 million.

Supporting the overall gain in operating profit, average gross margin recovered substantially, widening by 350 basis points, or 3.5 percentage points, to 10.7% from 7.2% a year ago. Gross margin dollars jumped up by 41.8%, to $7.6 million from $5.3 million.

Hacking away at overhead, Culp slashed expenses by 300 basis points, or 3.0 percentage points, to 9.2% of sales from 12.2% last year. That translated to a cash savings of $2.6 million, which fell straight to the bottom line.