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Circular Knitting

Culp restructures mattress fabrics business

Company expects to achieve US$10-11 million in annualised savings and operating improvements and to return to break even operating post restructuring.

3rd May 2024

Knitting Industry
 |  High Point, NC, USA


Leading manufacturer of circular knitted mattress fabrics Culp, Inc. has announced a major restructuring plan designed to reduce costs, improve asset utilisation, and drive performance and profitable growth. The plan, which is being implemented primarily in the company’s mattress fabrics segment and, to a lesser extent, in its upholstery fabrics segment, includes the following strategic actions:

- Consolidating the company’s North American mattress fabrics operations, including a phased wind-down and closure of the company’s manufacturing plant in Quebec, Canada, and moving knitting and finishing capacity from this plant to the company’s facility in Stokesdale, North Carolina

- Improving efficiency and through-put by optimising volume and equipment in the company’s mattress fabrics operation in Stokesdale, North Carolina, to reduce costs and improve quality

- Transitioning the mattress fabrics segment’s weaving operation to a strategic sourcing model through the company’s long standing supply partners, enhancing competitiveness and value for customers

- Consolidating the company’s Haiti sewn mattress cover operation (which is located on the Dominican Republic/Haiti border) into one building and significantly reducing operating expenses at that location

- Restructuring the company’s upholstery fabrics finishing operation in China to align with current demand and continuing to leverage strategic supply relationships

- Reducing unallocated corporate and shared services expenses with targeted annualised savings of $1.5 million

The implementation of these restructuring actions will begin immediately and is expected to be mostly completed by the end of the calendar year.

Although these are very difficult decisions, they are necessary steps for CULP to ensure a sustainable business model and return to profitability in this lower demand environment. We sincerely regret the impact on our affected employees, but we remain confident in the company’s future

Iv Culp, president and chief executive officer of Culp, commented: “Our industry faces unprecedented challenges, including macro-economic headwinds pressuring consumer discretionary spending and housing markets, as well as changes in consumer spending patterns.”

“Through the third quarter of fiscal 2024, we were pleased with the sequential improvement we were making in a tough demand environment, especially the approximately 20 % year-over-year revenue growth in our mattress fabrics segment during both the second and third quarter of the fiscal year. However, the industry demand backdrop in both of our businesses experienced significant deterioration during the fourth quarter of fiscal 2024, with much of our customer base advising of sales declines of at least 20%.”

“These challenges have reduced demand for our products, resulting in excess capacity and an unsustainable cost structure at current volume levels within our mattress fabrics business. With no ascertainable catalysts that might be expected to drive industry recovery in the near term, we now believe the operating environment will remain pressured for some time.”

“As a result, we are taking aggressive action to bring our manufacturing costs and capacity in line with current and expected demand trends. Importantly, the changes we are making to remove redundancies and transition to a more agile model will not hinder our ability to grow our business going forward, but they will enable us to grow more efficiently and profitably with a lower level of fixed assets.”

“Overall, these restructuring actions will reduce the number of associates in our mattress fabrics segment by approximately 240 people, representing around 35% of the segment’s total workforce. By taking these steps, we believe we can substantially reduce our fixed costs without materially impacting our top-line sales and without sacrificing our ability to support our customers, grow our business, and maintain our competitive advantage. We also believe these steps will enable us to optimise resources, improve quality, leverage our strong global strategic partnerships, bolster our balance sheet, and ensure a solid foundation for accelerated growth. We are diligently focused on returning our business to profitability, while growing our innovative product portfolio to enhance customer and shareholder value.”

“Although these are very difficult decisions, they are necessary steps for CULP to ensure a sustainable business model and return to profitability in this lower demand environment. We sincerely regret the impact on our affected employees, but we remain confident in the company’s future,” added Culp.

Culp, Inc. is one of the world’s largest marketers of mattress fabrics for bedding and upholstery fabrics for residential and commercial furniture. The company markets a variety of fabrics to its global customer base of leading bedding and furniture companies, including fabrics produced at Culp’s manufacturing facilities and fabrics sourced through other suppliers. Culp has manufacturing and sourcing capabilities located in the United States, Canada, China, Haiti, Turkey, and Vietnam.

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