Culp, Inc. (NYSE: CULP) reported Q2 EPS of $0.23, $0.02 better than the analyst estimate of $0.21. Revenue for the quarter came in at $77 million versus the consensus estimate of $76.32 million.

Financial Outlook

Commenting on the outlook for the third quarter of fiscal 2019, Bowling remarked, “We expect overall sales to be down approximately seven percent compared with the third quarter of last year.

“We expect sales, operating income and margins in our mattress fabrics segment to show sequential improvement over the second quarter, but to be significantly lower than the third quarter of fiscal 2018, due primarily to the continued significant growth in Chinese imported mattresses. Assuming the bedding industry relief materializes under U.S. trade laws, we expect to see more normalized trends during the fourth quarter of fiscal 2019 that are more in line with the prior year.

“In our upholstery fabrics segment, we expect sales to be slightly up compared with a strong third quarter last year due to the timing of the Chinese New Year. Operating income and margins are also expected to be slightly up compared with the same period a year ago. However, our projections are contingent upon any potential additional tariffs that could be imposed effective January 1, 2019, and could therefore affect our operating costs.

“Considering these factors, the company expects to report pre-tax income for the third fiscal quarter of 2019 in the range of $4.6 million to $5.4 million, excluding any restructuring and related charges and credits and other non-recurring charges. Pre-tax income for last year’s third quarter was $7.5 million. Our performance for the fourth quarter of fiscal 2019 is currently expected to be more in line with the results achieved during the fourth quarter of last fiscal year.

“Based on our current budget, capital expenditures for fiscal 2019 are now expected to be in the $6.0 million to $6.5 million range, as we have moved to a more maintenance level of capital expenditures. Additionally, given the strong free cash flow achieved in the second quarter and the current outlook, free cash flow for fiscal 2019 is expected to be improved over last year’s results, even with the significant headwinds we are facing in our mattress fabrics segment,” added Bowling.

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