Culp, Inc. Common Stock Water Tower Research Virtual Insights Conference

Thank you. Hi, Linda. We so appreciate it.

Yeah. Thank you, Linda. I appreciate the opportunity to be here, and that's a good opening question. It is helpful maybe to give a short, little bit about Culp just so anyone that doesn't know us will have a better feeling. We are a 55-year-old company serving the bedding and furniture industries. While we are best known for mattress and upholstery fabrics, we have kind of evolved lately into a much broader solutions provider, with some mattress covers, performance fabric technologies, and a very flexible global sourcing platform. What's important today is over the last two years, we focused on strengthening the business through innovation, operational improvements, and balance sheet improvement. So we really have an experienced leadership team, including Mary Beth Hunsberger, who's our newly appointed CFO, and as you mentioned, she's on the call today.

We are now seeing those investments we made translate into market share gains and improved performance despite a challenging backdrop. So we have been through a significant restructuring, and the point I'd like to make is we are now a re-energized company poised for a solid future. I guess back to your question, commenting about our sales growth, I think you asked me, in the quarter, which we just released. I think the best way to describe the market today is that it's still challenging, but probably a little more stable than it was 12 to 18 months ago. If you look at the bedding industry, shipment levels remain below historical norms after several years of pressure from inflation, lower housing activity, and cautious consumer spending. Upholstery, likewise, has faced many of the same headwinds. So we are certainly not operating in what anyone would call a strong demand environment.

What's encouraging, though, to us is that despite that, as you mentioned, we delivered 6.5% consolidated sales growth in the quarter, but that includes more than 13% growth in bedding. As I quote these numbers for our Q1, remember also, Linda, that this quarter had one less week than last year. I have already mentioned it to you, our growth is not driven by market recovery, it's being driven by our own execution, and that gives us a lot of confidence. When I step back and look at what's working, a few things stand out to me. First, we have built a manufacturing and sourcing platform that gives customers flexibility. Whether they need domestic, nearshore, offshore production, we are able to provide options at a time when supply chain decisions are becoming much more complicated. Secondly, innovation continues to make a difference.

Our Sonno mattress cover business is performing very well, and we are introducing differentiated products across bedding and upholstery that help our customers stand out in the marketplace. Lastly, our commercial team, led by Tommy Bruno, has done an outstanding job deepening customer relationships and turning opportunities into product wins. I will close this. While we would certainly welcome a stronger environment, no doubt, we are focused on controlling what we can control. What gives me confidence is that we are seeing the benefits of stronger customer partnerships, differentiated capabilities, and disciplined execution, and that is all before the market fully recovers.

Yeah, sure. It is funny, Linda, I have now been in this business a long time, and one of the biggest changes I have seen is that customers today are really valuing flexibility almost as much as they value price. Historically, suppliers like us competed primarily on cost, quality, and of course, service. Those are still important today, but customers now are focused on supply chain resilience, speed to market, innovation, and then how we are managing risk. Maybe the best example is in sourcing. Years ago, many companies were comfortable relying heavily on a single manufacturing region. Today, our customers are looking for options. They want the ability to react quickly when tariffs change, or their supply chains get disrupted, or just general market conditions shift, which seems to be happening regularly.

We saw that, I guess I am really proud of the fact we saw that trend developing years ago and intentionally positioned ourselves for it. Today, we offer customers a manufacturing footprint that spans across the U.S., and then we have nearshore and also offshore operations, which allow us to tailor solutions around what our customers need, rather than pushing them into a one-size-fits-all approach. We are also deeply into our Project Blaze, which really the essentials of that is combining the Culp segments into one operating platform and an integrated brand, Culp branded business. Mary Beth is going to have a lot more to say about that, I am sure. Basically, we want to be easier to do business with. Another important change is that customers increasingly want solutions, not just products.

That's one reason we've really expanded into the sewn mattress cover business, and we've got capabilities that help customers simplify their supply chain. Same thing is true when it comes to innovation, whether it's cooling technology, sustainability, performance, or manufacturing efficiencies. Customers are looking for ways to differentiate themselves, and we want to be part of helping them do that. Really, I guess the way I think about our evolution is simple. We've worked to become more valuable to our customers by helping them solve more problems. That's strengthened our relationships with customers, it's improved our competitive position, and we're positioned well regardless of where we are in the cycle.

Yeah, absolutely. I actually think innovation becomes especially important when demand is relatively soft, like we see today. When markets are growing more rapidly, companies can offer to grow or just kind of grow alongside the market. But when growth is tougher to find, innovation becomes the most effective way to stand out and create opportunities. At Culp, our innovation goes way beyond aesthetics. We think about products, materials, manufacturing processes, and ways to help customers create more compelling offerings. In bedding, first great example is our mattress cover business. We've developed capabilities that allow us to provide complete solutions rather than simply individual components. As you touched on, we are investing in products that combine multiple consumer benefits like cooling, comfort, sustainability, and manufacturing efficiency.