Culp, Inc. (NYSE:CULP) Q4 2023 Earnings Call Transcript

Boyd Chumbley: Yes, Anthony. This is Boyd. And as to the first question, I’d say, the strength of the business, there is some contribution both from existing customers as the continuing to benefit from the shift in consumer spending to travel and experiences. It’s certainly benefiting that segment and really all customers in that segment. So a lot of the strength and the solid incoming order and backlog position we have is related to existing customers, but we certainly are seeing new customer contributions in that as well. So it’s really both fronts are contributing overall. And to this point, no, for your second part of your question, we’re really not seeing any signs of any downturns in that segment yet. As you know, those orders and backlogs do have a longer timeframe for completion and installation. So we’ve got a pretty good backlog carrying out over a number of months at this point and really not seeing yet any signs of slowdown there. It remains very solid.

Anthony Lebiedzinski: Okay. Got you. Okay. Thanks a lot. And then, last question, in terms of product pricing, what is your confidence level in terms of being able to continue to price products properly to reflect your own current costs?

Iv Culp: I feel very confident in that, Anthony. And it’s just — maybe it’s confidence compared to where we were. We did talk a lot in this last fiscal year, which was a tough year, about always being behind the eight ball in terms of catching the cost. We just — things were going up on us faster than we can pass them through. Upholstery did a better job than mattress fabrics on that. And it’s not a management thing, the industry allowed us a different outcome. We didn’t — we just didn’t keep pace on the mattress side. As we’ve gotten to the point now where so much of our business feels like it needs to be remerchandised and that’s coming from retailers and customers wanting their freshened floors, we’re able to have a lot of new introductions that set at proper margin.

And it sounds, obvious, but we just weren’t — we weren’t getting fair margins on some of the business that was lingering. So now as we launch new things they just come — it comes at a better prospect. So I don’t feel — it’s always a competitive business. We’re used to that for our entire history. But we have improving costs and we have new products with new technologies that we can price fairly. So I don’t — it’s a competitive business, but I am not worried about price pressure for us.

Anthony Lebiedzinski: That’s great to hear. Well, thank you very much and best of luck.

Iv Culp: Thank you, Anthony.

Boyd Chumbley: Thank you.

Operator: The next question comes from Rex Henderson with Water Tower Research. Please go ahead.

Rexford Henderson: Good morning. Thanks for taking my call. And I want to offer my congratulations to the whole executive team and to Tommy in particular for showing some progress in CHF, that’s encouraging. I was particularly focused on the gross margin line which turned positive for the first time in a while. And my questions start there, I think. The gross margin was positive this quarter, but not very strongly yet. And I’m just wondering kind of where you are in the process of getting — how many SKUs are there that are still negative margin products and how long is it going to take to get to the point where the entire lineup is making money for you?