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

Tommy Bruno: Yeah. Thank you for the question, Rex. For us, we are working diligently on the SKU rationalization process that we’ve talked about previously. I would estimate that over the next quarter or two that we would be worked through on all of the SKUs that aren’t productive for us. We’re having those conversations daily. And as Iv mentioned, a lot of the new programs that we’re launching and as they phase in and become a larger part of our mix, as we rationalize out the lower profitability items and get the newer programs launched, we expect steady improvement in not only our top line, but we expect that to follow through on the bottom line as well.

Rexford Henderson: Okay. Great. So a couple of quarters to get to a more reasonable number. That’s really — that’s encouraging.

Iv Culp: Rex, just to make a point, I’m sure you are fully aware of this. I mean, it would be — an option would be just to stop selling those items, but that’s not a responsible supplier. We need to phase these out through the right process to our customers and support our customers for the long-term, which we always will do and make that transition in the most expedient way we can, but we can’t rush it. We just need to make it happen over a hopefully a short period.

Rexford Henderson: Okay. The press release and in your comments, you also mentioned operating efficiencies. Can you quantify that a little bit? What’s going on in terms of operating efficiencies in CHF?

Ken Bowling: Yeah. Rex, it’s Ken. I think that that’s obviously one of the focuses that we’ve had. We’ve had issues with labor, getting the right mix of labor, that part of the challenge the has calmed down. So we’re getting more consistent labor there. I mean that’s been a focus. Obviously, the — rightsizing the business, getting the right run rates and unit cost in line there. So those have all been concurrent high priorities as we’ve gone through the last several months. And I know Tommy, that’s been your focus or is your focus now, going forward. So it’s hard to quantify. It’s just we’ve got a number of initiatives that we’re working on. And as Iv said, we are confident that over time our operating performance will reflect those.

Iv Culp: Rex, if we were ranking the most important thing to us to return profitability, the new volume at proper margin is first. So that’s the first thing. And then the operational improvements are right behind it. And that’s inclusive also improved costing of materials, freight costs and things like that, that are starting to help. So it’s operating better in addition to better costing. But really the main driver is going to be volume and new programs.

Rexford Henderson: Okay. Actually, Ken, touched on another question I had and that is, earlier you talked about you had some labor turnover and labor inefficiencies. Do you feel like that’s fully behind you or is there still progress to be made on that front?

Iv Culp: I think, Rex, it’s certainly better than it was. We went through a period of time where it was just difficult to retain anyone. I would say today and Tommy can comment, because he has the most U.S. employees, we aren’t having a problem finding workers anymore, but there is still some challenge in retaining workers. I mean we aren’t — the jobs we offer are — their hard jobs. There are long hours and there is got to be some skilled labor there. So much better. Now, we’ve got a lot of attention focused on retaining those people. Is that fair, Tommy? Is that what you’re seeing?

Tommy Bruno: Yeah. We’re able to recruit effectively and we’re working very hard on employee engagement and retention.