Culp, Inc. has recently unveiled a substantial restructuring initiative, outlining plans to gradually shutter its manufacturing plant in Quebec, Canada. Concurrently, the company intends to consolidate its knitting and finishing operations at its facility in North Carolina. This strategic move appears aimed at enhancing operational efficiency, potentially lowering costs, and capitalizing on synergies within the North Carolina location. However, it’s important for Culp to navigate this transition thoughtfully, considering the implications for the local workforce and communities affected by the plant closure.
Culp has stated that its restructuring plan, primarily focused on its mattress fabrics segment and to a lesser extent on its upholstery fabrics segment, aims to cut costs, enhance asset utilization, and foster performance and profitability. As part of these efforts, approximately 240 positions will be eliminated from the mattress business, constituting roughly 35% of the segment’s total workforce.
Plans also include improving efficiency and through-put by optimising volume and equipment at its mattress fabrics operation in Stokesdale, North Carolina, to reduce costs and improve quality; and transitioning the mattress fabrics segment’s weaving operation to a strategic sourcing model through the company’s long standing supply partners.
Iv Culp, President and Chief Executive Officer of Culp, Inc., have announced that the restructuring process will commence immediately and is anticipated to be largely finalized by the end of the calendar year.
“Our industry faces unprecedented challenges, including macro-economic headwinds pressuring consumer discretionary spending and housing markets, as well as changes in consumer spending patterns,” he said. “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.”
In total, the restructuring plan is expected to generate US$10.0 to $11.0 million in annualised cost savings and operating improvements when fully implemented by the end of the calendar year, with most of the resulting benefit realized during the second half of the fiscal year.
