NASDAQ: CULP

Culp markets a variety of fabrics and other products in different categories to a global customer base, including fabrics produced at our manufacturing facilities and fabrics produced by other suppliers. In fiscal 2026, we operated production and distribution facilities located in North Carolina, Shanghai, China, and Ouanaminthe, Haiti (on the Dominican Republic border), and we also operated a facility in Tennessee for a portion of the year before closing it in connection with the integration of our two operating divisions.

Culp also sources fabrics and cut and sewn kits from other manufacturers, located primarily in China, Vietnam, and Turkey. Substantially all of these products are created by Culp designers and made specifically for Culp. In connection with the Fiscal 2025 restructuring referenced below, we transitioned the internal weaving operations in our bedding business to a strategic sourcing model primarily utilizing one of our long-standing supply partners in Turkey.

In May 2024, Culp announced a restructuring plan (the “Fiscal 2025 restructuring”) that was effectively completed during our fiscal 2025 year (with the sale of our manufacturing facility in Quebec, Canada, occurring on April 30, 2025, at the start of our first quarter of fiscal 2026). The Fiscal 2025 restructuring primarily focused on the consolidation of certain operations within our bedding segment. It included a phased wind-down and closure of our manufacturing plant in Quebec, Canada, the transition of a portion of that plant's knitting operations to our manufacturing facility in Stokesdale, North Carolina, and the transition of that plant's weaving operations to a strategic sourcing model. In addition, the company reduced its fixed cost structure through the consolidation of its sewn mattress cover operation in Haiti and rationalized its internal upholstery finishing operation in China to better align with demand and further leverage strategic supply relationships. See “—Fiscal 2025 Restructuring” below for further details regarding the restructuring.

During fiscal 2026, we completed the integration of our U.S. upholstery distribution and window treatment operations into our owned facility in Stokesdale, North Carolina, and reduced our facility footprint in China. See "—Fiscal 2026 Business Integration" below for further details regarding the integration of our two operating divisions into one unified Culp-branded business.

Additional information about trends and developments in each of our business segments is provided in the “Segments” discussion below, as well as in our “Management’s Discussion and Analysis” in Part II, Item 7 of this report.

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General Information

Culp, Inc. was organized as a North Carolina corporation in 1972 and made its initial public offering in 1983. Our common stock currently trades on the Nasdaq Stock Market LLC (Nasdaq) under the symbol “CULP.” The company's fiscal year is the 52- or 53-week period ending on the Sunday closest to April 30. Our executive offices are located in High Point, North Carolina.

Culp maintains a corporate website at www.culp.com. We will make this Annual Report and our other Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to these reports available free of charge on our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”). Copies of any materials we file or furnish with the SEC can also be obtained free of charge through the SEC’s website at www.sec.gov. The information included on our website is not incorporated by reference into this annual report or any other reports we file with, or furnish to, the SEC.

Fiscal 2025 Restructuring

At the beginning of fiscal 2025, Culp announced and initiated the Fiscal 2025 restructuring, which was designed to reduce costs, improve asset utilization, and drive performance and profitable growth. The plan, which was mostly focused within the company’s bedding segment and, to a lesser extent, its upholstery segment, included the following strategic actions:

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Consolidating the company’s North American bedding operations, including a gradual discontinuation and closure of the company’s manufacturing plant in Quebec, Canada, and the incorporation of the knitting and finishing capacity at this plant into the company’s facility in Stokesdale, North Carolina;

•
Cost efficiency, throughput and quality improvements via the optimization of volume and equipment in the company’s bedding operation in Stokesdale, North Carolina;

•
Transitioning the bedding segment’s internal weaving operation to a strategic sourcing model through the company’s long-standing supply partners, which enhanced competitiveness and value for customers;

•
Consolidating the company’s Haiti sewn mattress cover operation (which is located on the Dominican Republic border) into one building, which significantly reduced operating expenses at that location;

•
Restructuring the company’s upholstery finishing operation in China to better align with demand and continuing to leverage strategic supply relationships; and

•
Reducing unallocated corporate and shared services expenses with targeted annualized savings of $1.5 million.

These restructuring actions were effectively completed during fiscal 2025, with the sale of the Quebec facility occurring at the start of fiscal 2026. Since the inception of this restructuring initiative, we incurred cumulative restructuring and restructuring-related charges totaling $5.3 million, most of which related to the bedding segment. Of the total $5.3 million in cumulative charges, we recorded a restructuring credit of $(3.4) million in fiscal 2026 related to the sale of the Quebec, Canada, facility noted above, and we incurred $8.7 million of restructuring and restructuring-related charges during fiscal 2025. The $5.3 million cumulative charges included $7.2 million of cash charges and a $(1.9) million non-cash restructuring credit. For further information about the Fiscal 2025 restructuring, see Note 10 to the consolidated financial statements.

Fiscal 2026 Business Integration

At the end of fiscal 2025, we announced and initiated a strategic transformation of our operating model through the combination of our two operating divisions into a single, integrated business designed to optimize operational agility, further streamline costs and processes, and increase responsiveness to customer needs and market trends. This integration initiative included, among other actions, increased centralization and collaboration among previously division-specific functions and departments, the transition of the duties and responsibilities of certain key division leadership roles to a company-wide scope, and the consolidation of certain upholstery and window treatment operations into a shared management model within our owned Stokesdale, North Carolina facility, which had historically been operated solely by our bedding segment. In addition, we closed leased facilities in Burlington, North Carolina, and Knoxville, Tennessee, each operated by our upholstery segment, and transitioned their production and distribution activities to the Stokesdale, North Carolina, facility. We also reduced our upholstery facility footprint in China from three to two facilities during fiscal 2026.

These integration actions were completed by the end of fiscal 2026. Since the inception of this restructuring initiative, we have incurred restructuring and restructuring-related charges totaling $2.7 million, of which $676,000 were incurred in fiscal 2025 and $2.0 million of which were incurred in fiscal 2026. This included approximately $1.4 million in cash costs and $1.3 million in non-cash charges. For further information on the Fiscal 2026 business integration, see Note 10 to the consolidated financial statements.

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Segments

Our operations are classified into two business segments for reporting purposes: bedding and upholstery. The following table sets forth certain information for each of our segments.

Sales by Fiscal Year ($ in Millions) and Percentage of Total

Company Sales

Segment

Fiscal

2026

Fiscal

2025

Fiscal

2024

Bedding

$

116.6

57

%

$

113.9

53

%

$

116.4

52

%

Upholstery

86.9

43

%

99.3

47

%

108.9

48

%

Total

$

203.5

100

%

$

213.2

100

%

$

225.3

100

%

Additional financial information about our operating segments can be found in Note 19 to the consolidated financial statements included in Item 8 of this report.

Bedding. The bedding segment, previously known as Culp Home Fashions prior to the recent integration of our bedding and upholstery divisions, manufactures and markets bedding and sewn mattress covers to bedding manufacturers. These products include woven jacquard fabrics, knitted fabrics, and some converted fabrics. Our bedding business operates a fabric manufacturing facility located in Stokesdale, North Carolina, and, prior to the Fiscal 2025 restructuring, operated a fabric manufacturing facility in St. Jerome, Quebec, Canada. As part of the Fiscal 2025 restructuring, Culp relocated some of its knitting and finishing operations from its Quebec, Canada, facility to Stokesdale, North Carolina, and transitioned its woven jacquard fabric operations to a strategic sourcing model utilizing outside suppliers. See “—Manufacturing and Sourcing—Bedding Segment,” below, for information on our bedding manufacturing.

During fiscal 2023, we completed a restructuring and rationalization of our U.S.-based cut and sewn mattress cover platform, moving our research and development ("R&D") and prototyping capabilities to our owned facility in Stokesdale, North Carolina. This initiative also involved the discontinuation of our higher-cost on-shore production capabilities through the closure of two leased facilities in High Point, North Carolina, and allowed us to generate cost savings by utilizing our lower-cost mattress cover production and sourcing capabilities in Haiti and Asia. Also, as part of the Fiscal 2025 restructuring, we consolidated our Haiti sewn mattress cover operation into one building and significantly reduced operating expenses at that location.

In prior fiscal years, we completed several multi-year capital projects in our bedding business, including certain operational consolidations, capacity expansions, efficiency and customer service enhancements, and other measures to maintain flexibility in our fabric sourcing strategies. In fiscal 2021, we invested in additional knit machines and other equipment to expand our bedding capacity in North America, and we also enhanced the digital project management platform that allows us to work with customers from concept ideation and 3D mapping to product life cycle management and final merchandising. In fiscal 2022, we expanded our leading-edge technology by investing in robust hot melt lamination finishing equipment. In fiscal 2024, we invested in knitting software to monitor machine efficiency and output and a chemical dosing system designed to enhance our finishing capabilities and provide immediate cost saving benefits.

We believe the success of our bedding business over the longer term is due largely to a strategy focusing on creative design and product innovation, a strong, multi-faceted and flexible global manufacturing and sourcing platform, solid long-term customer and vendor relationships, and reliable service. Our business model has allowed us to provide bedding manufacturers with innovative products developed from consumer-based research and trend analysis, and we have been able to meet continually changing demand trends with the support of our flexible global platform.

Upholstery. The upholstery segment, previously known as Culp Upholstery Fabrics prior to the recent integration of our bedding and upholstery divisions, markets fabrics for residential, commercial, and hospitality furniture. This segment also includes window treatment products and installation services through our Read Window Products business, including roller and solar shades, drapery, roman shades and top treatments, hardware, and top-of-mattress soft goods, for customers in the hospitality and commercial industries.

During fiscal 2025 and fiscal 2026, the upholstery segment reduced the number of facilities it operates in Shanghai, China, and now operates two facilities there. From these locations, we market a variety of upholstery and cut and sewn kits sourced from third-party producers, mostly in China and Vietnam. We utilize these facilities for design, prototyping, warehousing, quality control, and inspection operations related to these products. As part of the Fiscal 2025 restructuring, we rationalized our internal upholstery finishing operation in China to better align with demand and further leverage strategic supply relationships. See “—Manufacturing and Sourcing—Upholstery Segment,” below, for information on our upholstery manufacturing.

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We continue to expand our marketing efforts to sell our upholstery products in countries other than the U.S., including the Chinese local market. In fiscal 2024, we established an administrative office located in Ho Chi Minh City, Vietnam, for the purpose of enhancing our sourcing capabilities and to further diversify our supply chain in Asia. In fiscal 2026, we also added a showroom in Ho Chi Minh City, Vietnam, to facilitate better product exposure with our growing customer base there. Additionally, we market a variety of window treatments, using mostly customer-supplied fabrics and materials. These window treatment products are now fabricated at our facility in Stokesdale, North Carolina (following the consolidation described above in "—Fiscal 2026 Business Integration"), as well as by third-party suppliers.

In recent years, our upholstery business has successfully transitioned from reliance on a large fixed capital manufacturing base to a more flexible and scalable marketing model better equipped to meet changing levels of customer demand and shifting consumer tastes. At the same time, we have maintained control of the most important “value added” aspects of our business, such as design, finishing, quality control, and logistics. This strategy has allowed us to reduce capital investment in fixed assets and better control production costs, while continuing to leverage our design and finishing expertise, industry knowledge, and customer and supplier relationships.

We believe the success of our upholstery business over the longer term is due largely to a strategy focusing on design and product innovation in a low-cost environment, speed-to-market execution, consistent quality, reliable service and lead times, and increased recognition of and reliance on the Culp brand. We believe this strategy serves as a competitive differentiator in our markets and enables us to provide furniture manufacturers with products from nearly every category of fabric for upholstered furniture and meet continually changing demand levels and consumer preferences.

Overview of Industry and Markets

Culp offers products primarily to manufacturers and other customers in four principal markets – bedding, residential furnishings, commercial furnishings, and hospitality furnishings. The bedding segment supplies the bedding market, which comprises mattress sets (mattresses, box springs, foundations and top-of-bed components) and bedding accessory products. The upholstery segment supplies the residential furnishings market and the commercial and hospitality furnishings markets. The residential furnishings market includes upholstered furniture sold to consumers for household use, including sofas, sofa-beds, chairs, recliners, and sectionals. The commercial furnishings market includes fabrics used for upholstered seating sold primarily for use in offices, healthcare facilities, and other institutional settings as well as window treatment products for commercial application. The hospitality furnishings market includes fabrics and window treatment products for use in the hospitality industry (primarily hotels, restaurants, and theater seating). The principal markets into which the company sells products are described in more detail below. The great majority of our products are sold to manufacturers for end use in the U.S. and, accordingly, the discussions below are focused on that market.

Overview of Bedding Industry

The bedding industry has contracted and expanded in recent years in accordance with the general economy, although traditionally the industry has been relatively mature and stable. This is due in part to the fact that a larger share of bedding industry sales are replacement purchases, which are generally less volatile than sales based on economic growth and new household formation. Since the second half of fiscal 2022, the bedding industry has experienced weakness in domestic mattress sales, with industry reports reflecting significant unit contraction and historically low volume. We believe this industry softness is mostly driven by inflationary pressures and related uncertainty affecting consumer spending, especially for mattress products in the low to mid-range price points. Industry reports indicate that these factors, along with price increases driven by recent tariff-related actions, are expected to continue affecting the bedding industry into fiscal 2027.

Until the last several years, the U.S. bedding industry largely remained a North American-based business, with limited competition from imports. This dynamic was mainly driven by the short lead times demanded by mattress manufacturers and retailers, the customized nature of product lines, the relatively low direct labor content in mattresses, and strong domestic brand recognition. In recent years, imports of bedding into the U.S. accelerated significantly, especially for lower-priced and roll-packed, boxed bedding. Major importing countries in fiscal 2026 included Indonesia, Mexico, Vietnam, Poland, and China, among others. The result of the increase in imports has been a decline in sales for the major U.S. bedding manufacturers, which has affected major suppliers to those manufacturers, including Culp. While several rounds of actions by the U.S. Department of Commerce intended to promote domestic production have yielded some benefits to domestic manufacturers, and recent U.S. tariff measures may ultimately enhance the competitive positioning of domestic manufacturers, imported products continue to retain solid market share. Additionally, many mattress producers have adjusted to an assembly-only model in the U.S., still utilizing a mix of domestic and imported materials from suppliers like Culp.

We believe that key trends in the bedding industry include increased demand for roll-packed/compressed (or "boxed") mattresses through both online and traditional sales channels, greater awareness among consumers about the health benefits of better sleep, greater emphasis on designs knitted or woven into mattress fabric, consolidation resulting in larger market share for certain mattress manufacturers and

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marketers, and the pricing and supply chain impacts stemming from the ongoing global trade negotiations and related tariff and import control measures. Consumer acceptance of roll-packed/compressed, or “boxed,” mattresses as a delivery mechanism continues to drive growth and increase market share for this product, increasing potential demand for knitted fabrics and sewn mattress covers.

Mattress fabric design efforts are based on current trends in home decor and fashion. Additionally, the growth in non-traditional sources for retail mattress sales, such as online e-commerce channels and wholesale warehouse clubs, may potentially increase overall consumption of bedding products due to convenience and high traffic volume, which may result in more frequent product replacement. Among fabric types, knitted fabrics have continued to increase in popularity. Knitted fabric was initially used primarily on premium mattresses, but these fabrics are now used in more mattresses at mid-range to lower retail price points and nearly all roll-packed bedding. Knitted fabrics offer higher gross margin potential because they are viewed as more versatile due to their design flexibility in both style and texture and their functionality with roll-packed bedding.

Overview of Residential, Commercial, and Hospitality Furnishing Industries

Overall demand for our residential and commercial upholstery depends upon consumer and business demand for furniture products, which is subject to variations in the general economy, including current inflationary pressures affecting consumer spending and declines in consumer confidence. Purchases of furniture products are discretionary for most individuals and businesses, and economic downturns or periods of depressed consumer confidence reduce demand for our upholstery fabrics. In addition, sales of residential furniture are influenced significantly by the housing industry and by trends in home sales and household formation. Reduced home sales in recent years have adversely affected our residential sales.

Additionally, demand for our upholstery and window treatment products for the commercial and hospitality industries generally reflects economic trends affecting businesses; consumer spending on travel and experiences; demand for new and refurbished hotel and resort properties; and demand for new and refurbished commercial office space. While increased consumer spending on travel and experiences following the COVID-19 pandemic drove increased demand for our products in the hospitality market, this trend shifted in fiscal 2026, with travel and leisure spending being challenged by ongoing global volatility, tariffs, and inflation. As a result, hotel and resort properties and other hospitality/entertainment businesses have been reluctant to start new projects or have delayed planned projects, which has adversely affected our hospitality sales. In addition, significant challenges in the commercial real estate market following the COVID-19 pandemic and its impact on remote work trends have adversely affected our commercial sales to some extent in recent years.

The sourcing of components and fully assembled furniture from overseas continues to play a major role in the furniture industry. The largest source for imported upholstery continues to be China, while China and Vietnam now serve as the largest sources for fully assembled furniture. Imports of upholstery, both in roll and in “kit” form, have significantly impacted the furniture market in recent years, with fabrics entering the U.S. from China and other low labor-cost countries resulting in increased price competition in the upholstery and upholstered furniture markets. The supply chain and pricing impacts stemming from the ongoing trade negotiations between the U.S. and China and other low labor-cost countries, as well as related tariff and import control measures, may ultimately impact this competitive dynamic.

In general, the residential furniture industry has been consolidating for several years, with the result of this trend being fewer, but larger, customers for marketers of upholstery fabrics. Intense price competition continues to be an important consideration for both residential and commercial furniture.

Additionally, with ongoing trade and other tensions between the U.S. and China, the trend of customers transitioning some or all of their supply chains away from China beginning in late fiscal 2019 has continued and, in some cases, accelerated. While we believe Asia remains a preferred location for sourcing of components, including fabric, we continue to diversify our sourcing strategies to develop additional geographic options to service our customers.

Products

As described above, our products include bedding and upholstery, which are our two identified operating segments. These fabrics are sold in roll form and as sewn mattress covers by the bedding segment, and in roll form and as cut and sewn kits by the upholstery segment. Our upholstery segment also provides window treatments and related products.

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Bedding Segment

Bedding segment sales constituted 57% of our total net sales for fiscal 2026, compared with 53% for fiscal 2025. The company has emphasized fabrics that have broad appeal at prices generally ranging from $2.00 to more than $18.00 per yard.

Upholstery Segment

Upholstery segment sales totaled 43% of our total net sales for fiscal 2026, compared with 47% for fiscal 2025. The company has emphasized fabrics that have broad appeal at “good” and “better” prices, generally ranging from $5.00 to $15.00 per yard.

Product Categories by Segment

We market products in most categories of fabric that manufacturers currently use for bedding and furniture. We also market window treatment products to customers in the hospitality and commercial industries. Our product lines include:

Bedding

•
Knitted fabric – Various patterns and intricate designs produced on special-width circular knit machines utilizing a variety of synthetic and natural yarns. Knitted bedding fabrics have inherent stretching properties and spongy softness, which conforms well to layered foam packages.

•
Woven jacquards – Various patterns and intricate designs, woven on complex looms using a variety of synthetic and natural yarns; sourced from third parties following the Fiscal 2025 restructuring.

•
Converted fabric – Suedes, pile, and embroidered fabrics, as well as other specialty type products, are sourced to offer diversity for higher-end mattresses.

•
Sewn mattress covers – Covers for mattresses (primarily specialty beds), sewn from bedding produced by our facilities or sourced from third parties.

Upholstery

•
Woven jacquards – Elaborate, complex designs such as florals and tapestries in traditional, transitional, and contemporary styles. Woven on intricate looms using a wide variety of synthetic and natural yarns.

•
Woven dobbies – Fabrics that use straight lines to produce geometric designs such as plaids, stripes, and solids in traditional and country styles. Woven on less complicated looms using a variety of weaving constructions and primarily synthetic yarns.

•
Velvets – Soft fabrics with a plush feel. Woven or knitted in basic designs, using synthetic yarns that are yarn dyed or piece dyed.

•
Suedes – Fabrics woven or knitted using microdenier polyester yarns, which are piece dyed and finished, usually by sanding. The fabrics are typically plain or small jacquard designs, with some printed. These fabrics are sometimes referred to as "microdenier suedes."

•
Faux leathers – Sueded or knitted base cloths that are overprinted with polyurethane, and composite products consisting of a base fabric that is coated with a top layer of polyurethane that simulates the look and feel of leather.

•
Cut and sewn kits – Covers made from various types of upholstery and cut and sewn to the specifications of furniture manufacturing customers for use on specific furniture frames.

Through our Read Window Products business, the upholstery segment also markets a variety of window treatment products and installation services for customers in the hospitality and commercial industries. These products include roller and solar shades, drapery, roman shades and top treatments, hardware products, and soft goods such as duvet covers, bed skirts, bolsters and pillows.

Manufacturing and Sourcing

Bedding Segment

Our bedding segment currently operates two manufacturing plants, with one located in Stokesdale, North Carolina, and one in Ouanaminthe, Haiti, on the Dominican Republic border. In connection with the Fiscal 2025 restructuring, we closed our manufacturing

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plant in St. Jerome, Quebec, Canada, and expanded the capacity of our plant in North Carolina via the relocation of knitting and finishing equipment from our Canada facility. In addition, we consolidated our Haiti production operations from two facilities to one. See “—Fiscal 2025 Restructuring” for further details regarding the Fiscal 2025 restructuring. Over the past 12 fiscal years, we have made capital expenditures to consolidate our production facilities and to modernize both knit and weaving equipment, enhance and provide knit and woven finishing capabilities, and expand capacity. The result has been an increase in manufacturing efficiency and reductions in operating costs, as well as expanded product offerings.

Knitted fabrics are currently produced at our Stokesdale facility, while our jacquard (damask) fabric, which was previously produced solely at our facility in Canada, is now sourced primarily from a long-tenured, strategic supplier located in Turkey. The majority of our finishing and inspection processes for bedding are conducted at the Stokesdale plant, which also offers finished goods distribution capabilities and houses the majority of the bedding business’s administrative offices. Additionally, our mattress cover operation has a wholly owned manufacturing platform in Haiti for production of cut and sewn mattress covers that now consists of a single leased facility following the Fiscal 2025 restructuring.

In addition to the bedding and sewn covers manufactured internally, we have important supply arrangements that allow us to source bedding and sewn covers from strategic suppliers. We source some knitted fabrics, certain converted fabric products, and sewn mattress covers using our China platform. We also source sewn mattress covers from a strategic supply relationship in Vietnam, and our woven jacquard (damask) and knitted fabrics from outside suppliers, with the majority of our woven jacquard (damask) fabrics sourced from a long-standing, strategic supplier located in Turkey. Substantially all of our outsourced bedding products are made specifically for Culp and manufactured to our design specifications.

Upholstery Segment

During fiscal 2025 and fiscal 2026, the upholstery segment reduced the number of facilities it operates in Shanghai, China, and now operates two facilities there. At these facilities, we inspect fabrics sourced from a limited number of suppliers. As part of the Fiscal 2025 restructuring, we rationalized our internal upholstery finishing in China to align with current demand and further leverage strategic supply relationships. Additionally, we previously produced cut and sewn upholstery kits in Haiti, but we discontinued this production during fiscal 2024 due to reduced demand.

A large portion of our upholstery products, as well as certain elements of our production processes, are sourced from outside suppliers. Our facilities in China provide a base from which to access a variety of products, including certain fabrics (such as microdenier suedes and polyurethane fabrics) that are not produced anywhere within the U.S. We have identified opportunities to develop significant relationships with key overseas suppliers in China that allow us to source products on a cost-effective basis, while limiting our investment of capital in manufacturing assets. During fiscal 2025 and 2026, we sourced unfinished and finished fabrics, as well as cut and sewn kits, from a limited number of strategic suppliers in China that are willing to commit significant capacity to meet our needs and work with our product development team located in China to meet the demands of our customers. Beginning in late fiscal 2019, we also developed strategic supplier relationships in Vietnam for additional sourcing of our cut and sewn kits, which has allowed us to begin adjusting our supply chains to meet customer demands. In fiscal 2024, we established an administrative office in Ho Chi Minh City, Vietnam, for the purpose of enhancing our strategic sourcing and further diversifying our supply chain in Asia. Additionally, beginning in fiscal 2022, we developed strategic supplier relationships in Turkey for additional sourcing of fabric products, providing further diversification in our supply chain.

We fabricate a variety of window treatment products for our Read Window Products business at our facility in Stokesdale, North Carolina. We also use a limited number of strategic suppliers in the U.S. and Mexico for window treatment fabrication. The majority of upholstery fabrics and materials used by our Read Window Products business to fabricate window treatments are customer-supplied. These materials are generally sourced by customers, and we also source a portion of other window treatment products such as hardware and roller shades, from outside suppliers in the U.S., Turkey, and China.

Product Design and Innovation

Consumer tastes and preferences related to bedding, upholstered furniture, and window treatment products change over time. The use of new fabrics, creative designs, and special production finishes and technologies remains an important consideration for manufacturers and marketers to distinguish their products at retail and to capitalize on changes in preferred colors, patterns, textures, and performance properties. Culp’s success is largely dependent on its ability to market fabrics and products with appealing designs and patterns, as well as performance properties such as cleanability, stain-resistance, cooling, sustainability, and health- and hygiene-related benefits. The process of developing new designs and innovative finishes involves maintaining an awareness of broad fashion and color trends, as well as wellness and other consumer trends, both in the U.S. and internationally.

To enhance our design and innovation creativity and advance the synergies between our bedding and upholstery segments, we launched a new innovation campus in downtown High Point, North Carolina, during fiscal 2022. This space combines our design, innovation,

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and sales teams for both businesses into a shared location to support collaboration and pull our top creative talent together to develop new products and technologies based on the latest consumer trends.

Bedding Segment

Design innovation is a very important element of bedding production. We invest significant resources to stay ahead of current design trends, including maintaining a team of dedicated design and innovation professionals; investing in research and development activities, such as participation in international design shows; and implementing systems for creating, cataloging, and simulating new designs. Price point delineation for our fabrics and our customers’ finished mattress products is accomplished through fabric quality as well as variation in design. Consumers are often drawn to the mattress that is the most visually appealing when in a retail showroom or by viewing mattress products online, so this design variation, together with price point delineation, helps our customers merchandise different looks at various price points. Fiber differentiation also plays an important part in design. For example, rayon, organic cotton, and other special fibers, including recycled fibers promoting sustainability and fibers with cooling properties, are incorporated into the design process to allow the retailer to offer consumers additional benefits related to their sleeping experience. Similarly, many fabrics contain special production finishes that enhance fabric performance.

Bedding designs are not routinely introduced on a scheduled seasonal cadence. Designs are typically introduced upon the request of the customer as they plan new product introductions. Additionally, we work closely with our customers on new design offerings around the major furniture markets such as those in Las Vegas, Nevada, and High Point, North Carolina.

Upholstery Segment

The company has developed an upholstery design and product development team (with staff located in the U.S. and in China) primarily focused on value in designing furniture body cloths, while promoting style leadership with pillow fabrics and color. Our design staff regularly attends international trade and design shows to maintain familiarity with current design and fashion trends. The team searches continually for new ideas and for the best sources of raw materials, yarns, and fabrics, utilizing a supply network located mostly in China. Using these design elements, the team develops product offerings using ideas and materials that take both fashion trends and cost considerations into account to offer products designed to meet the needs of furniture manufacturers and, ultimately, consumer preferences.

Upholstery designs are introduced at major fabric trade conferences that occur twice annually in the United States. We prioritize the protection of our proprietary designs and are assertive in addressing any copying or infringement.

Distribution

Bedding Segment

Most of our bedding shipments originate from our facility in Stokesdale, North Carolina, and we currently have additional distribution capabilities in China, Haiti, and Turkey. Following the Fiscal 2025 restructuring, distribution from Canada was eliminated in connection with the closure of our former facility there.

Through arrangements with major customers and in accordance with industry practice, we maintain a significant inventory of “make to stock” bedding at our distribution facility in Stokesdale, North Carolina, so that products may be shipped to customers with shorter lead times and/or on a “just in time” basis.

Upholstery Segment

A majority of our upholstery products are marketed on a “make to order” basis and are shipped directly from our distribution facilities in Stokesdale, North Carolina, and Shanghai, China. We also have distribution capabilities in Vietnam and Turkey.

In addition to “make to order” distribution, an inventory of select fabric patterns is held at our distribution facilities in North Carolina and China from which our customers can obtain quick delivery of sourced fabrics through a program known as “Culp Express.”

Window treatment products sold through our Read Window Products business are done on a “job order” basis, with manufactured products shipped directly to the job installation site from our facility in Stokesdale, North Carolina, or shipped from our strategic suppliers.

Sources and Availability of Raw Materials

Bedding Segment

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Raw materials account for approximately 60%-70% of our bedding production costs. The bedding segment purchases primarily synthetic yarns (polyester, polypropylene, and rayon), certain greige (unfinished) goods, glue adhesives, laminates, dyes, and other chemicals. Most of these materials are available from several suppliers, and prices fluctuate based on supply and demand and the general rate of inflation. The ongoing global trade negotiations, including the recent imposition of U.S. tariffs on China imports and the possibility for additional tariffs, have also affected the price of raw materials and may continue to do so. Additionally, because many of our basic raw materials are produced from petrochemical products, our costs are highly sensitive to the underlying price of oil, which has experienced fluctuation in recent periods in connection with impacts from the U.S. conflict with Iran.

The bedding segment generally has not had significant difficulty in obtaining raw materials. However, our increasing use of outside suppliers to source materials could subject the bedding segment to price adjustments, delays, expenses, or production interruptions caused by shipping logistics or business partners outside of our control.

Upholstery Segment

The upholstery segment generally does not purchase raw materials directly, but raw materials, particularly synthetic yarns (polyester, acrylic, rayon, and polypropylene) and dyes, are important to our suppliers of finished and unfinished fabrics. Raw materials account for approximately 60%-70% of the costs of the upholstery products we manufacture. As with our bedding segment, our costs fluctuate based on supply and demand, the general rate of inflation and the price of oil. In addition, the ongoing global trade negotiations, including U.S. tariffs on China imports and the possibility for additional tariffs, have also affected raw material costs and may continue to do so.

Increased reliance by both our U.S. and China upholstery operations on outside suppliers for basic production needs such as base fabrics, yarns, and finishing services has caused the upholstery segment to become more vulnerable to price increases, delays, or production interruptions caused by problems within businesses that we do not control.

Seasonality

Overall, demand for our products generally depends upon consumer demand for furniture and bedding products, which reflects sensitivity to overall economic conditions, including consumer confidence, unemployment rates, and housing market conditions.

Bedding Segment

The bedding business and the bedding industry in general are slightly seasonal, with sales traditionally being the highest in early spring and late summer and another peak in mid-winter. In the U.S., customers often purchase mattresses during major holidays in conjunction with retail store promotional events. However, these seasonality trends relate more to in-store retail sales. Online sales, which have grown in recent years, are less affected by in-store seasonality trends.

Upholstery Segment

The upholstery business has some seasonality, which is tied to the timing of holidays in our manufacturing facilities. Our facilities in China close during Chinese National Holiday (in October) and the Chinese New Year (which occurs in January or February each year), often causing sales to be higher in advance of these holiday periods and sometimes lower during or immediately following the same periods.

Competition

Competition for our products is high and is based primarily on price, design, quality, product performance, timing of delivery, and service.

Bedding Segment

The bedding market is concentrated within a few relatively large suppliers including Culp, as well as some niche producers focusing mainly on knitted products. We believe our principal bedding competitors are BekaertDeslee Textiles (fabric and mattress cover producer), Global Textile Alliance (fabric and mattress cover producer), and several smaller companies producing knitted fabrics, sewn covers, and other fabric, including companies in China supplying fabric and cover products to sub-contract manufacturers in the U.S. In addition, our bedding customers continue to face increasing competition from imports of finished beds, which indirectly compete with our bedding products because import producers generally do not purchase our fabrics.

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Upholstery Segment

In the upholstery market, we compete against a large number of companies ranging from a few manufacturers comparable in size to Culp to small producers and converters (companies that buy and re-sell fabrics, but have no manufacturing). We believe our principal upholstery competitors are Crypton, Dorell Fabrics Co., Morgan Fabrics, Richloom Fabrics, Specialty Textile, Inc., and ZhongWang Fabrics, plus a significant number of smaller competitors (both manufacturers and converters).

The trend in the upholstery industry toward greater overseas competition and the entry of more converters has caused the industry to become substantially more fragmented in recent years, with lower barriers to entry. This has resulted in a larger number of competitors selling upholstery products and an attendant increase in competition based on price.

Environmental and Other Regulations

We are subject to various federal and state laws and regulations, including the Occupational Safety and Health Act (“OSHA”) and federal and state environmental laws, as well as similar laws governing our facilities in China and Haiti and our former facility in Canada. We monitor our compliance with these laws and regulations in an attempt to minimize the risk of violations.

Our operations involve a variety of materials and processes that are subject to environmental regulation. Under current law, environmental liability can arise from previously owned properties, previously leased properties, and properties owned by third parties, as well as from properties currently owned and/or leased by the company. Environmental liabilities can also be asserted by adjacent landowners or other third parties in toxic tort litigation.

In addition, under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”), and analogous state statutes, liability can be imposed for the disposal of waste at sites targeted for cleanup by federal and state regulatory authorities. Liability under CERCLA is strict as well as joint and several.

Domestic and foreign laws and regulations, as well as international agreements, may result in new regulations on greenhouse gas emissions. It is uncertain if, when, and in what form, a mandatory carbon dioxide emissions reduction program may be enacted either through legislation or regulation. However, if enacted, this type of program could materially increase our operating costs, including costs of raw materials, transportation, and electricity. It is difficult to predict the extent to which any new rules or regulations would affect our business, but we would expect the effect on our operations to be similar to that for other manufacturers, particularly those in our industry.

We have been involved from time to time, and may again be involved, in environmental claims or litigation and requests for information from environmental regulators. Each of these matters is carefully evaluated and addressed based on information presently available. Based on this information, we do not currently believe that environmental matters will have a material adverse effect on either the company’s financial condition or results of operations. However, there can be no assurance that the costs associated with environmental matters will not increase in the future.

Human Capital

Our Employees

As of the end of fiscal 2026, we employed 887 people, an increase of 56 employees compared to the end of the prior fiscal year. The year-over-year increase in the number of employees primarily relates to an increase in employees in the bedding segment due to a ramp-up in cut and sew production in Haiti as a result of higher demand, partially offset by headcount reductions associated with the fiscal 2026 business integration and the consolidation of certain facilities.

Approximately 405 of our employees work in the United States, and 482 are employed in international locations. We employ the vast majority of our team on a full-time basis.

The hourly employees at our former manufacturing facility in Canada were represented by a local, unaffiliated union. The collective bargaining agreement covering those employees was terminated in connection with our closure of that facility in fiscal 2025. We are not aware of any ongoing efforts to organize our employees, and we believe our employee relations are very good with our workforce.

Our company-wide annual employee turnover rate was approximately 25.2% during fiscal 2026, compared to approximately 46.3% in the prior year. Although our turnover rate was down in fiscal 2026 compared to the prior year, employee turnover in recent fiscal years has been higher than near-term historical trends, driven mostly by the rationalization of our bedding cut and sew operation in Haiti during fiscal 2024; the discontinuation of our upholstery cut and sew operation in Haiti during fiscal 2024; the Fiscal 2025 restructuring and associated closure of our former Canada manufacturing facility, consolidation of our two manufacturing facilities in Haiti, and rationalization of our internal upholstery finishing operation in China; and the fiscal 2026 business integration and consolidation of

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certain upholstery facilities in the U.S. and China. See “—Fiscal 2025 Restructuring” and "—Fiscal 2026 Business Integration” for further details regarding these restructuring and integration actions. Excluding employee layoffs associated with these events, our company-wide annual employee turnover rate was approximately 18.4% in fiscal 2026, 24.5% in fiscal 2025, and 17.6% in fiscal 2024.

Mission Statement and Values

Our human resources department has adopted the following mission statement embodying our values and goals in our relationships with employees:

Culp HR Services is committed to providing outstanding employee support in a mutually respectful, safe, diverse, and collaborative environment through innovative programming that engages our associates and promotes the success of Culp, Inc.

We strive to maintain a welcoming and inclusive workplace. Discrimination on the basis of race, ethnicity, sex, age, religion, national origin, sexual orientation, gender, gender identity, genetic information, disability, veteran status, or other status protected by law, as well as sexual harassment or harassment of any kind, are not tolerated in our workplaces. Employees have multiple avenues available to report inappropriate behavior, including a dedicated “HR Connection” phone line. All reports of inappropriate behavior are promptly investigated and appropriate action is taken to prevent their recurrence. We also prohibit retaliation against individuals who, in good faith, report any violation of company policies, including unlawful discrimination or harassment.

Along with our mission statement and values, we act in accordance with our Code of Business Conduct and Ethics (“Code of Conduct”), which sets forth expectations and guidance for employees to make appropriate decisions. Our Code of Conduct covers topics such as conflicts of interest, fair dealing, protecting confidential information, appropriate use of company assets, compliance with laws (including, without limitation, anti-corruption and antitrust laws), workplace safety and environmental stewardship, and reporting Code of Conduct violations. The Code of Conduct reflects our commitment to operating in a fair, honest, ethical, and responsible manner, and also provides direction for reporting complaints in the event of alleged violations of our policies. Our executive officers and supervisors maintain “open door” policies, and any form of retaliation is strictly prohibited.

We also conduct regular training programs with our management and employee leaders to inform and refresh their knowledge about company policies and procedures pertaining to employment and human capital.

Employee Recruitment, Development, Engagement, and Wellness

We strive to attract, recruit, and retain employees through competitive compensation and benefit programs that are aligned with those of comparable industries and companies and in the geographic areas where our facilities are located, and that comply with local regulatory requirements. We also provide development opportunities that support career growth and maintain a wide variety of programs to engage with our employees and promote overall wellness. We believe these efforts support all of our personnel in the workplace and elsewhere in their lives, which in turn promotes employee satisfaction and retention.

We also continue to strengthen our workforce analytics to advance HR metrics and delivery, enhance HR operations, and continually evaluate responsible use of artificial intelligence to support efficiency and decision-making. Our focus is on translating insights into action through deeper leader engagement, continued emphasis on retention and safety, and sustained communication with employees.

Our human resources department concentrates on aligning employee feedback, leadership action, and measurable outcomes. Results from our ongoing company-wide CULPchat surveys help shape priorities, and we are intentional about communicating with employees on how their feedback is being addressed. In addition, we conduct targeted retention and attrition surveys with front-line supervisors and managers to better understand turnover challenges at the operational level. Analysis of this data then informs action planning.

In addition to CULPchat, other examples of employee engagement initiatives include:

•
Interactive TeamTalk meetings, business strategy sessions, and video chat sessions with senior management

•
Leadership Talk Tuesdays for managers and supervisors, with each session featuring either an external or internal guest speaker presenting various leadership development topics and also covering company human resources policies and benefits

•
Frontline Leadership Academy, with monthly sessions held in-person at our Stokesdale, North Carolina facility targeting associates who are new in leadership roles and those in need of extra leadership development

•
Regularly scheduled, on-site informational and assistance visits by the company's human resources benefits team to our Stokesdale, North Carolina, facility

•
The CulpVets program, which provides special recognition to military veterans

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•
The “CULPgrow” program, which provides employees with skills assessment and education assistance, such as GED, ESOL (English to Speakers of Other Languages), and computer literacy programs. The purpose of CULPgrow is to provide a workplace where every employee has the key resources they need to grow, develop, and reach their career goals. The program focuses on identifying the skills and goals of each employee, as well as ways the company can invest in their future and provide tools and resources that support their career advancement. It also provides resources such as financial educational assistance, as well as mentorship opportunities where employees can be matched with a company mentor and guided through pathways for success within the company.

•
The "Share the Love" program, a company-wide global giving initiative that involves employees in each of our geographic locations choosing a charitable endeavor to support, based on their knowledge of local cultural considerations and areas of need

•
Employee awards and recognition programs

These engagement efforts and programs are continually refined and updated to meet the evolving needs of our workforce.

Safety and Health

The safety and health of our employees is a fundamental priority at Culp. In fiscal 2026, we launched a new "Target Zero" safety program that reflects our ongoing commitment to creating a workplace where every employee goes home safe at the end of every shift. We recognize that safety culture is driven by leadership, and what we consistently discuss and prioritize sets the standard for our teams. Our leadership is expected to reinforce safety daily through shift huddles, conversations, and visible leadership commitment; engage with employees on hazards and safety concerns; and recognize and affirm safe behaviors in real time.

In addition to Target Zero, we maintain comprehensive safety monitoring and training programs, with regular reports to senior management on these topics. Our behavior-based safety initiative combines awareness programs, observation, and training to enhance continued compliance with safe and healthy practices in our facilities.

Customers and Sales

Bedding Segment

Major customers for the bedding business include leading bedding manufacturers such as Serta-Simmons Bedding (SSB), Somnigroup International (f/k/a Tempur Sealy International (TSI) prior to its acquisition of Mattress Firm), Brooklyn Bedding, FXI, Sleep Number, and Ashley Furniture. Our largest customer in the bedding segment is Serta-Simmons Bedding (SSB), accounting for approximately 13% of the company’s consolidated sales in fiscal 2026. These sales include sales to customers who are also subcontractors and licensees for SSB. Our bedding customers also include many small and medium-size bedding manufacturers.

Upholstery Segment

Our major customers for our upholstery business are leading furniture manufacturers including Ashley Furniture, Flexsteel Home, Jonathan Louis, La-Z-Boy Incorporated (La-Z-Boy Wholesale, Joybird and England), Southern Furniture Industries (Fusion and Southern Motion), and Best Home Furnishings. Major customers for the company’s fabrics for commercial furniture include Exemplis, HNI Corporation, Hilton, and Best Western. Our largest customer in the upholstery segment is La-Z-Boy Incorporated, which accounted for approximately 12% of the company’s consolidated sales in fiscal 2026.

The following table sets forth our net sales by geographic area by amount and percentage of total net sales for the three most recent fiscal years.

Net Sales by Geographic Area

(dollars in thousands)

Fiscal 2026

Fiscal 2025

Fiscal 2024

United States

$

139,936

68.8%

$

143,713

67.4%

$

153,631

68.2%

North America (Excluding USA)(1)

31,544

15.5%

32,912

15.4%

29,357

13.0%

Far East and Asia(2)

28,963

14.2%

30,586

14.3%

36,334

16.1%

All other areas

3,039

1.5%

6,026

2.8%

6,011

2.7%

Subtotal (International)

$

63,546

31.2%

$

69,524

32.6%

$

71,702

31.8%

Total

$

203,482

100.0%

$

213,237

100.0%

$

225,333

100.0%

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(1)
Of this amount, $28.7 million, $28.8 million, and $25.1 million are attributable to shipments to Mexico in fiscal 2026, 2025, and 2024, respectively.

(2)
Of this amount, $12.6 million, $16.0 million, and $18.3 million are attributable to shipments within China in fiscal 2026, 2025, and 2024, respectively.

Sales attributed to individual countries are based upon the location that the company ships its products to for delivery to customers.

For additional segment information, including the geographic location of long-lived assets, see Note 19 in the consolidated financial statements.

Backlog

Bedding Segment

The order backlog for our bedding segment is not a reliable predictor of future shipments because the majority of sales in that segment are made on a just-in-time basis.

Upholstery Segment

Although it is difficult to predict the amount of order backlog that is “firm” in our upholstery segment, we have reported the portion of the upholstery backlog from customers with confirmed shipping dates within five weeks of the end of the fiscal year. As of May 3, 2026, the portion of the upholstery segment backlog with confirmed shipping dates prior to June 8, 2026, was $8.5 million, compared with $6.5 million as of the end of fiscal 2025 (for confirmed shipping dates prior to June 2, 2025). The increase in the order backlog for our upholstery segment for this period is primarily due to more consistent ordering activity from a large residential customer in fiscal 2026, as compared to fiscal 2025 (when such customer had concentrated periods of ordering throughout the year that led to periods of elevated or reduced backlog, including a period of lower backlog at the end of fiscal 2025).

Intellectual Property

We currently hold, or have registration applications pending for, numerous trademarks and copyrights for various product and trade names, logos, and fabric designs in the United States and certain foreign countries. We view such intellectual property, along with any unregistered copyrights, trademarks, service marks, trade names, domain names, trade dress, trade secrets, and proprietary technologies, as an important part of our business and seek to diligently protect, monitor, and defend, through appropriate action, against their unauthorized use.

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