Culp, Inc.

101 South Main Street
Post Office Box 2686
High Point, North Carolina 27261
U.S.A.
(336) 889-5161
Fax: (336) 889-8339
Web site: http://www.culpinc.com

Public Company
Incorporated: 1972 as R.G. Culp and Associates
Employees: 4,300
Sales: $477 million (1998)
Stock Exchanges: New York
Ticker Symbol: CFI
NAIC: 31321 Broadwoven Fabric Mills

Culp, Inc. is a world leader in the manufacture and marketing of upholstery fabrics for furniture, as well as a leading producer of mattress fabrics known as tickings. Over 3,000 of the company’s upholstery fabrics are used in residential and commercial furniture applications by such manufacturers as Furniture Brands International, Bassett, Flexsteel, La-Z-Boy, LADD, Hon Industries, Herman Miller, and Steelcase. The company’s 1,000 mattress ticking styles are sold to manufacturers Sealy, Serta, Simmons, and Spring Air. The company focuses on fabrics that have broad appeal in the promotional and popular-priced categories of furniture and bedding. Gulp operates three regional distribution and 17 manufacturing facilities, which include a variety of weaving, printing and finishing operations, as well as yarn and greige (unfinished base fabric) production. These operations enable Gulp to have one of the broadest product lines in its industry.

1970s Origins as a Fabric Converter

Gulp has long been known as an aggressive mill that combines a breadth of offerings at a variety of price points. The company’s commitment never to turn away a customer—and to treat even the smallest as if it were the most important—was established by Robert Gulp, Jr. Gulp founded R.G. Gulp and Associates in 1972 after a successful career in the upholstery fabrics business.

At age 55, having worked for 30 years for Golding Brothers, a mattress ticking, upholstery, and drapery fabrics supplier, Gulp, Jr., leased a portion of a knitting mill in High Point, North Carolina, and converted it to offices and a warehouse. He used much of his personal savings to finance the new company and appealed to several friends for additional investments. Howard Dunn, a former colleague at Golding, joined Gulp in starting the company, as did Gulp’s son, Robert III, who, at 25, had a master’s degree from the Wharton School of Business at the University of Pennsylvania.

Gulp, Jr., maintained leadership of the company until the late 1980s, at which point, Robert Gulp III took over as chief executive officer in 1988 and chairman in 1990. The business continued to adhere to Gulp’s philosophy of “winning the ties,” influencing customers to do business with Gulp because of the company’s commitment to serve customers.

Originally the company was strictly a fabric converter, something of a wholesaler in the fabric world. Specifically, R.G. Gulp and Associates took orders from furniture and mattress makers and arranged to have different mills make the necessary cloth. One of the company’s first big customers was Stuart Furniture, forerunner of Klaussner Furniture in Asheboro, North Carolina, to whom Gulp sold a cloth originally designed to line caskets when Stuart asked for a fabric to cover sofas and chairs. The company had first-year sales of $1.4 million.

A Full-Line, Full-Service Manufacturer in the 1980s

The furniture industry made a dramatic shift in the late 1970s when furniture makers began to buy fabric directly from upholstery fabric manufacturers. As a result, R. G. Gulp and Associates, with sales of $22 million as a converter, moved into the manufacturing arena in 1978. It leased its first plant, Upholstery Prints, in Burlington, North Carolina, where it successfully pioneered the method of transferring prints onto upholstery fabric using heat, the same method used to print designs on t-shirts. In the early 1980s, flock fabrics were becoming popular for the first time, and Gulp’s method of transfer printing proved less expensive than the traditional wet printing. The innovation thus created a niche for the company and fueled its growth.

As a manufacturer, Bob Gulp dreamed of seeing the newly renamed Gulp, Inc. become a full-line, full-service producer capable of fulfilling a broad range of customer needs. Yet of the three men who ran the company in the late 1970s, only Howard Dunn had any experience in manufacturing. Nonetheless, in 1979, the company opened Gulp Ticking to convert mattress ticking, and, by 1983, was manufacturing the majority of its product line.

Gulp also reasoned that by having a stake in several market segments, such as residential furniture and bedding, and manufacturing a broad range of fabrics types at various price points, his company could withstand the cyclical nature of fabric sales. “That way no matter what is hot, we have products in that area,” Gulp observed. To achieve this end, the company embarked upon a determined capital investment program with the long-term goal of becoming a vertically integrated producer of a broad range of goods serving a variety of upholstery markets. In the early 1980s, Gulp made several acquisitions: a former Cannon Mills fabric plant that produced jacquard and dobby woven fabrics in Graham, North Carolina (1982); a dyeing and finishing plant formerly operated by Dan River in Burlington, North Carolina (1983); and in 1985, it purchased the Baxter Kelly plant in Anderson, South Carolina, which produced woven velvets. Gulp also invested $27 million in new equipment between 1983 and 1986. To help pay for its acquisitions, reduce its bank borrowing and finance further growth, the company went public in 1983, offering about one million shares of common stock for sale.

Gulp was well on its way to becoming a major player in the upholstery market by the mid-1980s with a reputation not just for good value, but for service as well. By 1985, sales were at $100 million; by 1986, they totaled $150 million—$113 million from upholstery fabric, $22 million from mattress ticking, and $15 million from industrial fabrics. Yet in spite of its growth, the company continued to employ a tight-knit, family business management structure. Almost all of the sales and management personnel in the company came up through its ranks, and when people left key positions, they were replaced from the ranks.

A major part of Gulp’s development program was its increased reliance on a distinctive “stock distribution system” that it had established at its inception. Beginning in the 1980s, Gulp committed a set level of production each month to popular fabric styles and colors, which were kept in stock for immediate distribution to small furniture manufacturers from its warehouses around the country. At the same time, the company’s special order system was set in place to attend to the needs of its larger manufacturers. All fabrics went to central distribution centers, which shipped directly to the large customers, while warehouses around the country served the smaller customers.

Aggressive Spending and Acquisitions in the Late 1980s

By the mid- to late 1980s, Gulp was set to expand again, launching a program aimed at reducing lead times to customers and making it the foremost manufacturer of textured and jacquard upholstery fabric. It began plans to expand its mattress ticking division, purchasing a printing plant in Stokesdale, North Carolina, in 1986 from Fieldcrest Cannon where it began to process all of its printed ticking. The following year, Gulp contracted with a company in Germany for a large number of jacquard looms for its plant in Graham and installed 90 state-of-the-art dobby looms in a new 100,000 square foot plant it constructed in Pageland, South Carolina. In 1988, it bought the tufting and flocking business of Quaker fabric.

While Gulp was expanding product lines and services, becoming a vertically integrated firm, it was also changing its business organization, reorganizing along product lines as part of an effort to dispel the image of Gulp as a producer of converted goods and seconds. In 1987, its upholstery business was still divided into a textured and prints division and a tufted and woven pile fabrics division. In place of these two divisions, it began to market upscale and contemporary patterns, regardless of price point, with the Gulp Decorative Fabrics label, while country and commercial designs were assigned the Gulp name. Gulp also undertook in 1987 to become known as a producer of original, innovative fabrics, expanding its design staff significantly to implement a new emphasis on design.

Company Perspectives:

Design is an essential factor in the complex equation Gulp’s customers use to gauge the value of its fabrics. The company’s practice is increasingly to bring customers into the design process. This helps build a working partnership, enabling the company to share its analysis of trends and styling changes, and to benefit, in turn, from the customer’s own market research and often close communication with retailers. Investing capital and human resources in what Gulp calls “customer intimacy,” means making it easy to do business with Gulp. This includes on-time delivery of quality finished products, matching efficient manufacturing with strategically located regional distribution centers and being driven by the computerized CulpLink customer information system.

Gulp now manufactured velvets, flocks, wovens, and jac-quards as well as mattress ticking, and business was strong in the midst of a persistently sluggish home furnishings market. The company also had a growing overseas market, long before exports became a popular catchword in American textile circles, accounting in 1989 for $5.3 million of Gulp sales. The company reported a 27 percent gain in net income for fiscal 1991, attributing its steady growth to three primary factors: increased exports, increased domestic shipments to existing accounts, and its diversity of offerings. Despite its heavy emphasis on acquisitions and capital investment during the late 1980s, the company had no substantial long-term debt. At the close of fiscal 1991, a year during which its capital spending totaled $11 million (capping off a five-year period during which capital expenses totaled $46 million), Gulp’s long-term debt amounted to less than $17 million on a total capital base of approximately $66 million. Yet the company was experiencing growing pains as a result of its flurry of acquisitions and decided to halt growth in order to fine tune its manufacturing expertise, upgrade facilities, and “learn the business.”

In fact, Culp was at the leading edge of its market in its move toward vertical integration. Beginning in the early 1990s, consolidation became common among upholstery fabric makers as a means of accommodating customers. As furniture manufacturers and retailers got larger, suppliers had to increase in size to serve them. Large, vertical mills had the advantage over small ones because they could meet the volume and delivery requirements of large furniture manufacturers and retailers. Culp thus continued to increase its vertical capacities, beginning with its 1993 acquisition of Rossville Mills, Chromatex, and Rossville Velours for $34 million. In 1995, it bought Rayonese Textile, Inc. and then invested $13 million to add 72 air-jet jacquard looms to this subsidiary to triple production of bedding and furnishing fabrics. It added privately held Phillips Mills for $47 million in 1997, giving it additional velvet and printing capacity. Later that year, it bought out its supplier, Artec Industries, a yarn manufacturer, for $17 million and capped off the year by purchasing Dan River’s spun yarn operation in Wetumpka, Alabama.

In 1994, Culp reorganized its management structure again to accommodate its greater capacity. Led by a five-person team of executive officers who made business decisions collectively, the company was divided into six business units which handled day-to-day operations: Velvets/Prints, Culp Textures, Rossville/Chromatex, Culp Home Fashions, Phillips Mills, and Artee Industries. Each unit was run independently by a team comprised of a representative from manufacturing, marketing, finance, human resources, and design. Each unit also had its own sales force. The new structure was intended to allow the company to work more closely with customers on product development and to foster a focused effort on selling. It would also allow for an emphasis on internal operations. In fact, general and administrative expenses declined while on-time deliveries increased, and between 1989 and 1996, workplace accidents decreased by 86 percent while labor turnover dropped 25 percent, attendance improved 20 percent, and the company gave its employees a yearly wage increase.

Niche Markets and Exports in the 1990s

By 1996, Gulp’s overseas market had taken off with sales to Canada and Mexico, Europe, the Middle East, Asia, and Australia. Between 1989 and 1996, international sales increased at a rate of 47 percent annually from $5.3 million to $70 million, or 25 percent of sales. The emphasis on overseas selling meant that even when the domestic market in upholstery fabric was down, Culp could continue to grow. As a group at that time, upholstery manufacturers were among the most prolific exporters in the American textile industry with many companies exporting 15 to 30 percent of their fabrics. Culp was perhaps the segment’s largest exporter with exports totaling about 29 percent of sales for fiscal 1998. Estimates for the year put the domestic residential fabric market at about $2.2 billion and the international market at about twice that.

However, shaky economies in many important international markets began to temper Gulp’s export success. Business also began to slow in the United States in 1997, although the company still achieved a more than five percent gain in domestic sales due primarily to significantly higher sales and shipments of mattress ticking. Gulp’s streak of 21 quarters during which it posted consistently higher earnings ended that year. During 1998, weak international sales of printed flock upholstery fabrics and Gulp’s recent spate of acquisitions led the company once again to decide to take a breather to unify related products and marketing programs. It further streamlined operations by cutting back to four divisions, which encompassed all of its manufacturing and marketing operations: Culp Decorative Fabrics, Culp Home Fashions; Culp Velvets/Prints, and Culp Yarns. The company also began to direct efforts toward specialty markets: fabrics for infant car seats, strollers, and cribs; RVs and van conversions; slip-on automotive seat covers; marine applications; and outdoor furniture. Culp also returned its focus to its strength—customer service—investing in a proprietary software, CulpLink, which allowed customers to view information online concerning their current and past orders. Finally, Culp opened its Howard L. Dunn Design Center, a state-of-the-art facility where customers were invited to view new products and participate in product development.

Principal Subsidiaries

Rayonese Textile, Inc. (Canada); Culp International, Inc.

Principal Divisions

Phillips Weaving; Artec Yarns.

Principal Operating Units

Culp Decorative Fabrics; Culp Home Fashions; Culp Velvets/Prints; Culp Yarns.

Further Reading

Duff, Mike, “Culp, Inc.; Ready for the Big Leagues,” HFD—The Weekly Home Furnishings Newspaper, April 13, 1987, p. 1.

Krouse, Peter, “Textile Tiger,” News & Record, September, 7, 1997, p. El.

McCurry, John W., “Culp Contends for Upholstery’s Crown,” Textile World, March 1996, p. 56.

_____, “Upholstery Mills Chase Soft Fabric,” Textile World, November 1998, p. 76.

Williams, Christopher, “Gulp’s Performance Goes Against Fabric of Textiles,” News and Observer (North Carolina), November 1997, p. 22.

—Carrie R. Rothburd