Company: CULP
Filing Date: 2025-03-07
Form Type: 10-Q
Source: 0000950170-25-035191
Chunk: 76

Company: CULP INC
Filing Date: 2025-03-07
Form: 10-Q
Item: Item 1A
Chunk 76
---
Except as set forth below, there have not been any material changes to our risk factors during the three months ended January 26, 2025, from the risk factors disclosed in Item 1A “Risk Factors” of the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on July 12, 2024, for the fiscal year ended April 28, 2024.

Our business may be adversely affected by increased tariffs or other changes in U.S. trade policy related to imported products, as well as violations of existing trade policies.

Many of our products are manufactured or sourced outside of the United States. The U.S. government has imposed certain tariffs on imports from various countries, including China, where a significant amount of our products is produced. Recently, the U.S. government significantly increased tariffs on imports from China, and has indicated a willingness to impose additional tariffs on imports from China and other countries. Any tariffs that result in increased costs of imported products and materials could require us to increase prices to our domestic customers. Moreover, if other countries enact retaliatory tariffs in response to U.S. trade policy, our sales, and the economy in general, may be adversely affected. If we are unable to pass along these additional costs, our gross margins on products sold may be adversely affected. As a result, the tariffs could have a material adverse effect on our results of operations. 

In addition to tariffs, the U.S. government considers other proposals for substantial changes to its trade and tax policies, which could include import restrictions, changes to or withdrawal from existing trade agreements, and border-adjustment taxes, among other possible measures. Material changes in these policies could increase our tax obligations, require us to source materials from different regions, or increase prices to customers, which could adversely affect sales. Any significant change in U.S. trade or tax policy related to imported products could have a material adverse effect on our business and financial results.

There are also a number of trade regulations and duties currently in place to protect the U.S. textile industry against competition from low-priced foreign producers, such as those in China and Vietnam, but violations of these trade regulations and duties by foreign producers has had, and may in the future have, a material adverse effect on our operations. In May of 2019, the U.S. Department of Commerce imposed punitive anti-dumping measures against China mattress imports to address violations of trade regulations. Despite the imposition of these duties, if China producers move their production out of China, which we believe