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With that, I will now turn the call over to Frank Saxon, chairman and chief executive officer of Culp. Please go ahead, sir.

Frank Saxon -- Chairman and Chief Executive Officer

Thank you, Dru, and good morning, everyone, and thanks for joining us today. I would like to welcome you to the quarterly conference call with analysts and investors. With me on the call today is Iv Culp, president and chief operating officer; and Ken Bowling, chief financial officer. I will begin the call with some brief comments and Ken will then review the financial results for the quarter.

I'll then update you on strategic actions in each of our segments. After that, Ken will review our second-quarter business outlook. And then we'll be happy to take your questions. We are pleased to report a solid start to fiscal 2020 with our overall sales in line with expectations.

We're especially encouraged to see the higher sales in mattress fabrics following a difficult year of declining sales related to the influx of low-cost mattress imports from China as well as retail disruption. The mattress industry appears to be stabilizing, and we are realizing some benefits from the punitive antidumping measures announced by the U.S. government early in our first quarter. We are optimistic our business will continue improving with the further reduction of excess inventory of the China mattress imports.

We've also faced external challenges in the upholstery fabrics business due to the ongoing international trade disputes and recently imposed additional tariffs. However, we are pleased that in spite of the lower sales and uncertain market conditions, our upholstery fabric business showed improved profitability for the first quarter of fiscal 2020. Additionally, we continue to evaluate and develop our strategy for Culp Home Fashions, our business product's business. We're focused on the best way to leverage this new online sales platform and expand our market reach with new products and customers, and expect improving results over the next few quarters.

In each of our businesses, we executed our product-driven strategy with a relentless emphasis on design creativity and product innovation. With the support of our flexible and growing global platform, we are confident we can sustain our culp strong competitive advantage and respond to the changing demand trends of our diverse customer base. Importantly, we have the financial strength to pursue our growth strategy. I'll now turn the call over to Ken, who will review the financial results for the quarter.

Ken Bowling -- Chief Financial Officer

Thank you, Frank. As mentioned earlier on the call, we have posted slide presentations to our Investor Relations website that cover key performance measures. We have also posted our capital allocation strategy. Here are the financial highlights for the first quarter.

Net sales were $75 million, up 4.7% compared with prior-year period. On a pre-tax basis, the company reported income of $2.8 million, compared with pre-tax income of $1.9 million for the first quarter of last year. The financial results for the first quarter of last year included approximately $2 million in restructuring-related charges due to the closure of the company's Anderson, South Carolina production facility. Excluding these charges, pre-tax income for the first quarter of last fiscal year was $4 million.

The current quarter was affected by divisional operating income pressures in the mattress fabrics and home accessories segments, offset somewhat by improved year-over-year operating performance in the upholstery fabrics business. We'll cover more detail shortly. Additionally, unallocated corporate SG&A expense was significantly higher this quarter as compared to the prior-year period due primarily to a favorable adjustment related to share-based compensation plans that occurred in the first quarter of last fiscal year. Net income attributable to Culp, Inc.

shareholders was $1.3 million or $0.11 per diluted share for the first quarter, compared with net income of $957,000 or $0.08 per diluted share for the prior-year period. The results for the first quarter of last fiscal year included the restructuring and related charges I just noted. The effective income tax rate for the first quarter of this fiscal year was 59.1%, compared with 46.5% for the same period a year ago. The increase in our company's effective income tax rate reflects the continued shift in mix of Culp income that is now mostly earned by the company's foreign operations located in China and Canada at higher income tax rates in relation to the U.S.

Additionally, the current mix of taxable income has resulted in a significant increase in the company's Global Intangible Low Taxed Income Tax, or GILTI, which represents a U.S. income tax on the company's foreign earnings. Importantly, income tax is incurred in the U.S. on a cash basis for fiscal 2020 are expected to be minimal due to the projected utilization of the company's U.S.

federal net operating loss carryforwards. Looking ahead, for the rest of this fiscal year, we estimate that our consolidated effective income tax rate will be in the 45% to 48% range based on the facts we know today. The income tax rate can be affected over the fiscal year by the mix in timing of actual earnings from our U.S. operations and foreign subsidiaries located in China and Canada versus annual projections.

Notably, the U.S. Treasury Department and Internal Revenue Service have issued newly proposed regulations that, if enacted and if enacted as proposed, could provide us with some relief from the GILTI tax under the proposed GILTI taxed high-tax exception election beginning in fiscal 2021 or later subject to the timing of the enactment. The proposed GILTI tax -- the proposed GILTI high-tax exception election is not available until the proposed regulations are finalized and effected. Trailing 12 months adjusted EBITDA as of the end of the first quarter of fiscal 2020 was $22.3 million or 7.4% of sales.

Consolidated return on capital for the trailing 12-month period was 10.4%. Now let's take a look at our business segments. For the mattress fabrics segment, sales were $38.7 million, up 12.5% compared to last year's first quarter. Notably, this is the first quarter-over-quarter sales increase since the third quarter of fiscal 2018.

Operating income for the quarter was $2.6 million, compared with $2.8 million from a year ago, with an operating income margin of 6.8%, compared with 8.1% a year ago. Our operating performance was affected by several factors during the first quarter of this fiscal year. We also experienced temporary lower demand for more profitable knit products as customers absorbed existing excess inventory, resulting in reduced production schedules. We also incurred certain employee-related costs that were higher than expected.

In spite of these challenges, we believe business conditions are stabilizing will result in improved profitability going forward as we continue to rationalize production in the most cost-effective locations. Return on capital for the trailing 12-month period for the mattress fabrics segment was 15.2%. For upholstery fabrics segment, sales for the first segment were $31.9 million, down 7.6% over the prior year. Operating income in the quarter was $2.9 million, compared with $2.5 million a year ago, with operating income margin of 9%, compared with 7.3% a year ago.

Our improved operating performance for the first quarter of this fiscal year reflects a favorable product mix and a better currency exchange rate than we experienced a year ago. Return on capital for the trailing 12-month period for the upholstery fabrics segment continue to be impressive coming in at 57%. The home accessories segment, which includes operations of eLuxury reported $4.3 million of sales for the first quarter with no full period of comparable results for the same period last year as a result of the June 2018 investment in eLuxury. The $4.3 million was comparable to the sales level achieved in the fourth quarter of last fiscal year.

Operating loss for the quarter was $535,000, which was in line with expectations. And our operating performance was affected by reduced demand for our legacy products and increased marketing fees and promotional expenses. Now turning to the balance sheet. We reported $44.2 million in total cash and investments and outstanding borrowings of $925,000 for a net cash position of $43.3 million.

During the first quarter, we incurred $935,000 in capital expenditures and spent $1.2 million on regular dividends. Also, operating lease assets and liabilities totaling $6.5 million as of the end of the first quarter of this fiscal year, recorded as a result of the adoption of a new lease accounting standard. Cash flow from operations and free cash flow were $2 million and $986,000, respectively, compared with cash flow used in operations and negative free cash flow of $1.9 million and $4.6 million, respectively, for the prior-year period. This reflects a $4 million and $5.6 million year-over-year improvement in cash flow from operations and free cash flow, respectively.

The company did not repurchase any shares in the first quarter. With respect to our share repurchase program, the board has approved an increase in the authorization for the company to acquire its common stock from the $1.7 million currently available back to a total of $5 million. With that, I'll turn the call back over to Frank.

Frank Saxon -- Chairman and Chief Executive Officer

Thanks, Ken. I will start with the mattress fabrics segment. We were energized by the return to a positive sales trend for mattress fabrics for the first quarter. In addition to an extra week of sales for the quarter, these results reflect strong performance from CLASS, our sewn cover mattress business as well as higher-than-expected sales of woven mattress fabrics.

We are benefiting from the growing demand for mattress covers from customers in the popular and expanding roll-packed or boxed-bedding space. We have diversified our customer base in this segment, and we're encouraged by additional opportunities with existing and new customers. Our flexible, global platform, including our production locations in the U.S., Haiti and Asia supports this strategy and has allowed us to meet changing customer demands with outstanding service and delivery performance. We remain committed to product innovation as we strive to deliver a favorable product mix of mattress fabrics and sewn covers.

As a firm acknowledgment of the evolving trends in bedding and mattresses, we've established a dedicated innovation team to ensure we're developing and offering the latest technologies and forward-looking products for our customers. At the same time, we are enhancing our design capabilities with an expanded creative team to complement our innovation strategy. Culp has traditionally enjoyed a strong competitive position in the marketplace with our creative designs and innovative products. And these new initiatives will allow us to further leverage these capabilities and expand our market reach.

Looking ahead, we are optimistic that the mattress industry is finally improving and is benefiting as a result of the antidumping measures against the Chinese importers and the continued sell-through of excess inventory. We have a compelling business model supported by creative designs, innovative products and an efficient global platform, with the ability to provide the latest product offerings from fabric to sewn covers. We look forward to the opportunities ahead for our mattress fabrics business. Now I'll turn to the upholstery fabrics segment.

Our upholstery fabrics sales were in line with expectations for the first quarter. The modest drop in sales over the prior-year period reflects the continued soft retail environment for residential furniture as well as ongoing issues surrounding international trade agreements and the associated tariffs. This unstable environment has disrupted supply chains throughout the furniture industry. However, in spite of these challenges, we aggressively pursued our product-driven strategy and remain focused on the diversification of our customer base.

We are continuing to make excellent progress with Read Window Products, our window treatment and installation services business, which has supported our ability to expand our reach in the hospitality market. We are optimistic about the future contribution from Read as we grow this business. We also continue to see favorable demand trends from our residential furniture customers for our popular line of highly durable, stain-resistant LiveSmart fabrics. Notably, we recently extended this brand with the introduction of LiveSmart Evolve, a new line of fabrics featuring the same performance technology combined with use of recycled fibers to deliver a sustainable product.

The LiveSmart Evolve launch has been very well received in recent showings and affirms Culp's ongoing commitment to environmental responsibility. Above all, we will continue to focus on product innovation and creative designs that meet the changing demands of our customers. While additional tariffs took effect during the quarter, we work closely with our customers to make adjustments in response to these new tariffs. We are pleased with the efficient scale-up of operations of our strategic partner relationships in Vietnam for additional sourcing of our cut and sew kits.

And we will further pursue this opportunity to support our customers in light of the ongoing trade disputes between the U.S. and China. Looking ahead, the uncertainties surrounding additional proposed tariffs and associated geopolitical risk makes it challenging to forecast the potential impact on our business. However, we're closely monitoring the situation and will enact appropriate responses as necessary.

Despite these challenges, we believe Culp has the right strategy in place for upholstery fabrics and is well positioned for the long term. And next, I'll review our newest business segment, Culp home accessories, which includes the operations of eLuxury, our e-commerce and finished products business offering bedding accessories and home goods. The sales of this business were consistent with the results for our fourth quarter of last year and in line with our expectations. We are refining this business model with a more aggressive and the strategic focus on the business-to-business market, along with greater customer diversification and new online retail marketplaces.

We also remain committed to improving the performance of our legacy product lines. In tandem with our strategies, we're developing many new products and are excited about the opportunity to leverage this new sales channel and reach new customers for Culp. Ken will now review the outlook for our second quarter, and then we'll be glad to take your questions.

Ken Bowling -- Chief Financial Officer

We expect overall sales to be comparable to the second quarter of last year. We expect mattress fabrics sales to be slightly up compared with the second quarter of last fiscal year, and operating income and margins are expected to be moderately up as compared with the previous year second quarter. In our upholstery fabrics segment, we expect sales to be comparable to the same period last year. Our operating income and margins are expected to be slightly higher compared with the same period a year ago.

However, our projections are as contingent upon any potential additional tariffs that could be imposed in the future and could, therefore, affect our operating costs. In our home accessories segment, we expect second-quarter sales to be considerably down as compared with the second quarter of fiscal 2019 as we refine our strategies and focus on higher margin products. We expect an operating loss for the quarter, but with meaningful improvement as compared to the first quarter of this fiscal year. Considering these factors, the company expects to report pre-tax income for the second quarter of fiscal 2020 in the range of $3.2 million to $3.8 million.

Pretax income for last year's second quarter was $4.3 million, which included a net benefit of $543,000 in restructuring and related charges and credits and other nonrecurring items. Excluding these credits, pre-tax income for the second quarter of last year was $3.7 million. Based on our current budget, capital expenditures for fiscal 2020 are expected to be in the $7 million to $8 million range. Depreciation and amortization is expected to be approximately $9 million.

Additionally, given the current outlook, free cash flow for fiscal 2020 is expected to be comparable to last year results even with an uncertain geopolitical environment. As a reminder, cash flow from operations last year was $13.9 million and free cash flow for the year was $11.5 million. With that, we'll now take your questions.

Questions & Answers:

Operator

[Operator instructions] OK. First from Stifel, we have John Baugh.

John Baugh -- Stifel Financial Corp. -- Analyst

Thank you. Good morning. I guess my first question is just around the extra week and how that plays out -- how that played out in the quarter? You just reported as 5%, 6%, 7% incremental to revenues overall or is there some timing difference?

Iv Culp -- President and Chief Operating Officer

John, hey, it's Iv. Good morning. Thanks for the question. And yes, for sure anytime we have an extra week, it's a good thing for a quarter, but it's really important to know that our sales are up more than just the extra week, which is why we have used the term being energized by the sales levels.

So it's not just a week, it's actually a growth in our business on top of that week.

John Baugh -- Stifel Financial Corp. -- Analyst

OK.

Ken Bowling -- Chief Financial Officer

Yes in the [Inaudible]

John Baugh -- Stifel Financial Corp. -- Analyst

Yes?

Ken Bowling -- Chief Financial Officer

Yes, go ahead. I was just going to say on the upholstery side, where the sales were actually down, but again, that extra week was a factor plus the soft retail. And remember that last year, we had the U.S. operation in Anderson.

This year, we did not. So that also affected sales year-over-year comparison.

John Baugh -- Stifel Financial Corp. -- Analyst

OK. And then maybe if -- could you go into a little more background or color behind the knitted fabric inventory issue sort of what was basically happening in your customer level and your production and the timing and all that and how that sorts out?

Iv Culp -- President and Chief Operating Officer

Yes, sir. That's a really good question and we've been trying to explain a lot. So I'm glad you asked us about that. Kind of what's happening is we are seeing a lift in the business or had a solid lift in the business in Q1 and a lot of that was driven by CLASS, which is our cut and sew product, which we talked about pretty extensively as well as the woven mattress fabrics, which is what's happened really strong in Q1 as well.

But the knits were impacted because most of the cut and sew business uses knits. And just like the mattress industry had inventory in the system, while we're waiting out the antidumping on the Chinese mattress imports, we had inventory in our system that we had built for the cut and sew business. So we had shifts, inventory to Haiti or had it stored in the U.S., prepped in the previous quarter, so we had the CLASS sale in Q1, but we didn't have the production of the knit fabric in Q1 to service that CLASS business. So just kind of disrupted our efficiency and our production schedule, which impacted our profits on.

We really pulled the slack out of our internal system with the inventory and it shows up in the inventory numbers and how pleased we were to have those much more in line, but it did impact efficiency in the short term. I hope that helped to explain that, John.

John Baugh -- Stifel Financial Corp. -- Analyst

And how does that sort of setup for Q2 as it relates to this topic?

Iv Culp -- President and Chief Operating Officer

Yes. So Q2, I mean, just -- once we get the slack out, which we have done, we're back to much more efficient schedules and operating, and then we'll fuel it as normal fabric to finished cover and be able to drive those efficiencies like we expect.

John Baugh -- Stifel Financial Corp. -- Analyst

OK. You mentioned changes in design. Any specifics in terms of people, talent, you said a dedicated, these existing people you're sort of repositioning or kind of some flavor for exactly what you're doing there?

Iv Culp -- President and Chief Operating Officer

Yes. Sure. I'm pleased to talk about that. It's both.

We -- the business has changed a lot in the last year or two years as you've followed so closely. And so there is just more than our traditional bedding customers which we -- are still there and very strong. So much the new business that we're capturing and new customers is just demanding the different type of products. So we've taken some internal resources and established a really aggressive, purely innovation team that's sort of, irrespective of design, just focused on what's the best innovation we can find, and we've added some new resources that we're really excited about just on a pure creative standpoint, and then those two teams will marry things together and not be tied on.

They're not both having to think about it jointly as they can do it separately and then we'll pull back together, put the right design on the right innovation. It's a new onset we're really excited about as we move forward.

John Baugh -- Stifel Financial Corp. -- Analyst

OK. And my last question is on eLuxury. It just sounds to me like you're going to walk away from some unprofitable business maybe on the B2C side, I don't know. Any color there? What's precisely you're doing and prospects for getting that business to break even?

Frank Saxon -- Chairman and Chief Executive Officer

Yes, sir. We have to get that business to breakeven and better. And we've learned a lot over the last year that we've invested in it. There are some places in e-commerce that just aren't -- are hard to be profitable.

Fees can be much more than we expect. They can change without a lot of warning. And so we are just refocused on products that fit in that space and then refocusing products for B2B business, which is our core customers as well as our current customer base in some new areas and some new growth that we can do with finished products to find places, and along with retail marketplaces that don't carry such heavy fee. So we're not walking away from the major markets.

We have to be on those. So we just have to be on them with products and fee base that fits our profit model. We're happy -- we're excited about the service platform. And I believe it's critical to our future to have the way we're servicing that finished product business.

So we just have to be smarter on what the fees are and where we can make money.

John Baugh -- Stifel Financial Corp. -- Analyst

All right. Thanks. Good luck.

Operator

And our next question comes from Budd Bugatch with Raymond James.

Budd Bugatch -- Raymond James -- Analyst

Hi. It's Budd for Bobby Griffin. Good morning.

Iv Culp -- President and Chief Operating Officer

Hey, Budd.

Budd Bugatch -- Raymond James -- Analyst

A couple of questions. Could we dig into what the -- in the mattress segment the employee-related costs were? Can you talk a little bit about what the elevation was? It looks like operating expense was about $500,000 more than last year. And so can you quantify what those -- what that delta was and what the surprise was?

Ken Bowling -- Chief Financial Officer

Yes, we -- Budd, it's Ken. We don't -- we can't quantify it. I mean it's employee-related cost in the area of healthcare and some workers' comp that, from time to time, will get out of -- I guess out of trend. That did pressure the quarter.

Also, two of -- as a part of that operating costs, we had some inefficiencies that you have mentioned as well. So those two pressured the quarter. Obviously, when we look at breaking down exactly the impact, I think the -- if you rank the two, I think the inefficiencies were greater, obviously, than the other one, but they -- in tandem, they both affected the quarter.

Budd Bugatch -- Raymond James -- Analyst

So looking forward, how do we think about the run rate of opex for mattress fabrics? Do we continue to run it at a $3 million level a quarter or you should add some extra week costs in there, I would think? What's the right way to model that?

Ken Bowling -- Chief Financial Officer

I guess, Budd, I'll start and then, Iv, you can jump in. I think the way I would look at it is, if you look at the -- as we're projecting for the second quarter, we are guiding that the margins will be improved, again, because we're thinking that this event with the help -- with the employee-related costs will not be there. Plus, as Iv explained, the improvement in inefficiencies getting all this flow through out of the way, which will help the margins going forward. So I think beginning in the second quarter, we'll see that improvement.

And then going forward from there, depending on sales level, we'll get the lift in margins as well or at least in bearable profit. Iv, I don't know if you want to add anything to that or --

Iv Culp -- President and Chief Operating Officer

Sorry, Budd, you can ask a question there.

Budd Bugatch -- Raymond James -- Analyst

Well, yes, I mean, last year's second-quarter gross margin for mattress fabrics, I think you were at 15.5%. Do you think you'll be there again this quarter or above where you were somewhere between the 14.7% and 15.5%? How do we think about that? What's the -- what was the impact of NIC and the inefficiency on gross margin?

Ken Bowling -- Chief Financial Officer

Yes. I think, Budd, as we look ahead, again, looking at second quarter, I think, I would say, the gross margin would be very comparable to last year, or at least last year's first quarter. So yes, I think that we would be back up in that range, in the 15%-ish range back up from the 14.7% this quarter once we achieve those improvements.

Budd Bugatch -- Raymond James -- Analyst

We've enjoyed up to 20% gross margins in this, and if you are in innovating territory, I would think you would want to get back to that bogey again where the gross margin begins with two. I know it may not be possible in today's competitive arena, at least in the near term, but is that how we should think about it? Is that something we're looking forward to?

Iv Culp -- President and Chief Operating Officer

Budd, yes, this is Iv. Yes, sir, I mean, there's nothing that has changed in the way we are approaching the business and the costs that we're putting behind it. And I just think we need to get back to that stability and all product lines firing like they had in the past. The cost level that we're applying to the business has not increased.

And so some of the things that impact us temporarily are not carryforward. And yes, sir, I think we should be thinking about moving back to those gross margins.

Budd Bugatch -- Raymond James -- Analyst

But one of the things that has changed is the percentage of CLASS, the penetration of CLASS in that category. I would think CLASS carries a lower gross margin because it's more labor-intensive. Is that not the right way to think about it?

Iv Culp -- President and Chief Operating Officer

No -- yes, I wouldn't think about it like that. I mean with CLASS, we really have an incredible platform based with our Asian production, our Haiti production and our U.S. production, all three are doing very well. For sure, it's a labor-intensive business, but what's really good about us with CLASS is we're -- generally, if we're doing our jobs well or supplying the fabric through to the finish cover and there's no reason, that should be any lower profit expectation than we expect on any other product.

Budd Bugatch -- Raymond James -- Analyst

But for us bean counters, that doesn't have a lower gross margin on the other side of the business when you look at it [Inaudible]

Iv Culp -- President and Chief Operating Officer

You mean just a pure fabric versus a sound cover?

Budd Bugatch -- Raymond James -- Analyst

Yes, sir.

Iv Culp -- President and Chief Operating Officer

No, Budd. I mean, that should -- we're not making extra because it is consuming our internal production, but we shouldn't be sacrificing margin as we sell mattress covers.

Budd Bugatch -- Raymond James -- Analyst

OK. And looking at eLuxury or the home accessories segment, when do we -- when do you think we get to breakeven? What's the likely -- what's the right -- how should we hold you accountable for getting that segment to breakeven? When should we get there?

Iv Culp -- President and Chief Operating Officer

Well, the expectation we have, Budd, is by the end of this fiscal year. So the improvement plan that we're undertaking is really targeted for this year.

Budd Bugatch -- Raymond James -- Analyst

OK. All right. And so not in the second quarter, and -- but by the time we get to the third quarter and the fourth quarter, we should be at a run rate for an annual breakeven. Is that right?

Iv Culp -- President and Chief Operating Officer

Yes.

Ken Bowling -- Chief Financial Officer

Yes.

Budd Bugatch -- Raymond James -- Analyst

OK. And for me too, I know in the corporate overhead, you had a low stock comp last year, and we got the extra week this year. What's the right level of corporate overhead right now? Is it in the $2.2 million, $2.3 million a quarter? How do we -- what -- and how much of that is fixed and how much of it's variable?

Ken Bowling -- Chief Financial Officer

Yes. Budd, that's a great question because last year was such a unique event with the reversal. Yes, I would say, in that two -- $2.2 million, $2.3 million range is a good point.

Budd Bugatch -- Raymond James -- Analyst

OK. And how much of it's fixed, Ken, and how much of it's variable? Does it have much variability to it -- to revenues?

Ken Bowling -- Chief Financial Officer

Yes. Some of it, Budd, but there is some bonus expense in there, obviously, the stock comp expense, but there is a lot of fixed in there as well. So I would say, much more fixed than variable.

Budd Bugatch -- Raymond James -- Analyst

And strategically, I know you've got a major operation in China that's been a real success, and this a trade dispute as we watched has caused a lot of disruption, you've moved some partner shipping to -- I think to other parts of the world. Tell me, Frank, how you think about that strategically now to the extent that you're willing to. It's got to be on your mind, I would think.

Frank Saxon -- Chairman and Chief Executive Officer

It is, Budd. And that's something we've looked at for a number of years and as we've looked around the world, which we've always done, we've looked for other sources of upholstery fabrics, particularly, whether that be Turkey, Indonesia, India, maybe the Asian countries. We still today, China even with 30% tariffs on it, is still more cost-effective, A, and B, more breadth to product. We're dabbling in a couple of small areas, but as hard as we've looked, we don't see other good sources of opportunity for fabrics.

And so we hear this from our customers as well. So this is actually, we feel like, pretty good news is, China is going to be there. 90 -- our best guess is 85% to 90% of upholstery fabrics come out of China today and they have for the last 10, 15 years, as you know. And we just don't think that's going to change.

But I'll tell you, we've looked, our teams have looked all over the world, we've made trips to Indonesia, Vietnam, Turkey and the competitive fabrics aren't there. Nor importantly, the breadth of product we can get, and the reason is the textile infrastructure in China is so extensive. And it's just not that extensive in these other -- you can get pockets of fabrics. India might do sheets real well, Turkey might do certain woven fabrics well, for example.

So our best guess right now as hard as we've looked, we are going to -- China is going to serve us very well.

Iv Culp -- President and Chief Operating Officer

And, Budd, this is Iv. If I can just tack on to what Frank's saying, and I agree with everything he said. What we are doing in all of our businesses is tariffs, for sure, have been disruptive to the industry and without any doubt to us. But we are rationalizing so much of where we're producing products that we're able to mitigate some tariffs by what we're doing in Vietnam with our cut and sew, so we're adding some extra processing to Chinese fabric in advantageous countries, whether it be Vietnam or Haiti and helping our customers mitigate tariff impacts.

That's a big strategy that we'll keep going forward all throughout this year and further if there's -- if tariffs continue to be a hindrance.

Budd Bugatch -- Raymond James -- Analyst

Well, I'm thinking outside of the tariffs. I'm just wondering if there is any regulatory issues that you're seeing in China that start to worry you that maybe makes it harder for a nondomestically owned business to operate there?

Frank Saxon -- Chairman and Chief Executive Officer

And we've, obviously, watched that real closely and we're staying in tune with other businesses. We've actually seen none to the date. No non-tariff type barriers, no disadvantageous treatment to a foreign-owned company. In fact, Budd, we've seen some examples of the opposite.

They really want to help exporters of products from China and that would make common sense, and we've seen that. So we're not seeing any of that treatment that some people may talk about. And we, obviously, are watching for that, but we've -- one of the strategies we've done over there for years is we have a totally China operation. We have no expense.

So our relationships with the government are all local Chinese to Chinese, and we've enjoyed terrific relationships over the years, and I don't see that today.

Budd Bugatch -- Raymond James -- Analyst

Well, thank you very much. Good luck on the balance of the year and the next couple of quarters.

Iv Culp -- President and Chief Operating Officer

Yes, sir. Thank you.

Operator

[Operator instructions] We'll move on to Marco Rodriguez with Stonegate Capital Markets.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Good morning. Thank you for taking my questions. Just wondering if could kind of follow up on a prior question in regard to the innovation initiatives that you're -- you talked about today. I just kind of wanted to get a little bit better of a sense, if you talked about the bedding trends that have changed over the last year with the box beds, if you will? And I was just wondering if you can maybe talk a little bit more about the change that you're making there? Is that something that was being driven internally, something maybe that you have been discussing with particular clients? Or were there some sort of competitive pressures that kind of pushed you in that direction?

Iv Culp -- President and Chief Operating Officer

I think it's really something we were driving internally, Marco. We just recognized that, and I'm recognizing a lot as I think about the business on the mattress side and the upholstery side. We, for such a long time, diversified the two businesses and let them target accounts or segments of the business that makes sense. And mattress fabrics were for mattress fabrics and upholstery fabrics were for furniture companies.

And so we didn't blend them that much intentionally because we wanted to keep them targeted to their markets. What's happening today is there's just so much cross-functional things. People that were making furniture are now making mattresses and vice versa. We just have new customers coming at us and we need to have different offerings.

And so we don't need to be constrained by the way we were always constrained in the past and we need to have the businesses cooperate more. So it's really what's driving it. We just see and innovation need to be thinking different than we always thought. It doesn't mean we've always had high marks for innovation and we are thrilled with where we've been.

So -- and we just think there should be more attention paid to it. And then obviously, we've got to have creative design, which we're going to bolster that up. But we just need design to be designed, and innovation to be innovation and not be constrained by what type of fabric or what division it's coming from. So we're just looking across all the borders now.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Understood. Very helpful. And then just to confirm your response to the question on the knitted fabric inventory that negatively impacted Q1 margins. If I understood the answers correctly, it sounded like that issue is gone and so it shouldn't be a negative impact in Q2.

Did I understand that correctly?

Iv Culp -- President and Chief Operating Officer

Yes, sir. That's right. Exactly right.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Got it. And any sort of sense that you can provide in terms of where you're kind of thinking about the excess inventory levels in the mattress industry? Any color or any kind of thoughts or conversations you've had with customers?

Iv Culp -- President and Chief Operating Officer

It's so hard to be definitive about that though we definitely are feeling and believe there is some positive impact to our business as that inventory has waned. I think, I feel a lot better that the business for the North American producers is in the short term looking very strong. We don't see inventory being that burden that it was for so long through the last year. So what we see orders, we see replenishment, we see things being done.

So we see e-commerce slots now being filled by customers that we would expect to fill them. And so I think that's really starting to flush itself out.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Gotcha. And then on the upholstery fabrics side, just trying to get a little better sense in terms of your thought process as the year kind of progresses. Obviously, tariffs are a big wildcard. It sounded like you're starting to make some -- rather mitigate some of that impact through shifting some of the supply chain aspects of your products through Vietnam and Haiti.

And is that what is kind of the main driver? It kind of sounds like top line should be kind of pressure because of the weak retail environment, tariffs, etc., but then it seems like you're talking about margins might be improving as the year kind of progresses. So can you kind of help to kind of walk through that kind of that -- those effects there?

Iv Culp -- President and Chief Operating Officer

Sure. We -- I'll be happy to give my best on that. We definitely believe sales have been impacted by some retail just uncertainty. I mean there's pockets of -- our customers are doing very well, and others that have been struggling and just generally speaking, there's a lot of uncertainty about what tariffs will do, were they'll go and then how do we -- should we respond to those.

So our customers are thinking about that almost every day. And so from a profit standpoint, we are very pleased that we have been able to navigate through all those difficulties and maintain actually improved profitability, which we're pleased about. And we haven't just passed all that on. We work with our customers to mitigate parts of it, find alternative channels to add value and then help to stem some of the tariff increase.

At the same time, we are benefiting some by currency that's happening in the market that's benefiting us too and so that's helping to wash some of the tariffs out. On balance, we feel like we can maintain profitability in uncertain time, but we have to be prepared to make some moves to help that further if and when the tariff fight doesn't subside.

Ken Bowling -- Chief Financial Officer

And, Marco, this is Ken too. Just to add on that, we talk about the currency, obviously, but we also talk about the product mix. I mean, as I mentioned before, with the U.S. operation, Anderson gone now, that pressure that we had in previous years or at least last year is now gone.

So we're focusing more and more profitable products. Our growing hospitality business, our new performance fabrics, especially, now with LiveSmart Evolve product line. And all those are giving us confidence as we go forward that we'll be able to continue to perform well in the future.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Got it. And can you quantify what was the positive impact for FX to gross margins in the quarter?

Ken Bowling -- Chief Financial Officer

It was -- we don't quantify it, Marco, but it was significant. And if you look at the range that's taken place over the last, I guess, quarter it was a significant impact. But there was a lot of different pieces in there that makes it hard to nail down the exact number, but it was a material impact this quarter.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Gotcha. And last quick question here. Just wondering a little bit more about Read Window a year and a half here now since -- or so since you've acquired it. Just wondering what maybe sort of lessons you've kind of learned versus expectations you guys had? And then what are sort of your expectations for that segment in terms of growth and margins?

Frank Saxon -- Chairman and Chief Executive Officer

OK. Marco, this is Frank. We are almost a year and a half in, as you said, and we are more excited about this market segment today than we even were in the beginning. We like it for a number of reasons.

It uses a lot of the same capabilities that we do internally cut and sew fabric from offshore, but we have domestic customers. It's higher margin -- significantly higher margin. It's a more stable environment. So we've learned a lot now about producing window treatments, both draperies and roller shades.

And that marketplace, of course, we are a producer and installer as well. And I believe what you'll see from Culp in the years ahead is more investment in this category. So we're very pleased with it. They're off to a great start.

I think it's only going to get better. And so the synergies between Culp's operations and Read are pretty much as we thought they would be and that Culp hospitality is going to be a force in the years ahead in that marketplace, and I think we're going to see organic growth and acquisition growth as well in that category.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Got it. Thanks for your time, guys.

Iv Culp -- President and Chief Operating Officer

Thank you.

Operator

And it looks like at this time, we have no further questions from the audience. I'd like to turn the floor back to Frank Saxon for any additional or closing remarks.

Frank Saxon -- Chairman and Chief Executive Officer

OK. Thank you, everyone, for your participation today and your interest in Culp. We look forward to updating you next quarter. Have a great day.

Operator

And once again, ladies and gentlemen, that concludes our call for today. Thanks for joining us. You may now disconnect.

Duration: 53 minutes

Call participants:

Dru Anderson -- Investor Relations

Frank Saxon -- Chairman and Chief Executive Officer

Ken Bowling -- Chief Financial Officer

John Baugh -- Stifel Financial Corp. -- Analyst

Iv Culp -- President and Chief Operating Officer

Budd Bugatch -- Raymond James -- Analyst

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

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