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Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Equity Research Firm

Equity Bottom-Up

<ul><li>Amidst weak demand and ongoing macro headwinds, Culp posted a solid quarter as it executes on its restructuring plan.</li><li>Culp posted 1QFY25 adjusted EPS of ($0.41), roughly in line with our estimate of ($0.38), versus ($0.27) in 1QFY24, on better-than-expected sales growth and operating margins in upholstery, offset by manufacturing inefficiencies in mattress resulting from the company’s global restructuring initiatives.</li><li>Culp had not previously provided formal earnings guidance for the quarter, so we take this performance as roughly in line with expectations given the challenging macro environment in residential furniture and management’s discussion of the restructuring in May.</li></ul>

Amidst weak demand and ongoing macro headwinds, Culp posted a solid quarter as it executes on its restructuring plan.Culp posted 1QFY25 adjusted EPS of ($0.41), roughly in line with our estimate of ($0.38), versus ($0.27) in 1QFY24, on better-than-expected sales growth and operating margins in upholstery, offset by manufacturing inefficiencies in mattress resulting from the company’s global restructuring initiatives.Culp had not previously provided formal earnings guidance for the quarter, so we take this performance as roughly in line with expectations given the challenging macro environment in residential furniture and management’s discussion of the restructuring in May.

Culp, Inc. - 1QFY25 Adj. EPS ($0.41) Vs. Prior Year ($0.27) As Mattress Restructuring Gains Traction

Thematic (Sector/Industry)

<ul><li>A quiet week in the markets for the Water Tower Research Furniture and Furnishings indexes as the summer comes to a close.</li><li>The Water Tower Commercial/Contract Furniture Index was up 0.2% and the Mass Retailers Index was up 1.0%, while the Residential Manufacturers &amp; Suppliers Index (-0.5%) and the Home Goods Retailers Index (-1.5%) were both down.</li><li>Over the same time, large caps (S&amp;P 500 and DJ 30) were up 0.6%, while small caps (R2K) were down 0.2%.</li></ul>

A quiet week in the markets for the Water Tower Research Furniture and Furnishings indexes as the summer comes to a close.The Water Tower Commercial/Contract Furniture Index was up 0.2% and the Mass Retailers Index was up 1.0%, while the Residential Manufacturers &amp; Suppliers Index (-0.5%) and the Home Goods Retailers Index (-1.5%) were both down.Over the same time, large caps (S&amp;P 500 and DJ 30) were up 0.6%, while small caps (R2K) were down 0.2%.

Furniture/Furnishings Weekly - Earnings Season Insights

<ul><li>Despite the spike in volatility earlier in the week, the markets were relatively calm by the end of the week, with mixed results for furniture/furnishings stocks.</li><li>The Water Tower Research Commercial/Contract Furniture Index (-0.9%), Residential Manufacturers &amp; Suppliers Index (+2.2%), and Home Goods Retailers Index (+1.3%) all lagged the two large-cap market indexes (+3.0%), which outperformed the small-cap R2K index (+2.1%).</li><li>ARHS noted weaker-than-anticipated demand at the high end. CFO Dawn Phillipson said on the 2QFY24 investor call, “We experienced softening demand comps starting in May, and the negative trend accelerated into July”, with comps now expected to be down somewhere in the negative low- to mid-teens in 2HFY24.</li></ul>

Despite the spike in volatility earlier in the week, the markets were relatively calm by the end of the week, with mixed results for furniture/furnishings stocks.The Water Tower Research Commercial/Contract Furniture Index (-0.9%), Residential Manufacturers &amp; Suppliers Index (+2.2%), and Home Goods Retailers Index (+1.3%) all lagged the two large-cap market indexes (+3.0%), which outperformed the small-cap R2K index (+2.1%).ARHS noted weaker-than-anticipated demand at the high end. CFO Dawn Phillipson said on the 2QFY24 investor call, “We experienced softening demand comps starting in May, and the negative trend accelerated into July”, with comps now expected to be down somewhere in the negative low- to mid-teens in 2HFY24.

Furniture/Furnishings Weekly - Aug 12, 2204

<ul><li>Furniture &amp; furnishings stocks retrenched broadly, in line with the broader ‘risk-off’ move that affected all major indexes.</li><li>The Water Tower Research Commercial/Contract Furniture Index declined (-3.1%), the Residential Manufacturers &amp; Suppliers Index fell (-1.6%), and the Home Goods Retailers Index declined (-7.2%).</li><li>The S&amp;P 500 and Dow 30 were both down (-2.1%), while the R2K declined (-5.8%). The Mass Retailers Index declined (-5.6%).</li></ul>

Furniture &amp; furnishings stocks retrenched broadly, in line with the broader ‘risk-off’ move that affected all major indexes.The Water Tower Research Commercial/Contract Furniture Index declined (-3.1%), the Residential Manufacturers &amp; Suppliers Index fell (-1.6%), and the Home Goods Retailers Index declined (-7.2%).The S&amp;P 500 and Dow 30 were both down (-2.1%), while the R2K declined (-5.8%). The Mass Retailers Index declined (-5.6%).

Furniture/Furnishings Weekly - Stocks Down as Market Retrenches

<ul><li>The market rotation continued to benefit many of the stocks in the Water Tower Research Furniture and Furnishings indexes.</li><li>The Water Tower Research Commercial/Contract Furniture Index was up (+5.5%) and Home Goods Retailers Index was up (+4.7%) for the week, while the Residential Manufacturers &amp; Suppliers Index pulled back slightly (-1.4%) overall, even as many individual issues within the index continued higher, as the rotation to smaller-cap and value stocks <span style="font-size: var(--content-font-size);">continued with the S&amp;P 500 and Dow 30 (-1.9%) down, while the </span>R2K (+1.8%) continued higher.</li><li>The Water Tower Research Mass Retailers Index was down modestly (-0.4%).</li></ul>

The market rotation continued to benefit many of the stocks in the Water Tower Research Furniture and Furnishings indexes.The Water Tower Research Commercial/Contract Furniture Index was up (+5.5%) and Home Goods Retailers Index was up (+4.7%) for the week, while the Residential Manufacturers &amp; Suppliers Index pulled back slightly (-1.4%) overall, even as many individual issues within the index continued higher, as the rotation to smaller-cap and value stocks continued with the S&amp;P 500 and Dow 30 (-1.9%) down, while the R2K (+1.8%) continued higher.The Water Tower Research Mass Retailers Index was down modestly (-0.4%).

Furniture/Furnishings Weekly - Conn's Files as Industry Bankruptcies and Layoffs Mount

United States

Culp, Inc. manufactures and markets upholstery fabrics and mattress tickings for use in furniture and bedding industries. The Company's fabrics are used in the production of residential and commercial furniture and bedding products, including sofas, recliners, chairs, loveseats, sectionals, sofa-beds, office seating, panel systems, and mattress sets.

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Culp Inc (CULP US)

Culp, Inc. - 1QFY25 Adj. EPS ($0.41) Vs. Prior Year ($0.27) As Mattress Restructuring Gains Traction

Culp had not previously provided formal earnings guidance for the quarter, so we take this performance as roughly in line with expectations given...

Water Tower Research

Furniture/Furnishings Weekly - Earnings Season Insights

A quiet week in the markets for the Water Tower Research Furniture and Furnishings indexes as the summer comes to a close.

Water Tower Research

Furniture/Furnishings Weekly - Aug 12, 2204

Despite the spike in volatility earlier in the week, the markets were relatively calm by the end of the week, with mixed results for furniture...

Water Tower Research

Furniture/Furnishings Weekly - Stocks Down as Market Retrenches

Furniture & furnishings stocks retrenched broadly, in line with the broader ‘risk-off’ move that affected all major indexes.

Water Tower Research

Furniture/Furnishings Weekly - Conn's Files as Industry Bankruptcies and Layoffs Mount

The market rotation continued to benefit many of the stocks in the Water Tower Research Furniture and Furnishings indexes.

Water Tower Research

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