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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

Thematic (Sector/Industry)

<ul><li>Furniture &amp; furnishings equity issues slumped in the final two weeks of 2023 and into the first week of 2024. The group had a positive year.</li><li>The commercial/contract furniture stocks gained 46%, beating all major broad market indices.</li><li>Steelcase led the sector with a ~91% gain for the year.</li></ul>

Furniture &amp; furnishings equity issues slumped in the final two weeks of 2023 and into the first week of 2024. The group had a positive year.The commercial/contract furniture stocks gained 46%, beating all major broad market indices.Steelcase led the sector with a ~91% gain for the year.

Furniture/Furnishings Weekly - WTR Furniture/Furnishings Conference Approaching

<ul><li>Stocks have had a few good weeks and last week was another. The furniture/furnishings group has focused on restoring and defending margins.</li><li>The “rolling recession” rolled over the sector this year. Despite sales pressure, earnings improved for the best in the group, notably the commercial/contract names, residential manufacturers, and select retailers.</li><li>Costco, which includes furniture in its broad merchandise mix, reported 1QFY24 revenue of $57.8 billion, matching estimates. </li></ul>

Stocks have had a few good weeks and last week was another. The furniture/furnishings group has focused on restoring and defending margins.The “rolling recession” rolled over the sector this year. Despite sales pressure, earnings improved for the best in the group, notably the commercial/contract names, residential manufacturers, and select retailers.Costco, which includes furniture in its broad merchandise mix, reported 1QFY24 revenue of $57.8 billion, matching estimates. 

Furniture/Furnishings Weekly - Costco Shows Why It's Best in Class

Equity Bottom-Up

<ul><li>After inputting data from the Culp 2QFY24 Form 10Q filing, FY24 estimates are unchanged. We moderated FY25 and FY26 revenue and profit expectations.</li><li>This note incorporates that filing and introduces our reformatted earnings model. We hope the revised model and reformatting will be easier to read and understand.</li><li>As is our custom, our working excel models are available to our readers on request. </li></ul>

After inputting data from the Culp 2QFY24 Form 10Q filing, FY24 estimates are unchanged. We moderated FY25 and FY26 revenue and profit expectations.This note incorporates that filing and introduces our reformatted earnings model. We hope the revised model and reformatting will be easier to read and understand.As is our custom, our working excel models are available to our readers on request. 

Culp, Inc. - Introducing Updated Model; FY24 Estimates Unchanged

<ul><li>Hooker Furniture results highlighted the past week in the furniture/furnishings space.</li><li>Hooker reported EPS of $0.65 on sales of $116.8 million, both ahead of FactSet consensus estimates of $0.28 and $116.3 million, respectively.</li><li>A year ago, Hooker reported EPS of $0.42.</li></ul>

Hooker Furniture results highlighted the past week in the furniture/furnishings space.Hooker reported EPS of $0.65 on sales of $116.8 million, both ahead of FactSet consensus estimates of $0.28 and $116.3 million, respectively.A year ago, Hooker reported EPS of $0.42.

Furniture/Furnishings Weekly - Hooker Furniture Beats on Improved Margins

<ul><li>We are revising our earnings estimates following Culp’s 2QFY24 earnings release and conference call.</li><li>Management’s 3QFY24 guidance suggests that our prior estimate was overly optimistic about the pace of improvement.</li><li>The objective of operating profitability by 4Q remains intact and achievable. We expect, and are modeling, positive net income in FY25.</li></ul>

We are revising our earnings estimates following Culp’s 2QFY24 earnings release and conference call.Management’s 3QFY24 guidance suggests that our prior estimate was overly optimistic about the pace of improvement.The objective of operating profitability by 4Q remains intact and achievable. We expect, and are modeling, positive net income in FY25.

Culp, Inc. - Revising Estimates After 2QFY24 Positive Surprise

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)

Furniture/Furnishings Weekly - WTR Furniture/Furnishings Conference Approaching

Furniture & furnishings equity issues slumped in the final two weeks of 2023 and into the first week of 2024. The group had a positive year.

Water Tower Research

Furniture/Furnishings Weekly - Costco Shows Why It's Best in Class

Stocks have had a few good weeks and last week was another. The furniture/furnishings group has focused on restoring and defending margins.

Water Tower Research

Culp, Inc. - Introducing Updated Model; FY24 Estimates Unchanged

After inputting data from the Culp 2QFY24 Form 10Q filing, FY24 estimates are unchanged. We moderated FY25 and FY26 revenue and profit expectations.

Water Tower Research

Furniture/Furnishings Weekly - Hooker Furniture Beats on Improved Margins

Hooker reported EPS of $0.65 on sales of $116.8 million, both ahead of FactSet consensus estimates of $0.28 and $116.3 million, respectively.

Water Tower Research

Culp, Inc. - Revising Estimates After 2QFY24 Positive Surprise

The objective of operating profitability by 4Q remains intact and achievable. We expect, and are modeling, positive net income in FY25.

Water Tower Research

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