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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>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

<ul><li>Culp, Inc. issued results for its 2QFY24 on Monday, December 4 after market close.</li><li>Revenue and operating profit were better for the just-reported quarter than those posted in 2QFY23 and our estimates, bolstering management’s contention that it would deliver—and investors would witness—sequential quarterly improvements in operating profitability for the balance of FY24.</li><li>Management also noted its belief of posting positive consolidated operating profitability by 4QFY24.</li></ul>

Culp, Inc. issued results for its 2QFY24 on Monday, December 4 after market close.Revenue and operating profit were better for the just-reported quarter than those posted in 2QFY23 and our estimates, bolstering management’s contention that it would deliver—and investors would witness—sequential quarterly improvements in operating profitability for the balance of FY24.Management also noted its belief of posting positive consolidated operating profitability by 4QFY24.

Culp, Inc.-  Culp Reports Improved 2QFY24

Thematic (Sector/Industry)

<ul><li>During the past two weeks, key big-box retailers reported the quarter ended in October, providing near real-time views into the state of the consumer and retailing.</li><li>Top-line results were mixed.</li><li>Our Read: Consumer spending continues to retreat from the pandemic bubble, with consumers moving down market to low-price and bargain retailers.</li></ul>

During the past two weeks, key big-box retailers reported the quarter ended in October, providing near real-time views into the state of the consumer and retailing.Top-line results were mixed.Our Read: Consumer spending continues to retreat from the pandemic bubble, with consumers moving down market to low-price and bargain retailers.

Furniture/Furnishings Weekly - A Glance at Big-Box Retailers Shows Mixed Top Line

<ul><li>Last week, we considered our outlook for furniture and furnishings. Today, we look at current indicators.</li><li>Economic fundamentals largely deteriorated over the past two weeks, but the stocks surged as interest rates eased.</li><li>Existing home sales dipped to a seasonally adjusted rate of 3.96 million in September, the first reading below 4 million since 2010, shortly after the Great Recession. </li></ul>

Last week, we considered our outlook for furniture and furnishings. Today, we look at current indicators.Economic fundamentals largely deteriorated over the past two weeks, but the stocks surged as interest rates eased.Existing home sales dipped to a seasonally adjusted rate of 3.96 million in September, the first reading below 4 million since 2010, shortly after the Great Recession. 

Furniture/Furnishings Weekly - Falling Rates Lift All Stocks

<ul><li>Following a spate of earnings last week and major retailer earnings ahead, we pause here to reflect on where the furniture and furnishings sectors—residential and commercial/contract— are now and a peek at their likely tracks in the early 2024.</li><li>Where are we in broad strokes? Residential: Following demand surges fueled by a once-in-a-lifetime focus by consumers on their homes during the pandemic, residential furniture and furnishings demand slumped as the focus shifted to “experiences” from goods.</li><li>Commercial: New demand (orders) didn’t enjoy the surge (though backlog deliveries fueled reported sales).</li></ul>

Following a spate of earnings last week and major retailer earnings ahead, we pause here to reflect on where the furniture and furnishings sectors—residential and commercial/contract— are now and a peek at their likely tracks in the early 2024.Where are we in broad strokes? Residential: Following demand surges fueled by a once-in-a-lifetime focus by consumers on their homes during the pandemic, residential furniture and furnishings demand slumped as the focus shifted to “experiences” from goods.Commercial: New demand (orders) didn’t enjoy the surge (though backlog deliveries fueled reported sales).

Furniture/Furnishings Weekly - Looking Ahead: What We Expect in 2024

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. - 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

Culp, Inc.- Culp Reports Improved 2QFY24

The consolidated revenue comparisons were modestly better than last year and our estimate. Moreover, the consolidated operating income (loss)...

Water Tower Research

Furniture/Furnishings Weekly - A Glance at Big-Box Retailers Shows Mixed Top Line

During the past two weeks, key big-box retailers reported the quarter ended in October, providing near real-time views into the state of the...

Water Tower Research

Furniture/Furnishings Weekly - Falling Rates Lift All Stocks

Existing home sales dipped to a seasonally adjusted rate of 3.96 million in September, the first reading below 4 million since 2010, shortly after...

Water Tower Research

Furniture/Furnishings Weekly - Looking Ahead: What We Expect in 2024

Following a spate of earnings last week and major retailer earnings ahead, we pause here to reflect on where the furniture and furnishings...

Water Tower Research

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