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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.

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Thematic (Sector/Industry)

<ul><li>Economic headlines had two items affecting furniture/furnishings: one good, one not.</li><li>The Positive: The University of Michigan Consumer Sentiment gauge (as distinguished from Consumer Confidence reported below) surged 29% over two months.</li><li>The mid-January reading jumped 13% to 79, the highest since early 2021.</li></ul>

Economic headlines had two items affecting furniture/furnishings: one good, one not.The Positive: The University of Michigan Consumer Sentiment gauge (as distinguished from Consumer Confidence reported below) surged 29% over two months.The mid-January reading jumped 13% to 79, the highest since early 2021.

Furniture/Furnishings Weekly - Conflicting News Items Dominate Headlines for the Sector

Equity Bottom-Up

<ul><li>Flexsteel led the news in the furniture and furnishings industry last week with a positive preannouncement.</li><li>The company said 2QFY24 EPS will be $0.57 versus preannouncement consensus of $0.27.</li><li>Sales are expected to hit $100 million in the quarter, ahead of the preannouncement consensus of $96 million.</li></ul>

Flexsteel led the news in the furniture and furnishings industry last week with a positive preannouncement.The company said 2QFY24 EPS will be $0.57 versus preannouncement consensus of $0.27.Sales are expected to hit $100 million in the quarter, ahead of the preannouncement consensus of $96 million.

Furniture/Furnishings Weekly - FLXS Announces Positive Surprise Ahead of Conference

<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

<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

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 - Conflicting News Items Dominate Headlines for the Sector

The Positive: The University of Michigan Consumer Sentiment gauge (as distinguished from Consumer Confidence reported below) surged 29% over two...

Water Tower Research

Furniture/Furnishings Weekly - FLXS Announces Positive Surprise Ahead of Conference

Flexsteel led the news in the furniture and furnishings industry last week with a positive preannouncement.The company said 2QFY24 EPS will be...

Water Tower Research

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

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