Updating Estimates for 2Q22 Pre-Release
|52 Week Range||$11.93-$17.88|
|Avg. Daily Vol. (30 day)||18,096|
|Shares Out (MM)||12.3|
|Market Cap (MM)||$159.00|
|Enterprise Value ($MM)||$133.00|
|Revenue TTM (MM)||$318.3|
|Fiscal Year End||April|
- On November 3, after the market close, Culp issued a pre-release revising its expectations for 2Q22. Previous expectations announced when Culp reported 1Q22 results called for 2Q22 net sales and consolidated operating income to be “comparable” to that reported in 1Q22. The revised expectations, based on unaudited preliminary results for 2Q22 (ended Sunday 10/31/2021) now call for sales to decline by ~11% versus 1Q22 and for consolidated operating income of $1.3-$1.6 million.
- With this release, management did not provide any additional quantification or outlook for the balance of fiscal 2022. Instead, it promised that view when if formally reports 2Q22 in early December. This is a significant change in the near-term outlook.
- Management pointed to a significant shortfall in sales expectation, primarily in its upholstery fabric segment (CUF). During the quarter, Vietnam, where Culp sources most of its upholstery kits, was shut down due to COVID-19. That affected Culp’s sourcing partners and upholstery customers. Initially, and for most of the quarter, management was told that re-opening was imminent; but that proved wrong. In its release, management noted that those restrictions have now been lifted, thereby allowing shipment to be resumed at “normalized” capacity.
- Similarly, CHF, Culp’s mattress fabrics segment, was not spared from macro-economic pressures due to supply chain constraints and labor shortages that affected Culp’s customers and delayed their accepting orders, most notably in the second half of 2Q22.
- In conversation, management noted that it has not seen any negative market-share impact. While disappointed with the macro impact affecting the quarter, it maintains that its business foundation is solid and evinced optimism for the long-term due to its innovation, creativity, global manufacturing platform, and consistent customer focus.
- Our new estimates are summarized in the Estimates and Valuation tables. Our revised and detailed income statement, balance sheet, and cash flow model follow as exhibits to this note. The Excel model is available on request or to Visible Alpha clients, at their option. Despite the near-term guidance for 2Q22 exclusively, we are shaving previous expectations for several out-quarters.
ESTIMATES AND VALUATION
On November 3, after the market close, Culp issued a pre-release revising its expectations for 2Q22. Previous expectations announced when Culp reported 1Q22 results called for 2Q22 net sales and consolidated operating income to be “comparable” to that reported in 1Q22. The revised expectations, based on unaudited preliminary results for 2Q22 (ended Sunday 10/31/2021) now call for sales to decline by ~11% versus 1Q22 and for consolidated operating income of $1.3-$1.6 million.
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