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Bear of the Day: Culp Inc. (CULP)

Madeleine Johnson

Headquartered in High Point, North Carolina, Culp Inc. (CULP) is a company that manufactures, sources, markets, and sells mattress and upholstery fabrics. Its fabrics are used in residential and commercial furniture and bedding products like sofas, recliners, chairs, loveseats, sectionals, sofa-beds, office seating, panel systems, and mattress sets.

Shares of CULP have experienced volatile stretches throughout 2018, and the stock is down almost 35% since the start of the year.

Last quarter, Culp reported disappointing results for its first quarter fiscal 2019.

Earnings of 24 cents matched the Zacks Consensus Estimate, while revenues of $72.5 million fell 10.1% year-over-year.

Mattress fabrics sales were down 23.6%, but upholstery fabrics sales ticked up 10.9% from the prior year period.

Culp did provide guidance for Q2, and anticipates sales to be down about 5% compared to the same period last year. Pre-tax income is expected to be in the range of $3.6 million to $4.6 million.

“As expected, our results for the first quarter reflect challenging bedding industry conditions resulting primarily from the significant increase of low-priced imported mattresses from China…While we are experiencing considerable headwinds, we are optimistic that we will begin to see improvement in our quarterly results in the second half of the fiscal year,” said Frank Saxon, president and CEO.

Culp, Inc. Price and Consensus

Culp, Inc. Price and Consensus | Culp, Inc. Quote

Because of these results, analysts have turned bearish on Culp, with three cutting their estimates in the last 60 days for the current fiscal year. The Zacks Consensus Estimate has fallen 19 cents during that same time period from $1.41 to $1.20 per share.

This sentiment has stretched into 2020, and our consensus estimate has dropped 13 cents in the past two months.

CULP is now a Zacks Rank #5 (Strong Sell).

The whole Textile-Home Furnishings industry has taken quite the hit this year compared to the S&P 500—it’s down nearly 50%. While it may be best to avoid this industry altogether right now, if you’re interested in adding a textile stock to your portfolio, you should consider Interface Inc. (TILE). This company makes modular carpet under the Interface and FLOR brands, and expects around 24% earnings growth for the year.

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