FIRENZE, Italy — My family marked the occasion of the recent High Point Market by leaving the country. Fortunately for this column, we escaped to Italy, where so many fine things originate, including and especially fine furniture.
We shopped in a Divani & Divani by Natuzzi gallery and browsed Tuscan furniture manufacturers’ wares at a mouthwatering “fiera,” or public fair, that gathered Florence-area products and specialties.
The takeaways at the Scandicci Fiera 2023, in addition to the tastiest olives we ever had and the largest selection of licorice I have ever seen, included the pride Italians exude for their home furnishings and those who make them. It is a sight most rare at U.S. expos, fairs and festivals open to the public to see a furniture manufacturer exhibiting along with the locally grown foods and wares.
In Scandicci, a suburb of Florence, the furniture makers were next door to exhibit spaces for Fiat, Lancia and Alfa Romeo.
The residual question I was left with leaving the Divani & Divani in southwestern Florence was where Natuzzi is in the global marketplace these days. Natuzzi is a company I closely watched 25 years ago and a brand I have always respected. In fact, my family’s love of Italy can be traced back to January 1994, when I visited Natuzzi facilities in Udine and Santeramo.
My travels on the interwebs quickly revealed that Natuzzi just “reimagined” its gallery concept in time for the High Point Market, a relaunch chronicled by Home News Now in early October. The aptly but ironically unimaginatively named “Reimagined Gallery Concept” is based on eight pillars, which is twice as many pillars as any good life depends (family, friendship, work and faith).
Across the pond in Milan, Natuzzi also revealed in mid-October its Colle seating system anchored by a big sofa designed by — wait for it – BIG, or Bjarke Ingels Group of Copenhagen. “Colle” translates as “hill” and, sure enough, this sofa is reminiscent of a very large rolling hillock. And Natuzzi is based in Santeramo in Colle in the southern region of Italy called Apulia.
The Colle joins Natuzzi’s The Circle of Harmony collection that for the past four years has paired the company with several of the world’s leading architects and designers. Now in its fourth year, or chapter as the company calls them, The Circle of harmony seeks to articulate in product Natuzzi’s core values, which are “Mediterranean flair, design, harmony, Italian character, innovation, comfort and sustainability,” according to Natuzzi’s literature.
The Colle is a modular seating system that wraps a plush cushion around a wood infrastructure for rounded edges and deep seating. Variations include an armchair, two- and three-seat versions, corner units and a sofa. I don’t have a retail price point, but, if you have to ask … ?
In an era so dominated by clean lines, The Colle’s embrace of softness, even wrinkles, is notable, as is its eco-conscious design for production, which is a hallmark of The Circle of Harmony. Comfort is the watchword of The Circle of Harmony’s fourth chapter.
“For years, we believed that stepping out of our comfort zone symbolized a break with the world that best represents us,” P.J. Natuzzi, Natuzzi’s chief creative officer, told archiproducts. “Our aim is to furnish everyone’s comfort zone by making it a place to inhabit with pride and a space to share where we can recharge our energy to face the challenges of everyday life.”
Discomfort calling, too
The gallery “reimagination” and the debut of The Colle coincided with the release of Natuzzi’s second-quarter earnings, which were grim, especially at the top line. Sales for the global manufacturer-retailer plummeted 29% compared to the second quarter a year ago, dropping to 83.5 million euros, or about $88.5 million.
Significantly, like most furniture makers and sellers, the more meaningful context for measuring success or hardship continues to be not last year but 2019, or before the pandemic turned everything upside down. Compared to the second quarter of that last “normal” year, Natuzzi’s sales were down about 9%.
“We’ve been through an unprecedented cycle that brought the sector to potentially one of the most positive momentums in its dynamics to a very difficult situation,” said Natuzzi Group CEO Antonio Achille. “If we look at what’s happening around the globe in the real estate market, we do see signs of [persistent] uncertainty.” He pointed out China in particular.
Breaking down sales by region, Natuzzi saw a 21% drop in sales in North America to a total of about 25 million euros ($26.2 million). In China, where it is in a joint venture with Kuka, sales fell by fully half to $7 million from approximately $14 million.
In Europe, sales were down more than a third, ending up at $28.3 million. Not helping Natuzzi in most of these regional sales figures is a euro-dollar exchange rate that has the euro trading at nearly 1-to-1 against the dollar, or 1.06. You might call the exchange rate Achille’s heel.
Achille said that the “negative market cycle” has yet to reach a turning point, or bottoming out, leaving Natuzzi to focus on “organic growth” in its retail distribution network and finding or achieving new efficiencies in production and throughout the supply chain, including Vietnam and China.
The silver lining could be branded sales, which Achille called the company’s strategic emphasis. Referring to sales of or under the names Natuzzi Italia and Natuzzi Editions, branded invoice sales are up 5% compared to 2019’s second quarter. In aggregate, branded sales comprise 90% of Natuzzi’s business at retail.
“This is important to us because we stated clearly in our long-term strategy that we are here to fully leverage the strengths of the brand of the company and act in more [the] high price point segment [of] the market,” he said during the earnings call.
Lowering costs of production
If sales are lagging, attack the gross margin, which is what the vertically integrated Natuzzi is doing, according to Achille. The company improved its gross margin last year by five percentage points to 36%, and this year, despite no price increases, the company is seeking further improvements by better leveraging its own production facilities.
In the second quarter this year, operating costs held steady compared to a year ago.
“We’re not having the sales that we aspire to because … of the market condition,” he said. “We try to accelerate the optimization of our back-of-the-house operational machine to extract more value, more cash, [until] growth comes back.”
The introduction of The Colle seating system reflects the more disciplined approach to product development already instilled at Natuzzi. Achille said the company is simplifying and streamlining its assortment, seeking fewer but bolder product launches, a product development strategy enabled by the company’s stable distribution network.
More unique product is needed to protect distribution during a growth phase. Organic growth relies on growth from within more than adding new customers, and roughly 600 of Natuzzi’s 700 stores are Natuzzi franchisees, according to the company.
If Natuzzi can help existing distribution become “more productive,” Achille told analysts, “we’re going to get more sales momentum.” This new productivity will come from an improving talent pool in retail management and marketing, as well as enhancements in its information technology systems.
Problems in China
The 50% drop in sales in China has two principal causes, according to Achille: What has been an inability to travel to China and, more recently, plummeting new home sales in the country. Since the pandemic, travel to China by Natuzzi executives has resumed, including a trip this month by Achille, which is improving the joint venture relationship with Kuka in which Natuzzi is a 49% owner.
New home starts are down everywhere, but in few countries as acutely as China.
“China is clearly a market where the wind not only for furnishing but for everything has changed significantly,” Achille said.
Natuzzi is quietly expanding its branded retail network in the United States. Just down the interstate from me, the new Midtown Atlanta store opened in September, joining new locations in San Diego and Manhasset, Long Island. Natuzzi now has a fleet of 19 stores in the United States and more than 700 globally. More than half of this count is in China.
The two-story Natuzzi Italia showroom in Manhasset opened in early August. Next up are planned openings in Denver and Houston, according to Jason Camp, Natuzzi Americas chief retail officer. Camp said on the earnings call that the average annual sales figure for stores in the Natuzzi’s U.S. network are between $3 million and $4 million.
Natuzzi became the first international home furnishings company to list on Wall Street when it went public in 1993.