by Company’s store network shows surprising resilience in spite of lingering challenges at retail
HIGH POINT — Natuzzi’s latest earnings statement for the first nine months of this year offers a glimpse at where the company is seeing success and opportunity despite ongoing challenges in the marketplace.
The results, which also touch on the company’s Q3 performance, are for the period ended Sept. 30. For that quarter, the company reported net revenue of 75 million euros, up .1% from 74.9 million euros the same period a year earlier. It also reported a loss of 7.4 million euros, compared to a loss of 2.4 million euros last year and an operating loss of 3.8 million euros compared to a loss of 1.4 million euros a year earlier.
For the full nine months, the company’s sales also were about level, at 243.9 million euros down .3% from 244.5 million euros the same period last year. Its loss totaled 11.5 million euros compared with 6.4 million euros a year earlier and its operating loss was 3.8 million euros compared with 2.2 million a year earlier.
The decline in profits is in spite of efforts the company has made to cut costs. For example, during the first nine months of the year, the company said that 538 individuals left the company — including 276 in Q3 with the closing of its Shanghai plant and shift of production to Quanjiao — although this was offset by hires in other areas such as retail, marketing and merchandising. From 2021 through September of this year, it said it had a net reduction of 1,110 individuals, a 26% decrease in headcount.
“This reduction is part of our strategy of transitioning Natuzzi from a volume-driven to a value-driven organization,” company CEO Antonio Achille said in the earnings presentation. “This shift requires a leaner workforce, new competencies and an evolved approach to human resources and organization. We remain committed to implementing this plan ethically and in full compliance with the laws. As restructuring progresses, our streamlined model positions us to unlock greater value when sales return to historical levels.”
The company attributed some of the operating quarterly loss to factors such as 3.4 million euros in one-time severance costs for the first nine months and related to a reorganization of its manufacturing operations in China, Romania and Italy “reflecting our ongoing efforts to optimize workforce levels across the groups facilities.” In addition, it experienced higher interest expenses on lease contracts and third-party financing along with unfavorable currency exchange rates on trade payables and receivables.
But the company also is spending in areas where it sees the need for additional investment. This includes some 1.7 million euros spent during the quarter in its Italian factories and on its retail stores in the U.S. and Italy.
Compared with some retail activity in the U.S., the company’s retail network appears to be doing relatively well.
Currently the company has 54 freestanding directly operated (DOS) stores managed directly by the company as well as 19 managed by its joint venture in China and several operated in the U.S. There are also another 602 franchise locations around the globe.
In his presentation highlighting growth opportunities in the new year and beyond, Achille noted that Natuzzi’s DOS stores saw sales increase by 6.3% during the first nine months and its U.S. DOS stores showing 22.3% growth over the same period. The growth in the U.S., he said, was supported by the 2023 opening of four DOS stores in San Diego, Manhasset, New York, Houston and Atlanta along with a new store in Denver opened this past September.
By comparison, sales from the franchise locations fell less than 1%, for a total of 97.8 million euros compared with 98.7 million the same period last year.
He also cited the company’s Re-Imagined Gallery network as an area of opportunity now and in the future. Since the launch of the concept in the fall of 2023, he said, the company has received proposals for 142 projects including new openings and retrofits, which will be implemented starting in the first quarter of next year.
“Natuzzi has redefined its wholesale shop-in-shop format resulting in an innovative concept designed to support independent retailers to properly represent the distinctiveness of our brand in their multibrand environment, while improving their sell-out performances,” he said. “We are witnessing a strong interest from both current and prospective partners.”
Other growth areas he identified are as follows:
Fostering new opportunities in trade and contract areas of the business: “I am particularly proud and thankful to our team for the progress made by the newly established division,” Achille said. “Natuzzi Harmony Residences in Dubai marks a transformative milestone for our business, reflecting our evolution and ambitions. It is a true testament to the power of the Natuzzi Italia brand, as it represents our first venture into designing and branding an entire residential building. This achievement reaffirms that establishing our dedicated Trade & Contract division was the right decision, enabling us to fully leverage Natuzzi’s assets and expertise while setting distinct growth and profitability targets.”
Production simplification and efficiency improvement: Achille noted that this includes “a comprehensive review of the company’s industrial operations to simplify processes, reduce working capital and drive further efficiencies. … Our efforts to optimize the footprint of our Asian operations are progressing as planned. In 3Q 2024 we completed the closing of our historical factory in Shanghai, shifting the production to the new plant located in Quanjiao, Anhui Province, China. This new plant, which will serve exclusively the Chinese market, offers industrial and transformation costs which are approximately 30% lower compared to the Shanghai plant.”
The divesture of non-strategic resources: This includes the sale of its showroom in High Point, which Achille noted is proceeding as planned with a $3.8 million payment received in October. He added that in November, the company also signed a preliminary agreement for the sale of land next to its factory in Romania with a final price between 2.9 million and 3.1 million euros. The closing is expected to be completed by the middle of next year. Proceeds from these sales will fund restructuring activities and expand the expansion of its DOS network, “with a particular focus on the U.S. market.”
Added Pasquale Natuzzi, executive chairman and company founder: “We are living in a dual-speed reality. On one hand, our performance reflects the ongoing challenges posed by the persistent economic crisis. On the other hand, we are seeing growing evidence of the strength of our long-term Brand/Retail project, which continues to gain momentum, paving the conditions to capture the full potential of our brands.
“These results testify that Natuzzi is one of the few global design and high-end furniture brands. They also reinforce my belief that, moving forward, the positive impact of our strategic initiatives will effectively counterbalance market headwinds, positioning us for a prosperous future.”
