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From Home Furnishing Business

Nova Lifestyle Q2 Sales up 35.3 Percent

August 12, 2014  by in Financial Reports, Industry   

Net income was $3.4 million, and included a non-cash, pre-tax gain of $2.2 million, due to the change in the fair value of warrant liability. This compares with net income of $1.2 million in the second-quarter 2013.

The company also announced further progress on its e-commerce and digital initiatives, as well as its objectives to expand global sales and distribution:

The company has received a commitment from The Hong Kong Furniture Association and The Dongguan Furniture Association to promote Nova Lifestyle's e-commerce platform to its base. As previously announced, the company had secured letters of intent from more than 100 furniture brands, signaling their intention to make their brands and products available on Nova Lifestyle's dedicated e-commerce Web site, which will exclusively offer furniture and home furnishings to consumers in China. The company is on track to complete the e-commerce platform by the fourth quarter of 2014.

As previously announced, the Company plans to launch a new mobile device application in the fourth quarter of 2014. The mobile app will provide China-based consumers and the company's China-based franchisees with a new digital and user-friendly way to complete transactions. Consumers will also be able to download the app and review Nova LifeStyle products from home.

The company has begun production for IKEA under its supply agreement to manufacture products for sale in China and Asia, with the first delivery completed in early August 2014.

Through the first six months of 2014, Nova Lifestyle's net sales of $43.8 million were 28.3 percent ahead of the prior-year. Growth was primarily driven by a 43 percent increase in sales in North America, which included $4.4 million in sales from the company's subsidiary, Bright Swallow, which was acquired in April 2013. Sales to China increased 5 percent primarily due to higher sales to non-franchisees, with sales in Asia, excluding China, up 144 percent. This was offset by a decline in sales in Europe.

Gross profit was $8.2 million, an increase of 15.9% compared to the prior year period. Gross margin was 18.8% compared to 20.8% in the prior year period, which is primarily due to strategic changes in our sales and marketing plans as we increased sourcing from third party vendors to supply our growing distribution as we increase our market share.

First-half 2014 net income was $3.7 million, compared with net income of $2.4 million through the first six months of 2013.

"The second quarter was another strong quarter for us as we achieved sales growth of over 35% reflecting solid execution on our growth initiatives to increase distribution in key global markets," said Tawny Lam, president of Nova LifeStyle. "We also achieved higher operating profitability, with our operating income margin up 70 basis points year-over-year as we continue to tightly control costs even as we invest in the growth of our business. We are making further progress on our growth initiatives including our e-Commerce platform and digital initiatives and are thrilled with the support we have received from leading furniture brands and organizations targeting the China market."

Click here for the complete Nova Lifestyle second-quarter release.