Natuzzi Reports Financial Results for First Nine Months of 2024 & Third Quarter

December 15, 2024  by Karen Parrish in Business Strategy, Industry   

FIRST NINE MONTHS OF 2024 HIGHLIGHTS:

— Total net sales were €243.9 million, in line with the same period in 2023 (-0.3%).

— Branded sales were €221.2 million, up 0.3% from 2023 same period and up 3.1% from 2019 same period. Branded sales were 93.0% of total sales, compared to 92.6% in the same period of 2023 and 78.5% in the same period of 2019.

— DOS sales were €57.4 million, up 6.3% from 2023 and up 20.8% from 2019 same periods. 2024 growth was driven by a 22.3% sales increase from dos in the U.S., where we opened one additional store in Denver. During the first 9 months of 2024, we closed two non-performing Natuzzi Italia stores, one in Spain and one in Switzerland, as part of our ongoing effort to progressively improve the quality of our retail.

— As part of our transformation, during the first 9 months of 2024, we accelerated our restructuring which affected P&L results with (€4.8) million of one-off severance costs:
- (€4.1) million accrued in cost of sales;
- (€0.7) million accrued in selling and administrative expenses.

— During the first 9 months of the year, 538 persons exited our group. These exits were partially offset by hires in strategic areas such as retail, marketing and merchandising. From 2021 to September 2024, we had a net reduction of 1110 persons, equivalent to a ~26% of total.

— In the first nine months of 2024, gross margin was 35.8%, compared to 35.8% in the first nine months of 2023 and 29.0% in the first nine months of 2019. Excluding (€4.1) million of one-off severance costs, gross margin would have been 37.4%, which compares to 36.3% in 2023 first nine months and 30.0% in 2019 first nine months.

— In the first nine months of 2024, we had an operating loss of (€3.6) million, compared to an operating loss of (€2.2) million in 2023 first nine months and an operating loss of (€19.5) million 2019 first nine months. Excluding (€4.8) million of one-off severance costs, we would have reported an operating profit of €1.2 million, which compares to an operating loss of (€0.7) million in 2023 first nine months and to an operating loss of (€16.1) million in 2019 first nine months.

— Net finance costs were (€7.4) million, compared to (€5.6) million in 2023 and (€7.7) million in 2019 same period, mainly as a consequence of higher interest expenses on lease contracts and third-party financing, as well as unfavorable currency movements on trade payables and receivables.

— During the first 9 months of 2024, we invested €5.4 million, primarily to upgrade our Italian factories and for the dos located in the U.S. and Italy.

— We continue the divestment program of non-strategic assets we announced:
- we received $3.8 million in October 2024 as a first installment for the sale of a building located in High Point, North Carolina.
- we signed a preliminary agreement for the sale of a land in Romania for an expected price between €2.9 and €3.1 million.
- as of September 30, 2024, we held €17.1 million in cash, from €33.6 million as of December 31, 2023. In particular, the difference in cash is determined as follows:
- net cash used in operating activities (€5.1) million. Of this, (€6.0) million to reduce workforce;
- net cash used in investing activities (€5.4) million;
- net cash used in financing activities (€7.1) million;
- effect of movements exchange rates on cash (€0.4) million;
- difference in bank-overdraft repayable on demand €1.5 million.
 

THIRD QUARTER 2024 HIGHLIGHTS

— Total net sales were €75.0 million, in line with 3Q 2023 (+0.1%).

— Branded sales were €68.8 million, up 0.3% from 3Q 2023 and up 4.6% from 3Q 2019. Branded sales were 93.7% of total sales, compared to 93.9% in 3Q 2023 and 78.6% in 3Q 2019.

— DOS sales were €16.8 million, down 1.4% from €17.1 million in 3Q 2023 and up 25.7% from €13.4 million in 3Q 2019.

— As part of our transformation, during 3Q 2024, we accelerated our restructuring which affected P&L results with (€3.4) million of one-off severance costs:
- (€2.9) million accrued in cost of sales;
- (€0.5) million accrued in selling and administrative expenses.

— In 3Q 2024, 276 persons exited our group. These exits are mainly due to the closing of our Shanghai plant, whose production was moved to Quanjiao.

— In 3Q 2024, gross margin was 31.8%, compared to 35.4% in 3Q 2023 and 28.7% in 3Q 2019. Excluding (€2.9) million of one-off severance costs, gross margin would have been 35.7%, which compares to 35.5% in 3Q 2023 and 30.5% in 3Q 2019.

— In 3Q 2024, we had an operating loss of (€3.8) million, compared to a loss of (€1.4) million in 3Q 2023 and a loss of (€8.7) million in 3Q 2019. Excluding (€3.4) million of one-off severance costs, we would have reported an operating loss of (€0.4) million, which compares to an operating loss of (€1.1) million in 3Q 2023 and an operating loss of (€6.8) million in 3Q 2019.

— Net finance costs were (€3.3) million, compared to net finance costs of (€1.4) million in 3Q 2023 and (€3.1) million in 3Q 2019, mainly as a consequence of higher interest expenses on lease contracts and third-party financing, as well as unfavorable currency movements on trade payables and receivables.

— During 3Q 2024, we invested €1.7 million, primarily to upgrade our Italian factories and for the dos located in the U.S. and Italy.

Pasquale Natuzzi, executive chairman of the group, commented, “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."

"On Nov 12, I had the privilege of inaugurating the Natuzzi Harmony Residences, a 110,000-square-feet, 9-floor building with 50 apartments, located in a prestigious area in Dubai. For the first time, we have led the whole architectural and creative direction both for the exterior and interior design, resulting in a project which is a living tribute to our Brand DNA. This initiative is a clear testament that our Brand enjoys global recognition and that we completed our evolution into a lifestyle brand."

"We also continue to innovate and lead where our brand has its origins. In October, at the High Point Market, we unveiled our 'Re-imagined Gallery' concept — an innovative format designed to strengthen the coherence of the Natuzzi brand representation and improve commercial performance with our distribution partners. The 'Re-imagined Gallery' has since become our global standard for the brand's presence in multi-brand retailers. Along with our global retail format, it ensures consistent brand representation across markets and channels. Thanks to these efforts, we are increasingly presenting our collection in a unified and inspiring way across our 678 stores and 628 galleries worldwide."

"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."

Click here to see the full shareholder's letter and results.