Natuzzi Quarterly Sales and Loss Rise
- Scott Peters
- Oct 3, 2022
The Italian leather furniture maker reported sixth quarterly revenue gain in a row but struggled with long manufacturing lead times, Covid lockdowns in China and inflation pressures.
Natuzzi SpA fell 4.5% to $5.92 after the Italy-based leather furniture maker reported sixth consecutive quarterly revenue growth in a row.
However, long lead time of up to four months and inflation pressure are providing significant operation and logistic headwinds.
Revenue in the fiscal second quarter increased 7.8% to €116.9 million from €108.4 million and 26.8% from €92.2 million in the pre-pandemic second quarter 2019.
North America sales declined 11% to €31.3 million but Greater China sales surged 24.1% to €13.3 million.
North American sales declined because of the closure of Shanghai manufacturing factory for the first two months in the quarter.
Gross margin declined to 31.4% from 34.1% a year ago on the rising energy and raw materials costs offset by improved sales-mix and price increase.
Net loss in the period increased to €0.6 million from €0.1 million and diluted loss per share was 2 cents compared to break-even a year ago.
Natuzzi Italia invoiced sales in the second quarter was €53.6 million, an increase of 34.2% from a year ago and 69.5% from the similar period in 2019.
Natuzzi Editions invoiced sales, including invoiced sales from Divani&Divani by Natuzzi, was €45.1 million, an decline of 12.2% from a year ago and an increase of 14.0% from pre-pandemic second quarter 2019.
Unbranded business Invoiced sales was €13.3 million, a fall of 5.9% and 22.6% from a year ago and two years ago respectively.
Wholesale sales declined 17.5% to €43.4 million in the second quarter from a year ago, primarily because of the closure of Shanghai facility.
Natuzzi wholesale sales channels consisting primarily of Natuzzi branded galleries in multi-brand stores, as well as mass distributors selling unbranded products.
Our Chinese factory produces Natuzzi Editions chiefly for the APAC and North America Regions.
The impact in terms of missed production can be estimated in €15 million for the quarter, as the factory was completely closed from the end of March till the beginning of May when it resumed its operations albeit at 20% of its capacity and only during the first week of June the factory was allowed to run at full capacity.
Our retail partners, especially in North America, have in general witnessed a softer demand versus a very strong 2021. This has led them to postpone purchases of “new stock” products, while they are focusing on de-stocking.
As a result, since April we are reporting a slow-down in our orders, chiefly from the Wholesale channel. Also in response to slower new demand, during the quarter, we focused on reducing our backlog to improve the service level and provide customer with a shorter and more reliable delivery time.
The order portfolio at the end of June was reduced at €102.0 million from €114.4 million at the beginning of the year.
This allowed us to improve our service level to final customer: in August, 86% of the overall orders were delivered within the date requested by customers.