Natuzzi S.p.A(US:NTZ)2024-06-24 18:49Financial Data and Key Metrics Changes - The company reported an operating profit of EUR0.6 million, a significant improvement compared to a loss of EUR0.9 million in 2023 and a loss of EUR3 million versus pre-COVID levels in 2019 [1] - Gross margin reached almost 37%, which is 1.5 percentage points above 2023 and 7 percentage points above 2019 [80] - The company has improved its gross margin by 7 percentage points since 2019, with a potential normalized improvement of around 10 percentage points [4][5] Business Line Data and Key Metrics Changes - Sales from directly operated stores grew to EUR20 million, representing a 13% increase compared to the same period last year [79] - The retail segment has been growing nearly 4% in the quarter, with the weight of freestanding stores increasing by 25 percentage points since 2019 [11][12] - The trading contract sales for Natuzzi Italia were included in the overall sales figures, indicating a focus on this segment for future growth [83] Market Data and Key Metrics Changes - The US and China markets reported sales above last year, while Southern Europe and emerging markets saw lower sales [78] - The company operates in over 100 markets, with a strategic focus on strengthening local positions in key geographies like the US and China [21][22] Company Strategy and Development Direction - The company is focusing on eight strategic pillars, including expanding margins, leveraging brand strength, and enhancing retail operations [6][21] - A new retail format was introduced, emphasizing sustainability and creating immersive brand experiences in over 200 stores [14][15] - The company is actively restructuring and optimizing its operations to improve efficiency and reduce costs [28][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the markets are not yet recovering due to persistent high interest rates, particularly affecting the real estate sector [3] - There is optimism regarding future growth opportunities, especially in the US and China, despite current market challenges [22][24] - The management emphasized the importance of cash management while maintaining a focus on mid-term value creation [32] Other Important Information - The company is exploring the sale of non-strategic assets to improve cash flow, although high interest rates currently hinder these efforts [31] - The company is integrating IT systems in China to enhance operational efficiency and brand management [24] Q&A Session Summary Question: Can you provide more detail on the gallery business in North America and Europe? - Management confirmed that the gallery business is expected to grow year-over-year, with some galleries being a restart of previous accounts and others representing new opportunities [38][39] Question: Will gross margin exceed 40% with the measures taken? - Management indicated that they are progressing towards a gross margin of 40% through improved pricing discipline and retail margin integration [41][42] Question: Can you discuss the joint venture in China and its expected growth? - Management clarified that while governance remains unchanged, they have gained more influence in driving key decisions, which is expected to positively impact growth [44] Question: Are raw material costs alleviating or softening? - Management noted that most raw material costs have stabilized, with a more normalized environment expected to support margin expansion [48][88] Question: What percentage of sales is from Natuzzi Italia versus the new contract business? - Management confirmed that contract sales are included in Natuzzi Italia's overall sales figures, indicating a focus on this segment for future growth [83]