Natuzzi S.p.A(NTZ) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a decline in sales for Q4 2023, which is significant but in line with industry trends due to a tough market for durable goods and furniture [9][14] - Gross margin for Q4 2023 was 36.2%, down from 38.8% in Q4 2022, but up from 34.6% in Q4 2019, indicating a trajectory of improving margins despite challenges [13] - For the full year 2023, gross margin improved to 36.3% compared to 35.6% in 2022, reflecting better inventory management and cost control [56] Business Line Data and Key Metrics Changes - Sales from branded goods exceeded 92% in Q4 2023, up from 85% at the beginning of 2021, indicating a significant shift towards becoming a brand retail company [10][11] - Retail sales accounted for nearly 60% of total sales in Q4 2023, up from 52% in 2021, highlighting the company's transition to a retail-focused model [11] Market Data and Key Metrics Changes - In the U.S., the average ticket for Natuzzi Dali is around $9,000, with the best-selling configuration priced at approximately $14,000, indicating a strong positioning in the premium segment [18] - The company has opened 632 branded stores and one franchising store in the U.S., with a pipeline of new galleries, reflecting a strong focus on this market [37] Company Strategy and Development Direction - The company is committed to transforming into a brand retail company, with significant investments in retail and factory enhancements [10][12] - A restructuring plan has been executed, resulting in a reduction of 514 employees in 2023, with a total reduction of 759 employees since 2021, leading to annual savings of EUR22.5 million [15][45] - The company aims to enhance its retail processes and guidelines to improve brand experience and store profitability [30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the tough market conditions in 2023 but expressed confidence in the company's long-term strategy and potential for recovery [17][83] - The company is optimistic about the U.S. market showing signs of improvement, while the recovery in China remains uncertain due to macroeconomic factors [64][63] Other Important Information - The company invested EUR12 million in 2023, with EUR4.6 million allocated to retail and EUR7.2 million for factory enhancements [16] - The company has created a Global Retail Excellence Division to standardize best practices across its retail network [28] Q&A Session Summary Question: Has there been an inflection point in China due to government stimulus measures? - Management noted that while there are initial signs of rebound for Natuzzi Editions, Natuzzi Italia has not yet seen recovery, and the market remains sensitive [61][63] Question: Are there signs of stabilization in North America? - Management confirmed signs of improvement in North America, with expectations for a faster rebound compared to China [64] Question: How will the headcount reduction impact future costs? - The headcount reduction will positively impact both cost of goods sold and general administrative expenses, contributing to improved margins [68][75] Question: Will capital from liquidated non-core assets be reinvested in North America? - Management confirmed that proceeds from the sale of non-strategic assets will be reinvested in expanding the North American footprint [72][73] Question: What are the expectations for gross margin with increased revenue? - Management indicated that with increased sales, the gross margin is expected to improve, potentially exceeding 40% [79][80]